1992 (5) TMI 50 - AT - Income Tax

Investment allowance withdrawn due to machinery disposal, Tribunal rules. Assessee's appeal dismissed.

The Tribunal upheld the decision of the first appellate authority confirming the withdrawal of the investment allowance under section 155(4A) in relation ... Investment Allowance, Rectification Of Mistakes, S. 10 Issues:Withdrawal of investment allowance under section 155(4A) in relation to assessment year 1980-81 based on the purchase and subsequent disposal of machinery.Analysis:The appeal was made by the assessee against the order passed by the Ld CIT(A) confirming the withdrawal of investment allowance amounting to Rs. 2,55,436 made by the assessing officer under section 155(4A) of the Income-tax Act, 1961, in relation to assessment year 1980-81. The assessee's counsel argued that the withdrawal of investment allowance in relation to certain machinery was not justified as those were simply discarded and sold as scrap. Reference was made to the decision of the Hon'ble Supreme Court in Vania Silk Mills (P.) Ltd. case and the ITAT Delhi 'D' Bench decision in the case of IAC v. Kumar Steels to support the argument. On the other hand, the Senior Departmental Representative supported the orders of the assessing officer and the first appellate authority, emphasizing the distinction between the facts of the present case and the Vania Silk Mills (P.) Ltd. case in terms of machinery disposal. The machinery in question was discarded by the assessee and sold as scrap within a short period, leading to the withdrawal of the investment allowance under section 155(4A).The Tribunal considered the submissions from both sides and analyzed the facts of the case. The disputed machinery, namely the Blasting machine and steel pipe rolling and welding straightening plant, were purchased by the assessee during the relevant assessment year and claimed to have been discarded in a subsequent year. The scrap value of the machinery was realized through sale in a year after 1983-84. The Tribunal noted that while the decisions in the Vania Silk Mills (P.) Ltd. case and the Kumar Steels' case involved machinery discarded due to fire, the present case involved machinery discarded by the assessee's choice. The Tribunal emphasized that the investment allowance was being claimed by estimating the cost of the discarded machinery at the assessee's discretion, which would defeat the purpose of section 155(4A) aimed at preventing misuse of deductions under section 32A. It was observed that the assessee's actions in discarding the machinery and selling the scrap within a short period were in violation of the conditions under law, justifying the withdrawal of the investment allowance. The Tribunal upheld the order of the first appellate authority confirming the withdrawal of the investment allowance and dismissed the appeal filed by the assessee.In conclusion, the Tribunal found that the machinery in question was discarded by the assessee's choice and sold as scrap within a short period, leading to the withdrawal of the investment allowance under section 155(4A). The Tribunal upheld the decision of the first appellate authority and dismissed the appeal, emphasizing the legislative intention behind section 155(4A) to prevent misuse of deductions and the importance of adhering to the conditions provided under law to retain such allowances.