Indian Kanoon - Search engine for Indian Law

15. Learned Departmental Representative also contended that there is no evidence on record to show that there was an offer by M/s. Servotech in definite terms and acceptance thereof. According to her, there might have been certain negotiations but such negotiations should not be taken as concluded contract. The contract being in respect of plant and machinery on turn key basis, the learned Departmental Representative argued, should have been in writing for the sake of being exact and definite. She also drew our attention to the letter dt. 28th Oct., 1986 sent by M/s. Servotech to the assessee in which M/s. Servotech mentioned "We have pleasure in enclosing herewith our offer for 200 MTD Soyabean processing complex on turn key basis". "In token of your acceptance, we would request you to kindly sign and send us duplicate copy of this letter". She also drew our attention to letter dt. 30th Oct., 1986 sent by the assessee to M/s. Servotech alongwith a cheque of Rs. 51,000 as a token advance against the order for solvent extraction plant.

16. It appears that much weight has been attached by the CIT(A) to these two letters, wherefrom he reached the conclusion that the letter dt. 28th Oct., 1986 was an offer by M/s. Servotech and the letter dt. 30th Oct., 1986 was acceptance by the assessee. Whether a concluded contract has been made or not is a question of fact to be determined in each case by consideration of all the relevant circumstances and facts and cannot be determined by picking up only these two letters. It may be repeated that the parties to the contract had cordial relation, though the correspondence, entered into between them appears formal. Because of such relations, the correspondence indicated special mention "Kind attention -Mr. P. C. Mutha", "Attention - Mr. L. S. Rawlani". It is, thus, indicative of the fact that particular representatives of the parties to the contract were in contact with each other. As the sequence of events show, after receipt of the quotations from M/s. Servotech dt. 3rd March, 1986, a resolution authorising Shri P. C. Mutha to negotiate with the suppliers was passed by the Board of Directors of the assessee-company on 31st March, 1986. Soon thereafter Shri P. C. Mutha visited Bombay and contacted M/s. Servotech during the period from 31st March, 1986 to 12th April, 1986. It is claimed by the assessee that visit of Shri P. C. Mutha during the period from 7th to 12th April, 1986 was for finalising of the contract and the contract was as such finalised. This stand of the assessee deserves to be accepted, since soon thereafter the assessee wrote letter dt. 26th April, 1986 to M. P. Consultancy Organisation Ltd. Bhopal for preparation of a project report for applying for term loan to ICICI. The said letter unequivocally mentioned "we have already obtained registration certificate from DGTD for increasing the capacity, xerox copy of which is enclosed herewith and further we have finalised plant with M/s. Servotech Engineers (P) Ltd., Bombay as per their quotation dt. 3rd March, 1986".

In reply thereto, M. P. Consultancy Organisation Ltd., vide their letter dt. 23rd June, 1986 required the assessee to make payment of Rs. 2,000. It is, thus, crystal clear that the contract for purchase of the plant was finalised between the assessee and M/s. Servotech before the 26th April, 1986. There is, therefore, truth in the contention of the assessee that the contract was entered into orally during 7th to 12th April, 1986 when Shri P. C. Mutha had visited M/s. Servotech in Bombay.

17. Had there not been such finalisation, the assessee-company would not have perhaps floated public issue of equity shares, vide prospectus dt. 21st April, 1986. The said prospectus clearly mentioned that the object of the public issue was to raise funds for expansion of the solvent extraction plant to 90,000 Tonnes per annum. It was clearly mentioned in the prospectus that the assessee-company would be entitled to deduction under S. 32A of the IT Act by way of investment allowance. It is, thus, abundantly clear that the assessee-company had entered into the contract of purchasing the plant under the clear understanding that it would be entitled to benefit under S. 32A. The said prospectus also mentioned that the new solvent extraction plant with 200 MTD capacity was being installed with latest technology. The cost of the project was estimated at Rs. 348 lacs. Then there is central layout of the plant dt. 10th July, 1986 prepared by M/s. Servotech. These events go to show that the assessee had entered into the contract for the plant and machinery in April, 1986.

(3) The assessee received quotation from M/s. Servotech, vide letter dt. 3rd March, 1986.

(4) Soon thereafter, resolution was passed by the Board of Directors on 31st March, 1986 authorising Shri P. C. Mutha to negotiate with the suppliers.

(5) Shri Mutha visited Bombay and contracted M/s. Servotech during 31st March, 1986 to 3rd April, 1986 and 7th April, 1986 to 12th April, 1986, and finalised the contract.

(6) This is evident from the letter dt. 26th April, 1986 written by the assessee to M. P. Consultancy Organisation Ltd. (A Public undertaking) mentioning that the plant was finalised with M/s. Servotech Engineers (P) Ltd. as per their quotation dt. 3rd March, 1986.