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TMI Blog2003 (11) TMI 291X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 1989-90." "(2) That the Learned Commissioner of Income-tax (Appeals) has erred in ignoring the fact that plant and machinery purchased during assessment year 1989-90 continues to be utilized in the Fertilizer and Fibres Undertakings notwithstanding the fact that the two undertakings have been transferred as going concern." "(3) 'That the Learned Commissioner of Income-tax (Appeals) has erred in concluding that interest is leviable under section 155 of the IT Act for recall of Investment Allowance claim granted to the Company in the earlier years." "(4) The appellant craves leave to alter, modify or otherwise amend the ground of appeal hereinbefore stated should it become necessary." 'Note: The Ld. Counsel for the assessee has not pressed Ground No. 3. 3. In ITA No. 500 (Kol.) of 2002 (assessment year 1992-93), the appellant-assessee has taken the following grounds of appeal: "(1) That the learned Commissioner of Income-tax (Appeals) has wrongly concluded that the transfer of Fertilizer and Fibres Undertakings as a going concern falls within the purview of section 32A(5) of the IT Act for withdrawal of Investment Allowance granted for plant and machinery purchased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s total investment allowance granted to the assessee in assessment year 1989-90 was Rs. 2,85,91,002. Since the plant and machinery of Fertilizer Division and Fibres Division were sold/transferred within eight years of their installation, the Assessing Officer invoked the provisions of sections 32A(5) and 155(4A) of the Act and withdrew the investment allowance already granted in assessment year 1989-90, by his order dated 13-9-1995. As a consequence of the aforesaid order, the Assessing Officer carried out necessary rectifications so as to give consequential effect to the investment allowance to be carried forward to subsequent assessment years which resulted in the creation of demand of Rs. 4,36,23,595 for assessment year 1992-93 including interest charged. 6. Aggrieved by the aforesaid orders of the Assessing Officer, the assessee preferred appeals for both the assessment years before the CIT(A). As far as assessment year 1989-90 is concerned, the assessee contended before the CIT(A) that since the assessee-company had not transferred the plant and machinery per se out of the Fertilizer and Fibres Undertakings, the transfer of the above two undertakings did not fall within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ump sale which, according to him, is outside the scope of sub-section (5) of section 32A. His third submission was that the legislative intent behind section 32A is to encourage the industrial development of the country by providing incentive, in the form of investment allowance under section 32A, on investment in the acquisition, installation and consequential use of plant or machinery for the purposes of business. He has also submitted that so long as the plant and machinery on which the investment allowance had been granted continued to be installed and used for the purposes of the aforesaid business, the investment allowance once granted could not be withdrawn. He has further contended that the legislative intent in enacting sub-section (5) of section 32A is clear in as much as it seeks withdrawal of investment allowance only when plant and machinery per se is sold or transferred and not otherwise. He has also submitted that any construction that defeated the aforesaid legislative intent or led to unreasonableness or anomaly between the legislative intent and literal interpretation should be discarded. According to him, in such an anomalous situation, the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ): "Where an allowance by way of investment allowance has been made wholly or partly to an assessee in respect of a ship or an aircraft or any machinery or plant in any assessment year under section 32A and subsequently- (a) at any time before the expiry of eight years from the end of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed, the ship, aircraft, machinery or plant is sold or otherwise transferred by the assessee to any person other than the Government, a local authority, a corporation established by a Central, State or Provincial Act or a Government Company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or in connection with any amalgamation or succession referred to in sub-section (6) or sub-section (7) of section 32A; or (b)" " ".or (c) " the investment allowance originally allowed shall be deemed to have been wrongly allowed, and the Assessing Officer may, notwithstanding anything contained in this Act, recompute the total income of the assessee for the relevant previous year and make the necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndicated above; and (iii) such sale or otherwise transfer has been effected in the year ended 31st March, 1994, i.e., well before the expiry of eight years from the end of the previous year in which they were acquired or installed. The case of the assessee thus squarely falls within the ambit of section 32A(5). 