Assistant Commissioner of Vs. Vardhman Die Caster - Court Judgment

Excerpt:
1. these three appeals by the revenue for assessment years 1982-83, 1985-86 and 1986-87 are directed against a consolidated order passed by the dcit(a), rohtak, for four years, namely, assessment years 1981-82, 1982-83, 1985-86 and 1986-87.2.1 the assessing officer passed a consolidated order under section 154 dated 26-12-1991/20-1-1992 for assessment years 1981-82, 1982-83, 1983-84, 1985-86, 1986-87 and 1988-89. the assessing officer has observed in the said order under section 154 that the assessee purchased plant and machinery for business purposes. the machinery so purchased was leased out to m/s. oswal electricals, faridabad w.e.f.1-4-1987. the assessee derived income from lease @ rs. 3,000 p.m. (the correct amount of rent is rs. 30,000 p.m. as per lease agreement dated 1st april,.....

Judgment:
1. These three appeals by the revenue for assessment years 1982-83, 1985-86 and 1986-87 are directed against a consolidated order passed by the DCIT(A), Rohtak, for four years, namely, assessment years 1981-82, 1982-83, 1985-86 and 1986-87.

2.1 The Assessing Officer passed a consolidated order under section 154 dated 26-12-1991/20-1-1992 for assessment years 1981-82, 1982-83, 1983-84, 1985-86, 1986-87 and 1988-89. The Assessing Officer has observed in the said order under section 154 that the assessee purchased plant and machinery for business purposes. The machinery so purchased was leased out to M/s. Oswal Electricals, Faridabad w.e.f.

1-4-1987. The assessee derived income from lease @ Rs. 3,000 p.m. (the correct amount of rent is Rs. 30,000 p.m. as per lease agreement dated 1st April, 1987 placed at pages 26 and 27 of the paper book). Since the plant and machinery, on which investment allowance had been allowed was transferred before the expiry of 8 years, from the end of the previous year, in which it was installed, the investment allowance was liable to be withdrawn under section 155(4A), read with section 32A(5), of the Income-tax Act, 1961. The Assessing Officer issued a notice under section 154 dated 23-10-1991. The Assessing Officer observed that no satisfactory reply was received from the assessee. He placed reliance on the clarification given by the Ministry of Law conveyed to his office vide letter No. RA/IT/FED/91-92/1275-1276 dated 26-11-1991 of the Chief Auditor clarifying that the leasing out of the plant and machinery is treated as transfer. Hence, the investment allowance allowed to the assessee as per details mentioned hereunder was withdrawn by the aforesaid order under section 154 :Assessment year Amount withdrawn1981-82 Rs. 87,2851982-83 Rs. 8,0431983-84 Rs. 17,8021984-85 Rs. 1,09,3121985-86 Rs. 12,3511986-87 Rs. 42,4781988-89 Rs. 8,527 The DCIT vide his consolidated order dated 1-7-1992 held that the Assessing Officer was not justified in withdrawing the investment allowance for any of the assessment years because leasing out the machinery cannot be said to constitute transfer. In any case, the question involved was disputable, hence no mistake apparent from record existed. He, therefore, cancelled the impugned order under section 154 and allowed the assessee's appeals.

3. The revenue has preferred the present appeals against the aforesaid consolidated order passed by the DCIT(A) for the aforestated three years.

4. The learned Departmental Representative submitted that the Hon'ble Supreme Court in a recent judgment in the case of CIT v. Narang Dairy Product [1996] 219 ITR 479/85 Taxman 375 has held that in cases where the machinery or plant is not wholly used by the assessee for the purposes of business carried on by him, for the period specified in section 34(3)(b), and such machinery was let out to others, it can be safely stated that the machinery or plant is "otherwise transferred" by the assessee to another person. The withdrawal of the development rebate by the ITO by relying on section 34(3)(b) of the Act was held to be justified in that case. The learned Departmental Representative submitted that the facts of the present case are exactly similar. The provisions contained in section 34(3)(b) are similar to the provisions contained in section 32A(5), read with section 155(4A). The order passed by the Assessing Officer is, therefore, perfectly valid and justified.

5. The learned Departmental Representative also relied upon the judgment of Hon'ble Gujarat High Court in the case of Kalindi Investment (P.) Ltd. v. CIT [1995] 213 ITR 207/79 Taxman 62 to support this contention that the concept at 'mistake apparent from record' as envisaged under section 154 cannot be read as such into section 155.

