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TMI Blog2013 (9) TMI 812X X X X Extracts X X X X X X X X Extracts X X X X ..... d a reserve only for Rs.93,26,754/-. The same is less than 75% of the claim for the investment allowance – Held that:- Reliance has been placed upon the judgment of Hon'ble Bombay High Court in the case of Indian Oil Corporation Ltd. vs. S.Rajagopalan, Income-Tax Officer, Companies Circle II(1), Bombay & Ors., [1973 (4) TMI 12 - BOMBAY High Court] and also on the judgment in the case of Commissioner of Income-tax vs. Khandelwal Ferro Alloys Ltd., [1988 (11) TMI 54 - BOMBAY High Court] If during the assessment year relevant to the year of installation or use the total assessed income of the assessee is nil or negative, then the assessee cannot be expected to create an actual and non-illusory reserve equivalent to 75% of the claim and as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 143(3) of the Act. The AO observed that the assessee had claimed the investment allowance deduction for Rs.1,40,35,103/- under Section 32A(1) of the Act. The AO has opined that the assessee did not comply with the statutory requirement of Section 32A(4)(ii) of the Act, as the assessee has not created the 75% reserve amounts to Rs.1,05,26,327/-, but created a reserve only for Rs.93,26,754/-. The same is less than 75% of the claim for the investment allowance. Finally, the AO has rejected the claim of the assessee and made the addition, which was deleted by the first appellate authority. Being aggrieved, the Department has filed an appeal before the Tribunal, who has allowed the appeal in favour of the Department by upholding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raft, machinery or plant to the assessee : [Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words "twenty-five per cent", the words "twenty per cent" had been substituted :] Provided [further] that no deduction shall be allowed under this section in respect of-- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house; (b) any office appliances or road transport vehicles; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33; and (d) any machinery or plant, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ired or the machinery or plant was installed, a new ship or a new aircraft or new machinery or plant [other than machinery or plant of the nature referred to in clauses (a), (b) and (d) of the [second] proviso to sub-section (1)] for the purposes of the business of the undertaking; and (b) until the acquisition of a new ship or a new aircraft or new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India: Provided that this clause shall have effect in respect of a ship as if for the word "seventy-five", the word "fifty" had been substituted. Explanation.--Wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing] Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to sub-section (1) of section 145 or sub-section (2) of that section or the omission by the assessee to disclose his income fully and truly. It may be mentioned that Hon'ble Bombay High Court in the case of Indian Oil Corporation Ltd. vs. S.Rajagopalan, Income-Tax Officer, Companies Circle II(1), Bombay Ors., [1973] 92 ITR 241, observed that - "... if in the assessment year relevant to the year of installation or use of new machinery or plant the total assessed income of the assessee is nil, the assessee cannot naturally be expected to have c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the assessment year relevant to the year of installation or use the total assessed income of the assessee is nil or negative, then the assessee cannot be expected to create an actual and non-illusory reserve equivalent to 75% of the claim and as such reserve can only be created out of assessed profits. There can be no obligation on the part of the assessee to create a reserve as a condition merely for carrying over the development rebate without it being actually allowed to the assessee by setting off the rebate against the assessed profit. So, we are unable to accept the contention of the Department that the assessee must create the reserve in the year of installation or use of the plant or machinery, irrespective of any profits. S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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