TMI Blog1992 (9) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the ground of appeal No. 7 of the appeal before him afresh. 4. Regarding the ground of appeal No. 5 for the asst. yr. 1990-91, the Counsel for the assessee did not press the same. As such, the ground of appeal No. 5 for the asst. yr. 1990-91 is dismissed for non-prosecution. 5. The ground of appeal that requires our decision for both the assessment years are the grounds Nos. 1 and 2. 6. A return showing an income of Rs. 1,69,83,110 was filed on 31st Jan., 1990. As per the law applicable, the case was initially processed under s. 143(1)(a) of the Act. Later on, as the case was selected for scrutiny, a notice under s. 143(2) was issued. 7. For the asst. yr. 1990-91, a return showing an income of Rs. 1,58,93,980 was filed on 26th Dec., 1990. 8. After hearing the speech of the Finance Minister on 19th March, 1990, the assessee filed a revised return for the asst. yr. 1989-90 proposing to withdraw the claim of investment allowance under s. 32A and pressing for the claim of investment deposit scheme allowance under s. 32AB of the Act. In the original return, the assessee had claimed deduction under s. 32A at Rs. 15,11,940, while in the revised return, the claim was raised to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble business or profession whereas the benefit of investment allowance is available even if there is no such profit, because the deduction is linked merely to the cost of the plant and machinery. It is notable that the definition of the expression eligible business or profession as contained in cl. (i) of s. 32AB(2) has been omitted w.e.f. 1st April, 1991. (c) The acquisition of the various assets during the previous year is the condition precedent for availing of the benefit of the existing investment allowance, whereas the deduction under s. 32AB can be availed of even before the assets are acquired or plant and machinery have been installed by making a deposit with the designated Development Bank. (d) The investment allowance under s. 32A is allowed at 25% of the actual cost of the plant and machinery. Under the provisions of s. 32AB, the entire cost of such assets qualifies for deduction if the same is upto 20% of the profits of the eligible business or profession. It is further notable that such deduction is to be allowed before the losses if any brought forward from earlier year is set off under s. 72 (vide amendment made by the Finance Act, 1987). It is notable that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the assessee, the bar under s. 32AB(10) applies at the assessment stage for the purpose of allowance. The provisions do not apply at the stage of claim by the assessee. According to the assessee as in his case, the asst. yr. 1989-90 was the first year of the assessee where the provisions of s. 32AB could be applied, it cannot be said that the deduction under s. 32A of the Act had been allowed to the assessee and hence no deduction under s. 32AB can be allowed in view of the provisions of s. 32AB(10). 14. The Assessing Officer was, however, of the view that the return filed on 20th March, 1990, could not be treated as a revised return filed under s. 139(5) because the original return was filed after the due date prescribed under s. 139(1) of the IT Act. He also held that the assessee had not discovered any omission or wrong statement in the original return filed because it had claimed deduction for investment allowance under s. 32A on plant and machinery worth Rs. 75,59,703. He found that in the financial year 1989-90 relevant to the asst. yr. 1990-91, the investment in the plant and machinery worth Rs. 1.2. crores were made. Further heavy investments were required to be mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid return. In view of the circular of the Board discussed above, the assessee was required to exercise the option for the first time in asst. yr. 1989-90, which the assessee had gone in the original return. Therefore, the assessee is not entitled to claim of deduction under s. 32AB." For the asst. yr. 1990-91, he agreed with the finding of the Assessing Officer and disallowed the claim of the assessee under s. 32AB of the Act. 16. The assessee's counsel to start with, submitted that the Assessing Officer during the appellate proceedings before the CIT(A) agreed with the assessee's contention that the audit report as required under s. 32AB was submitted in Form No. 3AA of the IT Rules. It was submitted that once the assessee submitted the audit report as required under s. 32AB in Form No. 3AA of the IT Rules, the assessee clearly showed his intention of claiming the deduction under s. 32AB of the Act. However, due to oversight, the assessee computed the allowance only under s. 32A of the Act. It was submitted that this was an error and omission on the part of the assessee and as such, the assessee could file a revised return under s. 139(5) of the Act. 17. The counsel fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in