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TMI Blog2001 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... see cannot be withdrawn?" The facts of the case are that the respondent-assessee which is a registered firm had installed new machinery during the relevant previous year of the value of Rs. 2,07,017 on which investment allowance under section 32A was claimed which came to Rs. 51,754. As required under law, the assessee had created reserve for Rs. 39,000 for the purpose of making the above claim for investment allowance. This allowance was allowed, while computing the assessment originally made under section 143(3) on March 31, 1980. After the close of the previous year relating to the assessment year 1979-80, the firm was dissolved on October 22, 1979, and the assets and liabilities of the firm were distributed amongst the four partners, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibution of assets on the dissolution of a firm does not amount to utilisation of the amount of reserve fund in contravention of the provisions of section 32A(4). In the aforesaid facts and circumstances, the Tribunal has raised the above question of law and referred it to this court for its decision. We have heard Mr. Sandeep Bhandawat, learned counsel for the Revenue, and Mr. Vineet Kothari, learned counsel for the assessee. The relevant provision of section 32A(5)(c) of which breach is alleged reads as under: "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 Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falls for consideration is whether distribution of assets on the dissolution of a firm amongst partners amounts to utilisation of amount credited to the reserve account under sub-section (4) of section 32A for distribution by way of dividends or profits or for any other purpose which is not a purpose of the business of the undertaking so as to invoke the provision for deeming the investment allowance having been wrongly allowed enabling the Assessing Officer to rectify the assessment order in terms thereof. We are of the opinion that the matter stands concluded by the decision of the Supreme Court in the case of Malabar Fisheries Co. v. CIT [1979] 120 ITR 49. The controversy before the apex court had arisen in the wake of an identical p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the previous year in which the sale or transfer took place or the money was so utilised." The Supreme Court, considering the question in the light of distribution of assets on the dissolution of a firm, said: "A partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or the firm's assets all that is meant is property or assets in which all partners have a joint or common interes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs is not done by the dissolved firm. In this sense, there is no transfer of assets by the assessee (dissolved firm) to any person, It is not correct to say that the distribution of assets takes place eo instanti with the dissolution of the firm or that it is effected by the dissolved firm." In conclusion, the Supreme Court held that in the case of distribution of assets on the dissolution of a partnership firm, section 34(3)(b) was not applicable and, consequently, the development rebate allowed to the firm could not be withdrawn on such distribution of assets under section 155(5). The same principle applies while considering the utilisation of the amount credited to the reserve account in the case of investment allowance. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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