The exercise of power under section 155 is not hedged in by the condition of there being a mistake apparent on the face of record in all cases but depends on the coming into existence of certain facts envisaged under section 155 which may result in making the entire order erroneous. If for establishing the jurisdictional fact, inquiry into a debatable issue of fact and law is to be gone into that jurisdiction is inherent in the exercise of power under section 155.

5.1 The learned Departmental Representative also placed reliance on judgment of Hon'ble Calcutta High Court in the case of CIT v. East India Cold Storage (P.) Ltd. [1996] 218 ITR 668. In this case, the ITO completed the original assessment of the assessee for assessment year 1979-80 allowing investment allowance under section 32A of the Income-tax Act, 1961 on plant and machinery of cold storage and also allowed deduction in respect of profits and gains from the cold storage under section 80HH of the Act. The ITO took the view that such allowance and deduction was wrongly allowed to the assessee and it was a mistake apparent from the record. The ITO, therefore, withdrew the allowance and deduction by passing an order of rectification under section 154 of the Act. The CIT (Appeals) confirmed the said order. The Tribunal held that whether the cold storage could be taken as an industrial undertaking within the meaning of sections 32A and 80HH was debatable and hence the mistake was not apparent from record. The Tribunal allowed the assessee's appeal. The Hon'ble Calcutta High Court held that in view of the judgment of the Supreme Court in Delhi Cold Storage P. Ltd. v. CIT [1991] 191 ITR 656/59 Taxman 144, in which it was held that cold storage did not come within the meaning of an 'industrial undertaking', the order of rectification passed by the Assessing Officer was valid. The learned Departmental Representative submitted that the subsequent judgment of the Hon'ble Supreme Court has been relied upon by the Calcutta High Court to sustain the order under section 154 passed by the Assessing Officer. The facts of that case are exactly similar to the facts of the present case. The DC(A) ought to have confirmed the order under section 154 passed by the Assessing Officer.

5.2 The learned Departmental Representative further relied upon the decision of the ITAT in M.A. No. 84 of 1994. The Departmental Representative was requested to furnish a copy of the said order but the same has not been furnished so far.

5.3 The learned Departmental Representative submitted that the assessee's counsel has submitted an application in terms of rule 10 of Income-tax Appellate Tribunal Rules, 1963 along with an affidavit of Shri R.K. Jain. In this application, it has been stated that the assessee-firm had been doing the business of manufacturing die casted component for automobile industries, etc., and that it was using the machines purchased by it in various assessment years beginning from assessment year 1981-82 onward for the purposes of the said business up to 31st July, 1986. With effect from 1-8-1986, it was decided by the partners after mutual consultation that, as the aforesaid business was not yielding expected rate of profit, they should switch on to another line of business, namely, utilising their commercial assets by leasing them out to M/s. Oswal Electricals. The firm accordingly entered into an agreement with M/s. Oswal Electricals on 1-8-1986 by which they leased out all their assets including plant and machinery to M/s. Oswal Electricals w.e.f. 1-8-1986 at a rent of Rs. 40,000 p.m. This agreement was valid up to 31-3-1987. On 1-4-1987, a fresh lease agreement was entered into between the assessee and M/s. Oswal Electricals for continuing the leasing of the machines in question @ Rs. 30,000 p.m. It has also been stated in the said application and the affidavit that the question relating to allowability of lease rent paid by M/s. Oswal Electricals to the assessee came up for consideration in the assessment proceedings of M/s. Oswal Electricals for assessment year 1987-88. M/s.

Oswal Electricals submitted a letter dated 31-1-1989 to their Assessing Officer along with copy of lease agreement dated 1-8-1986. The matter regarding allowability of the lease rent in the case of M/s. Oswal Electricals travelled up to the Tribunal. The Tribunal vide order dated 30-6-1993 in ITA Nos. 204 & 7506/Del/96 for assessment years 1988-89 and 1989-90 respectively allowed deduction in respect of the said lease rent in the hands of M/s. Oswal Electricals.

