TMI Blog2015 (1) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... entitles an assessee carrying on a business or profession to reduce his taxable income by the sum utilised by him for purchase of new plant and machinery and or deposited with the Industrial Development Bank of India for such utilisation. A perusal of clause 9 of the Scheme mentions that the withdrawal could either be utilised for purchase of new ship, aircraft, plant & machinery or computers to be installed either in office or at the business premises. In the alternative, the amount can also be used for repayment of principal amount of term loans which should have been contracted after 31.03.1986 taken from a specified financial institution including specified banks. It is required to be noted that the clause does not state that the term loan should be used for any specific purpose like purchase of new machinery etc. - Decided in favour of assessee. Separate relief under sections 80HH and 80I of the Act - Held that:- The question is squarely governed by the decision of this Court in the case of Commissioner of Income tax vs. Amod Stamping reported in [2004 (1) TMI 15 - GUJARAT High Court] which has been considered by the Apex Court in the case of Joint Commissioner of Income-T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in deleting the addition made under section 32AB(6) of the Act ? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in directing to allow separate relief under sections 80HH and 80I of the Act? TAX APPEAL NOs. 480 481 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of ₹ 40,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1169 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of ₹ 15,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals for consideration of the aforesaid substantial question/s of law. 3. Mr. Manish Bhatt, learned Senior Standing Counsel appearing for the revenue has drawn the attention of this Court to the provisions of section 32AB, more particularly, sub-clause (6) of the Act and strongly contended that the Tribunal has erred by overlooking the fact that deduction u/s 32AB(1) is allowable only if the amount out of income chargeable to tax is deposited in Investment Deposit Account and is utilised during the previous year for the purchase of any new ship, new aircraft, new machinery or plant. He submitted that sub clause 6 of section 32AB carves out an exception that where the amount is withdrawn by the assessee and is utilised for the purpose specified in the scheme in circumstances other than the circumstances specified in clauses (b), (c) and (e) of sub-section 5(A) then that amount shall be deemed to be the profits and gains of business or profession of that previous year. He submitted that in the case of the assessee, the amounts were utilised to repay the loans of SBI as well as for purchase of trucks and tankers which is certainly not in accordance with the requirements of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Tribunal. He submitted that considering the provisions of section 32AB, more particularly sub-clause (1) and (6) and the provision of clause 9 of the Scheme, it is clear that the requirement is repayment of principal amount of specified term loans and the purpose of term loans is not elaborated further. 5.1 Mr. Soparkar has taken this Court to the findings of both the authorities and submitted that in view of the concurrent findings of both the authorities below wherein the authorities have come to the conclusion that the loan is taken after 1986 which is a term loan and the amount withdrawn is used for repayment of term loan which is contracted after 31.03.1989. He has also relied upon the recent decision of the Apex Court in the case of Commissioner of Income-Tax vs. Calcutta Knitwears reported in [2014] 362 ITR 673 (SC). He has also relied upon another decision of the Apex Court in the case of Mysore Minerals Ltd. vs. Commissioner of Income-Tax reported in [1999] 239 ITR 775 and submitted that the Apex Court has held that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred 5.2 Mr. Soparka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partner, or as the case may be, any member of such firm, association of persons or body of individuals: Provided further that no such deduction shall be allowed in relation to the assessment year commencing on the 1st day of April, 1991, or any subsequent assessment year. (2) For the purposes of this section,- (i) Omitted (ii) new ship or new aircraft includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the date of such acquisition owned by any person resident in India; (iii) new machinery or plant includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the list in the Eleventh Schedule. (5) The deduction under sub-section (1) shall not be admissible unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant : Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. (5A) Any amount standing to the credit of the assessee in the deposit account shall not be allowed to be withdrawn before the expiry of a period of five years from the date of deposit except for the purposes specified in the scheme or in the circum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deductions allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year: Provided that nothing in this sub-section shall apply- (i) where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956); or (ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme continues to apply to the company in the manner applicable to the firm. Explanation.