this case, the assessee had only made a claim under s. 32A to start with, and that claim was not allowed by the Assessing Officer. Therefore, it was submitted that the provisions of s. 32A(8C) do not apply to the facts of this case. Our attention was further invited to s. 32AB(10) to submit that the particular section will apply where a deduction has been allowed to an assessee under s. 32AB in any assessment year then no deduction could be allowed to the assessee under s. 32A(1) of the Act. It was submitted that in this case, no deduction under s. 32AB was allowed to start with, therefore, the Assessing Officer applying the provisions of s. 32A allowed the assessee relief under the said section. It was, however, submitted that under s. 32A(8C), there was no bar for the assessee for making claim under s. 32AB. Inviting our attention to the Board's letter No. F. No. 81/27/65-IT(B) dt. 18th May, 1965, it was submitted that the Officers of the Department must not take advantage of ignorance of an assessee as to his rights. It was submitted that it was the duty of the officer to assist a taxpayer in every reasonable way particularly in the matter of claiming and secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder s. 32AB if the assessee had claimed a deduction under s. 32A of the Act. However, the position in law has been changed w.e.f. 1st April, 1989. From 1st April, 1989, unless the assessee was allowed a deduction under s. 32A, he could not be denied deduction under s. 32AB. It was submitted that in this case, there was no allowance made under s. 32A. It was submitted that unless an order under s. 143(3) or 144 was passed, there could not be any adjudication regarding the allowance or disallowance of the relief under s. 32A. Our attention was invited to the decision of the Bombay High Court in the case of CIT vs. Smt. Archana R. Dhanwatey (1982) 24 CTR (Bom) 142 : (1982) 136 ITR 355 (Bom). It was submitted that in that given case, the Bombay High Court held that the deduction could be allowed from the income from other sources of certain items though not claimed by the assessee. It was submitted that on page 356 of the same case, it was held that there was a duty on the part of the ITO to consider whether the assessee was entitled to a deduction from the income from other source though no such specific claim was made by the assessee. It was submitted that the jurisdiction of the IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee got an opportunity of filing a revised claim under s. 32AB of the Act. If the Department had left the assessment at the stage of s. 143(1)(a) adjustment, then the assessee would have got no opportunity of filing a revised claim. Our attention was invited to the provisions of s. 143(3) to submit that the said section talks about the determination of the sum payable by an assessee on the basis of the assessment completed under s. 143(3). It was submitted that the assessee, in fact, wanted to reduce the income and claim refund, therefore, this claim was contrary to the provisions of s. 143(3). It was, therefore, submitted that the assessee was not entitled to reduce the income. Our attention was invited to the Commentary of learned authors Chaturvedi and Pithisaria on Income-tax law, 4th edition, 3rd Vol. on page 3348-3349 and it was submitted since under the provisions of new s. 143(1), an assessment is not to be made now, the provisions of sub-ss. (2) and (3) of s. 143 have been recast and are entirely different from the old provisions. A notice under s. 143(2) will be issued only in cases fixed for scrutiny. He particularly invited our attention to the following obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t I of this report, it has been mentioned that "a further report as required under the proviso to s. 32AB(5) is furnished in Part-III of this form." Our attention was further invited to page No. 8 of the paper book to submit that this was the annexure of the report in Form No. 3AA. It was submitted that the Assessing Officer very well knew that item No. 11 of Part III of the annexure to the report in Form No. 3AA shows the purchases of plant and machinery amounting to Rs. 75,59,703. It was also submitted that item No. 13 showed that the amount of deduction permissible to the assessee in accordance with the provisions of s. 32AB amounted to Rs. 48,71,375. It was submitted that the claim of the assessee was always available to the Assessing Officer. It was, therefore, submitted that on the basis of these documents which were already available along with the original return, there was a clear omission on the part of the assessee to specifically claim the deduction under s. 32AB; the assessee, therefore, exercised his option to make the claim on revised basis. Our attention was invited to s. 139(5) to submit that if any person having furnished return under s. 139(1) or in pursuance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Act, 1986 and brought in