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TMI Blog1987 (6) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... granted investment allowance. For the two assessment years deduction of Rs. 27,000 and Rs. 31,471 were allowed as investment allowance. In the accounting year relevant to the assessment year 1983-84, the assessee formed a partnership firm and he transferred his sole proprietary business to the firm. The ITO as well as the AAC had referred to the provisions of section 32A and by considering the words contained therein ' sold or otherwise transferred '. The conclusion arrived at was the plant and machinery have been transferred by the assessee to another person and, accordingly, the investment allowance earlier granted should be withdrawn u/s 155(4A). 3. The plea of the assessee before us was that the term " sale or otherwise transfer " mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re purchased in 1981-82, therefore, to that extent it would be wrong to hold that investment allowance already granted for assessment year 1980-81 should be withdrawn. 4. The learned departmental representative relied on the Supreme Court decision in the case of Kartikeya V. Sarabhai v. CIT [1985] 156 ITR 509 where they have clearly held introduction of any asset by a partner into firm as his capital contribution results in a transfer and, therefore, the authorities below have rightly held that investment allowance already granted should be withdrawn in the facts of the case. 5. We have given our careful considerations to the arguments advanced by the parties. Section 32A(5)(a) reads as under : " 32A(5)(a) : if the ship, aircraft, mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate entities under the Income-tax Act for assessment purposes. When the issue is approached from this point of view it appears that since the individual is a separate entity, who had introduced the plant and machinery to the firm which is another person for assessment purpose under the said Act could be said to have otherwise transferred the said plant and machinery. Even from the point of view of general law, a proprietor, who is a sole owner of a property after introducing the said property in the firm's business his rights in the property gets reduced as he cannot claim 100 per cent ownership of the said plant and machinery. 7. The plant and machinery is a capital asset and since by introducing the plant and machinery into firm's busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , this argument of the assessee has no merit at all. The case laws relied on by the assessee on Hind Construction Ltd.'s case and Malabar Fisheries Co.'s case both of the Supreme Court have been considered by their Lordships of the Supreme Court in the case of Kartikeya V. Sarabhai. Since there is a change of person as regards ownership of the capital asset and is, therefore, covered squarely by the term ' otherwise transferred ' which has made us to come to this conclusion that in cases of conversion of said proprietary business to a partnership business the investment allowance granted to the proprietorship business is necessarily to be withdrawn in its hands. One other argument advanced by the assessee was that sub-section (7) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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