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2018 (3) TMI 885 - AT - Income TaxApplicability of section 33AB(7) - Investment deposit account - addition as deemed income as unutilized amount out of withdrawals from NABARD deposit account which was not utilized before 31.3.2011 for its intended purpose - Held that - The provisions of section 33AB (7) of the Act uses the expression being utilised . It is not in dispute that the amount withdrawn by the assessee from NABARD was for utilisation as per Tea Development Scheme of 2007 and the assessee had in fact placed orders for acquisition of various machineries that are required for setting up of new units to be engaged in growing and manufacturing of tea i.e acquisition for machineries /specified purposes as envisaged in para 9(a) to (k) of the Scheme. It is not in dispute that the assessee had paid substantial portion of the proforma invoice value as advance before 31.3.2011 and had included the same in the utilization statement before 31.3.2011 which clearly indicates its intention of utilizing the withdrawals from NABARD deposit accounts. Hence the purpose for which the provision has been made by the legislature has been satisfied by the assessee in this case before us. Thus we hold that the action of the revenue in bringing to tax the deemed income in terms of section 33AB(7) of the Act deserves to be deleted. - Decided in favour of assessee
Issues Involved:
1. Justification of the applicability of section 33AB(7) of the Income-tax Act, 1961 against the assessee. 2. Interpretation of the term "being utilized" within the context of section 33AB(7). 3. The legislative intent behind section 33AB and its liberal interpretation. 4. The timing of utilization of funds withdrawn from the NABARD deposit account. Detailed Analysis: 1. Justification of the Applicability of Section 33AB(7): The primary issue is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding the applicability of section 33AB(7) against the assessee. The assessee's main business involves the cultivation, manufacturing, and trading of tea. The Assessing Officer (AO) added an unutilized amount of ?1,49,82,251 to the assessee's income under section 33AB(7) because it was not utilized before 31.3.2011 for its intended purpose. The assessee argued that the amount was utilized within a reasonable period and in accordance with the Tea Development Scheme, 2007, and hence should not be taxed as deemed income. 2. Interpretation of the Term "Being Utilized": The assessee contended that the term "being utilized" should be interpreted liberally. The assessee had placed orders and made substantial payments towards the procurement of machinery before 31.3.2011, although the actual utilization spread over the next accounting year. The assessee argued that the legislative intent behind section 33AB was to promote the growth and development of the tea industry, and a strict interpretation would frustrate this objective. 3. Legislative Intent and Liberal Interpretation: The Tribunal noted that section 33AB was introduced to encourage the internal mobilization of resources for the tea industry. Similar provisions existed under section 32AB, and the legislative history indicated a liberal interpretation to avoid penalizing assessees for minor delays in utilization. The Tribunal emphasized that incentive provisions should be construed liberally to advance their objective, as supported by the Supreme Court decisions in Bajaj Tempo Ltd vs CIT and CIT vs Gwalior Rayon Silk Manufacturing Co. Ltd. 4. Timing of Utilization of Funds: The Tribunal found that the assessee had utilized ?3,82,92,849 before 31.3.2011 and the remaining ?1,49,82,251 before the due date for filing the return under section 139(1). Although the statute mandates utilization within the previous year, the Tribunal held that the slight delay did not warrant the addition of the unutilized amount as deemed income. The Tribunal noted that the entire utilization was in accordance with the Tea Development Scheme, 2007, and there was no diversion of funds for non-business purposes. Conclusion: The Tribunal held that the action of the revenue in taxing the deemed income under section 33AB(7) was not justified. The provisions of section 33AB(7) should be interpreted liberally to fulfill the legislative intent of promoting the tea industry. The appeal of the assessee was allowed, and the addition of ?1,49,82,251 as deemed income was deleted. The order was pronounced in the open court on 07.03.2018.
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