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[2008] 303 ITR 58 (GUJ.) HIGH COURT OF GUJARAT Commissioner of Income-tax v. Shree Shantinath Silk Mills D.A. MEHTA AND Z.K. SAIYED, JJ. IT REFERENCE NO. 50 OF 1997 FEBRUARY 26, 2008 Section 32A of the Income-tax Act, 1961 - Investment allowance Where assessee had in fact purchased new machineries valued at an amount higher than amount standing to credit of investment allowance reserve account, transfer of amount of reserve thereafter to capital account of partners did not constitute violation of any of provisions contained in section 32A(5) Where the assessee had in fact purchased new machineries valued at an amount the higher than the amount standing to credit of investment allowance reserve account, transfer of the amount of reserve thereafter to the capital account of partners did not constitute violation of any of provisions contained in section 32A(5). B.B. Naik for the Appellant. S.N. Divatia for the Respondent. JUDGMENT D.A. Mehta, J.-The following two questions have been referred by the Income-tax Appellate Tribunal, Ahmedabad Bench "B", under section 256(2) of the Income-tax Act, 1961, at the instance of the Commissioner of Income-tax, Surat : "1. Whether, on the facts and in the circumstances of the case and in law, the hon'ble ITAT was right in holding that by crediting the partners, capital account by the amount standing to the credit of the investment allowance reserve account does not result in distribution by way of profit of such reserve in a case where the assessee has utilised the amount credited to the investment allowance reserve account for the purpose of acquiring new machinery and plant for the purpose of the business of the undertaking ? 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that if out of three conditions as prescribed by the provisions of section 32A(5), one condition in clause (b) is satisfied and the other two conditions as mentioned in clause (a) and clause (c) are not satisfied even then in that case the provisions of section 155(4A) will not be applicable.?" The assessment years are 1979-80 and 1980-81. The corresponding accounting periods are samvat years 2034…

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