by the Income-tax (Amendment) Rules, of 1987, the retained earnings and international resources generation of the company would improve. The new scheme of investment deposit account will be neutral as between small and large companies and will also insulate the timing of investment decisions from tax considerations. This measure should help to reduce the premium on spending which taxation of business profit inevitably creates, and thus curb the conspicuous extravagance in the corporate sector. The new scheme should also help to neutralise the bias in favour of borrowings and needless capacity creation. From the above discussion it is clear that the provisions of s. 32AB as compared to s. 32A were brought in with a specific purpose of allowing the assessee proper incentive to reduce the premium on spending. It is clear that the provisions of s. 32AB was considered as more beneficial to the national economy and to the corporate sector. We are, therefore, of the opinion that unless it is impossible to do so, the provision of law should be interpreted in such a way that it encourages the growth of industry as envisaged in long-term financial policy. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. As learned Authors Chaturvedi and Pithisaria observed on page 3283 of the 3rd Vol., 4th Edition of Income-tax Law "those filing delayed voluntary returns under s. 139(4) are, strictly speaking, not included within the enabling provisions of s. 139(5). Be that as it may, there seems no bar to filing more than one return, one after the other, under s. 139(4)", therefore, even the second return filed by this assessee may be treated as a return filed under s. 139(4) itself. However, as we have observed above, the Assessing Officer was duty-bound to allow the assessee necessary relief under s. 32AB of the Act compared to the claim of the assessee under s. 32A as the figure of allowance under s. 32AB was available with him at the time of passing of the order under s. 143(1)(a) and even later on under s. 143(3). The Assessing Officer was bound to invite the attention of the assessee to the higher deduction under s. 32AB of the Act. This is particularly true because the assessee had complied with all other conditions prescribed under s. 32AB r/w r. 5 and Form No. 3AA of the IT Rules. 23. Though the learned Departmental Representative advanced an argument, which on the face of it, look ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount. It is not the case whether the Assessing Officer was required to look into the past record of the assessee. As discussed above, examples given by the Board's circular No. 549 dt. 31st Oct., 1989 are not exhaustive but only are illustrative. We are of the opinion that as per para 5.4. of the said circular, this adjustment could be made on the basis of the information available in the return or the documents accompanied with the return. The documents with return included the audit report as prescribed under s. 32AB of the IT Act r/w r. 5AB and Form No. 3AA of the IT Rules. The document in item No. 13 of Part III clearly mentions that the amount of deduction permissible in accordance with the provisions of s. 32AB. Thus, we are of the opinion that at the time when the Assessing Officer made adjustment under s. 143(1)(a), he was duty-bound to allow the assessee this relief in respect of the deduction under s. 32AB instead of deduction under s. 32A of the Act. Various decisions quoted by the assessee's counsel and the Departmental Representative need not be repeated here. The decision of the ITAT Delhi Bench is passed on the basis of the Delhi High Court decision which was binding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee's counsel. We find that the Assessing Officer had relied upon the decision of the Bombay High Court in the case of Bombay Burmah Trading Corpn. Ltd. vs. CIT (1983) 32 CTR (Bom) 306 : (1984) 145 ITR 793 (Bom) and the assessee had relied upon the Bombay High Court decision itself in the case of CIT vs. Glaxo Laboratories (India) Ltd. the latter decision of the Bombay High Court has not discussed the earlier decision in Bombay Burmah's case. In the Bombay Burmah Trading Corpn.'s case, the Hon'ble High Court differed from the decision of the Madras High Court in the case of CIT vs. Kisenchand Chellaram (India) P. Ltd. (1980) 16 CTR (Mad) 243 : (1981) 130 ITR 385 (Mad). The Bombay High Court followed the basic decision of the Supreme Court in the case of India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC). It was held that any fee paid by the assessee to Registrar of Companies for enhancement of capital is not allowable as revenue expenditure. In the case reported in (1990) 81 CTR (Bom) 69 : (1990) 181 ITR 59 (Bom), a finding was given by the Tribunal that the assessee did not need funds but it needed the technical collaboration agreement to run profitably. It was held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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