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TMI Blog1984 (8) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Act, 1961 (' the Act '). In the common grounds, it was urged that the Commissioner (Appeals) erred in his decision inasmuch as one of the conditions for grant of investment allowance was that the reserve created should have been utilised for acquisition of new machinery and plant. The relevant facts in brief are that the assessee-firm carries on business in the manufacture and sale of industrial gaskets, conveyor system and allied components and follows financial year as the accounting year. Originally, the firm consisted of five partners. 2. I.G.P. Engineers (P.) Ltd., a newly floated company, was admitted as a partner evidenced by a deed of partnership dated 22-6-1979. On 31-7-1979, the firm was dissolved and the erstwhile business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Board's circular on this point and came to the conclusion that the ITO was not correct in withdrawing the investment allowance. Accordingly, he directed the ITO to restore the investment allowance originally allowed by him. 4. The learned departmental representative was heard at length. He has relied on the orders of the ITO and reiterated the grounds taken by the revenue in these appeals. According to the learned departmental representative, the conditions prescribed in sub-section (4) of section 32A were not fulfilled, viz., the reserve should be utilised for acquiring before expiry of 10 years a new ship or a new aircraft or a new machinery or plant for the purpose of business of the undertaking. Therefore, he urged that the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his order to urge that even the spirit of the circular is in favour of the assessee. 6. We have duly considered rival contentions and the facts of the case. In our opinion, the issue boils down to the question whether the assessee is the successor to the erstwhile firm in terms of section 32A(7) and, consequently, the benefits of sub-sections 6(a) and 6(b) would apply to the assessee or not. A perusal of the rectificatory orders passed by the ITO shows a contradiction in his views inasmuch as he invoked section 155(4A) in first para of his order, while in the third para he mentioned that there was no transfer or sale whatsoever but there was only distribution of assets on dissolution of the firm. Clause (a) of sub-section (4A) of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the erstwhile firm, which has been granted the investment allowance and, therefore, the business has been taken over as a going concern subject to the satisfaction of the dues of the partners by way of allotment of shares and loans. Thus, although there is no sale or transfer of the plant and machinery to the company but only there was distribution of assets among the partners on the dissolution of the firm in terms of the decision of the Supreme Court in the case of Malabar Fisheries Co., nonetheless there was succession to the business by an erstwhile partner and not a third party so as to attract para 3 of the Board's instruction No. 1015, dated 5-10-1976. Therefore, clause (a) of sub-section (4A) of section 155 itself provides fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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