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2024 (6) TMI 1285 - AT - Income TaxIssues Involved: 1. Applicability of Section 32AD of the Income Tax Act, 1961 for investment made in the financial year 2015-16. 2. Whether the notification issued by the Central Board of Direct Taxes (CBDT) on 20.07.2016 keeps the operation of Section 32AD in abeyance until 20.07.2016. 3. Whether the notification stating that it shall come into force on the date of its publication in the official gazette overrides the provisions of Section 32AD(1) of the Act. Issue-wise Detailed Analysis: 1. Applicability of Section 32AD of the Income Tax Act, 1961 for investment made in the financial year 2015-16: The assessee argued that Section 32AD, inserted by the Finance Act, 2015, effective from AY 2016-17, allows for an additional investment allowance of 15% of the cost of new assets acquired and installed. The provision applies for five assessment years from 2016-17 to 2020-21. The assessee contended that the section does not stipulate that the deduction is only allowable post the notification of backward areas. The Memorandum explaining the provisions of the Finance Bill, 2015, and the CBDT Circular No. 19 of 2015, support this interpretation, stating that the section is effective from 01.04.2016 and applies to AY 2016-17 onwards. The Tribunal agreed with this interpretation, confirming that Section 32AD is applicable for investments made in FY 2015-16. 2. Whether the notification issued by the Central Board of Direct Taxes (CBDT) on 20.07.2016 keeps the operation of Section 32AD in abeyance until 20.07.2016: The assessee argued that the notification specifying backward areas should not override the legislative intent of Section 32AD, which is to provide benefits for a period of five years starting from 01.04.2015. The Tribunal noted that the section itself is clear about its applicability from 01.04.2015 and does not empower the executive to delay its effectiveness. The Tribunal concluded that the notification does not keep the operation of Section 32AD in abeyance until 20.07.2016 and that the benefits of the section apply from 01.04.2015. 3. Whether the notification stating that it shall come into force on the date of its publication in the official gazette overrides the provisions of Section 32AD(1) of the Act: The Tribunal found that the notification issued by the CBDT on 20.07.2016, which states that it shall come into force on the date of its publication, does not override the provisions of Section 32AD(1). The Tribunal emphasized that the section is a beneficial provision intended to promote industrialization in backward areas as part of the fiscal measures promised under the Andhra Pradesh Reorganization Act, 2014. The Tribunal held that the notification should be read in conjunction with the legislative intent, ensuring that the benefits of Section 32AD apply from 01.04.2015, irrespective of the date of the notification. Conclusion: The Tribunal allowed the appeal of the assessee, confirming that the provisions of Section 32AD are applicable for investments made in FY 2015-16. The notification issued by the CBDT does not keep the operation of Section 32AD in abeyance until its publication date, and it does not override the provisions of Section 32AD(1). The assessee is entitled to the deduction under Section 32AD for AY 2016-17.
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