12. The contention of the learned counsel for the assessee that the investment allowance already granted could not be withdrawn under section 32A(5)(a) as the eligible assets continued to be part of the same undertaking and also continued to be installed and used therein for the purposes of the same business and in the same way as before their transfer, misses a crucial aspect of section 32A in that it requires that the eligible assets should be owned by an assessee as also that the same should be 'wholly used for the purposes of the business carried on by him.' As held in TR Ganapathy Chettiar v. ITO [1990] 70 ITD 127 (Mad.) (TM); the investment allowance under section 32A is very much attached to the person who is the owner of the plant and machinery rather than attached to the plant and machinery itself, irrespective of the fact which assessee holds the plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid units including the eligible assets therein can be construed to be a sale or transfer of the machinery and plant within the meaning of clause (a) of sub-section (5) of section 32A. 14. In our view, the issue before us is squarely covered by a decision of the Hon'ble Bombay High Court in S.M. Chemicals Electronics (P.) Ltd. v. CIT [1995] 215 ITR 943, against the assessee. In that case, the issue before the Hon'ble Court was whether the sale of business as a going concern constituted transfer of machinery for the purposes of withdrawal of investment allowance within the meaning of sections 32A(5) and 155(4A) of the Act. In that case also, the learned counsel for the assessee had unsuccessfully contended that the assessee having sold the entire business undertaking consisting of a number of devices as a going concern, the provisions of section 155(4A) had no application because, in such a case, according to him, the machinery as such was not sold or otherwise transferred which was a condition precedent for the withdrawal of the development rebate. Taking note of the provisions of sub-section (5) of section 32A and sub-section (4A) of section 155, the Court held: "The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f installation. In this context, therefore, any parting with that asset would involve a breach of the statutory condition, subject to which alone development rebate is originally granted. It stands to reason, therefore, that the expression 'otherwise transferred' must be given such wide amplitude of meaning as is consistent with its ordinary connotation. There can be no warrant for cutting down that meaning, to any extent." 16. Now we shall proceed to consider the submissions of the learned counsel for the assessee. His submission is that the term 'sold or otherwise transferred' in section 32A(5)(a) does not include slump sale of the unit as a whole as in that case the plant or machinery is not transferred per se but as part of the unit. The term 'sale' is not defined in the Act. However, section 54 of the Transfer of Property Act, 1882 defines 'sale' as "transfer of ownership in exchange for a price paid or promised or part paid and part promised." Section 6 of the Transfer of Property Act, 1882 defines 'transfer of property' as an "act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, or to himself and one o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivisions including the eligible assets therein. Simply because the plant and machinery have not been sold or transferred as such but as part of and together with the whole unit does not, in our view, meant that they have not been sold or otherwise transferred within the meaning of clause (a) of sub-section (5) of section 32A of the Act. 17. The position may be examined from another angle. It is the assessee's case that it sold/transferred the Fertilizer Division and Fibres Division as going concerns which also mean that it transferred everything, viz; the machinery and plant included therein. Transfer of business/unit as a 'whole' and as 'going' concerns necessarily involves transfer of all the components/parts/assets included therein. In our opinion, there is no substance in the assessee's contention that the sale/transfer of the aforesaid units/divisions as a whole does not mean sale/transfer of the machinery and plant included therein. Our view is also supported by the legal principle that whole includes part as also the maxim that "the greater contains the less" - Omne rnajus continent in se minus. It will, therefore, be contradiction in terms to say that though the entire bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature from saying so in the statute itself. 20. We have carefully considered the aforesaid submissions of the ld. Counsel for the assessee. In our view, the words of clause (a) of subsection (5) of section 32A and sub-section (4A) of section 155 are plain and simple to convey the legislative intent beyond doubt. The phrase 'sold' or 'otherwise transferred' occurring therein has been judicially interpreted to be terms of the widest import. Inclusive nature of the definition of 'transfer' in section 2(47) also supports the aforesaid view. There is no dispute that the assessee had parted with the possession and ownership over the eligible assets also consequent upon sale of the Fertiliser and Fibre Units, in favour of the transferee-companies. We have no doubt that the sale/transfer of the entire unit/division also amounts to transfer of everything (e.g., machinery or plant) included in the unit/division. No ambiguity or anomaly is involved in it. The legislative intent is clear that the benefit of investment allowance shall be withdrawn if it is found that the eligible assets have been sold or otherwise transferred