1989 (5) TMI 110 - AT - Income Tax

Summary

Issues Involved:
1. Claimability of deduction under section 32AB.
2. Interpretation of the term "previous year" in section 32AB.
3. Compliance with the time frame prescribed under section 32AB(1)(a).

Issue-wise Detailed Analysis:

1. Claimability of Deduction under Section 32AB:
The primary issue in this appeal relates to the claimability of deduction under section 32AB, which was introduced by the Finance Act, 1986, effective from April 1, 1987. The assessee, a private limited company manufacturing pump sets and potato chips, claimed a deduction amounting to Rs. 3,86,602 under section 32AB. This amount comprised Rs. 3,62,000 deposited with IDBI and Rs. 24,971 utilized for purchasing new machinery. However, the Inspecting Assistant Commissioner disallowed the deduction on the grounds that the deposit was not made within the time frame prescribed under section 32AB(1)(a).

2. Interpretation of the Term "Previous Year" in Section 32AB:
The assessee contended that the term "previous year" in section 32AB should be interpreted to mean the period of 12 months ending on March 31, 1987, rather than the period ending April 30, 1986. The Commissioner of Income-tax (Appeals) rejected this interpretation, stating that the term "previous year" should be understood as the period of 12 months up to which the accounts of the assessee were made up. The Tribunal upheld this view, emphasizing that the term "previous year" has not been redefined in section 32AB and should be interpreted as per section 2(34) read with section 3 of the Income-tax Act.

3. Compliance with the Time Frame Prescribed under Section 32AB(1)(a):
The Tribunal examined whether the deposit made by the assessee with IDBI on June 25, 1987, complied with the time frame prescribed under section 32AB(1)(a). This section stipulates that the deposit must be made before the expiry of six months from the end of the previous year or before furnishing the return of income, whichever is earlier. The Tribunal noted that the assessee's accounting period ended on April 30, 1986, making the deadline for the deposit October 31, 1986. Since the deposit was made on June 25, 1987, it was clearly beyond the prescribed time limit.

The Tribunal also addressed the assessee's argument that section 32AB is a beneficial provision and should be liberally construed. It referred to several judicial decisions, including those of the Supreme Court and various High Courts, to emphasize that while beneficial provisions should be liberally construed, this cannot be done by disregarding the clear language of the statute. The Tribunal concluded that the language of section 32AB(1)(a) was clear and unambiguous, and the requirement of making the deposit within the specified time frame was mandatory.

In summary, the Tribunal upheld the disallowance of the deduction claimed by the assessee under section 32AB, concluding that the deposit was not made within the prescribed time frame. The appeal filed by the assessee was accordingly dismissed.