Distribution of assets among partners on dissolution of a firm does not amount to a transfer of assets within the meaning of section 10(2) (vib) of the Indian Income-tax Act, 1922/section 34(3) (b) of the Income-tax Act, 1961.

1. The Income-tax Appellate Tribunal, Delhi Bench "C", has referred the following questions of law to this court for opinion along with the statement of the case:

"1. Whether, on the facts and circumstances of the case, distribution of assets among the partners in species on the dissolution of the firm amounts to sale or transfer within the meaning of section 10(2) (vib) of the Indian Income-tax Act, 1922/section 34(3) (b) of the Income-tax Act, 1961 ?

2. Whether, in view of the provisions of section 10(2) (vic) (ii) of the Indian Income-tax Act, 1922/section 33(4) of the Income-tax Act, 1961, on the admitted facts and in the circumstances of the case, one-half of the development rebate in respect of machinery and plant which fell to the share of the two partners, A. R. Khosla and Adarsh Bala Khanna, was rightly withdrawn by the Income-tax officer in respect of the assessment years 1959-60 to 1963-64 ?

3. Whether, in respect of the assessment year 1964-65 when the factory worked for the whole year, the Income-tax Officer was legally entitled to disallow development rebate for the year in question on the basis of subsequent events which took place after the close of the account year, viz., 31st March, 1964 ?"

2. The relevant facts are that on April 1, 1959, a partnership firm styled as Messrs. Kay Engineering Co., Kapurthala, was formed to carry on the business of manufacture and sale of electrical accessories at Kapurthala. This partnership consisted of four partners, namely, Anant Ram Khosla 1/3rd, Smt. Adarsh Bala Khanna, 1/6th, Shanti Swarup Khosla, 1/3rd and Manmohan Swarup Khosla, 1/6th. Anant Ram Khosla and Shanti Swarup Khosla are brothers, Smt. Adarsh Bala Khanna is the daughter of Anant Ram Khosla, while Manmohan Swarup Khosla is the son of Shanti Swarup Khosla. Manmohan Swarup Khosla retired from the said partnership firm on June 9, 1961, and the firm was dissolved by mutual consent of the partners by a deed of dissolution executed on that date. From the 10th of June, 1961, a new firm was constituted under the same name with the following partners :

The Income-tax Appellate Tribunal, Delhi Bench "C", has referred the following questions of law to this court for opinion along with the statement of the case : "1. Whether, on the facts and circumstances of the case, distribution of assets among the partners in species on the dissolution of the firm amounts to sale or transfer within the meaning of section 10(2) (vib) of the Indian Income-tax Act, 1922/section 34(3) (b) of the Income-tax Act, 1961 ?

2. Whether, in view of the provisions of section 10(2) (vic) (ii) of the Indian Income-tax Act, 1922/section 33(4) of the Income-tax Act, 1961, on the admitted facts and in the circumstances of the case, one-half of the development rebate in respect of machinery and plant which fell to the share of the two partners, A. R. Khosla and Adarsh Bala Khanna, was rightly withdrawn by the Income-tax officer in respect of the assessment years 1959-60 to 1963-64 ?

3. Whether, in respect of the assessment year 1964-65 when the factory worked for the whole year, the Income-tax Officer was legally entitled to disallow development rebate for the year in question on the basis of subsequent events which took place after the close of the account year, viz., 31st March, 1964 ?"

3. The relevant facts are that on April 1, 1959, a partnership firm styled as Messrs. Kay Engineering Co., Kapurthala, was formed to carry on the business of manufacture and sale of electrical accessories at Kapurthala. This partnership consisted of four partners, namely, Anant Ram Khosla 1/3rd, Smt. Adarsh Bala Khanna, 1/6th, Shanti Swarup Khosla, 1/3rd and Manmohan Swarup Khosla, 1/6th. Anant Ram Khosla and Shanti Swarup Khosla are brothers, Smt. Adarsh Bala Khanna is the daughter of Anant Ram Khosla, while Manmohan Swarup Khosla is the son of Shanti Swarup Khosla. Manmohan Swarup Khosla retired from the said partnership firm on June 9, 1961, and the firm was