JUDGMENT

H.N. Seth, J. - This is a combined reference in respect of assessment years 1954-55, 1955-56, 1956-57 and 1957-58, made at the instance of the assessee, Matrumal Dhanna Lal, u/s 66(1) of the Income Tax Act, 1922.

2. The assessee is a Hindu undivided family doing business under the name and style of Matrumal Dhanna Lal of Hathras. There is an oil mill situated at Chemar Gate, Hathras. This mill along with another oil mill situated at Aligarh originally belonged to the partnership firm, Messrs. Kishan Lal Matrumal, formed on August 13, 1935, by five partners including Rai Sahib L. Dhanna Lal as representing the assessee-Hindu undivided family and L, Chiranji Lal representing his own Hindu undivided family. Duo to certain differences the partnership business was discontinued after the year 1941. The partners referred their dispute in respect of the dissolution of the firm and settlement of accounts to arbitration. The arbitrators gave their award on June 30, 1947, which was later made a rule of the court and accepted by the parties. Under that award the oil mill at Hathras was valued at Rs. 9,50,000 and allotted to the assessee's family. The other oil mill at Aligarh was valued at Rs. 5,00,000 and was allotted to the other party. As the value of the property allotted to the assessee-family exceeded the value of the property allotted to the other partner, the arbitrator directed the former to pay the difference of Rs. 2,52,476 to the other partner in order to equalise the two shares. The written down value, as per the Income Tax records, of the oil mill at Hathras, on 27th March, 1946, i.e., while it belonged to the partnership of Kishan Lal Matrumal, was Rs. 1,53,348. In the year 1947-48, which was the first year of the mill's operation by the assessee's family exclusively, the Income Tax Officer allowed depreciation thereon on the basis that its actual cost to the assessee-family was Rs. 9,50,000. Depreciation was allowed on this basis up to the assessment year 1953-54. In the year 1954-55, the Income Tax Officer held that in the assessment year 1947-48 the written down value of the mill in the hands of the assessee-firm should have been fixed on the basis that its actual cost to the assessee was Rs. 1,53,348 and that the written down value in the assessment year 1954-55 was the difference between the said amount and the depreciation actually allowed to the assessee-family from the assessment year 1947-48 up to and including the assessment year 1953-54. He, accordingly, determined the written down value, on this basis, for the assessment year 1954-55 to 1957-58.

3. The assessee thereafter preferred an appeal against the orders for these years before the Appellate Assistant Commissioner, contending that the oil mill in question had been purchased by it for a sum of Rs. 9,50,000 and that its written down value should have been determined on that basis. It was further contended that the Income Tax Officer was not within his rights to ignore the written down value determined in the preceding years and to determine it afresh on a new basis. The Appellate Assistant Commissioner, however, allowed the assessee's appeal on the ground that the Income Tax Officer was not competent to determine the written down value in the year under appeal regardless of the written down value determined in the preceding year.

4. The revenue then preferred appeals in respect of these years before the Tribunal. After considering the nature of the transaction involved in the case, the Tribunal ultimately came to the conclusion that when the property was divided amongst the partners it did not result in sale of assets to a partner and did not involve any transfer of property. After considering a number of cases, it came to the conclusion that so far as assets, distributed to various partners of the firm on its dissolution, were concerned the actual cost of such assets to the partners so receiving it was their actual cost to the previous owner thereof. Ac