High Court Of Allahabad
CIT vs. Jai Prakash Associates (P) Ltd.
Sections 32A, 36(1)(iii)
Asst. Year 1983-84
R.K. Agrawal & Prakash Krishna, JJ.
IT Ref. No. 274 of 1991
11th March, 2005
A.N. Mahajan, for the Revenue : R.P. Agarwal & S.P. Gupta, for the Respondent
By the court :
The Tribunal, Allahabad, has referred the following questions of law under s. 256(1) of the IT Act, 1961 (hereinafter referred to as “the Act”), for opinion to this Court:
“1. Whether, on the facts and in the circumstances of the case, the learned Tribunal was, in law, justified in holding that the claim of investment allowance is allowable ?
2. Whether, on the facts and in the circumstances of the case and material available on record the Tribunal was justified in law, in deleting the addition made being payment of interest exceeding 15 per cent on the deposits ?” The present reference relates to the asst. yr. 1983-84. Briefly stated, the facts giving rise to the present reference are as follows : The respondent-company is engaged in the business of construction of tunnels, bridges, roads, etc. It claimed investment allowance under s. 32A of the Act. It had also paid interest amounting to Rs. 59,622 and Rs. 63,943 for the asst. yrs. 1982-83 and 1983-84, respectively, which was more than 15 per cent. The AO in the course of assessment proceedings disallowed the investment allowance as also amount of interest paid in excess and over 15 per cent on the ground that it is against the provisions of the Companies (Acceptance of Deposits) Rules. Feeling aggrieved, the respondent preferred an appeal before the CIT(A) who had allowed the claim of investment allowance as also the entire amount of interest paid by the respondent on the deposits. While doing so the CIT(A) has relied upon a decision of the Tribunal of Delhi Bench in the case of ITO vs. Hydle Construction (P) Ltd. [reported at (1984) 20 TTJ (Del)(FB) 518âEd.]. He further found that the provisions of Companies (Acceptance of Deposits) Rules do not apply to deposits, which are neither renewed nor freshly accepted during the relevant period. The order of the CIT(A) has been upheld by the Tribunal.
We have heard Sri A.N. Mahajan, learned standing counsel for the Revenue. Sri R.P. Agarwal and Sri S.P. Gupta, have filed their appearance on behalf of the respondent-company. We find that the apex Court in the case of CIT vs. N.C. Buddharaja & Co. & Anr. (1993) 114 CTR (SC) 420 : (1993) 204 ITR 412 (SC) has held that the activity of construction of dam does not amount to manufacture or production of an article or thing and, therefore the undertaking is not entitled for investment allowance. Respectfully following the aforesaid decision we are of the considered opinion that the Tribunal was not justified in allowing the claim of investment allowance under s. 32A of the Act. So far as disallowance of interest paid in excess of 15 per cent on deposits are concerned, it may be mentioned here that CIT(A) has found that the provisions of Companies (Acceptance of Deposits) Rules apply to fresh deposits and not to old deposits, which have neither been renewed nor freshly accepted during the relevant period. In view of the specific finding recorded by the CIT (A), which has been affirmed by the Tribunal that neither any deposit has been renewed nor any fresh deposit has been accepted during the relevant assessment year, the provisions of the Companies (Acceptance of Deposits) Rules would not be applicable. We, therefore, uphold the order of the Tribunal in deleting the addition made being payment of interest exceeding 15 per cent on the deposits. In view of the foregoing discussion, we answer the first question in the negative, i.e., in favour of the Revenue and against the assessee and the second question referred to us is answered in the affirmative, i.e., in favour of the assessee and against the Revenue. However, there shall be no order as to costs.
[Citation : 281 ITR 419]