Income Tax Appellate Tribunal - Ahmedabad
Deputy Commissioner Of Income-Tax vs Gujarat Instrument Ltd. on 19 December, 1997
Equivalent citations: [1998]66ITD413(AHD)
ORDER
Shri Gopal Chowdhury, J.M.
1. The revenue has filed the present appeal against the order passed by the CIT(Appeals) for the assessment year 1990-91.
2. The first ground of appeal raised by the revenue is with regard to the reduction of the amount of subsidy from the cost of plant and machinery for the purpose of calculating depreciation. It appears that the Assessing Officer while framing assessment directed that the subsidy received by the assessee-company is to be deducted to arrive at the actual cost of the assets under section 43(1) of the Income-tax Act for calculating depreciation.
2.1 The first appellate authority following the decision of Gujarat High Court in the case of CIT v. Grace Paper Industries (P.) Ltd. [1990] 183 ITR 591 directed the Assessing Officer not to reduce the amount of subsidy for the purpose of calculating depreciation.
2.2 After hearing both the sides, we find that the present issue is now covered by the decision of the Supreme Court in favour of the assessee in the case of CIT v. P.J. Chemicals Ltd. [1994] 210 ITR 830/76 Taxman 611 Accordingly, this ground of appeal is rejected.
3. The next ground is in relation to the deduction under section 32AB of Rs. 2,34,349 which was allowed by the CIT (Appeals).
3.1 The Assessing Officer found that the company has claimed investment deposit benefit under section 32AB of Rs. 2,34,350 on purchase of plant and machinery made during the year. The assessee in support of its claim has filed the Auditor's report in form No. 3AA. The details of purchase was filed by the assessee before the Assessing Officer which is as follows :-
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S. No. Description Amount Date of Date of
invoice actual
payment
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1. Moler Crimping tool 12017 4-10-1989 16-7-1990
2. Wipro Cot Dot Matric 84875 30-3-1990 9-6-1990 Printer & 21-8-1990
3. Mono Printer Memory 42554 31-3-1990 -
Total 139446 (disallowables)
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From the said details, the Assessing Officer found that the payments for the purchase of machineries were made after the expiry of previous year. Although purchases were made during the year under consideration since the payments were made beyond the previous year. Hence the relief claimed by the assessee under section 32AB was negatived by the Assessing Officer.
3.2 The first appellate authority allowed the claim holding that as the plant and machinery were purchased during the accounting year and delivery were taken before the end of the accounting year. The appellant-company can be said to have utilised the amount for purchase of new machinery or plant and therefore, entitled for deduction under section 32AB. According to the first appellate authority for availing benefit under section 32AB either the amount should be deposited with the Development Bank or to be utilised for purchase of new machinery or plant, actual payments is not the acid test. Being aggrieved by the said finding, the revenue has preferred the present appeal before the Tribunal.
3.3 The learned departmental representative Shri G. M. Brahmbhatt has supported the order passed by the Assessing Officer and submitted that on going through the plain language the provisions of section 32AB, it will be clear that for availing benefit under section 32AB the assessee either has to deposit the amount in an account maintained by him with the Development Bank or utilised any amount during the previous year for the purchase of any ship, new aircraft, new machinery or plant without depositing any amount in the deposit account. Hence it is clear that the amount has to be utilised during the previous year which according to the learned D.R., the purchase price has to be paid during the previous year, if it is paid beyond the previous year the assessee is not entitled to relief under section 32AB of the Act.
3.4 On the other hand, Mr. B. D. Karia, the learned counsel appearing on behalf of the assessee has relied upon the impugned order and submitted that the assessee is a limited company maintaining its accounts under the mercantile system. It has been submitted that there is no dispute in the fact that the machineries in questions were purchased during the previous year which could be apparent from the date of invoice. Of course the payments were made beyond the previous year. The machineries were purchased and the assessee-company got delivery of the same during the previous year and the company has also debited the purchase amount of the machinery in its books of account. In such circumstances, the learned counsel on behalf of the assessee submitted that the first appellate authority was correct in holding that the actual payment is not a criteria for availing benefit under section 32AB of the Income-tax Act because the assessee has already utilised its income for the purpose of purchase of machinery.
3.5 We have heard both the sides and perused the materials on record. It appears that the facts of the present issue is not in dispute that the assessee-company purchased machineries on 4-10-1989, 30-3-1990 & 31-3-1990 i.e., within the previous year under consideration, for which payments were made on 16-7-1990, 9-6-1990 & 21-8-1990 i.e., beyond the previous year. The relevant provision of section 32AB reads as follows :-
"32AB (1) subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head 'Profits and gains of business or Profession', has, out of such income -
(a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, whichever is earlier; or
(b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a) in accordance with, and for the purposes specified in, a scheme (hereinafter in this section referred to as the scheme) to be framed by the Central Government. ..............."
