TaxTMI 
TaxTMI 
1997 (1) TMI 126
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....il, 1987 placed at pages 26 and 27 of the paper book). Since the plant and machinery, on which investment allowance had been allowed was transferred before the expiry of 8 years, from the end of the previous year, in which it was installed, the investment allowance was liable to be withdrawn under section 155(4A), read with section 32A(5), of the Income-tax Act, 1961. The Assessing Officer issued a notice under section 154 dated 23-10-1991. The Assessing Officer observed that no satisfactory reply was received from the assessee. He placed reliance on the clarification given by the Ministry of Law conveyed to his office vide letter No. RA/IT/FED/91-92 /1275-1276 dated 26-11-1991 of the Chief Auditor clarifying that the leasing out of the plant and machinery is treated as transfer. Hence, the investment allowance allowed to the assessee as per details mentioned hereunder was withdrawn by the aforesaid order under section 154 : Assessment Amount withdrawn Year 1981-8....
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....t High Court in the case of Kalindi Investment (P.) Ltd. v. CIT [1995] 213 ITR 207/79 Taxman 62 to support his contention that the concept of 'mistake apparent from record' as envisaged under section 154 cannot be read as such into section 155. The exercise of power under section 155 is not hedged in by the condition of there being a mistake apparent on the face of record in all cases but depends on the coming into existence of certain facts envisaged under section 155 which may result in making the entire order erroneous. If for establishing the jurisdictional fact, inquiry into a debatable issue of fact and law is to be gone into that jurisdiction is inherent in the exercise of power under section 155. 5.1 The learned Departmental Representative also placed reliance on judgment of Hon'ble Calcutta High Court in the case of CIT v. East India Cold Storage (P.) Ltd. [1996] 218 ITR 668. In this case, the ITO completed the original assessment of the assessee for assessment year 1979-80 allowing investment allowance under section 32A of the Income-tax Act, 1961 on plant and machinery of cold storage and also allowed deduction in respect of profits and gains from the cold storage und....
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....s. Oswal Electricals. The firm accordingly entered into an agreement with M/s. Oswal Electricals on 1-8-1986 by which they leased out all their assets including plant and machinery to M/s. Oswal Electricals w.e.f. 1-8-1986 at a rent of Rs. 40,000 p.m. This agreement was valid up to 31-3-1987. On 1-4-1987, a fresh lease agreement was entered into between the assessee and M/s. Oswal Electricals for continuing the leasing of the machines in question at the rate of Rs. 30,000 p.m. It has also been stated in the said application and the affidavit that the question relating to allowability of lease rent paid by M/s. Oswal Electricals to the assessee came up for consideration in the assessment proceedings of M/s. Oswal Electricals for assessment year 1987-88. M/s. Oswal Electricals submitted a letter dated 31-1-1989 to their Assessing Officer along with copy of lease agreement dated 1-8-1986. The matter regarding allowability of the lease rent in the case of M/s. Oswal Electricals travelled up to the Tribunal. The Tribunal vide order dated 30-6-1993 in ITA Nos. 204 & 7506/Del/96 for assessment years 1988-89 and 1989-90 respectively allowed deduction in respect of the said lease rent in th....
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....read with section 154(7) within 4 years from the end of the previous year in which the transfer took place. Thus the Assessing Officer could pass the order on or before 31st March, 1992. The Assessing Officer had already passed the impugned order under section 154 on 20th January, 1992 which was well within the prescribed time limit. The learned Departmental Representative also placed reliance on the judgment of the Hon'ble Supreme Court in the case of Hind Wire Industries Ltd. v. CIT [1995] 212 ITR 639/80 Taxman 79 in which it was held that the word 'order' in the expression 'from the date of the order sought to be amended' in section 154(7) was not clarified in any way. It did not necessarily mean the original order, it could be any order including the amended or rectified order. On the strength of this judgment, the learned Departmental Representative submitted that the period of 4 years prescribed in section 154(7) should be reckoned with reference to the lease dated 1-4-1987. If that is done, the order passed by the Assessing Officer is perfectly within time. 5.5 The learned Departmental Representative thus strongly urged that the order of the DC(A) should be set aside and ....
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....itted that the judgment of Hon'ble Calcutta High Court in East India Cold Storage (P.) Ltd's case relied upon by the learned Sr. Departmental Representative does not lay down the correct law as the earlier two judgments of Hon'ble Calcutta High Court referred to in the preceding para were not even brought to the notice of Hon'ble Calcutta High Court in the aforesaid case. 6.3 The learned counsel was fair enough to draw our attention towards various important judgments on the effect of the subsequent decision of the Supreme Court in relation to rectification of orders under section 154 regardless of the fact whether a particular judgment was in favour of the assessee or was against the assessee. 6.4 He invited our attention towards the judgment of Hon'ble Maharashtra High Court in Walchand Nagpur Industries Ltd. v. V.S. Gaitonde, ITO [1962] 44 ITR 260 in which it was held that effect of the decision of the Supreme Court was that the levy of excess dividend tax was at no time good and therefore, the assessment order made by the ITO levying excess dividend tax was bad at its inception on the date it was made, notwithstanding that the decision of the Supreme Court was given subse....
