1995 (9) TMI 122 - AT - Income Tax

Assessing Officer, Central Government, Motor Vehicles, Road Transport Vehicle, Subordinate Legislation, Transport Business

Summary

Issues Involved:
1. Disallowance of investment allowance under section 32AB.
2. Interpretation of section 32AB(4) of the Income-tax Act.
3. Applicability of the Investment Deposit Account Scheme, 1986.

Detailed Analysis:

1. Disallowance of Investment Allowance under Section 32AB:

The appeal was filed against the Commissioner (Appeals) order confirming the disallowance of investment allowance under section 32AB. The assessee, a transport business company, claimed a deduction of Rs. 19,677 under section 32AB, citing the Investment Deposit Account Scheme. The Assessing Officer rejected this claim, citing section 32AB(4), which prohibits allowance for amounts used to purchase road transport vehicles. The Commissioner (Appeals) upheld this decision.

2. Interpretation of Section 32AB(4) of the Income-tax Act:

Section 32AB was introduced by the Finance Act, 1986, effective from 1-4-1987. It allows deductions for amounts deposited in a Development Bank or used for purchasing new ships, aircraft, machinery, or plants. However, section 32AB(4) explicitly prohibits deductions for amounts used to purchase road transport vehicles. The Tribunal emphasized that the language of section 32AB(4) is clear and unambiguous, creating a clear-cut bar on deductions for road transport vehicles.

3. Applicability of the Investment Deposit Account Scheme, 1986:

The Investment Deposit Account Scheme, 1986, notified by the Central Government, allows deductions for amounts deposited in a deposit account or used for specific purposes, including the repayment of term loans contracted after 31st March 1986. However, the Tribunal noted that the Scheme, being subordinate legislation, cannot override the explicit prohibitions in section 32AB(4). The Central Government's notification cannot allow deductions for road transport vehicles if the statute explicitly prohibits it.

The Tribunal referenced the Supreme Court's rulings in Goodyear India Ltd. v. State of Haryana and Reserve Bank of India v. Peerless General Finance & Investment Co. Ltd., emphasizing that statutes must be interpreted reasonably and as a whole. The Tribunal concluded that allowing the deduction for the repayment of a term loan used to purchase road transport vehicles would defeat the law's intent and allow an indirect benefit explicitly forbidden by the statute.

Conclusion:

The Tribunal dismissed the appeal, affirming that the repayment of the principal amount of a term loan used to purchase road transport vehicles does not qualify for a deduction under section 32AB. The Tribunal held that the Scheme could not override the statutory restrictions imposed by section 32AB(4).