5.4 The learned Departmental Representative submitted that a perusal of the order passed by the Assessing Officer clearly indicates that the Assessing Officer was not at all made aware of the fact that the plant and machinery was leased out to M/s. Oswal Electricals for the first time w.e.f. 1-8-1986. The lease agreement submitted before the Assessing Officer in the case of the present assessee was only the lease agreement dated 1-4-1987. The said lease agreement dated 1-4-1987 nowhere gives any reference of any earlier lease agreement purported to have been executed on 1st August, 1986. The said lease deed dated 1-4-1987 also does not give and indication that it is a renewal of similar earlier lease agreement. The Assessing Officer, therefore, on the basis of material existing on the records of the assessee has mentioned in the order under section 154 that the plant and machinery was leased out to M/s. Oswal Electricals w.e.f. 1-4-1987. The argument raised on behalf of the assessee that the order passed by the Assessing Officer is beyond the period of limitation prescribed under section 155(4A)(i) cannot be validly raised, as the fact of leasing out the plant and machinery from 1-8-1986 was not specifically brought to the notice of the Assessing Officer in the assessment proceedings in the present case. The learned Departmental Representative, however, submitted that the income in assessment year 1987-88 shown by the assessee was shown only under the head 'Rent' and it was not indicated in the Profit and Loss account that it was a lease rent of plant and machinery. The learned Departmental Representative thus submitted that the lease deed dated 1-4-1987 is a fresh and distinct lease deed and the event of transfer took place when the lease deed was executed on 1-4-1987. Even assuming that the earlier lease deed dated 1-8-1986 existed, the second lease deed dated 1-4-1987 was a fresh lease in which no reference of the previous lease was given. The event of transfer, therefore, again took place when a fresh lease was granted from 1-4-1987 and the time limit of 4 years prescribed in section 154(7) will have to be reckoned from the end of the previous year in which the sale or other transfer took place. In the present case, the transfer took place on 1-4-1987. The Assessing Officer could pass an order under section 155(4A), read with section 154(7) within 4 years from the end of the previous year in which the transfer took place.

Thus the Assessing Officer could pass the order on or before 31st March, 1992. The Assessing Officer had already passed the impugned order under section 154 on 20th January, 1992 which was well within the prescribed time limit. The learned Departmental Representative also placed reliance on the judgment of the Hon'ble Supreme Court in the case of Hind Wire Industries Ltd. v. CIT [1995] 212 ITR 639/80 Taxman 79 in which it was held that the word 'order' in the expression 'from the date of the order sought to be amended' in section 154(7) was not clarified in any way. It did not necessarily mean the original order, it could be any order including the amended or rectified order. On the strength of this judgment, the learned Departmental Representative submitted that the period of 4 years prescribed in section 154(7) should be reckoned with reference to the lease dated 1-4-1987. If that is done, the order passed by the Assessing Officer is perfectly within time.

5.5 The learned Departmental Representative thus strongly urged that the order of the DC(A) should be set aside and the order passed by the Assessing Officer under section 154 should be restored.

6. The learned counsel for the assessee strongly supported the order of the DC(A). He also invited our attention towards the order passed by the Tribunal in assessee's own case for assessment year 1981-82 in ITA No. 6926/Del/92, dated 30-3-1995. In the said order the Tribunal has confirmed the view taken by the DC(A) in relation to this year matter so far as assessment year 1981-82 is concerned. He was, however, fair enough to state that after the said decision was rendered by the Tribunal, the judgment of Hon'ble Supreme Court in the case of Narang Dairy Products (supra) relied upon by the learned DR was delivered.

Hence, the matter may require a fresh look.

6.1 The learned counsel submitted that the effect of a Supreme Court decision by virtue of the provisions of the Constitution is that the Supreme Court declares the law of the land and it must be held to have been always the law of the land. However, it cannot be placed on the same footings as a retrospective piece of legislation and the legal fiction which goes with retrospective legislation cannot arise in the case of a Supreme Court decision declaring what the law of the land is.

But it does not obliterate the existence of such debate, doubt or conflict prior to such decision. For this proposition he placed reliance on the judgment of Hon'ble Gujarat High Court in the case of CIT v. Maneklal Harilal Spg. & Mfg. Co. Ltd. [1977] 106 ITR 24, judgment of Hon'ble Calcutta High Court in the case of Export Enterprises (P.) Ltd. v. ITO [1983] 142 ITR 641/15 Taxman 299 and the judgment of Calcutta High Court in the case of Jiyajee Rao Cotton Mills Ltd. v. ITO [1981] 130 ITR 710. The learned counsel submitted that the principles of retrospective legislation is not applicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute or when there is conflict of judicial opinion between different High Courts.

