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TMI Blog1996 (9) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... ght that the assessee was not a small scale industrial undertaking, or in other words, a small-scale exporter and consequently therefore grant of deduction was a mistake in the nature of an error apparent on the face of the record. Action under section 154 of the Act was initiated on the basis that the assessee will be entitled to deduction under section 35B only if the assessee is a small-scale exporter or the holder of an export house certificate. In view of the provisions of section 35B(1A) appearing to be inserted by the Finance Act, 1978, with effect from April 1, 1978, and consequently deleted with effect from April 1, 1980, by the Finance Act, 1979, there being no dispute that the said provision governs the situation with regard to the assessment year in question, the phrase "small-scale industrial undertaking" by virtue of clause (d) of the Explanation to section 35B(1A), is to carry the same meaning as to be found in section 32A(2) (Explanation clause (2)). Referring to the said provision of section 32A, an industrial undertaking is to be understood to be deemed to be a small-scale industrial undertaking if the aggregate value of the machinery and plant installed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance as the assets used in production and manufacturing process. The first appellate authority proceeded to reason out further that lorries are not utilised and in fact had been specifically barred from being considered under section 32A in view of the reasoning stipulated in Explanation, clause (2), thereof. The first appellate authority emphasised that the incorporation of Explanation, clause (2) to section 32A(2) of the Act in section 35B(1A) is without any modification and therefore the position as a result thereof can only lead to the conclusion that those things that are specifically shut out otherwise, if thought to be included, it would amount to straining of the language used or resulting in misinterpretation of the section or the purpose of the relief. In the process of reaching conclusion as a consequence, the first appellate authority proceeded to cancel the order of the Income-tax Officer. This conclusion of the first appellate authority has been endorsed by the Income-tax Appellate Tribunal, Cochin Bench, when the proceedings were taken up by the Revenue. The Appellate Tribunal has posed the question for consideration in the following manner : " The question tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 35B was granted on a sum of Rs. 1,43,417. This must be on the accepted position even by the Revenue that deduction was granted on the basis of compliance with the statutory provisions in regard thereto, the consequence being that as far as the Revenue is concerned, that the assessee was an industrial undertaking was never in question. In addition thereto, even in an action under section 154 of the Income-tax Act, as would be available from the text of the order itself (annexure "A" dated January 29, 1986), the proceedings were sought to be reopened only on the solitary position that the assessee would be entitled for deduction under section 35B only if the assessee is a small scale exporter or holder of an export house certificate. The order is more than specific when it refers to the notice dated September 4, 1985, as a notice under section 154 of the Act for rectifying the mistake in granting deduction under section 35B only on the ground that the assessee could not be understood as a small-scale exporter. Learned senior tax counsel cannot be heard to contend in such a situation under the above accepted position on the basis of which the proceedings subsequently travelled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intrinsic contents of section 32A(1), we receive the necessary aid in the process of understanding the legislative intent. The statutory provision of section 32A(1) as a proviso dealing with the situation that no deduction could be allowed and such aspects are specified in the said proviso. Clause (b) to the said proviso clearly specifies that with regard to any office appliances or road transport vehicles, no deduction is to be allowed. Reading the said statutory provision under consideration, it would be found that the authority is required to ascertain the actual cost in regard to which investment allowance is to be granted and in regard thereto road transport vehicles are specifically taken out as stated above. There is yet another facet providing aid in the process of understanding the situation as to what should be understood to be plant or machinery in the context. Section 32A(2) of the Act particularises what is meant by ship or aircraft or machinery or plant that is referred to in sub-section (1) and requires that the new machinery or plant installed after March 31, 1976, satisfy certain conditions. One of these conditions is that such installation has to be in a small-s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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