within the prohibited period. In the context of such clear le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsferring the eligible assets within the prohibited period. This condition has to be strictly fulfilled by the assessee. If it fails to observe the said condition, the investment allowance availed by it has to be withdrawn. This is where clause (a) of sub-section (5) of section 32A comes into play. If the Revenue wants to withdraw the investment allowance, it must establish that the case is squarely covered by the aforesaid provisions. In CIT v. Veeraswami Nainar [l965] 55 ITR 35 (Mad.) affirmed by the Hon'ble Supreme Court in Indian Overseas Bank Ltd. v. CIT [1970] 77 ITR 512 the Court held: "Where therefore conditions are expressly imposed to entitle an assessee to an exemption, deduction or allowance, these conditions cannot be ignored on any theory of beneficial interpretation. It will follow that in order that an assessee can claim an allowance by way of development rebate under section 10(2)(vib) he should comply with the conditions imposed in the proviso thereto as otherwise, under the express terms of that proviso, he would not be entitled to the allowance. Where he fails to satisfy the conditions requisite for obtaining the allowance, it will not be for the Court to emba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e role of a law maker merely for an exhibition of judicial valour. They have to remember that there is a line, though thin, which separates adjudication from legislation. That line should not be crossed. What is to be borne in mind is as to what has been said in the statute as also what has not been said. A construction which requires for its support, addition or substitution of words or which results in rejection of words, has to be avoided, unless it is covered by the rule of exception." 28. In Pandian Chemicals Ltd. v. CIT [2003] 262 ITR 278, p. 281, the Hon'ble Supreme Court has held that the provision for encouraging industrial activity as contained in section 80HH can be liberally interpreted only if there is doubt with regard to the express language used. It held that there was no scope for importing any rule of interpretation when the words used in the provision were unequivocal. The Court held: "The learned counsel for the appellant then contended that having regard to the object with which section 80HH was introduced in the statute-book, this Court should give a liberal interpretation to the words in a manner so as to allow such object to be fulfilled. The rules of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rule of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning. Where the main object and the intention of a statute are clear, it must not be reduced to a nullity by the draftsman's unskilfulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used. Lord Reid has said that he prefers to see a mistake on the part of the draftsman in doing his revision rather than a deliberate attempt to introduce an irrational rule: The cannons of construction are not so rigid as to prevent a realistic solution." 32. In the second case cited by the assessee, namely, K.P. Varghese's case, the Hon'ble Supreme Court observed: "We must therefore eschew literalness in the interpretation of section 52, sub-section (2) and try to arrive at an interpretation which avoids this absurdity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the words used in the statute. This rule can, however, be discarded if the provisions are ambiguous or the Legislature has failed to express itself clearly or it produces manifestly unjust result which the Legislature could never have intended or leads to absurdity. In the present case before us, we do not find that the literal interpretation of the phrase 'sold or otherwise transferred' occurring in clause (a) of subsection (5) of section 32A, as judicially interpreted, produces such a result which the Legislature could never have intended or leads to any absurdity or unreasonableness. These provisions are neither vague nor can it be said that the Legislature has failed to express itself clearly. It cannot be said that the phrase 'sold or otherwise transferred' as occurring in section 32A(5)(a) leads to manifestly unjust or unreasonable results merely because they provide for the forfeiture of the benefit already availed in case they are literally interpreted. Besides, the provisions of sections 32A(5) and 155(4A) incorporate a well-intentioned and deliberate legislative policy to grant the investment allowance on the condition that the eligible assets, on which investment all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment allowance in assessment year 1989-90, the Assessing Officer has carried out consequential rectifications through the impugned order in assessment year 1992-93 leading the enhancement of total income as originally assessed. Since we have already upheld the withdrawal of investment allowance in assessment year 1989-90, the consequential rectifications carried out by the Assessing Officer in the assessment year under appeal do not warrant any interference. Accordingly, first two grounds of appeal are dismissed. 