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Issues involved: Interpretation of deduction under section 32AB of the Income-tax Act for the assessment year 1988-89.
Summary: Issue 1: Claim of deduction under section 32AB The appellant claimed deduction under section 32AB on investment, but the Assessing authority found discrepancies in the claimed investment in plant and machinery. The Commissioner of Income-tax (Appeals) upheld the disallowance, but the Tribunal accepted the plea of the appellant based on legal precedents. The Tribunal emphasized the utilization of the amount for the purchase of machinery during the previous year, setting aside the findings of the Commissioner of Income-tax (Appeals). Issue 2: Interpretation of section 32AB The Division Bench of the Bombay High Court held that the payment of advance amount for the purchase of plant and machinery amounts to utilization in the year of advance, making the deduction under section 32AB admissible. The Court clarified the difference between sections 32A and 32AB, emphasizing that under section 32AB, the purchase should be out of income from eligible business or profession, and the concept of utilization should be understood with reference to actual payments made to the supplier. In conclusion, the Court dismissed the appeal, holding in favor of the appellant and against the revenue, based on the interpretation of section 32AB and the utilization of the amount for the purchase of new machinery or plant as contemplated under the Act.
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