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TMI Blog2008 (2) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. JUDGMENT The judgment of the court was delivered by D. A. Mehta J.— The following two questions have been referred by the Income-tax Appellate Tribunal, Ahmedabad Bench "B", under section 256(2) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, Surat : "1. Whether, on the facts and in the circumstances of the case and in law, the hon'ble ITAT was right in holding that by crediting the partners, capital account by the amount standing to the credit of the investment allowance reserve account does not result in distribution by way of profit of such reserve in a case where the assessee has utilised the amount credited to the investment allowance reserve account for the purpose of acquiring ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1979-80 and Rs. 1,93,125 for the assessment year 1980-81 which was the investment allowance granted in the respective years. 3 . The assessee carried the matter in appeal before the Commissioner (Appeals), who came to the conclusion that the action of the Assessing Officer was bad in law as the assessee had in fact purchased new machineries valued at an amount higher than the amount standing to the credit of investment allowance reserve account. That the transfer of the amount of reserve thereafter to the capital account of the partners did not constitute violation of any of the provisions contained in section 32A(5) of the Act. 4 . The Revenue carried the matter in second appeal before the Tribunal. The Tribunal, for the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 :" 7 . On a plain reading it becomes apparent that any investment allowance granted under section 32A of the Act shall be deemed to have been wrongly granted if any one of the three conditions laid down in clauses (a), (b) and (c) are shown to have been violated. Clause (a) entitles the Assessing Officer to withdraw the investment allowance if the ship, aircraft, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case both the Commissioner (Appeals) and the Tribunal have concurrently found that the assessee had utilized the amount standing to the credit of the investment allowance reserve account for purchase of new machinery and plant; that in fact the value of the purchases of new machinery and plant was greater than the amount standing credited in the reserve account. That such purchases of new machinery and plant had taken place before the expiry of ten years from the end of the previous year in which the machinery or plant had been installed for which investment allowance had been granted. That year is samvat year, 2041, i.e., eight years from samvat year 2033. 9 . It is nobody's case that there is any violation of the conditions sti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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