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TMI Blog2004 (12) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... ance could not be withdrawn u/s 155(4A) X X X X Extracts X X X X X X X X Extracts X X X X ..... or (b) if at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilise the amount credited to the reserve account under sub-section (4) for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the proviso to sub-section (1)] for the purposes of the business of the undertaking; or (c) if at any time before the expiry of the ten years aforesaid, the assessee utilises the amount credited to the reserve account under sub-section (4) for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any assets outside India or for any other purpose which is not a purpose of the business of the undertaking, and the provisions of sub-section (4A) of section 155 shall apply accordingly." Section 155(4A) of the Act reads as under: "155.(4A) Where an allowance by way of investment allowance has been made wholly or partly to an assessee in respect of a ship or an aircraft or any machinery or plant in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so far as the first submission is concerned, it is necessary that the machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the tend of the previous year in which it was installed. This issue stands concluded by a decision of the apex court in the case of Malabar Fisheries Co. v. CIT [1979] 120 ITR 49, wherein the court was called upon to deal with identical controversy in relation to withdrawal of development rebate. In almost similar circumstances, a firm consisting of four partners carrying on six different businesses came to be dissolved and under the deed of dissolution, one of the businesses was taken over by one of the partners, while the remaining five businesses were taken over by two of the other partners. Development rebate granted to the firm was withdrawn on the ground that there was a sale or transfer of the machinery within the meaning of section 34(3)(b) read with section 2(47) of the Act. It was held that: "Having regard to the above discussion, it seems to us clear that a partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assets of the firm is replaced by an exclusive interest in an asset of equal value. That is why it has been held that there is no transfer. It is the realisation of a pre-existing right. The position is different, it seems to us, when a partner brings his personal asset into the partnership firm as his contribution to its capital." Therefore, the aforesaid decision representing a converse situation cannot carry the case of the Revenue any further. It is necessary to take note of two decisions of the Supreme Court. In South India Steel Rolling Mills v. CIT [1997] 224 ITR 654 (SC), the court upheld the action of the Commissioner of Income-tax under section 263 of the Act withdrawing the development rebate by referring to the provisions of section 33(1)(a) read with section 34(3)(a) of the Act. It was observed that the machinery or plant had to be owned by the assessee and wholly used for the purposes of the business carried on by the assessee, and further, that the reserve had to be utilised by the assessee during the period of eight years for the purpose of business of the undertaking. That the said condition could not be stated to have been complied with in the case of a disso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case also, it is not even the case of the Revenue that the machinery which was allotted to the partners on dissolution was subsequently transferred within the statutory period and hence, the ratio in the case of Malabar Fisheries [1979] 120 ITR 49 (SC), as reiterated by the apex court in the case of S. Balasubramanian [1998] 230 ITR 934, would apply on all fours. It is necessary to note that in a subsequent decision in the case of CIT v. Dalmia Magnesite Corporation [1999] 236 ITR 46, the apex court has once again reiterated the position that power under section 155(5) of the Act could not be invoked in the case of dissolution of a firm, because there was no transfer of plant by the assessee-firm. This was a case where the dissolution was automatic on death of one of the partners when the firm was constituted by only two partners. In so far as clause (b) of sub-section (5) of section 32A is concerned, it is stipulated that the investment allowance shall be deemed to have been wrongly granted if at any time within the specified period of ten years, the assessee does not utilise the amount credited to the reserve account. The Revenue contends that in the case of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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