On a bare perusal of the provision of the Act, it is clear that for availing the benefit under section 32AB the assessee has two options either it can deposit the amount in an account referred to as deposit account with the Development Bank before the expiry of 6 months from the end of the previous year or before furnishing the return of income whichever is earlier, or utilised the amount during the previous year for the purchase of any new ship, machinery etc. For the purpose of depositing the amount in deposit account maintained by the Development Bank. The period has been prescribed by the statute i.e., before the expiry of six months from the end of the previous year or before furnishing the return of income whichever is earlier. We do not find any such specific period has been prescribed for utilising the amount for purchase of new ship, new aircraft or new machinery etc. It is true that the amount for purchasing new ships, aircrafts, machineries etc. should be utilised during the previous year as it appears from the said provision. Now the question is whether the assessee had utilised the money during the previous year for purchase of the machineries in question or not. In this connection, the later part of the provision is also important which provides that Central Government shall prescribe scheme for the purpose of utilisation of the money under the investment deposit account. Pursuant to the said provisions Central Government has enacted Investment Deposit Account Scheme, 1986 by Notification No. G.S.R. 945(E), dated July 15, 1986 which is available in IT Law, fourth Edition by Chaturvedi and Pithisaria, Vol. I pg. 1192. Clauses (3) and (4) of this Scheme has provided how the deposit has to be made with the Development Bank of India which is not relevant for the purpose of the present case. Clause (9) of the Scheme reads as follows :-
"9. Utilisation of the amounts for the purpose of section 32AB - (1) an assessee, whose total income includes income chargeable to tax under the head 'Profits and gains of business or profession', may utilise -
(a) the whole or any part of the amount deposited by him in a deposit account under clause (a) of sub-section (1) of section 32AB of the Income-tax Act, or
(b) any amount out of such income, without depositing the same under clause (a) of sub-section (1) of section 32AB of the Income-tax Act, in accordance with this Scheme, for any of the following purposes, namely -
(i) purchase of new ship or new aircraft or new machinery or new plant for the purposes of the business or profession carried on by the depositor;
(ii) purchase of new computers to be installed either in the office or at a place where the depositor carries on business or profession;
(iii) repayment of the principal amount of term loans contracted after the 31st March, 1986, and taken for a period of three years or more from a financial corporation which is engaged in providing long-term finance for industrial development in India or from a scheduled bank or from any such other institution as the Central Government may, by notification in the Official Gazette, specify in this behalf."
From the reading of the aforesaid provision of the scheme, we find that any amount out of such income without depositing the same under clause (a) of sub-section (1) of section 32AB of the Act may be utilised for the purpose of purchase of new ship or new aircraft or new machinery for the purposes of business and profession carried on by the depositors. It has been mentioned in the provision of section 32AB of Income-tax Act that the provision of section 32AB is to be applied in accordance with and for the purposes specified in the scheme to be framed by the Central Government. On going through the language of the scheme, we find that no such restriction has been imposed in the scheme that the assessee has to make actual payment of cost of the machinery during the previous year in question. The Scheme only provides if the assessee does not select to deposit in a deposit account maintained with Development Bank, it may utilise the amount of income for the purchase of new ship, aircraft or new machineries etc. for the purpose of the business or profession carried on by the assessee in this background let us examine the facts of the present case. It is not in dispute that the machineries were purchased during the previous year and the assessee received delivery of the machines during the previous year. The only grievance of the revenue is that actual payments for the purchases were made beyond the previous year. As discussed above, considering the plain reading of the section alongwith the Investment Deposit Account Scheme, 1986 we are of the view that the legislature did not intend to restrict the meaning of the language in such way as being interpreted by the revenue. The only consideration which is required under section 32AB(1)(b) is that the assessee has to utilise the income for purchase of new machineries and plant during the previous year. If we interpret the provision in a restricted way to the effect that the assessee has to make actual payment of purchase that may defeat the object of the law. In this connection, the Board's Circular No. 550 dated 1-1-1990 on the scope and effect of the amendments made in section 32AB by the Finance Act, 1989 is relevant :
"14.2 To remove this anomaly, by amending section 32AB of the Income-tax Act, it has been provided that the benefit under this section shall be available to any assessee, deriving income from business or profession, who acquires new machinery or plant or deposits and utilise the deposit or the purchase of new machinery or plant to be used in the manufacture or production of priority items, i.e., items not specified in the Eleventh Schedule. For this purpose, reference to and the concept of eligible business or profession has been deleted. Further, as a consequence, the provisions for the mode of computation of profits of 'eligible business or profession' have also been amended and the amended sub-section (3) prescribes the mode for computation of profits of business or profession of an assessee for the purposes of sub-section (1)."
There is another aspect of the matter which requires consideration is that under section 32AB(1)(a) if an assessee wants to make deposit in the investment deposit account maintained with the Development Bank he can do so before the expiry of 6 months from the end of the previous year or before furnishing the return of his income whichever is earlier. For the purpose of depositing in the said account, the legislature has prescribed a fixed period and that too upto six months from the end of the previous year or upto the furnishing of return whichever is earlier. Therefore, it cannot be assumed that in the second provision the legislature has intended to restrict the provision so that the assessee has to make actual payment of the cost of the machineries during the previous year for the purpose of availing deduction under section 32AB of the Act. In the case of R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, the Supreme Court observed that it is true that equitable considerations are irrelevant in interpreting tax laws, but those laws, like all other laws, are to be interpreted reasonably and in consonance with justice. Further the Apex Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480 held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally to advance the objective of the provision and not to frustrate it. Considering the entire circumstances of the case, we are of the view that the finding recorded by the first appellate authority requires no interference.
3.6 The appeal is dismissed.