1993 (7) TMI 152 - AT - Income Tax

Summary

Issues:
1. Delay in filing the appeal.
2. Eligibility for deduction under section 32AB of the Income-tax Act, 1961 based on machinery purchase.
3. Interpretation of the term "utilisation" under section 32AB.
4. Applicability of the deduction under section 32AB if machinery is not received within the accounting period.
5. Comparison of the CIT(A) and assessee's counsel arguments.
6. Analysis of section 32AB and its purpose.
7. Guidance note by the Institution of the Chartered Accountants on audit under section 32AB.

Analysis:
1. The appeal was filed late by three days, and the delay was condoned after hearing the parties.
2. The assessee claimed an investment allowance on the purchase of machinery. The Assessing Officer allowed a deduction under section 32AB for machinery worth Rs. 27,302, but disallowed a deduction for an advance payment of Rs. 39,057 as the machinery was not received within the year.
3. The CIT(A) agreed with the Assessing Officer, stating that the purchase is complete only when the goods paid for are received. The utilisation of the amount is not complete until the machinery is delivered.
4. The assessee's counsel argued that utilisation for purchase of machinery should not depend on receipt within the accounting period. The money was used for purchasing the machine within the stipulated time.
5. The Departmental Representative supported the CIT(A)'s order.
6. Section 32AB aims to neutralize bias in favor of borrowing and capacity creation. The CBDT circular allows the benefit even if the machinery is not acquired immediately, emphasizing investment decisions beyond tax considerations.
7. The Institution of Chartered Accountants guidance notes that advance payment for machinery constitutes utilisation, even if the machinery is not installed or used in the previous year. Refunds on cancellation of orders are covered under section 32AB(7) as income of the year when the refund is due.

In conclusion, the appeal was allowed, and the assessee was entitled to relief under section 32AB for the entire sum of Rs. 66,359, not just Rs. 27,302, as the concept of utilisation was interpreted to include advance payments for machinery purchases.