2015 (8) TMI 572 - HC - Income Tax

Investment allowance under section 32A in respect of plant and machinery installed from April 1, 1987, to March 31, 1988, in the assessment year 1989-90 - Tribunal allowed claim - Held that - Reintroduction of the scheme of investment allowance under section 32A of the Act the intention of the Legislature was to grant the benefit thereunder in respect of plant and machinery installed after 1988 as also to plant and machinery installed during the period April 1, 1987, to March 31, 1988. However, with a view to take care of a situation whereby the cost of such machinery had been met with out of the amount released to the assessee from the Development Bank, an Explanation came to be introduced below sub-section (1) of the section which provides that for the purposes of investment allowance, actual cost shall mean the actual cost of the ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been met out of the amount released to the assessee from the Development Bank in accordance with the provisions of section 32AB(6) of the Act. Thus, to the extent of the benefit derived under section 32AB of the Act such amount stands reduced from the actual cost of the plant and machinery, and as such, the question of double deduction would not arise. As is apparent on a plain reading of sub-section (8B) of section 32A of the Act the provisions of that section have been made applicable to any new machinery or plant installed after March 31, 1987, but before April 1, 1988, if the assessee furnishes evidence to the satisfaction of the Assessing Officer that he had, before June 12, 1986, entered into a contract for the purchase of such plant or machinery with the manufacturer or owner of, or a dealer in, such machinery or plant, or had, where such machinery or plant has been manufactured in an undertaking owned by the assessee, taken steps for the manufacture of such machinery or plant. Thus, the intention of the Legislature clearly was to give the benefit of investment allowance in respect of plant or machinery installed during the period March 31, 1987, to April 1, 1988. If the contention of the appellant- Revenue were to be accepted, the provisions of sub-section (8B) of section 32A would be rendered nugatory and the very purpose of introducing the sub-section would be frustrated. Moreover, having regard to the fact that an assessee cannot claim the benefit of both investment allowance and investment deposit account in the same assessment year, the question of double deduction would not arise. Thus, sub-section (8B) of section 32A of the Act clearly envisages allowance of investment allowance under section 32AB of the Act in respect of plant and machinery installed from April 1, 1987, to March 31, 1988, in the assessment year 1989-90 and, hence, no infirmity can be found in the order of the Tribunal in allowing investment allowance under section 32A of the Act in respect of plant and machinery installed from April 1, 1987, to March 31, 1988. - Decided in favour of the assessee.

Issues Involved:
1. Entitlement to investment allowance under section 32A of the Income-tax Act, 1961.
2. Double deduction claim under sections 32A and 32AB.
3. Interpretation of statutory provisions and CBDT circulars.
4. Validity of Tribunal's order.

Detailed Analysis:

Issue 1: Entitlement to Investment Allowance under Section 32A
The core issue was whether the Tribunal was right in allowing the investment allowance under section 32A for plant and machinery installed between April 1, 1987, and March 31, 1988, in the assessment year 1989-90. The assessee, a Central Government public sector undertaking, claimed a deduction of Rs. 30,72,03,504 as investment allowance on machinery worth Rs. 1,06,41,24,179 installed during the specified period. The Assessing Officer disallowed the claim, arguing that the assessee had already availed deductions under section 32AB in previous years, and allowing section 32A would result in double deduction.

Issue 2: Double Deduction Claim under Sections 32A and 32AB
The Assessing Officer and the Commissioner of Income-tax (Appeals) held that since the assessee had claimed deductions under section 32AB in earlier years, it could not claim investment allowance under section 32A for the same assets, as this would amount to double deduction. However, the Tribunal allowed the claim, citing that the proviso to clause (a) of sub-section (8B) of section 32A permitted such a deduction for the assessment year 1989-90.

Issue 3: Interpretation of Statutory Provisions and CBDT Circulars
The Tribunal's decision was challenged on the grounds that it lacked reasoning and did not consider the findings of the Commissioner (Appeals) and the Assessing Officer. The court examined the relevant statutory provisions and CBDT Circular No. 559, dated May 4, 1990, which clarified that investment allowance could be claimed as an option to the deduction allowable under the Investment Deposit Account Scheme (section 32AB). The court noted that the combined effect of section 32A(8C) and section 32AB(10) was that an assessee could opt for either section 32A or section 32AB for a block of five years, starting from the initial assessment year.

Issue 4: Validity of Tribunal's Order
The court acknowledged that the Tribunal's order was cryptic and lacked detailed reasoning. However, instead of remanding the matter back to the Tribunal, the court decided to examine the facts and render its opinion. The court observed that the intention of the Legislature was to grant the benefit of investment allowance under section 32A for plant and machinery installed during the specified period, even if the assessee had claimed deductions under section 32AB in previous years. The court concluded that the provisions of section 32A(8B) clearly allowed the investment allowance for the assessment year 1989-90, and there was no question of double deduction since the actual cost of the plant and machinery would be reduced by the amount claimed under section 32AB.

Conclusion:
The court found no infirmity in the Tribunal's order allowing the investment allowance under section 32A for the specified period. The question was answered in favor of the assessee and against the Revenue, affirming the entitlement to the investment allowance under section 32A for the assessment year 1989-90. The reference was disposed of accordingly.

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