9911796707
TMI Blog2001 (11) TMI 259X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year ended on 31st March, 1987 the company purchased a ship known as 'M.V. Tamil Periyar' on 30-9-1986 at a cost of Rs. 39,63,80,428 and 'M.V. Tamil Kamaraj' at a cost of Rs. 40,00,26,286 in March, 1987 as per the details given below : 1. 'M.V. Tamil Periyar' cost Rs. 39,63,80,428 2. 'M.V. Tamil Kamaraj'cost Rs. 40,00,26,286 ---------------- Total Rs. 79,64,06,714 Add: Addition to cost because of exchange fluctuation Rs. 6,32,43,353 ---------------- Rs. 85,96,50,067 ---------------- The total investment allowance to which the assessee-company was entitled to in respect of the above two ships was Rs. 21,49,12,516. In addition to the aforesaid three ships the assessee-company purchased Dredger on 20-8-1990 for a sum of Rs. 87,98,435. 3.1 The appellant company debited to the profit and loss account and credited to the investment allowance reserve account the following amounts : Sl. No. Assessment year Amount 1. 1986-87 Rs. 86,52,447 2. 1987-88 Rs. 1,43,295 3. 1992-93 Rs. 11,89,41,592 4. 1993-94 Rs. 8,58,75,046 5. 1994-95 Rs. 21,16,52,404 ----------------- Total Rs. 42,52,64,784 ----------------- The Assessing Officer originally allowed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accountancy is thus clear and does not require an identity, between the amount transferred to reserve and funds utilised to acquire the new asset. The requirement of law is only that the assessee should acquire an asset on any date subsequent to the acquisition of the asset in respect of the investment allowance is claimed and the value of the asset so acquired should be equal to or in excess of the amount of reserve that the assessee is required to create under section 32A. Applying the above position it can be seen that the assessee has acquired four vessels in the following order: 1. 'M.V. Tamil Anna' 2-8-1985 2. 'M.V. Tamil Periyar' 30-9-1986 3. 'M.V. Tamil Kamaraj' 8-1-1987 4. Dredger 20-8-1990. 6.1 It would be noted that the cost of the vessel 'M.V. Tamil Periyar' covers the amount of investment allowance that is created in respect of the ship 'M.V. Tamil Anna'. The investment allowance granted in the case of 'M.V. Tamil Anna' is a sum of Rs. 8,18,91,973 and the reserve is only 75% thereof. The cost of the ship 'M.V. Tamil Periyar' is Rs. 39,63,80,428 without takings, into account the addition to the cost on account of exchange fluctuations 6.2 In respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment allowance for the aforesaid three assessment years is not justified. 7. On the other hand, the learned departmental representative Shri A.K. Nigam, Commissioner of Income-tax (ITAT), strongly supported the orders of the Revenue authorities and contended, to say in brief, that: The Assessing Officer, in his revision orders dated 27-3-2000 (for the assessment years 1986-87 and 1987-88) has brought out the details of investment allowance reserve created by the assessee for the years following which the deductions under section 32A were allowed for the three assessment years relevant for the consideration of the Tribunal. The appellant contends that the investment allowance reserve created by it should be held to have been utilised for the acquisition of the ships, namely, 'M.V. Tamil Anna' (in the year 1985-86) and 'M.V. Tamil Periyar' (in the year 1986-87). The Assessing Officer has brought out the facts in his revision orders so as to show that the acquisition of these ships cannot be held to have been made by utilising the investment allowance reserves, which came to be created (to the extent of specified percentage) much later. The creation of investment allowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have heard the rival submissions and considered the facts and the materials on record including the impugned orders and the case laws relied upon by the learned counsel for the assessee. On a careful perusal of the facts and the materials in the light of the rival submissions, it can be seen that the crux of the issue awaiting our adjudication is whether the investment allowance reserve created much later to the date of acquisition of new ship (other than the original ship in respect of which investment allowance reserve has been created) can be said to have been utilised for acquisition of the news ship (other than the original ship with respect to which the investment allowance reserve was created). No doubt a beneficial provision like section 32A is to be interpreted and applied liberally, but any such interpretation or liberality cannot go beyond the provisions of the section itself. While allowing an incentive the section is to be liberally interpreted, but at the same time if the conditions specified in the incentive section are not fulfilled, while withdrawing the benefit already allowed the assessee cannot expect any further concession or liberality. According to section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant (other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the second proviso to subsection (1) for the purposes of the business of the undertaking." Even though section 32Apermits creation of reserve in subsequent years due to insufficiency of profit for creation of reserve, it is nowhere stated in the section that the reserve can be created in respect of original ship, subsequent to the acquisition of the new ships in satisfaction of tile utilisation of reserve in respect of the original ship purchased. Section 32AB (Investment deposit account) permits the assessee to utilise the profits of the year for the purchase of the eligible asset in the same year itself, although it permits the assessee even to deposit such amount with IDBI to be eligible for deduction under section 32AB. But we do not find anything in section 32A permitting the assessee to purchase a new asset in satisfaction of the utilisation of the reserve created in respect of an originally purchased asset even without creating such reserve in respect of the original asset purchased. 10.1 Section 155(4A) reads as under: "Where an allowance by way of investment allowance has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o page 1157 of IT Law by Chaturvedi and Pithisaria (Vol. I 1991 edition) where the conditions regarding the investment allowance reserve are discussed as under : "The amount in such reserve (investment allowance reserve) must be utilised for the purpose of acquiring within the next following ten years, a new eligible asset for the purpose of business of the undertaking itself."[Section 32A(4)(ii)]. From the above it is clear that the amount from the investment allowance reserve should be utilised for the purpose of a new ship within the next following 10 years after the reserve is created. In this case, the reserves are created only in this subsequent assessment year and since the two ships were purchased in the assessment year 1987-88 itself the said purchases cannot be considered as utilisation of the reserve. Another reference is also drawn to page No. 1163 of IT Law by Sri Chaturvedi & Pithisaria (Vol. I 1992 edition) where dealing with the distinction between development rebate and investment allowance the following observation has been made viz.,: 'As regards condition No. V the important point of distinction is that the amount credited to the investment allowance reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
