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TMI Blog1993 (12) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years 1978-79 to 1980-81 has been utilised for distribution as profit amongst the partners before the expiry of 10 years in S.Y. 2041 and, therefore, investment allowance originally allowed is required to be withdrawn under section 155(4A) of the Act. The assessee submitted letter dated 5th July, 1989 before the Assessing Officer in which it was, inter alia, submitted that they have utilised the investment allowance reserve for acquiring the new machinery and have thereafter debited the investment allowance reserve account with a corresponding credit to partners' account. Copies of investment allowance reserve account from S.Y. 2036 till S.Y. 2041 and copy of machinery account of S.Y. 2041 were also submitted. It was further mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... originally granted and withdrawn by the impugned order under section 155(4A) are as under: Assessment year Investment allowance Investment allowance Reserve withdrawn 1978-79 9,38,000 9,93,099 1979-80 1,54,000 1,56,626 1980-81 1,79,601 1,93,125 ---------------- ---------------- 12,71,601 13,43,900 -------------------------------- The assessee purchased new plant and machinery aggregating to Rs. 14,51,597 as mentioned at page 6 of the order passed by the learned CIT(A). 3. The CIT(A) held that as the assessee in fact purchased new machineries of a higher amount and thereafter transferred the amount of reserve, there is no violation of the provisions contained in section 32A(5). Consequently the Assessing Officer had no ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous year in which it was acquired or installed, or (b) if at any time before expiry of 10 years the assessee does not utilise the amount credited to the investment allowance reserve account for the purpose of acquiring new machinery or plant for the purposes of the business of the undertaking, or (c) if at any time before the expiry of the 10 years aforesaid, the assessee utilises the amount credited to the reserve account for distribution by way of profits or dividends or for remittance outside India as profits or for creation of any assets outside India, or for any other purpose, which is not a purpose of the business of the undertaking. In such an event the provisions of section 155(4A) will apply. The fact that the assessee acquir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chinery in accordance with clause (b) of section 32A(5). The proper construction of the two relevant sub-clauses (b) (c) of section 32A(5) means that the provisions of law require the assessee either to utilise the amount for purchase of new plant and machinery at any time before the expiry of 10 years and in case the assessee cannot utilise that amount for purchase of new plant and machinery within the prescribed period of 10 years, the assessee, for that block of 10 years' period, should not utilise that amount of reserve for distribution by way of dividends or profits or for other prohibitive or non-business purposes prescribed in sub-clause (c) of section 32A(5). In the present case, the assessee has duly complied with the condition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs' capital account. Transferring it to partners' capital account instead of investment allowance utilisation account tantamounts to distribution of profits, according to the Assessing Officer. The manner of making a book keeping entry or the account to which the amount of investment allowance reserve, after it has been utilised for purchase of plant and machinery would not in substance make any difference and will not disentitle the assessee to retain the benefit of investment allowance originally granted in all the years under consideration. 8. The Hon'ble Gujarat High Court in the case of Karamchand Premchand (P.) Ltd., after elaborately considering the similar provisions of sections 33, 34 and 155 relating to development rebate held a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been distributed from the general reserve out of the nucleus provided by the balance carried forward from the development rebate reserve account. We have already seen earlier that this apprehension was misconceived as in fact and also in law, dividend had to be distributed out of profits and there were huge amount of profits available for meeting the amount of Rs. 29,000 by way of dividend which was distributed. Consequently, on the facts of this case, there was no escape from the conclusion that all the conditions precedent as contemplated by section 33 read with section 34(3)(a) of the Act were satisfied by the assessee for not only earning development rebate but for retaining it and the prohibited purposes enumerated by section 34(3)(a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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