Income Tax Appellate Tribunal - Jaipur
Nav Bharat Construction Co. vs Income-Tax Officer on 29 November, 1994
Equivalent citations: [1995]52ITD219(JP)
ORDER
M.A.A. Khan, Judicial Member
1. The dispute in this appeal from CITs order under Section 263 of the Income-tax Act, 1961 ('the Act') relates to the claim of the assessee for Investment Allowance under Section 32A of the Act. The assessee a registered firm engaged in the business of construction of Dams, purchased an excavating machine on 28-3-1987 for Rs. 24,72,400 from M/s. Tata Engineering & Locomotive Company Ltd., Jamshedpur (TELCO) and the same reached assessee's place of business in Rajasthan on April 1987. The said machine was put to use on 5-4-1987 in the construction of a Tunnel at Narwali Distributory in Rawatpura Village, Distt. Banswara (Raj.). The assessee claimed Investment Allowance at Rs. 5,68,100 and the same was allowed at Rs. 5,19,933 by the Assessing Officer (AO). But in revisional proceedings the learned CIT took the view that since the excavating machine was not 'installed' in assessment year 1987-88, the assessee was not entitled to Investment Allowance under Section 32A in respect thereto in that year. He, therefore, held the assessment as made by the Assessing Officer, erroneous and prejudicial to the interest of Revenue and accordingly modified the assessment by directing withdrawal of the Investment Allowance allowed by the Assessing Officer. Hence this appeal by the assessee.
2. The main contention of Mr. Moolchand Luhadia, partner, arguing the case himself for the assessee-firm was that since the machinery was purchased on 28-3-1987 and loaded on a hired trailer on 30-3-1987 for taking to assessee's place of business, it would be considered as 'installed' for the purposes of Investment Allowance under Section 32A of the Act. This argument was supported with a large number of cases of the High Court & Supreme Court. The learned Departmental Representative, however, supported the order under appeal and further submitted that until and unless the machinery was brought to the place of business of the assessee in Rajasthan or elsewhere and placed in a position for use in assessee's business, the same cannot be considered to have been 'installed'. After hearing the parties at considerable length and on a study of the material placed before us we agree with the learned Departmental Representative.
3. The controversy between the parties centers around the meaning of the word 'installed' used in the language of Section 32A. In order to understand the true meaning of this term in the context it has been used in Section 32A and explained in various judicial pronouncements, which have been relied upon by the assessee, it is necessary to reproduce the relevant part of this provision. Section 32A, as is relevant for our purpose, provides as under :
Investment Allowance :
Section 32A.-(1) In respect of a ship or an aircraft or machinery or plant specified in Sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five per cent of the actual cost of the ship, aircraft, machinery or plant to the assessee;
Provided that ** ** ** Provided further ** ** ** Explanation: ** ** **
(2) The ship or aircraft or machinery or plant referred to in Sub-section (1) shall be the following, namely :-
(a) ** ** ** (b) any new machinery or plant installed after the 31st day of March, 1976,- (i) ** ** ** (ii) ** ** **
(iii) in any other industrial undertaking for the purposes of business of construction, manufacture or production of any article or thing, not being an article or thing specified in the list in the Eleventh Schedule:
Provided that nothing contained in Clauses (a) and (b) shall apply in relation to,-
(i) a new ship or new aircraft acquired, or
(ii) any new machinery or plant installed, after the 31st day of March, 1987 but before the 1st day of April, 1988, unless such ship or aircraft is acquired or such machinery or plant is installed in the circumstances specified in Clause (a) of Sub-section (8B) and the assessee furnishes evidence to the satisfaction of the Assessing Officer as specified in that clause;
(c) ** ** ** (2A)to(7) ** ** **
(8) The Central Government, if it considers necessary or expedient so to do, may, by notification in the Official Gazette, direct that the deduction allowable under this section shall not be allowed in respect of any ship or aircraft acquired or any machinery or plant installed after such date as may be specified therein.
