No Tax Evasion on Transfer of Old Machine from Head Office to Branch for Own Use: Allahabad HC

The Allahabad High Court has ruled that transferring an old machine from head office to branch for internal use doesn't constitute taxable transfer under income tax laws. Justice Saumitra Dayal Singh quashed prosecution proceedings against a manufacturer that shifted a ₹28 lakh lathe between units, holding such movements without consideration aren't taxable when ultimate ownership remains unchanged. The judgment clarifies that bona fide internal reorganizations shouldn't trigger tax evasion allegations under Section 132 without evidence of concealment. The court emphasized distinguishing between accounting entries and taxable events during business restructurings. This precedent protects companies undertaking genuine operational reorganizations from undue tax harassment. Tax practitioners recommend businesses document all internal asset transfers with board resolutions and proper fixed asset register entries. While the department may appeal, the ruling could influence pending cases involving internal asset movements. The CBDT might need to clarify guidelines for field officers on assessing such transactions to prevent unnecessary litigation.