The Supreme Court although resolves such a debate, doubt or conflict of judicial opinion but it could not obliterate the existence of such debate, doubt or conflict prior to such decision.

6.2 The learned counsel submitted that the judgment of Hon'ble Calcutta High Court in East India Cold Storage (P.) Ltd.'s case (supra) relied upon by the learned Sr. Departmental Representative does not lay down the correct law as the earlier two judgments of Hon'ble Calcutta High Court referred to in the preceding para were not even brought to the notice of Hon'ble Calcutta High Court in the aforesaid case.

6.3 The learned counsel was fair enough to draw our attention towards various important judgments on the effect of the subsequent decision of the Supreme Court in relation to rectification of orders under section 154 regardless of the fact whether a particular judgment was in favour of the assessee or was against the assessee.

6.4 He invited our attention towards the judgment of Hon'ble Maharashtra High Court in Walchand Nagpur Industries Ltd. v. V.S.Gaitonde, ITO [1962] 44 ITR 260 in which it was held that effect of the decision of the Supreme Court was that the levy of excess dividend tax was at no time good and therefore, the assessment order made by the ITO levying excess dividend tax was bad at its inception on the date it was made, notwithstanding that the decision of the Supreme Court was given subsequent to that date. It was held that it was a mistake apparent from record within the meaning of section 35 of the Income-tax Act, 1922. The income-tax authorities were clearly in error in refusing to rectify the mistake.

6.5 The learned counsel invited our attention to the judgment of Hon'ble Supreme Court in the case of S.A.L. Narayana Row, CIT v. Model Mills, Nagpur [1967] 64 ITR 67 in which the Hon'ble Supreme Court approved the view taken by the High Court in directing the Commissioner to refund the amount of tax which was illegally collected. The levy of additional tax was held to be illegal by the Supreme Court in the case of Khatau Makanji Spg. & Wvg. Mills [1956] 30 ITR 841. The Hon'ble Supreme Court held that the levy of such additional tax was illegal and the High Court was justified in directing the departmental authorities to accept the application for rectification.

6.6 The learned counsel also invited our attention towards a Board's Circular No. 68 dated 17th November, 1971 published in 83 ITR (Statute) page 6. The Board in the said circular has clarified that a mistake arising as a result of subsequent interpretation of law by the Supreme Court would constitute a mistake (apparent from the record and rectificatory action under sections 35 and 154 of Income-tax Act, 1922/61) would be in order. It was further clarified that where the assessee moves an application under section 154 pointing out that in the light of a latter decision of the Supreme Court pronouncing the correct legal position a mistake has occurred in any of the completed assessment in his case, the application shall be acted upon, provided the same has been filed within time and is otherwise in order.

6.7 The learned counsel also invited our attention towards a judgment of Hon'ble MP High Court in the case of CIT v. Ganga Iron Industries [1985] Taxation 79(3)320 as well as decision of ITAT, Ahmedabad Benches in Fag Precision Bearing Ltd. v. Dy. CIT [1993] 47 ITD 193.

6.8 The learned counsel without prejudice to his earlier submissions submitted that a subsequent decision of the Hon'ble Supreme Court may be a valid basis for passing a rectification order provided the action is taken by the Assessing Officer within the limitation of time prescribed in section 154/155 of the Act. The subsequent judgment of the Hon'ble Supreme Court cannot extend the limitation of time prescribed in these sections. For this purpose, he placed reliance on the judgment in CIT v. Sir Shadilal Sugars & General Mills [1978] 114 ITR 729 (All.).

6.9 The learned counsel for the assessee submitted that the application submitted under rule 10 of the Income-tax Appellate Tribunal Rules, 1963 accompanied by an affidavit of Shri R.K. Jain clearly proves the fact already existing on the assessment records of the company that it had given its plant and machinery on lease to M/s. Oswal Electricals w.e.f. 1-8-1986. The audited Profit and Loss account for the year ended on 31st March, 1987 clearly shows that the appellant had received rent amounting to Rs. 3,20,000. The monthly lease rent was Rs. 40,000 p.m.

