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TMI Blog2015 (1) TMI 833X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to see that the industry does not carry on its business with old machinery and that the industry equips itself with the latest plant and machinery. Therefore, in order to take benefit of the beneficiary legislation, the assessee firm has every right to plan its tax payment accordingly. Essentially, it entitles an assessee carrying on a business or profession to reduce his taxable income by the sum utilised by him for purchase of new plant and machinery and or deposited with the Industrial Development Bank of India for such utilisation. A perusal of clause 9 of the Scheme mentions that the withdrawal could either be utilised for purchase of new ship, aircraft, plant & machinery or computers to be installed either in office or at the business premises. In the alternative, the amount can also be used for repayment of principal amount of term loans which should have been contracted after 31.03.1986 taken from a specified financial institution including specified banks. It is required to be noted that the clause does not state that the term loan should be used for any specific purpose like purchase of new machinery etc. - Decided in favour of assessee. Separate relief under sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of CIT (A) directing to delete the addition of ₹ 40,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1169 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of ₹ 15,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of ₹ 8,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether the Tribunal is right in law and on facts in confirming the order passed by CIT (A) deleting the addition of ₹ 12,59,626/- made under section 32A(6) of the Income Tax Act, 1961 ? 2. The assessee firm is engaged in the business of manufacturing detergent. So far as Tax Appeal Nos. 378/2002, 454/2000, 480/2006, 481/2006, 1169 & 1170 of 2006 are concerned, the assessee filed its return of income for the years in question declaring total income. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plant. He submitted that sub clause 6 of section 32AB carves out an exception that where the amount is withdrawn by the assessee and is utilised for the purpose specified in the scheme in circumstances other than the circumstances specified in clauses (b), (c) and (e) of sub-section 5(A) then that amount shall be deemed to be the profits and gains of business or profession of that previous year. He submitted that in the case of the assessee, the amounts were utilised to repay the loans of SBI as well as for purchase of trucks and tankers which is certainly not in accordance with the requirements of Section 32AB. He submitted that the Tribunal has not adhered to the provisions of section 32AB(1) of the Act. 3.1 Mr. Bhatt has also drawn our attention to Clause 17.3 and 17.6 of the CBDT Circular No. 461 dated 09.07.1986 and submitted that the circular clearly envisages the salient features of the scheme. 3.2 Mr. Bhatt submitted that the authorities below have erred in law and on facts in directing the Assessing Officer to adopt the status of the assessee trust as individual and to allow deduction u/s 80L of the Act. He submitted that the authority below has erred in law in deleting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdrawn is used for repayment of term loan which is contracted after 31.03.1989. He has also relied upon the recent decision of the Apex Court in the case of Commissioner of Income-Tax vs. Calcutta Knitwears reported in [2014] 362 ITR 673 (SC). He has also relied upon another decision of the Apex Court in the case of Mysore Minerals Ltd. vs. Commissioner of Income-Tax reported in [1999] 239 ITR 775 and submitted that the Apex Court has held that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred 5.2 Mr. Soparkar submitted that so far as question no. 2 raised in Tax Appeal No. 454 of 2000 is concerned, the same is squarely governed by the decision of the Apex Court in the case of Joint Commissioner of Income-Tax vs. Mandideep Eng. And Pkg. Ind. P. Ltd reported in [2007] 292 ITR 1 (SC) which has considered the view taken by this Court in the case of Commissioner of Income tax vs. Amod Stamping reported in [2005] 274 ITR 176. 6. We have heard learned advocates for both the sides. To appreciate the moot question raised in the present set of appeals, it shall be necessary to have a look at the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " includes machinery or plant which before its installation by the assessee was used outside India by any other person, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of such installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee; (iv) "Tea Board" means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953). (3) The profits of business or profession of an assessee for the purposes of sub-section (1) shall be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with the provisions of sub-section (1) of section 32 from the amounts of profits computed in accordance with the requirements of Parts II and III of the Schedule VI to the Companies Act, 1956 (1 of 1956), as increased by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. (5A) Any amount standing to the credit of the assessee in the deposit account shall not be allowed to be withdrawn before the expiry of a period of five years from the date of deposit except for the purposes specified in the scheme or in the circumstances specified below :- (a) closure of business; (b) death of an assessee; (c) partition of a Hindu undivided family; (d) dissolution of a firm; (e) liquidation of a company. