1971 PLP 1075 (PTD)

S. A. Nusrat, Advocate Supreme Court instructed by Mujahid Hussain, A. O. R. for Petitioner. Nemo for Respondent. Date of hearing: 23rd August 1971. WAHEEDUDDIN AHMAD, J.‑--The respondent which was a regis tered firm up to the assessment year 1960‑61, was incorporated as a Private Limited Company on the 23rd September 1959, and commenced business front the 1st October 1959 during the assess ment year 1961‑62. The firm had installed certain new machinery on which additional depreciation allowance under rule 8(2) of the Income‑tax Rules was allows until it was incorporated into a private limited company. During the assessment year 1961‑62, when the respondent‑company came to be assessed for the first time, the Income‑tax Officer did not allow depreciation allowance on the old machinery transferred. The respondent challenged this order in appeal before the Appellate Assistant Commissioner of Income‑tax, who allowed the appeal and gave additional depreciation at the rate of 7 % which the Income‑tax Officer has not allowed. The matter was then taken before the Income‑tax Appellate Tribunal. This appeal was dismissed on the 27th August 1965, relying on the decision of the Madras High Court in the case of Veerappa Transports v. C. I. T., Madras ((1963) 50 I T R 442). The petitioner moved an application under section 66(1) of the Income‑tax Act for reference of the following question to the High Court: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing additional depreciation on machinery originally purchased by the registered firm and used for about two years and then taken over by the limited company?" The Tribunal, relying on the decision of the West Pakistan High Court in the case of C. I. T. v. Bufco Tanneries Ltd. (P L D 1966 Lah. 244), held that the question needed no further consideration and refused to refer the matter to the High Court. The matter was then taken in the High Court of Sind and Baluchistan, Karachi, under section 66(2) of the Income‑tax Act. The High Court also refused to direct the Income‑tax Tribunal to refer the above question to this Court by order dated the 20th January 1971. The petitioner seeks permission to file an appeal against the said order. Mr. S. A. Nusrat, learned counsel for the petitioner admitted that the facts of this case are identical to the facts of the case is C. I. T. v. Bufco Tanneries Ltd. In that case it was held by the West Pakistan High Court as under:‑ "In this case, we find that it is only a re‑adjustment made by the partners of the firm to carry on their business as a limited company. The enterprise is the same, the persons are identical, the assets, machinery, building and plant have been absorbed in the share capital of the new company and in this way neither any change of ownership has taken place nor any re‑installation of machinery has been occasioned. In this view of the matter it cannot be said that the machinery is second hand and we are of the opinion that the depreciation claimed went with the assets and even if it can be said that the assets were owned by two different legal persons, the allowance has no reference to the persons who owned it but is attached to the machinery and plant itself." The learned counsel for the petitioner was unable to satisfy us that the view taken in this decision is not in accordance with law. If the unveiling of the limited company is done it is quite clear that it is only a re‑adjustment made by the partners of the firm to carry on their business as a limited company. In these circumstances, the authorities below and the High Court were perfectly justified in holding that it is the same persons who are concerned in the matter. The machinery is the same and there being no new installation the respondent‑company was entitled to have depreciation on it. The impugned order calls for no interference. The petition is dismissed. Leave refused.