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TMI Blog1981 (7) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... which the machinery and plant were allotted to the two coparceners at their written down value. After the partition, the two members sold the said machinery and plant allotted respectively to them to the Gemini Pictures Circuit Private Ltd. On coming to know of the sale within a period of eight years from their installation the ITO proposed by his letter dated 6th February, 1971, to withdraw the development rebate on the ground that the machinery had been sold within the statutory period. For the assessee-family it was contended before the ITO that the person to whom the development rebate was allowed, namely, the HUF, did not sell or transfer the same and that s. 155(5) of the Act would not be attracted. This contention was rejected by the ITO and he passed orders withdrawing the development rebate allowed for the relevant assessment years 1960-61 to 1965-66. On appeal, the AAC upheld the order of the ITO and the assessee carried the matter in appeal to the Tribunal. The Tribunal held that the provisions of s. 34(3)(b) were not attracted, since the HUF to whom the development rebate was originally granted did not sell or otherwise transfer the machinery and plant before the expir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which the provisions came to be attracted. Section, 155(5) provides that where an allowance by way of development rebate has been made wholly or partly to an assessee in respect of the machinery or plant installed and subsequently at any time before the expiry of eight years from the end of the previous year in which the machinery or plant was installed, the said machinery or plant was sold or otherwise transferred by the assessee " to any person other than the Government or in connection with any amalgamation or succession, or at any time before the expiry of the period of eight years the amount is utilised for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India or for any other purpose which is not a purpose of the business of the undertaking, then the development rebate originally allowed is to be deemed to have been wrongly allowed, and the ITO is authorised to recompute the total income of the assessee for the relevant previous year and make the necessary amendment to the assessment by rectification. The provisions of s. 154, in so far as they are necessary, would apply to such an amendment, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceased to utilise the amount credited to the reserve for the purpose of its business. When the HUF has ceased to exist then there is no question of its being in a position to utilise the amount or the amount being utilised by it for any other purpose. With the disappearance of the joint family, the capacity to utilise the amount transferred to the reserve for any offending purpose set out in the provision also ceases. Therefore, on a plain reading of the provision, it is not possible to hold that s. 155(5) is attracted. The learned counsel for the Revenue drew our attention to two decisions. One is reported in Addl. CIT v.. Dalmia Magnesite Corporation [1979] 117 ITR 930 (Mad). In that case, the assessee was a firm consisting of three limited companies as partners with equal shares. The firm carried on an industrial undertaking for prospecting of magnesite ores and manufacture of dead burnt magnesite. On June 16, 1959, there was a change in the constitution of the firm by the retirement of two of the partners. Certain changes took place also as a result of a scheme framed by the High Court. On 1st January 1964, the firm ceased to exist by virtue of the fact that one of the two pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rebate should not be granted to the assessee. But as far as this part of the decision is concerned, we have to consider it in the light of a decision of the Supreme Court in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 (SC). That was a case of a firm consisting of four partners carrying on six different businesses. During the accounting period relevant to the assessment years 1960-61 to 1963-64, the firm had installed various items of machinery in respect of which it received development rebate in its respective tax assessments under s. 33. The firm was dissolved on 31st March, 1963, and under a deed of dissolution one of the firm's businesses was taken over by one of the partners, and the other five by two of the other partners. The fourth partner received a large sum in lieu of his share in the assets of the firm. The question was whether the rebate allowed to the firm could be withdrawn on the ground that there was a sale or transfer of the machinery within the meaning of s. 34(3)(b) read with s. 2(47). It was held that s. 34(3)(b) was not applicable to the case and the development rebate allowed to the firm could not be withdrawn. At p. 54, their Lordships observed: " Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the problem before us. We have already adverted to the contention of the learned counsel for the Commissioner that s. 34(3)(a) and (b) are the provisions with reference to which s. 155(5) has been brought into the statute and that it may not be proper to look at s. 34(3)(b) alone for seeing whether s. 155(5) applies or not. In s. 155(5), apart from the sale or transfer by the assessee, cl. (ii) provides for situations where the assessee utilises the amount credited to the reserve for distribution of dividends, for remittances outside India and for any purpose which is not a purpose of the business of the undertaking. It is possible to apply s. 155(5) with reference to this situation provided all of them are done by the assessee. For instance, a distribution by way of dividends is possible only by a company which is in existence. Similarly, distribution of profits is possible only by an assessee who continues his business. As regards remittances outside India or creation of assets outside India the position is in no way different and the Person who created the asset outside India must exist. The position cannot be different when we come to cl. (c) of s. 155(5)(ii), that is, the ut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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