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2015 (2) TMI 18 - HC - Income TaxInvestment allowance granted in A.Y. 1983-84 and adjusted in A.Y. 1990-91 withdrawn in the year under consideration merely on cessation of some liabilities which is said to be taxable u/S 41(1) - Held that - On plain reading of section 155(4A) of the Income Tax Act, we find substance in the contention of learned senior advocate for the appellant-assessee that the conditions which have been enumerated in clause 4A of Section 155 of the Income Tax Act are not fulfilled by the revenue. Therefore, we hold that the tribunal was not right in law in holding that investment allowance granted in A.Y. 1983-84 and adjusted in A.Y. 1990-91 can be withdrawn in the year under consideration - Decided in favour of assessee. Depreciation granted earlier withdrawn and taxed as income u/s 41(1) - Held that - Insofar as this question is concerned, it appears from the record that the Tribunal has decided the appeal solely on the basis of the decision of the Bombay High Court in the case of Nectar Beverages (P) Ltd. v. Deputy Commissioner of Income Tax, 2004 (2) TMI 49 - BOMBAY High Court . However, the said decision of the Bombay High Court has been reversed by the Apex Court in the case of Nectar Beverages (P) Ltd. v. Deputy Commissioner of Income Tax, reported in 2009 (7) TMI 5 - SUPREME COURT , therefore the question raised in this appeal is required to be answered in favour of the assessee and hold that the Tribunal was not right in law in holding that depreciation granted earlier can be withdrawn and taxed as income u/s 41(1) of the Act - Decided in favour of assessee. Enhancement of income - Held that - Insofar as this question is concerned, in view of the decision of the Apex Court in the case of Micorp Global P. Ltd. v. Commissioner of Income Tax (2009 (2) TMI 5 - SUPREME COURT), the same is also required to be answered in favour of the assessee.
Issues Involved:
1. Withdrawal of investment allowance under Section 41(1) of the Income Tax Act. 2. Withdrawal and taxation of previously granted depreciation as income under Section 41(1) of the Income Tax Act. 3. Enhancement of the appellant's income by the Income Tax Appellate Tribunal. Detailed Analysis: Issue 1: Withdrawal of Investment Allowance The appellant-assessee contested the Tribunal's decision that allowed the withdrawal of investment allowance granted in the Assessment Year (A.Y.) 1983-84 and adjusted in A.Y. 1990-91, arguing that the cessation of some liabilities taxable under Section 41(1) of the Income Tax Act did not justify such withdrawal. The court examined Section 155(4A) of the Income Tax Act, which specifies conditions under which investment allowance can be withdrawn. The court found that the conditions enumerated in Section 155(4A) were not fulfilled by the revenue. Consequently, the court held that "the tribunal was not right in law in holding that investment allowance granted in A.Y. 1983-84 and adjusted in A.Y. 1990-91 can be withdrawn in the year under consideration." Thus, this issue was resolved in favor of the assessee. Issue 2: Withdrawal and Taxation of Depreciation The appellant-assessee argued that the Tribunal's decision to withdraw previously granted depreciation and tax it as income under Section 41(1) was incorrect, citing the Apex Court's ruling in Nectar Beverages P. Ltd. v. Deputy Commissioner of Income Tax. The court noted that the Tribunal had relied on a reversed decision by the Bombay High Court in Nectar Beverages (P) Ltd. v. Deputy Commissioner of Income Tax. The Apex Court had clarified that assets depreciated at 100% before 31.03.1995 did not form part of the block of assets and were not taxable under Section 41(1) or Section 50. Therefore, the court concluded that "the Tribunal was not right in law in holding that depreciation granted earlier can be withdrawn and taxed as income u/s 41(1) of the Act." This issue was also resolved in favor of the assessee. Issue 3: Enhancement of Income The appellant-assessee argued that if the first two questions were resolved in their favor, the third question regarding the Tribunal's enhancement of income would become academic. However, they still relied on the Apex Court's decision in Micorp Global P. Ltd. v. Commissioner of Income Tax. The court agreed, noting that the Tribunal's enhancement of income was unfounded. The Apex Court had emphasized that unproven transactions could not justify income enhancement or depreciation claims. The court held that "the Tribunal was not right in law in enhancing the income of the appellant." Conclusion The court allowed the appeal, quashing and setting aside the Tribunal's order. All questions of law raised in the appeal were answered in favor of the assessee and against the revenue.
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