TaxTMI 
TaxTMI 
TaxTMI 
1990 (12) TMI 119
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.... allowed. " 3. The assessee was issued with the notice to show cause as to why the development rebate/investment allowance granted to them be not withdrawn under section 154/155(5) of the Act. Similar action was taken for the subsequent years 1974-75, 1975-76 and 1978-79 to 1980-81. 4. In the course of the hearing before the IAC, assessee could not categorically state whether the scrapped/discarded/written off items of machinery and plant were transferred. The IAC therefore assumed in the absence of positive information that the scrapped/discarded plant and machinery were sold during the relevant previous year. According to the IAC, before invoking section 155(5), the only condition to be satisfied is that the plant and machinery were sold and transferred within a period of eight years of the installation. Section 155 does not make any distinction whether the plant and machinery is sold as such or as scrapped. He, therefore, withdrew the amount of development rebate/investment allowance allowed in the years under appeal. Being aggrieved assessee filed appeals before the CIT(A). 5. On facts, as is found from the impugned order, assessee admitted before the learned CIT(A) that the....
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....placed on a decision of 'B' Bench of the Bombay Tribunal rendered during May 1980, in ITO v. Hindustan Petroleum Corpn. Ltd. [IT Appeal Nos. 1707-1713 (Bom.) of 1979]. 9. Opposing, the learned Departmental Representative contended that conditions for grant of development rebate are to be strictly complied with, as held by the apex Court in Shri Subhlaxmi Mills Ltd. v. Addl. CIT [1989] 177 ITR 193. In addition, reliance was also placed on another decision of the Supreme Court in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49 wherein their Lordships of the apex Court held that if machinery was sold or otherwise transferred, development rebate had to be withdrawn, although on facts it was held that in the event of the dissolution of the firm, the assessee to be distributed in amongst the partners, it could not be said that the assets were transferred by the firm. Lastly, it was contended on behalf of the revenue that the term transfer was wide enough to embrace within its fold even relinquishment of an asset and placing reliance on the view taken by the Assessing Officer and the first appellate authority, it was submitted that the withdrawal of the development rebate was fully in con....
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.... so as to attract the provisions of section 34(3)(b) read with section 155(5) of the Act. The parts of the machinery were only replaced to make the machines serviceable and keep in working condition and, therefore, it was submitted that the Assessing Officer had wrongly appreciated the facts and applied the provisions of above sections to withdraw the development rebate/investment allowance already allowed. 11. We see considerable merit in these submissions of the learned counsel for the assessee. On a harmonious reading of the provisions of the Act, it is apparent that the legislature intended that concessions given be fully utilised for the purpose of business for a period of atleast eight years. To ensure this, it is provided that the plant and machinery should not be sold or transferred within the period of eight years. In addition, the Act provides that the assessee should make development reserve to the extent of 75% and the same should be debited to the profit and loss account of the relevant previous year and credited to the reserve account to the utilised by the assessee during the period of eight years and next following for the purpose of the business of the undertaking....
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....r scrap materials, whether such action would amount to sale or transfer as contemplated within the provisions of section 34(3)(b) of the Act is, indeed, a debatable issue. On this ground also, we are of the view that the Assessing Officer has not assumed proper jurisdiction so as to withdraw the development rebate granted to the assessee. 13. The main reliance of the CIT(A) and the departmental representative was on the decision in the case of Phoenix Chemicals Works (P.) Ltd. However, the facts of that case are clearly distinguishable. In that case, the assessee sold that machineries by parts. The written down value of the machinery sold for the assessment year 1979-80 was Rs. 30,940 and the sale proceeds were Rs. 950 only. The original cost of the said machinery was Rs. 3,42,264. In the assessment year 1980-81, the cost of the machinery sold was Rs. 1,63,050 and written down value was Rs. 64,184 and the same was sold for Rs. 25,269. On the peculiar facts of the case, the Tribunal held that the sale of the machinery or plant by part, as 'scrap' within a period of eight years would fall within the mischief of section 155(5) so that the development rebate allowed originally was lia....