( 1 ) THE Income Tax Tribunal, Ahmedabad Bench "a", Ahmedabad has referred the following question for the opinion of this Court under Section 256 (1) of the Income Tax Act, 1961 (the Act) at the instance of the applicant - Revenue. "whether, on the facts and circumstances of the case, the Tribunal was right in confirming the decision of the CIT (A), Surat, holding that investment allowance could not be withdrawn u/s 155 (4a) in the case of the assessee?"

( 2 ) THE Assessment Years are 1977-78 and 1978-79 and the corresponding accounting periods are the Financial Years ended on 31st March 1977 and 31st March 1978. The assessee, a partnership firm, was granted investment allowance of Rs. 1,55,293=00 and Rs. 81,000=00 for Assessment Years 1977-78 and 1978-79 respectively. However, the assessing officer, acting under provisions of Section 155 (4a) of the Act, withdrew the investment allowance originally granted on the ground that, as the firm was dissolved on 31st March 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 utilize the reserve within the statutory period of ten years for purchasing new machinery or plant as required by the section.

( 3 ) 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 31st December 1990, upheld the order of the Commissioner (Appeals), holding that there was no justification for withdrawing the investment allowance granted to the assessee.

( 4 ) HEARD the 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 entire business. That, in these circumstances, provisions of Section 32a (5) (a) of the Act would come into play and it was required to be held that investment allowance had been wrongly granted. In the alternative, it was submitted that Section 32a (5) (b) of the Act required that the assessee utilize the amount credited to the reserve account under sub-section (4) of Section 32a of the Act at any time before expiry of ten years from the end of the previous year in which the machinery or plant was installed. That, in the present case, admittedly, when the firm was dissolved, it was not possible for the firm to utilize the said reserve within the statutory period of ten years and even on this count, the orders made by the assessing officer withdrawing investment allowance were required to be upheld. In support of the submissions, reliance was placed on the decision of the Supreme Court of India in the case of Commissioner of Income Tax v. Vijaya Production (P) Ltd. , 243 ITR 181.

( 5 ) SECTION 32a (5), as is relevant for the present, reads as under :"32a (5 ). Any allowance made under this section in respect of any ship, aircraft, machinery or plant shall be deemed to have been wrongly made for the purposes of this Act - (a) if the shop, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired or installed; or (b) if 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 utilize the amount credited to the reserve account under sub-section (4) for the purposes of acquiring a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the proviso to sub-section (1)] for the purposes of the business of the undertaking; or (c) if at any time before