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this subsection shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) in relation to any withdrawals made from the deposit account either before or after the expiry of a period of five years from the date of deposit. (5AA) Where any amount, standing to the credit of the assessee in the deposit account, is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (5A), the whole of such amount shall be deemed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme continues to apply to the company in the manner applicable to the firm. Explanation.-The provisions of clause (ii) of the proviso shall apply only where- (i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company; (ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company; and (iii) all the shareholders of the company were partners of the firm immediately before the succession. (8) The Central Government may, if it considers it necessary or expedient so to do, by notification in the Official Gazette, omit any article or thing from the list of articles or things specified in the Eleventh Schedule. (9) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the provisions of this section shall not apply to any class of assessees, with effect from such date as it may specify in the notification. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such other institution as the Central Government may, by notification in the Official Gazette, specify in this behalf. (2)(a) Withdrawal from the deposit may be made by a depositor not more than once in every three calendar months, by making an application in Form D: Provided that no such application shall be granted unless the depositor has, for a minimum period of one year prior to the date of such withdrawal, in his account a minimum balance of an amount which is not less than the amount to be withdrawn. (b) On receipt of the request for withdrawal, the deposit office shall, as soon as may be, pay the amount to the depositor through a credit to the designated account. (c) The amount credited to the designated account under clause (b) shall be utilised by the depositor within fifteen working days from the date of such credit for the purpose for which the amount has been withdrawn; and the amount or any part thereof which has not been so utilised shall be refunded to the Development Bank and on such refund, the amount or part thereof, as the case may be, shall be treated as a fresh deposit in the account for the purposes of withdrawal under clause (a) of sub-paragraph (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets. By the new scheme relating to investment deposit account along with the proposed high depreciation rates announced by the F.M., the retained earnings and internal resources generation of the companies would improve. As mentioned in paras 5.12 to 5.18 of the LTFP, the investment allowance had tended to favour the large and more established enterprises, partly because such concerns could set off investment allowance against profits of old established units without waiting for profits from fresh investments. The new scheme of investment deposit account will be neutral as between small and large companies and will also insulate the timing of investment decisions from tax considerations. This measure should help to reduce the premium on spending which taxation of business profit inevitably creates, and thus curb the conspicuous extravagance in the corporate sector. The new scheme should also help to neutralise the bias in favour of borrowing and needless capacity creation The new scheme differs from the existing provisions of investment allowance as under : (a) The existing provisions of the investment allowance apply to only those assessees- (i) who purchase a ship or aircraft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with the designated Development Bank. (d) The investment allowance is allowed at 25 per cent of the actual cost of the plant, machinery, ship or aircraft to the assessee. As against this, under the new scheme, the entire cost of the ship or aircraft or plant or machinery will qualify for deduction, if the same is up to 20 per cent of the profits of the eligible business or profession. (e) Under the new provisions, the deduction is not admissible unless the accounts of the business or profession of the assessee, other than a company or a co-operative society have been audited by an accountant and the assessee furnishes along with the return of his income, the report of such audit in the prescribed form, duly signed and verified by such an accountant. No such audit is required as a condition for availing of the benefit of the existing investment allowance. (f) Subject to the fulfilment of the required conditions, the benefit of investment allowance continues to be available if the sale or transfer of a ship or an aircraft or plant or machinery is made as per a scheme of amalgamation. Such deduction is not provided in the new scheme, because in the Indian context amalgamations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere as closely as possible to the literal meaning of the words used, is a cardinal rule from which if we depart we launch into a sea of difficulties which it is not easy to fathom." That is to say, once the literal rule is departed, then any number of interpretations can be put to a statutory provision, each Judge having a free play to put his own interpretation as he likes. This would be destructive of the edifice of fiscal legislations which impose economic duties and sanctions. "9.1 The Apex Court in the case of Mysore Minerals Ltd (supra) has held that section 32 of the Income-tax Act confers a benefit on the assessee and that the provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee securing the benefit intended to be given by the Legislature to the assessee. It is also well- settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. 9.3 Therefore, even if the submission made by learned advocate for the revenue is accepted, in view of the decision of the Apex Court referred hereinabove, we think it fit to ans ..... X X X X Extracts X X X X X X X X Extracts X X X X
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