Law:

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Section 155 of the Income-tax Act, 1961 - Rectification of mistakes - Other amendments - Assessment year 1981-82 - Assessee-company was allowed investment allowance on an item of plant and machinery - Since said plant and machinery was not functioning efficiently resulting in frequent stoppages of production it was scrapped and utilised for manufacture of steel and steel was subsequently sold - Assessing Officer viewed that said asset was otherwise transferred, and invoked section 155(4A) to withdraw investment allowance granted - Whether, in light of above factual position, it could be held that plant or machinery on which investment allowance had been granted was sold or otherwise transferred - Held, no - Whether, therefore, Assessing Officer could not have invoked section 155(4A)(a) so as to withdraw investment allowance allowed at time of original assessment - Held, yes CASES REFERRED TO CIT v. Vania Silk Mills (P.) Ltd. [1977] 107 ITR 300 (Guj.) [Para 4], Vania Silk Mills (P.) Ltd. v. CIT [1991] 191 ITR 647/ 59 Taxman 3 (SC) [Para 4] and Marybong & Kyel Tea Industries Ltd. v. CIT [1997] 224 ITR 589/ 91 Taxman 11 (SC) [Para 4]. Manish R. Bhatt for the Applicant. JUDGMENT D.A Mehta, J. - This is a reference at the instance of the CIT and the following question of law has been referred to us by the Tribunal, Ahmedabad Bench 'B' under section 256(1) of the IT Act, 1961 (for short 'the Act') : "Whether, the Tribunal is right in law and on facts in setting aside the order passed by the ITO under section 155(4A) whereby the investment allowance allowed at the time of the original assessment stood withdrawn?" 2. The assessee is a private limited company and for asst. yr. 1977-78 it was allowed investment allowance of Rs. 56,716 on an item of plant and machinery known as "Reduction Gear Box". During the accounting period relevant to asst. yr. 1981-82 the said plant and machinery was scrapped since it was not functioning efficiently resulting in frequent stoppages of production. In light of this accepted position, the AO issued notice indicating intention to rectify under section 155(4A) of the Act. The assessee resisted the proposed action. However, according…

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