1998 (1) TMI 97 - AT - Income Tax

Summary

Issues Involved:
1. Withdrawal of investment allowance under section 154 read with section 155(4A) of the Income-tax Act, 1961.
2. Violation of provisions of section 32A(5)(a) and (b) of the Income-tax Act, 1961.
3. Jurisdiction of the Income-tax Officer (ITO) to pass the impugned order.

Issue-wise Detailed Analysis:

1. Withdrawal of Investment Allowance under Section 154 read with Section 155(4A):

The assessee challenged the order dated 15-9-1992 by the CIT(A), Jammu, which confirmed the ITO's order withdrawing the investment allowance granted for the assessment years 1982-83 and 1983-84. The ITO had withdrawn the allowance under section 154 read with section 155(4A) due to the assessee's violation of section 32A(5)(a) and (b). The ITO observed that the assessee sold the machinery before the expiry of eight years, violating section 32A(5)(a). The assessee contended that section 155(4A) was not applicable and that the investment allowance reserve had been utilized for purchasing new machinery, thus no allowance remained to be withdrawn. The ITO rejected this, noting that the investment allowance reserve was not utilized for the purchase of new machinery, as evidenced by the balance sheet entries and the transfer of the reserve to the Profit and Loss Account in the assessment year 1989-90.

2. Violation of Provisions of Section 32A(5)(a) and (b):

The assessee argued that it had fulfilled the conditions of section 32A(5)(b) by utilizing the investment allowance reserve within ten years for purchasing new machinery, thus complying with the statutory requirements. The CIT(A) and the ITO found that the assessee had violated section 32A(5)(a) by selling the machinery before the expiry of eight years. Additionally, the ITO noted that the investment allowance reserve was not utilized for purchasing new machinery, as the reserve remained intact until the assessment year 1988-89 and was later transferred to the Profit and Loss Account. The Tribunal agreed with the authorities, stating that the conditions under section 32A(5)(a), (b), and (c) are independent and any violation of these conditions warrants the withdrawal of the investment allowance. The Tribunal emphasized that the legislative intent was clear, and the use of the word "or" between the conditions indicated that any single violation would trigger the withdrawal.

3. Jurisdiction of the Income-tax Officer (ITO):

The assessee questioned the jurisdiction of the ITO, who passed the impugned order, arguing that the jurisdiction had been transferred to the IAC (Asstt.), Amritsar. The Tribunal examined the Directorate of OSM Services' instructions and the CIT, Amritsar's orders, which authorized ITOs attached to the DCIT, Special Range, Amritsar, to exercise powers relating to assessment work, including rectification under section 154. The Tribunal concluded that the ITO, Shri R.K. Sood, had the jurisdiction to pass the order, as he was duly authorized by the relevant instructions and orders.

Conclusion:

The Tribunal dismissed the appeals, upholding the CIT(A)'s and ITO's decisions. The authorities correctly interpreted and applied the provisions of section 32A(5)(a) and (b), and the ITO had the jurisdiction to pass the impugned order. The assessee's arguments were found to be without merit, and the investment allowance was rightly withdrawn.