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TMI Blog2001 (5) TMI 167X X X X Extracts X X X X X X X X Extracts X X X X ..... me of hearing, to short circuit the proceedings, the learned counsel for the assessee (even though this is an appeal by the Revenue) placed on record a paper book consisting of 24 pages covering both the appeals of the Revenue and that of the assessee. Adverting to page Nos. 17 to 24 of the said compilation, the learned counsel for the assessee submitted that the point at issue is now squarely governed by the said order of the Tribunal in favour of the assessee. The learned departmental representative also fairly admitted that the point at issue is now governed by the said decision of the Tribunal. After hearing both the sides and considering the facts and the materials on record including the decision of the Tribunal, cited supra, we are inclined to dismiss the Revenue's appeal by following the earlier decision of the Tribunal. Thus the Revenue's appeal is dismissed. 3. Now let us turn to the assessee's appeal in ITA No. 1793 (Mad.)/1993. Briefly stated, the facts of the case are that while framing the assessment under section 143(3) of the Income-tax Act the Assessing Officer observed that the assessee had purchased machinery (computer) for Rs. 34,85,062 under the hire purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing the mercantile system of accounting and income has accrued under mercantile system, the profits should be considered as having been utilised towards the acquisition of the computer for the purpose of section 32AB when the liability has been incurred for purchase of the asset. 3. Without prejudice to the above claim, the Commissioner (Appeals) should have directed the deduction of Rs. 1,51,452 being the amount paid during the year towards instalment of hire purchase in respect of machinery capitalised in the assessment year 1989-90 as that amount should be considered as 'utilised' and eligible for deduction under section 32AB.' The learned counsel for the assessee, Ms. B. Mala, Chartered Accountant, apart from relying on the grounds of appeal, contended, to say in brief that: The assessee was following mercantile system of accounting. Its income was charged on accrual basis; the computer was purchased and capitalised during the relevant period; and the appellant should be considered to have utilised the fund in respect of the purchase of the said computer for the purpose of section 32AB. Though payments were made later on, liability was created during the relevant period an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulation in section 3 2AB of the Act that the 'amount should be utilised' means that the flow of money should have been from the assessee in the purchase of the machinery. He contended that in the case of the assessee it has not utilised or paid any sum and as such the claim of the assessee is not sustainable. A perusal of the provisions of section 32AB shows that the Legislature placed emphasis on actual utilisation of the total income. There is no concept of 'deemed utilization'. Further, the assessee had not become the owner of the computers as it had agreed to purchase the computers on hire purchase basis. (In this connection in page Nos. 3 and 4 of the paper book, being the bilateral agreement between the assessee and the vendor may be seen) no sum out of the total income was utilised. The assessee has not paid any amount during the year under consideration towards purchase of the machinery on hire purchase. The phrase 'amount utilised' is to be read in conjunction with the word 'purchase' appearing in section 32AB. 'Purchase' is contra of 'sale'. For a valid sale there should be price paid or agreed to be paid. If the amount in not paid according to the hire purchase agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon the circular No. 9 of 1943 in the context of the allowance of depreciation on machinery on hire purchase scheme. While deciding the issue in respect of allowability of depreciation and development rebate, akin to investment deposit account, on hire purchase scheme and following the circulars dated 26-6-1959 and 15-7-1963 the Hon'ble Delhi High Court in the case of General Industries Corpn. has held that depreciation and development rebate are to be allowed to the assessee on the machineries purchased on hire purchase scheme. In this regard the following paragraph appearing in the said decision of the Delhi High Court is more relevant:-- "On a careful examination of the nature of the hire-purchase agreement, it can be said that though it is worded as a hiring agreement which matures into a sale, it can also be regarded as a sale on instalments. The property passes in such agreements on the payment of the last instalment. However, during the period of hire, the purchaser is also paying the price, so virtually it is a sale on instalments. The circulars of the Central Board of Direct Taxes only serve to overcome a greater difficulty in computing how the various allowances have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree with the Tribunal, following the Supreme Court's judgments, that the circulars are binding and in this case the circulars resolve a real difficulty in assessing the actual income of the assessee. The problem is common to all businesses where machinery purchased on hire-purchase is involved. We, answer the first question referred to us in the affirmative, in favour of the assessee and against the Department." In view of the above decision of the Delhi High Court we are inclined to hold that the assessee is the owner for the purpose of claim of investment deposit under section 32AB. 6.1 Now coming to the issue on hand whether actual payments should have been there during the previous year out of the income of the assessee (even though liability has been created by making provision in the accounts) for claiming deduction under section 32AB, we find that there is a direct decision on this issue rendered by the Ahmedabad Bench B of the Tribunal in the case of Dy. CIT v. Gujarat Instrument Ltd. [1998] 66 ITD 413. In that case, the assessee, in the return of income for the assessment year 1990-91 claimed investment deposit benefit under section 32AB on purchase of plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plain reading of the section along with the Investment Deposit Account Scheme, the Legislature did not intend to restrict the meaning of the language in such way as being interpreted by the Revenue. The only consideration which was required under section 32AB(1)(b) was that the assessee had to utilise the income for purchase of new machineries and plant during the previous year. The Board's Circular No. 550, dated 1-1-1990 on the scope and effect of the amendments made in section 32AB by the Finance Act, 1989 was relevant. Moreover, for the purpose of depositing in the investment deposit account, the Legislature has prescribed a fixed period and that too upto six months from the end of the previous year or upto the furnishing of return whichever is earlier. Therefore it could not be assumed that in the second provision the Legislature had intended to restrict the provision so that the assessee had to make actual payment of the cost of the machineries during the previous year for the purpose of availing deduction under section 32AB. Considering the entire circumstances of the case, the finding recorded by the first appellate authority was upheld." 6.2 In the instant case on h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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