MURUGAPPA CHETTIAR S Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN these references which arise in respect of the asst. yrs. 1973-74 and 1974-75, we are called upon to answer the following question :

(2.) THE assessee is an individual. Till the accounting year relevant to the asst. yr. 1972-73, the assessee was carrying on a business in tile works. For the asst. yr. 1973-74 for which the corresponding previous year was that commencing on 1-1-1147 (Malayalam era), corresponding to 17th Aug., 1971, the assessee was a partner of a firm constituted by taking in the assessee's son in the business as a partner. The business in the tile factory was run by that partnership firm in the asst. yrs. 1973- 74 and 1974-75. The partnership deed was dt. 17th May, 1972. Evidently, therefore, the partnership deed was executed during the middle of the accounting year. In the partnership deed, there was a clause specifying that the assets of the business of the tile factory brought into the business of the firm by the assessee would continue to be the exclusive property of the assessee and the other partner will have no manner of right over the same by reason of his becoming a partner of the firm. But, in the books of account of the partnership, all the assets and liabilities of the assessee in the business he was running were brought in as assets and liabilities of the firm. The assessee was given full credit for Rs. 1,52,560 in his capital account which was the figure brought forward from the books of the business run as his proprietary concern. These assets consisted of building, machinery, press, etc., which had been taken at book value from the proprietary concern.

(3.) IT was then submitted by the assessee's counsel that the inclusion of the assets in the books was a mistake. The Tribunal did not accept the case of mistake, and further found that, even assuming that it was a mistake, it appeared to have been perpetrated for a number of years and no attempt had been made to reverse the entries. Finally, it found that, on the finding that the assets were partnership property, the assessee was not entitled to depreciation.