The lease rent for 8 months comes to Rs. 3,20,000. The fact of existence of such a lease deed dated 1-8-1986 was also produced in the case of M/s. Oswal Electricals as is indicated in the letter dated 31-1-1989 submitted to the DCIT in the case of assessment proceedings of M/s. Oswal Electricals for assessment year 1987-88. Therefore, such a fact should be taken on record for the purposes of deciding this appeal. He invited our attention towards the lease deed dated 1-8-1986 placed at page 1 of the paper book. The said lease deed indicates that the assessee had given on lease its machinery, moulds, furniture and fixture, vehicles, generator set, etc. @ Rs. 40,000 p.m. w.e.f. 1st August, 1986. The duration of this lease agreement was up to 31st March, 1987. Clause (6) of the said lease agreement also authorises the party to renew the said agreement for further period by a mutual consent. He submitted that the second lease agreement executed between the parties on 1-4-1987 was in fact and in substance a renewal of the earlier agreement. The second lease deed was executed for a further period of 3 years with an option for its renewal by mutual consent as specified in clause (6) of the said lease agreement dated 1st April, 1987. The monthly rent was determined at Rs. 30,000 p.m. from 1-4-1987.

The learned counsel argued that even if it is assumed that the short-term lease of plant and machinery is covered within the expression 'otherwise transferred' as contemplated in section 32A(5) and section 155(4A), the action for rectification under section 155(4A), read with section 154(7) could be taken within a period of 4 years from the end of the previous year in which the sale or such other transfers took place in view of the clear provisions contained in section 155(4A)(i) of the Act. The four years' period reckoned from the date of the first lease, i.e., 1st August, 1986 expired on 31-3-1991.

The impugned order under section 154 was made on 20-1-1992, which is clearly barred by limitation of time. In none of the cases relied upon by the learned counsel for the assessee, it has been held that the limitation of time prescribed under section 155(4A)(i) will be extended because of any subsequent judgment of the Hon'ble Supreme Court. He, therefore, submitted that the order passed by the Assessing Officer under section 154 is clearly barred by limitation of time and deserves to be quashed on this ground also.

6.10 The learned counsel also submitted that the order passed by the Assessing Officer is based on some clarification issued by the Ministry of Law. The letter issued by the Ministry of Law is not based on any valid basis. By that time the judgment of the Hon'ble Supreme Court had also not been rendered or reported. The Assessing Officer has mechanically started the proceedings under section 155 on the basis of the said clarification issued by the Ministry of Law without applying his mind. The order passed by the Assessing Officer also deserves to be cancelled on this ground.

The learned counsel thus strongly urged that the order passed by the DC(A) should be confirmed on the aforestated ground even if it is found that the reasons given by the DC(A) in the order passed by him no longer survive in view of the judgment of the Hon'ble Supreme Court in the case of Narang Dairy Products (supra).

7. We have carefully considered the rival submissions made by the learned representatives of the parties. We have also carefully gone through all the judgments cited by the learned representatives of both sides. The following principles of law can be deduced from a careful study of all the judgments relied upon by the learned representatives of the parties : (a) The effect of the Supreme Court decision by virtue of the provisions of the Constitution is that the Supreme Court declares the law of the land and it must be held to have been always the law of the land.

(b) The subsequent judgment of the Hon'ble Supreme Court can be a valid foundation for passing a rectification order under section 154/155 provided the action is taken within the prescribed time limit.

