AI Drafter 
TaxTMI 
TaxTMI 
2004 (12) TMI 42
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....ectively. However, the Assessing Officer, acting under the provisions of section 155(4A) of the Act, withdrew the investment allowance originally granted on the ground that, as the firm was dissolved on March 31, 1978, the assets in question had been transferred to the partner, who had taken over the same from the assessee-firm; and the second ground was that, under section 32A(5)(b), it was not possible for the assessee-firm to utilise the reserve within the statutory period of ten years for purchasing new machinery or plant as required by the section. The assessee carried the matter in appeal for both the years and succeeded before the Commissioner of Income-tax (Appeals). The Revenue carried the matter in second appeal before the Tribunal. The Tribunal, for the reasons stated in its order dated December 31, 1990, upheld the order of the Commissioner of Income-tax (Appeals), holding that there was no justification for withdrawing the investment allowance granted to the assessee. Heard learned standing counsel for the Revenue. It is submitted that when the firm was dissolved, all the assets belonging to the firm were transferred to the erstwhile partner who took over the ent....
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....ction 155 shall apply accordingly." Section 155(4A) of the Act reads as under: "155.(4A) Where an allowance by way of investment allowance has been made wholly or partly to an assessee in respect of a ship or an aircraft or any machinery or plant in any assessment year under section 32A and subsequently- (a) at any time before the expiry of eight years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or in connection with any amalgamation or succession referred to in subsection (6) or sub-section (7) of section 32A; or (b) 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 ....
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....hin the meaning of section 34(3)(b) read with section 2(47) of the Act. It was held that: "Having regard to the above discussion, it seems to us clear that a partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint or common interest. If that be the position, it is difficult to accept the contention that upon dissolution the firm's rights in the partnership assets are extinguished. The firm as such has no separate rights of its own in the partnership assets, but it is the partners who own jointly or in common the assets of the partnership and, therefore, the consequence of the distribution, division or allotment of assets to the partners which flows upon dissolution after discharge of liabilities is nothing but a mutual adjustment of rights between the partners and there is no question of any extinguishment of the firm's rights in the partnership assets amounting to a transfer of ass....
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.... of the business carried on by the assessee, and further, that the reserve had to be utilised by the assessee during the period of eight years for the purpose of business of the undertaking. That the said condition could not be stated to have been complied with in the case of a dissolved firm. The court took note of the fact that section 155 of the Act was not invoked, but that was no reason to limit the power of the Commissioner under section 263 of the Act. The earlier decision in the case of Malabar Fisheries [1979] 120 ITR 49 (SC) was referred to and the court noted that it was not called upon to decide the issue in the context of section 34(3)(b) of the Act. This decision came to be cited before another Bench of the apex court in the case of CIT v. S. Balasubramanian [1998] 230 ITR 934. The respondent therein was a coparcener of an Hindu undivided family who carried on business. On a partial partition of the joint family, plant and machinery which had been the subject-matter of development rebate was allotted to two coparceners. The said two coparceners thereafter sold away to a third party the plant and machinery allotted to them. The Assessing Officer withdrew the develop....
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....on 32A is concerned, it is stipulated that the investment allowance shall be deemed to have been wrongly granted if at any time within the specified period of ten years, the assessee does not utilise the amount credited to the reserve account. The Revenue contends that in the case of the assessee, on dissolution, it is not able to utilise the amount credited to the reserve account and hence it be held that the investment allowance was wrongly granted. This submission cannot be accepted on a plain reading of the provisions. As can be seen from clause (a) of sub-section (5) of section 32A of the Act, it requires that machinery or plant is sold or otherwise transferred by the assessee to any person. Meaning thereby, the assessee in question has to be in existence and there has to be an overt act on the part of the assessee in selling or transferring the asset in question. Similarly, clause (b) requires that the assessee does not utilise the amount credited to the reserve account. In this clause also, the language employed by the Legislature goes to show that there has to be a positive act by the assessee concerned. The same position prevails in clause (c) where an assessee is requi....