ASSISTANT COMMISSIONER OF INCOME TAX Vs. SHANTINATH SILK MILLS
INCOME TAX APPELLATE TRIBUNAL
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B.M. Kothari, Accountant Member -
(1.) ALL these appeals involve consideration of a common point arising out of a common order passed by the CIT(A) for assessment years 1978-79 to 1980-81. Hence, these are being disposed of by a common order.
(2.) The Assessing Officer passed an order under Section 155(4A) on 6-10-1989 for all the three years under consideration. He issued a show-cause notice to the assessee stating that investment allowance reserve created in assessment 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before the expiry of 10 years in S.Y. 2041 and, therefore, investment allowance originally allowed is required to be withdrawn under Section 155(4A) of the Act.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 mentioned in the said letter that they have debited the investment allowance reserve account in S.Y. 2041 (assessment year 1986-87) specifically stating in the entry passed that because new machinery was purchased during the year that amount is debited to the investment allowance reserve and credited to partners' account. According to the assessee all the conditions required for retention of the investment allowance have been fulfilled as the amount of investment allowance reserve has actually been utilised in S.Y. 2041 for purchase of new machinery. Therefore, the proposed action of withdrawing the investment allowance originally allowed in the respective years is contrary to the provisions of law.
2.1 The Assessing Officer observed that since the amount of investment allowance reserve has been debited and the amount has been credited to partners' capital account this tantamounts to distribution of profits amongst the partners. He further observed that after purchase of new machinery in S.Y. 2041 the amount of investment allowance reserve created in the earlier years could have been transferred from investment allowance reserve account to the investment allowance utilisation account but could not have been transferred to partners' capital account. He, therefore, passed the order under Section 155(4A) withdrawing the amount of investment allowance granted in the respective years. The details of investment allowance reserve created in the respective years, and investment allowance originally granted and withdrawn by the impugned order under Section 155(4A) are as under:
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).
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 jurisdiction to take recourse to Section 155(4A) of the Act. He, accordingly, cancelled the orders passed under Section 155(4A) and allowed all three appeals, of the assessee. The revenue is aggrieved against the said order of the CIT).
(3.) THE learned Sr. D.R. strongly relied on the reasons mentioned in the order under Section 155(4A). He submitted that in view of the elaborate reasons given by the Assessing Officer in the said orders, the CIT(A) ought to have confirmed the same.;
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