TMI Blog2011 (2) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... t - ITR No. 192/1997 - - - Dated:- 22-2-2011 - Krishn Kumar Lahoti, Sushma Shrivastava, JJ. Sanjay Lal for the Appellant H.S. Shrivastava, learned Sr. Adv., with Sandesh Jain for the Respondent JUDGEMENT The Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur in R.A.No.82/Jbp/1997 by order dated 29.9.1997 has referred following question for the opinion of this Court under Section 256 of the Income Tax Act:- "Whether on the facts and in the circumstances of the case, the ITAT was justified in holding that the amount of Rs.15,55,875/- paid as advance for purchase of machinery during the year under consideration is the amount utilized for the purchase of machinery within the meaning of Sec.32AB of the Income Tax Act?" Learned counsel appearing for the revenue submitted that admittedly in the assessment year 1989-90, machinery in question was not acquired by the assessee, so the assessee was not entitled for investment allowance by deposit with the manufacturer. He has placed reliance to provisions of Section 32AB of the Income Tax Act, 1961 and submitted that until and unless such machinery is acquired or installed in the premises of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Appellate Tribunal who also found that the advance paid for purchase of machinery during the assessment year was in fact part payment against price of the machinery and therefore, it was an amount utilised for the purchase of machinery. The Income Tax Appellate Tribunal upheld the order of CIT (Appeal) and dismissed the appeal. Thereafter, the department filed an application before the Tribunal under Section 256 of the Income Tax Act for referring aforesaid question for the opinion of this Court. The Income Tax Appellate Tribunal has referred the question to this Court accordingly. To appreciate the rival contentions of the parties, it would be appropriate if the relevant provisions are referred. Section 32AB(1) of the Income Tax Act reads as under:- Investment deposit account 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 any account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six mon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this subsection shall have effect as if for the words "twenty five per cent", the words "twenty per cent" had been substituted; Provided further that no deduction shall be allowed under this section in respect of- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house; (b) any office appliances or road transport vehicles; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the purchase of the machinery. The delivery of the machinery may be taken in a subsequent year. If we accept the Department's contention then the scheme of section 32AB will fail. The advance is required to have a nexus with the income of the current year." The similar view has been taken by the Calcutta High Court in Tribeni Tissues Ltd.(supra) in which the the Division Bench of Calcutta High Court has held that the assessee should utilise amount for purchase of new machinery in accounting year, not necessary that the machinery or plant should be installed in the accounting year. The Division Bench of Allahabad High Court, relying on the judgment of Bombay High Court in Antifriction Bearing Corporation Ltd (supra) and quoting the aforesaid judgment in para 8 of the judgment, held that the amount given in advance for the purchase of plant and machinery amounts to utilization in the year advance was given for the purpose of clause (b) of section 32AB. The C.B.D.T Circulars which are relied on by the learned counsel for assessee also support his contention. In Circular dated 9.7.1986, the C.B.D.T. considering the amendment in the Finance Act, 1986 directed as under:- (c) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... II of the Sixth Schedule to the Companies Act lays down the requirements as to profit and loss account. These requirements, as per the provisions of section 32AB(3) of the Income-tax Act, will be applicable in the cases of corporate as well as non-corporate assessees. In Circular dated 22.9.1987, in para 20.1, the C.B.D.T. directed thus:- "20.1 The Finance Act, 1986, introduced section 32AB relating to investment deposit account. The provisions apply in relation to the assessment year 1987-88 and subsequent years. Under these provisions, an assessee is entitled to a deduction of an amount up to 20 per cent of the profits of 'eligible business or profession', if the said amount is either deposited with the Development Bank within the period up to six months from the end of the previous year or before furnishing the return, whichever is earlier, or is utilised during the previous year for the purchase of a new ship, new aircraft, or new machinery or plant." In view of the aforesaid discussion, the contention of learned counsel for the revenue has no substance and accordingly, aforesaid question referred by the ITAT is answered thus:- "The ITAT was justified in holding ..... X X X X Extracts X X X X X X X X Extracts X X X X
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