The Hon'ble Supreme Court in the case of SAL Naraina Rao's case (supra) is clinching on this point. In that case, the ITO levied an additional tax on the excess dividend declared by the company for assessment year 1952-53. When, later on, the levy of tax on the excess dividend was declared by the Bombay High Court in Khatau Makanji Spg. & Wvg. Mills' case (supra) to be illegal, the assessee applied to the ITO for refund of additional tax. The officer rejected the application and the Commissioner rejected its application under section 33A of the Income-tax Act. The assessee thereafter moved the Bombay High Court under Article 226 of the Constitution of India. The Hon'ble Bombay High Court held that though it was not expressly stated in the assessee's application to the ITO that the assessment order be rectified under section 35, the request in substance was that the tax should be declared to be unlawfully collected and on that account refunded and that could only mean a request for rectification. The High Court directed the Commissioner to refund the amount of tax which was illegally collected. In the meantime the judgment of Hon'ble Supreme Court in the case of Khatau Makanji Spg. & Wvg. Mills (supra) was delivered and it was held that the levy of an additional tax was illegal - CIT v. Khatau Makanji Spg. & Wvg. Mills Co. Ltd. [1960] 40 ITR 189 (SC). It was contended on behalf of the Department that the assessment for the year 1952-53 was completed long time back and before the judgment in the case of Khatau Makanji Spg. & Wvg. Mills (supra) was pronounced by the Hon'ble Bombay High Court and the Hon'ble Supreme Court. On these facts, the Hon'ble Supreme Court confirmed the order passed by the High Court and held that the application to the ITO was one in which a request for rectification of the order was implicit and the High Court was right in directing the Commissioner to refund the amount of tax which was illegally collected. The aforesaid judgment clearly supports the view that action under section 35 can be validly taken on the basis of a subsequent judgment of the Hon'ble Supreme Court. The Hon'ble Supreme Court in the case of Narang Dairy Product (supra) considered the question relating to withdrawal of development rebate under section 34(3)(b) of Income-tax Act, 1961. In that case, the assessee was carrying on the business of manufacture of milk powder. The Assessing Officer had originally allowed development rebate in assessment year 1965-66 on the entire plant and machinery owned by the assessee and used for the said business. A part of the machinery was subsequently sold. The machinery that was left entitling the assessee to the development rebate for the said year was determined at Rs. 85,222. This machinery was let out by the assessee on 27th August, 1969 to M/s. Hindustan Lever Ltd. for a period of three years with a provision for renewal of the agreement or for outright purchase. In these circumstances, the ITO by an amendment order dated 30th March, 1970 withdrew the development rebate originally granted to the assessee for assessment year 1965-66. It was held by the Appellate Tribunal and the High Court that no transfer was involved by the lease agreement and so section 34(3)(b) of the Act was not attracted. The Hon'ble Supreme Court held that in cases where the machinery or plant is not wholly used by the assessee for the purposes of business carried on by him, for the specified period and such user is given on hire to another, it can be safely stated that the machinery or plant is 'otherwise transferred' by the assessee to another person. The Hon'ble Supreme Court held that when the machinery was let out by the assessee to M/s.

Hindustan Lever, it cannot admit to any doubt that the said machinery or plant could not and was not used by the assessee for the purposes of business carried on by him. It is not only the ownership of the plant or the machinery but also its exclusive user by the assessee for the purposes of the business, that is essential to enable the assessee to get the development rebate under section 33(1)(a). In cases where an assessee disabled himself from such continued exclusive user of the plant or machinery for the purposes of his business for the specified period, the consequences specified in section 34(3)(b) will follow. The withdrawal of development rebate by the Assessing Officer was held to be justified.

8. The facts of the present case are also similar as in the case of Narang Dairy Product (supra). The provisions of section 155(5) and section 34(3)(b) of the Act provides that if any machinery or plant is sold or otherwise transferred by the assessee to any person at any time before the expiry of 8 years, the development rebate allowed under section 33 shall be deemed to have been wrongly made for the purposes of this Act and the provisions of section 155(5) shall apply accordingly. Similarly, the provisions of section 32A(5) provides that if any machinery or plant is sold or otherwise transferred by an assessee to any person at any time before the expiry of 8 years from the end of the previous year in which it was acquired or installed, any allowance made under section 32A shall be deemed to have been wrongly made for the purposes of this Act and the provisions of section 155(4A) shall apply accordingly. The provisions of section 155(5) dealing with the withdrawal of development rebate is also similar to section 155(4A) relating to withdrawal of investment allowance. Section 155(4A) provides that if at any time before the expiry of 8 years from the end of the previous year in which the machinery or plant was installed, is sold or otherwise transferred by the assessee to any person, the investment allowance originally allowed shall be deemed to have been wrongly allowed and the Assessing Officer may, notwithstanding anything contained in this Act recompute the total income of the assessee for the relevant previous year and make the necessary amendments and the provisions of section 154 shall, so far as may be, apply thereto. It further provides that the period of 4 years as specified in sub-section (7) of section 154 shall be reckoned in such cases from the end of the previous year in which the sale or other transfer took place.

9. In view of the aforesaid judgment of the Hon'ble Supreme Court in the case of Narang Dairy Products (supra) and in view of the similarity of the provisions relating to withdrawal of development rebate and investment allowance, we are of the opinion that the giving of the plant and machinery by the assessee on lease to M/s. Oswal Electricals comes within the meaning of expression 'otherwise transferred' used in sections 32A(5) and 155(4A).