(8A) ** ** ** (8B) Notwithstanding anything contained in Sub-section (8) or the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. GSR 870(E), dated the 12th June, 1986, issued thereunder, the provisions of this section shall apply in respect of,-
(a) (i) ** ** **
(ii) any new machinery or plant installed after the 31st day of March, 1987 but before the 1st day of April, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that before the 12th day of June, 1986, he had purchased such machinery or plant or had entered into a contract for the purchase of such machinery or plant with the manufacturer or owner of, or a dealer in, such machinery or plant, or had, where such machinery or plant has been manufactured in an undertaking owned by the assessee, taken steps for the manufacture of such machinery or plant:
Provided that nothing contained in Sub-section (1) shall entitle the assessee to claim deduction in respect of a ship or aircraft or machinery or plant referred to in this clause in any previous year except the previous year relevant to the assessment year commencing on the 1st day of April, 1989.
4. In exercise of its powers under Sub-section (8) of Section 32A, vide Notification No. GSR 870(E), dated 12-6-1986, the Central Government notified that deduction on account of Investment Allowance shall not be allowed in respect of any ship, aircraft or plant and machinery installed after 31-3-1987. Undisputedly the assessee has not advanced its claim as per provisions of Sub-section (8B) of Section 32A which carves out a sort of exception to 32A(8).
5. A bare reading of the relevant provisions contained in Section 32A would inform that the word 'installed' used in Sub-section (1) has a very close relation to the use of the machinery for the purposes of assessee's business. Whereas the mere acquisition of a ship or aircraft by the assessee for use in his business entitles him to claim Investment Allowance under Section 32A in the year of acquisition, such allowance cannot be so claimed by him in the year of acquisition of the plant and machinery. Besides acquisition, the 'installation' of the plant and machinery in that very year is essential for the success of such a claim. The use of the plant and machinery may no doubt be .made in the succeeding previous year but in order to claim the Investment Allowance in the earlier previous year, the plant and machinery shall have to be 'installed' in that earlier year.
6. It is true that the word 'install', as per Concise Oxford Dictionary page 519 and Webster's Encyclopaedic Unabridged Dictionary page 736, means 'to place in position for service or use' and the expression 'installed' used in the language of Section 32A does not necessarily mean 'fixed in position' but is also used in the sense of 'induct' or 'introduce' or 'placing in apparatus' in position for service or use - CIT v. Mir Mohammad Ali [1964] 53 ITR 165 (SC) and CIT v. Instrumentation Ltd. It is also true that the statutory test of installation is satisfied when the assessee purchases a bus or lorry and puts it on the road in the course of his business - CIT v. Sri Rama Vilas Service (P.) Ltd. [1960] 38 ITR 25 (Mad.), Raju and Mannar v. CIT [1963] 50 ITR 202 (Mad.), CIT v. Saraspur Mills Ltd. [1959] 36 ITR 580 (Bom.) and the expression 'installed' does not necessarily mean that the item of plant or machinery should be embedded in earth or should be fixed in a particular position - CIT v. Vulcan Laval Ltd. [1991] 188 ITR 453 (Bom.) and purchase of machines like Vibrators, Hoist moving lifts etc., could be said to be 'installed' within the meaning of Section 32A when these are ready for use. But the answer to the question as to whether a plant and machinery is to be treated as installed or an item of plant and machinery is to be considered as 'inducted' or 'introduced' in a given case shall have to be answered after taking into account not only the nature of such plant and machinery or an item thereof but also the nature of assessee's business. A mere acquisition of plant and machinery, which may be in a 'condition for service or use in the business of the assessee', would not amount to its 'installation' which means 'placing in a position for service or use'. Likewise the purchase of an item of plant and machinery would not amount to its 'installation' until and unless such item has been 'placed in apparatus in a position for service or use'. Mere purchase of an engine of a vehicle would not amount to its 'inductment' or 'introduction' unless such engine has been placed in the vehicle and the vehicle itself gets the 'position' of being used in the business. The terms like 'induct' or 'introduce' necessarily carry the sense of bringing from outside and placing in a position for service and use. Thus the answer to the pertinent question shall have to be given after taking into account the facts and circumstances of the given case. The distinction between the meanings of the words 'condition' and 'position' shall have to be kept in mind before deciding such an issue. A plant and machinery or an item thereof may be in a 'condition' of service or use in the business of the assessee but it may not be in a 'position' for such service or use. A bus, a motor car, a bicycle or any other mobile machinery may be in a 'condition' for service or use in the business of the assessee the moment such machinery is acquired or purchased, but it may not be in a 'position' to such service or use unless it is carried to and placed in that position at the business place of the assessee. Otherwise acquisition of a plant or machinery in a 'condition' for service or use would meet the requirement for grant of Investment Allowance under Section 32A and placing the same in a position for service and care would no more be necessitated. Such an interpretation of the word 'installed' used in the language of Section 32A would not only go contrary to the ratio of various decisions of the High Courts and Supreme Court in a number of cases, referred to by the assessee in his oral and written submissions, but would also betray the Legislature's intention in allowing Investment Allowance under Section 32Aof the Act. Therefore, instead of looking into the meanings of the terms 'install', 'induct' or 'introduce' in Dictionaries we should go to the facts in assessee's case and on the facts available therein decide the issue.