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.... prescribed in these sections. For this purpose, he placed reliance on the judgment in CIT v. Sir Shadilal Sugars & General Mills [1978] 114 ITR 729 (All.). 6.9 The learned counsel for the assessee submitted that the application submitted under rule 10 of the Income-tax Appellate Tribunal Rules, 1963 accompanied by an affidavit of Shri R.K Jain clearly proves the fact already existing on the assessment records of the company that it had given its plant and machinery on lease to M/s. Oswal Electricals w.e.f. 1-8-1986. The audited Profit and Loss account for the year ended on 31st March, 1987 clearly shows that the appellant had received rent amounting to Rs. 3,20,000. The monthly lease rent was Rs. 40,000 p.m. The lease rent for 8 months comes to Rs. 3,20,000. The fact of existence, of such a lease deed dated 1-8-1986 was also produced in the case of M/s. Oswal Electricals as is indicated in the letter dated 31-1-1989 submitted to the DCIT in the case of assessment proceedings of M/s. Oswal Electricals for assessment year 1987-88. Therefore, such a fact should be taken on record for the purposes of deciding this appeal. He invited our attention towards the lease deed dated 1-8-19....
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....aid clarification issued by the Ministry of Law without applying his mind. The order passed by the Assessing Officer also deserves to be cancelled on this ground. The learned counsel thus strongly urged that the order passed by the DC(A) should be confirmed on the aforestated ground even if it is found that the reasons given by the DC(A) in the order passed by him no longer survive in view of the judgment of the Hon'ble Supreme Court in the case of Narang Dairy Products. 7. We have carefully considered the rival submissions made by the learned representatives of the parties. We have also carefully gone through all the judgments cited by the learned representatives of both sides. The following principles of law can be deduced from a careful study of all the judgments relied upon by the learned representatives of the parties : (a) The effect of the Supreme Court decision by virtue of the provisions of the Constitution is that the Supreme Court declares the law of the land and it must be held to have been always the law of the land. (b) The subsequent judgment of the Hon'ble Supreme Court can be a valid foundation for passing a rectification order under section 154/155 provid....
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....acture of milk powder. The Assessing Officer had originally allowed development rebate in assessment year 1965-66 on the entire plant and machinery owned by the assessee and used for the said business. A part of the machinery was subsequently sold. The machinery that was left entitling the assessee to the development rebate for the said year was determined at Rs. 85,222. This machinery was let out by the assessee on 27th August, 1969 to M/s. Hindustan Lever Ltd. for a period of three years with a provision for renewal of the agreement or for outright purchase. In these circumstances, the ITO by an amendment order dated 30th March, 1970 withdrew the development rebate originally granted to the assessee for assessment year 1965-66. It was held by the Appellate Tribunal and the High Court that no transfer was involved by the lease agreement and so section 34(3)(b) of the Act was not attracted. The Hon'ble Supreme Court held that in cases where the machinery or plant is not wholly used by the assessee for the purposes of business carried on by him, for the specified period and such user is given on hire to another, it can be safely stated that the machinery or plant is 'otherwise trans....
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.... necessary amendments and the provisions of section 154 shall, so far as may be, apply thereto. It further provides that the period of 4 years as specified in sub-section (7) of section 154 shall be reckoned in such cases from the end of the previous year in which the sale or other transfer took place. 9. In view of the aforesaid judgment of the Hon'ble Supreme Court in the case of Narang Dairy Products and in view of the similarity of the provisions relating to withdrawal of development rebate and investment allowance, we are of the opinion that the giving of the plant and machinery by the assessee on lease to M/s. Oswal Electricals comes within the meaning of expression 'otherwise transferred' used in sections 32A(5) and 155(4A). 10. However, the action for rectification and withdrawal of investment allowance by the Assessing Officer can be taken only within the time limit prescribed under section 155(4A)(i). The said provision clearly provides that said withdrawal of investment allowance can be made within a period of 4 years from the end of the previous year in which the sale or otherwise transfer took place. In the present case, the assessee has placed on record the nece....
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....ated 1-8-1986, it cannot again be treated as having been re-transferred on every occasion when a fresh lease deed is executed or the term of the original deed is renewed by executing fresh lease agreements on the expiry of the period of earlier lease. If such an interpretation as contended by the learned Departmental Representative is accepted, the event of transfer would take place at all times as and when the lease deed is renewed or the fresh lease is granted in favour of the other person. It is only the first event of transfer which would attract the provisions relating to withdrawal of investment allowance. Once the machinery has already been transferred, the question of its repeated transfer or re-transfers would not at all be relevant for deciding the question relating to withdrawal of investment allowance. Therefore, the withdrawal of investment allowance or development rebate will necessarily have to be co-related with the event of first transfer. The reliance placed by the learned Departmental Representative on the judgment of Hon'ble Supreme Court in the case of Hind Wire Industries Ltd. also does not in any manner support his aforesaid contention. In that case, it was h....