2002 (8) TMI 42 - HC - Income Tax

1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in admitting the additional ground raised by the Revenue? - 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the investment allowance already allowed for the assessment years 1978-79 to 1981-82 was rightly withdrawn? both questions referred is, therefore, also answered in favour of the Revenue and against the assessee.

Summary

Issues:
1. Admissibility of additional ground raised by Revenue.
2. Withdrawal of investment allowance for assessment years 1978-79 to 1981-82.

Analysis:

Issue 1: Admissibility of additional ground raised by Revenue
The case involved the admissibility of an additional ground raised by the Revenue regarding the withdrawal of investment allowance for the assessment years 1978-79 to 1981-82. The firm, which was constituted as a partnership and later dissolved, had claimed investment allowance on machineries. The Assessing Officer withdrew the investment allowance during rectification proceedings, stating that the firm had transferred all its assets to one of its partners upon dissolution. The Appellate Authority and Tribunal upheld this withdrawal. The Tribunal allowed the Revenue to raise a new ground under section 155(4A)(b) of the Income-tax Act, as no new facts were required. The Tribunal's decision was supported by the Supreme Court's ruling in National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383, allowing consideration of fresh grounds without new facts. Thus, the first issue was decided in favor of the Revenue.

Issue 2: Withdrawal of investment allowance
The second question revolved around the withdrawal of investment allowance already granted to the firm for the mentioned assessment years. Citing the Supreme Court's decision in South India Steel Rolling Mills v. CIT [1997] 224 ITR 654, it was established that the benefit of development rebate or investment allowance is available only to the assessee owning and using the machinery or plant for business purposes. The law requires the assessee availing the rebate to exist and utilize the reserve amount for business purposes for a specified period. In this case, as the firm ceased to exist within the ten-year period, it became impossible to utilize the reserve amount, justifying the withdrawal of the investment allowance. The Tribunal's decision aligning with the legal provisions was upheld, answering the second issue in favor of the Revenue.

In conclusion, the High Court of Madras upheld the withdrawal of the investment allowance for the mentioned assessment years based on legal provisions and precedent, ruling in favor of the Revenue on both issues raised in the case.