10. However, the action for rectification and withdrawal of investment allowance by the Assessing Officer can be taken only within the time limit prescribed under section 155(4A)(i). The said provision clearly provides that said withdrawal of investment allowance can be made with in a period of 4 years from the end of the previous year in which the sale or otherwise transfer took place. In the present case, the assessee has placed on record the necessary facts and evidence by way of an application under rule 10 of ITAT Rules, 1963 that the plant and machinery was first given on lease to M/s. Oswal Electricals w.e.f.

1-8-1986 and in accordance with the lease agreement executed on that date. The affidavit annexed with the said application under rule 10 and the copies of the letter dated 31-1-1989 submitted in the case of M/s.

Oswal Electricals for assessment year 1987-88 as well as the copy of the order passed by the Tribunal in the case of Oswal Electricals [IT Appeal Nos. 204 and 756 (Delhi) of 1990] (supra) clearly proves that the existence and the genuineness of the lease agreement dated 1-8-1986 cannot be doubted. In fact the assessee had itself shown income by way of rent pertaining to the aforesaid lease agreement dated 1-8-1986 amounting to Rs. 3,20,000 in the audited profit and loss account submitted along with its return of income for assessment year 1987-88.

Therefore, the fact that the plant and machinery was given on lease w.e.f. 1-8-1986 is clearly borne out from the facts already existing on records. We are, therefore, inclined to accept the application under rule 10 of ITAT Rules, 1963 submitted on behalf of the assessee. The lease deed dated 1-8-1986 clearly proves that the entire plant and machinery in question was given on lease w.e.f. 1st August, 1986. The previous year in which the machinery was for the first time given on lease, therefore ended on 31st March, 1987. The 4 years' period of limitation prescribed in section 155(4A)(i) will, therefore, have to be reckoned from 31st March, 1987. The limitation of time for passing an order under section 155(4A)(i) expired on 31st March, 1991. The impugned order under section 154 read with section 155(4A) read with section 32A(5) was passed on 20th January, 1992. The said order was, therefore, clearly barred by limitation of time.

11. The contention of the learned Sr. Departmental Representative that the lease dated 1-4-1987 is a fresh lease and it does not give any reference of the earlier lease and therefore, the event of transfer took place on 1-4-1987 when the lease deed referred in the order under section 154 was executed. Therefore, the time limit would expire on 31st March, 1992. Such contentions advanced on behalf of the department cannot be accepted because if the entire plant and machinery has already been transferred vide lease deed dated 1-8-1986, it cannot again be treated as having been re-transferred on every occasion when a fresh lease deed is executed or the term of the original deed is renewed by executing fresh lease agreements on the expiry of the period of earlier lease. If such an interpretation as contended by the learned Departmental Representative is accepted, the event of transfer would take place at all times as and when the lease deed is renewed or the fresh lease is granted in favour of the other person. It is only the first event of transfer which would attract the provisions relating to withdrawal of investment allowance. Once the machinery has already been transferred, the question of its repeated transfer or re-transfers would not at all be relevant for deciding the question relating to withdrawal of investment allowance. Therefore, the withdrawal of investment allowance or development rebate will necessarily have to be co-related with the event of first transfer. The reliance placed by the learned Departmental Representative on the judgment of Hon'ble Supreme Court in the case of Hind Wire Industries Ltd. (supra) also does not in any manner support his aforesaid contention. In that case, it was held that the original assessment order dated 21st September, 1979 was amended by a rectification order passed on 12th July, 1982. Thereafter the assessee again moved second application for rectification of the fresh order dated 12th July, 1982 or 4th July, 1986. It was held by the Hon'ble Supreme Court that the application made on 4th July, 1986 was within 4 years of the fresh order of assessment made on 12th July, 1982 and hence, the application was within limitation of time. The principles of law laid down by the Hon'ble Supreme Court in this case do not in any manner relate to the present controversy before us.

12. In view of the aforesaid facts, we are of the considered opinion that the order passed by the Assessing Officer under section 154 read with section 155(4A)(i) and section 32A(5) on 20-1-1992 was clearly barred by limitation of time. We, therefore, agree with the ultimate conclusion arrived at by the DC(A) by which he has quashed the aforesaid rectification order passed by the Assessing Officer. But we do not agree with the findings given by the DC(A) that the leasing out of the machinery cannot constitute transfer within the meaning of the aforesaid provisions. The leasing out of the machinery on the facts of the present case clearly amounts to a transfer within the meaning of section 32A(5) as well as section 155(4A) and the order of the Assessing Officer has been cancelled only because the said order has been held to be clearly barred by limitation.