K.S. Viswanathan, Accountant Member - (1.) WE find it convenient to dispose of these four appeals together. The main issue in all these four appeals is whether the development rebate and investment allowance granted to the assessee for the assessment years 1974-75 and 1978-79 to 1980-81 were properly withdrawn.
(2.) The assessee is a firm having business in oil milling. In the assessment year 1974-75, the assessee had installed certain machineries on which development rebate was allowed amounting to Rs. 98,036. The assessee had made a petition under Section 264 of the Income-tax Act, 1961 ('the Act') to the Commissioner in which certain further reliefs were asked for. The Commissioner in his order had directed the ITO to consider the assessee's pleas and reframe the assessment order accordingly. The ITO passed an order on 6-5-1982 wherein he had considered the issues raised by the assessee in Section 264 proceedings before the Commissioner. For the assessment years 1978-79 to 1980-81, the ITO, in the course of the original proceedings, was satisfied that the assessee was entitled to investment allowance in respect of certain machineries installed by him. He had granted such investment allowances for these three years. The investment allowance for the assessment year 1978-79 was Rs. 6,65,290, for the year 1979-80 was Rs. 10,44,159 and for the year 1980-81 was Rs. 3,91,943. Subsequent to these assessments, the ITO came to know that the assessee had entered into a lease agreement by which these machineries had been leased out to certain parties. We may give the details of the lease at this stage. The lessee is Agarwal Industries and lease deed is dated 12-1-1978. As per the lease deed, the lessor, i.e., the assessee gave on lease all the machinery, plant and manufacturing unit for a period of five years from 1-4-1978 on an annual rent of Rs. 3 lakhs. The reasons for the lease are given in the preamble which says that due to the indifference, lack of interest, withdrawal of funds, etc., by [some of the partners of the lessor firm, the business of the lessor firm is becoming more and more uneconomical and, hence, the managing partner thought it best in the interests of the firm to lease out the industry and machineries. At the end of the lease period, the lessees have to hand over the unit in good running condition, to the assessee. During the continuance of the lease, all major repairs and replacements costing more than Rs. 1,000 shall be done by the lessors and water and electricity charges and other utility charges shall be paid by the lessees.
(3.) WHEN the ITO came to know of this lease, he formed an opinion that the assessee had transferred the machineries on which the investment allowance had been granted. He, therefore, passed an order under Section 155(4A) of the Act for the assessment year 1980-81 withdrawing the investment allowance of Rs. 3,99,943 allowed for that year.;