Madras High Court
Wilson Industries vs Commissioner Of Income-Tax on 26 August, 2002
Equivalent citations: (2003)179CTR(MAD)186, [2003]259ITR318(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu, J.
1. The questions referred to us at the instance of the assessee are :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in admitting the additional ground raised by the Revenue ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the investment allowance already allowed for the assessment years 1978-79 to 1981-82 was rightly withdrawn ?"
2. The assessment years are 1978-79 to 1981-82.
3. The assessee is a partnership firm, constituted under the deed dated July 24, 1978. It was subsequently dissolved on September 30, 1981, when, one V. J. John took over all the assets of the firm and continued the business thereafter as a proprietary concern. The investment allowance, which the assessee had claimed on machineries during these years and for which it had also created a reserve, was withdrawn in the proceedings initiated for rectification of the assessment orders already made in which the investment allowance had been granted.
4. In the order made by the Assessing Officer in the rectification proceedings, the withdrawal of the investment allowance was on the ground that the firm had transferred all its assets to one of its partners at the time of dissolution. On appeal, the appellate authority confirmed the order of the Assessing Officer. On further appeal to the Tribunal, the Revenue sought to sustain the disallowance on the ground that Section 155(4A)(b) of the Income-tax Act was attracted as the firm, by reason of its dissolution within three years of its formation, has disabled itself from being in a position to comply with the statutory requirement for claiming the grant and retaining the benefit of investment allowance. The ground so sought to be raised was allowed by the Tribunal to be raised on the ground that no fresh facts were required to be considered. It is now settled by the decision of the Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT , that it is open to the appellate forum to consider a fresh ground, if sought to be raised by the parties, if no new facts are required to be ascertained. It was, therefore, open to the Tribunal to permit the Revenue to raise the ground before the Tribunal. The first question referred is, therefore, answered in favour of the Revenue and against the assessee.
5. Regarding the second question, the law has already been declared by the Supreme Court in the decision reported in South India Steel Rolling Mills v. CIT , wherein, the court while considering the withdrawal of the development rebate that had been initially granted to the assessee held that the benefit of development rebate is available only to the assessee which is owning the machinery or plant and is using it wholly for the purpose of the business carried on by it. The court also observed (headnote) :
"The grant of development rebate under Section 33(1)(a) is subject to the conditions laid down in Section 34(3)(a), which means that the assessee who has obtained the development rebate under Section 33(1)(a) must also be the assessee, who should utilise the amount credited to the reserve account during the period of eight years next following for the purpose of the business of the undertaking for which the development rebate was given. The condition for grant of rebate under Section 33 read with Section 34(3)(a) would not be satisfied, if the assessee who has availed of the rebate ceases to exist before the expiry of the period of eight years."
6. The position in relation to investment allowance is similar. The words used in Section 155(4A)(b) of the Act are :
"at any time before the expiry of ten years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the assessee does not utilise the amount credited to the reserve account under Sub-section (4) of Section 32A for the purposes of acquiring a new ship or a new aircraft or new machinery or plant (other than machinery or plant of the nature referred to in Clauses (a), (b) and (d) of the proviso to Sub-section (1) of Section 32A) for the purposes of the business of the under taking."
7. The "assessee" referred to in this provision is the assessee who had claimed and obtained the benefit of investment allowance. The obligation to utilise the amount credited to the reserve is on that assessee who has claimed and received that benefit and who had created the reserve. When that assessee ceased to exist within the period of ten years, it would be impossible to utilise that amount within the period specified in that section as that amount had remained unutilised even at the time of dissolution. The withdrawal of the investment allowance directed by the Tribunal is in accordance with law. The second question referred is, therefore, also answered in favour of the Revenue and against the assessee.