40. Third ground of appeal is that the CIT(A) has erred in holding that interest is leviable under section 155 of the Act on recall of investment Allowance made in favour of the assessee-company in the earlier years. Withdrawal of the investment allowance in assessment year 1989-90 led, as a consequence thereof, to the enhancement of income as also the tax thereon as originally assessed in the assessment year under appeal. The assessee's plea before the Assessing Officer was that interest under section 234B should not be charged which was rejected by the Assessing Officer on the ground that the mandatory provisions of sub-section (4) of section 234B required hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of interest as also for the variation in the amount of interest so levied. Conceptually, levy of interest is different from varying the amount of interest so levied. While levy of interest is the initial step to be taken upon determination of income either under section 143(1) or by way of regular assessment, variation in the amount of interest so levied can take place only after the interest has been initially levied. Variation in the amount of interest levied becomes necessary in the event of increase or reduction in the amount of assessed tax, with reference to which interest is statutorily required to be calculated, as a result of an order of rectification, appeal, revision or settlement. While sub-section (1) of section 234B deals with levy of interest, sub-section (4) thereof deals with the situations in which the amount of interest as originally levied is required to be varied so as to maintain its co-relation with the amount of assessed tax as finally determined. 44. Relevant provisions of sub-section (4) of section 234B under which the Assessing Officer has varied/revised the amount of interest originally levied are as under: "(4) Where, as a result of an order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at view of the matter, his action in revising the amount of interest under the provisions of sub-section (4) of section 234B is justified. 46. In taking the aforesaid view, we have the support of the ratio laid down by the Hon'ble jurisdictional High Court in Kanoi Industries (P.) Ltd. v. Asstt CIT [2003] 261 ITR 488 (Cal.). In the context of the provisions for levy of interest under sub-section (1A) of section 201, the Hon'ble Court has held as under: "The use of the expression 'shall' in sub-section (1A) makes the liability to pay interest in the circumstances mentioned mandatory. Unlike subsection (1), no pre-condition of reasonable cause for non-payment of tax in time has been included in sub-section (1A). Unlike the restriction provided for in sub-section (1), sub-section (1A) does not contain any restriction for charging interest thereunder. The provision of sub-section (1A) is mandatory and automatic... The liability is absolute. It is obligatory for the Assessing Officer to charge interest upon non-compliance of any of the provision requiring deduction at source if noticed by him". 47. We shall now deal with the submission of the learned counsel for the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling under section 32A(5) and section 155(4A), the investment allowance originally granted as manifestly erroneous and, in that view of the matter, the law further requires, in specific terms, that the Assessing Officer shall not only recompute the total income for the relevant previous year but also make the necessary amendments in consequence thereof. Thus, the function of the Assessing Officer does not stop under section 155(4A), as contended by the learned counsel for the assessee, with the withdrawal of investment allowance and consequential recomputation of total income of the relevant previous year but also extends to making the necessary amendments in consequence thereof. We are of the view that revision/variation in the amount of interest as originally levied would be a necessary amendment required to be carried out, in terms of the provisions of section 155(4A), by the Assessing Officer in the light of the tax as assessed upon withdrawal of the investment allowance. In any case, the provisions of sub-section (4) of section 234B stand on their own in the field covered by them. This is particularly so because they are specifically made to apply in cases covered, inter alia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s entitled to be restored to the same position in which it would have been if the investment allowance had not been granted. Placing the Revenue in the same position requires that it should be compensated not only for the loss of tax but also for the loss of interest with reference to the amount of assessed tax, which it was entitled to recover if the assessee had not claimed the investment allowance. As held in several cases, interest is nothing but compensation for the use of money. It is in this background that the legal fiction created by sections 32A(5) and 155(4A) also mandates and requires the Assessing Officer to carry out the 'necessary amendment' upon withdrawal of investment allowance. Revision in the amount of interest is a logical action upon withdrawal of investment allowance and falls within the purview of 'necessary amendment' as required to be made by section 155(4A). Besides, the provisions of sub-section (4) of section 234B are unambiguous and clear in that they also specifically require the Assessing Officer to revise the amount of interest so as to bring the same in conformity with an order under section 154/155. The case of the assessee squarely falls under se ..... X X X X Extracts X X X X X X X X Extracts X X X X
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