7. The facts in assessee's case are quite simple. The assessee-firm carries on business of constructing Dams. It is headquartered at Kishangarh (Rajasthan). It may no doubt carry on its business anywhere in India and out of India but in so far as the year under consideration is concerned the assessee was carrying on its said business in the territories of Rajasthan and Gujarat States only. In the nature of assessee's business it required an excavating machine. The assessee accordingly placed an order on 24-3-1987 with TELCO at Jamshedpur for purchase of Tata Hitechi Model UH-083LC Bachoe for Rs. 24,03,500 and made advance payment of Rs. 2,00,000 also. To obtain the delivery of the machinery the assessee deputed its Supervisor Sri Padam Chand, who reached Jamshedpur on 26-3-1987. Sri Moolchand Luhadia, partner also followed him. The proposed machinery was got tested in the factory of TELCO at Jamshedpur, in the afternoon of 28-3-1987. It was found in a 'condition' of being used. As it was too late on that day and the following day was a holiday the gate-pass for removal of the machinery from the factory could be obtained on 30-3-1987. A trailer from Coastal Roadways was arranged and the machinery was removed from the TELCO factory and loaded on the Trailer at 5 p.m. on 30-3-1987. The machinery was carried to Rawatpura village in the District of Banswara in Rajasthan State where it was put to use on 5-4-1987 in the construction of a tunnel at Narwali Distributory. The balance payment of Rs. 22 lakhs plus was made on 10-4-1987. On these facts assessee's contention that the machine should be considered as duly 'installed' on 28-3-1987 when it was tested at TELCO factory at Jamshedpur and found in a condition to be used or at the most on 30-3-1987 when it was loaded on the trailor at Jamshedpur for being brought to Rawatpura village, cannot be accepted. The machinery may be said to be in a 'condition' to be used for the business of the assessee on 28-3-1987/ 30-3-1987 but certainly it was not in a 'position' for service or use in assessee's business. Until and unless the machinery was brought to the place of business of the assessee it cannot be claimed to be in a 'position' for service or use for the purpose of business. The testing of the machine at the TELCO factory at Jamshedpur declared it to be in a 'condition' for service or use, and not in a 'position' for service or use. The loading of the machine in the trailer on 30-3-1987 simply indicated its 'position for being carried to the place of business of the assessee' and not a 'position' for its service or use in assessee's business. The loading of the machinery in the trailer certainly did not amount to 'induct' or 'introduce' within the meaning of the terms used in the decisions of the Supreme Court and the High Courts. Since the machinery could be put to use on 5-4-1987 as the trailer could not cover the distance of about 1200 KM between Jamshedpur and Rawatpura Village, as was told to us in the course of arguments, the said machinery cannot be deemed to have been 'installed' within the year under consideration. The learned CIT has, therefore, rightly withdrawn the Investment Allowance under Section 32A wrongly granted by the AO.
8. Mr. Moolchand Luhadia had also urged that the impugned order was bad in law inasmuch as the learned CIT had no grounds to assume jurisdiction under Section 263. A number of cases were referred to in support of such arguments. But in view of the findings arrived at by us above, we entertain no doubt that since the assessment as made by the Assessing Officer in the case was erroneous in so far as that was prejudicial to the interests of revenue, the learned CIT had all the jurisdiction and power to revise the same by invoking the provisions of Section 263 of the Act. We thus find no merits in Mr. Moolchand's arguments in that behalf.
9. In the result, this appeal is devoid of any force and is dismissed as such.