-The provisions of clause (ii) of the proviso shall apply only where- (i) all the properties of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 subsection (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. (2)(a) Withdrawal from the deposit may be made by a depositor not more than once in every three calendar months, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abreast with new technology and to see that the industry does not carry on its business with old machinery and that the industry equips itself with the latest plant and machinery. Therefore, in order to take benefit of the beneficiary legislation, the assessee firm has every right to plan its tax payment accordingly. Essentially, it entitles an assessee carrying on a business or profession to reduce his taxable income by the sum utilised by him for purchase of new plant and machinery and or deposited with the Industrial Development Bank of India for such utilisation. 7.2 It is not in dispute that the Board's Circular No. 461 dated 9-7-1986 has explained the scope of the provisions relating to deduction under section 32AB in para 17.3 thereof as under :- 17.3 One of the reasons for our having a high capital output ratio in the industry is that the tax concessions have so far favoured investment in assets per se rather than output generated from those assets. By the new scheme relating to investment deposit account along with the proposed high depreciation rates announced by the F.M., the retained earnings and internal resources generation of the companies would impro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of low priority items as specified in the list in the Eleventh Schedule. It may be clarified that the business of construction is an eligible business for the purposes of this provision. (b) In order to encourage a more productive use of capital leading to a low cost economy, the benefits under the new investment deposit scheme shall be available only if there are profits in the eligible 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. (c) The acquisition of a ship or an aircraft or installation of plant and machinery, as the case may be, during the previous year is a condition precedent for availing of the benefit of the existing investment allowance, whereas the deduction under the new provisions can be availed of even before the ship or aircraft is acquired or the plant or machinery has been installed by making a deposit with the designated Development Bank. (d) The investment allowance is allowed at 25 per cent of the actual cost of the plant, machinery, ship or aircraft to the assessee. As against thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Court in paragraphs 24 26 has observed as under: 24. We may gainfully refer to The Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 at 71 which involved the Finance (No. 2) Act 1915 which imposed excess profits duty on trade or businesses commenced after the outbreak of the First World War in 1914. By subjecting the legislation to a strict literal interpretation, Rowlatt J. held that the Finance (No. 2) Act 1915, in isolation, did not apply to businesses that commenced after the outbreak of war in 1914 and observed as follows: . . . the principle in favour of a strict literal approach . . . simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used. 26. Lord Granworth in Grundy v. Pinniger, (1852) 1 LJ Ch 405 has observed that: To adhere as closely as possible to the literal meaning of the words used, is a cardinal rule from which if we depart we launch into a sea of difficulties which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (St.) 71). The decision in J.P. Tobacco Products P.Ltd. (1998) 229 ITR 123 (MP) was followed by the same High Court in the case of CIT v. Alpine Solvex P.Ltd. in I.T.A.No.92 of 1999 decided on May 2, 2000. Special leave petition against this was dismissed by this curt on January 12, 2001, (see (2001) 247 ITR (St.) 36). This view has been followed repeatedly by different High Courts in a number of cases against which no special leave petitions were filed meaning thereby that the Department has accepted the view taken in these judgments. See CIT v. Nima Specific Family Trust reported in (2001) 248 ITR 29 (Bom); CIT v. Chokshi Contacts P.Ltd. (2001) 251 ITR 587 (Raj); CIT v. Amod Stamping (2005) 274 ITR 176 (Guj); CIT v. Mittal Appliances P.Ltd. (2004) 270 ITR 65 (MP); CIT v. Rochiram and Sons (2004) 271 ITR 444 (Raj); CIT v. Prakash Chandra Basant Kumar (2005) 276 ITR 664 (MP); CIT v. S.B.Oil Industries P.Ltd. (2005) 274 ITR 495 (P H); CIT v. SKG Engineering P.Ltd. (2005) 119 DLT 673 = (2006) 285 ITR 423 (Delhi) and CIT v. Lucky Laboratories Ltd. (2006) 200 CTR 305 (All) Since the special leave petitions filed against the judgment of the Madhya Pradesh High Court have been dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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