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Issues:
- Interpretation of sections 34(3)(b), 155(5), 32A(5), and 155(4A) of the Income-tax Act, 1961 regarding the withdrawal of development rebate and investment allowance. - Application of the provisions when an entire business is sold as a going concern. - Comparison of relevant case laws and Circular No. 63 [F. No. 207/6/70-IT (AII)] dated 16-8-1971 of the CBDT with the current scenario. - Whether the Commissioner (Appeals) was justified in canceling the orders passed by the ITO. Analysis: The appeals before the Appellate Tribunal ITAT NAGPUR involved the interpretation of sections 34(3)(b), 155(5), 32A(5), and 155(4A) of the Income-tax Act, 1961 concerning the withdrawal of development rebate and investment allowance. The case revolved around the sale of an entire business as a going concern by a private ltd. company. The ITO had withdrawn the development rebate and investment allowance previously granted to the assessee when the entire business was sold. The Commissioner (Appeals) held that the provisions under section 155 did not apply in cases where the entire business was sold as a going concern, citing relevant case laws and Circular No. 63 of the CBDT. The Commissioner (Appeals) canceled the ITO's orders, leading to the department appealing before the Tribunal. The department contended that the Commissioner (Appeals) erred in his decision, emphasizing that the provisions of section 155 come into play immediately after the sale or transfer of plants and machinery. The department argued that the sale of the entire undertaking included the sale of plant and machinery, justifying the withdrawal of the development rebate and investment allowance. On the other hand, the assessee's representative supported the Commissioner (Appeals)'s decision, citing case laws and Circular No. 63 to uphold the cancellation of the ITO's orders. The Tribunal analyzed the relevant sections and concluded that the provisions applied when plant or machinery was sold or transferred, without requiring separate pricing for each asset. It held that the sale of the entire business included the plant and machinery, justifying the ITO's actions. The Tribunal distinguished the cited case laws, emphasizing the differences in facts and requirements for separate valuation. It rejected the argument that the matter was debatable, as the language of the sections was clear regarding the treatment of transferred assets. Consequently, the Tribunal vacated the Commissioner (Appeals)'s order and restored the ITO's orders for both assessment years. In summary, the Tribunal's decision clarified the application of relevant sections of the Income-tax Act in cases of business sales, emphasizing that the provisions applied when plant and machinery were sold or transferred, regardless of the sale of the entire business as a going concern. The Tribunal upheld the ITO's withdrawal of development rebate and investment allowance, rejecting the arguments based on cited case laws and Circular No. 63.
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