High Court Of Calcutta
CIT vs. Tribeni Tissues Ltd.
Section 32AB(1)(b)
Ajoy Nath Ray & Indira Banerjee, JJ.
IT Ref. No. 35 of 1997
27th August, 2002
Counsel Appeared : Dutta, for the Revenue : Pal, for the Assessee
JUDGMENT
BY THE COURT :
This is a reference under s. 256(1) of the IT Act, 1961. The single question referred to us is as follows : “Whether, on the facts and in the circumstances of the case and on a proper interpretation of s. 32AB(1)(b) of the IT Act, the Tribunal was right in law in holding that the assessee was entitled to the investment deposit allowance of Rs. 6,54,637?”
2. The issue which fell for decision by the Tribunal was this, that, if the assessee utilises a certain amount of money out of the assessee’s business profits, in a certain assessment year, for purchase of new machinery, but actually does not get the said machinery installed and used in the very same assessment year, is the assessee still entitled to deduction ?
3. On an interpretation of the wording of s. 32AB, the Tribunal has come to the conclusion, that sub-s. (1)(b) of the said section merely requires that the assessee has, out of the assessee’s business income, utilised any amount during the previous year for the purchase of any…. new machinery or plant….”
4. The Tribunal has correctly opined, that there are no additional words, in the said section, or subsection, requiring further that the assessee utilise, or install, the said machinery also, so as to qualify for getting the deduction. We are of the opinion that the Tribunal has correctly interpreted the section in this regard.
5. Dr. Pal, for the assessee, cites a Division Bench decision of the Bombay High Court given in the case of CIT vs. Antifriction Bearings Corporation Ltd. (2001) 165 CTR (Bom) 126 : (2000) 246 ITR 295 (Bom), where the Division Bench was pleased to hold that if a certain amount of advance is spent towards the purpose of obtaining new machinery, that advance will also be deductible by the assessee in the previous year in which the advance was sent out of the assessee’s business income.
6. Dr. Pal correctly argues, that if the business income of one previous year is left unused for the purpose of acquiring the new machinery, because the machinery cannot be got installed in that previous year exactly, then the previous year will pass, and the assessee will not be able to have the benefit of the investment allowance under s. 32AB, sub-s. (1) at all.
7. On behalf of the Department Mr. Dutta argued that in case the investment allowance is permitted to be had, without the necessity of installation, then and in that event, the assessee might simply send a remittance for the purpose of claiming deduction and never bother about the installation of the machinery at all.
8. If the facts disclose any fraudulent dealing like the above, by the assessee, i.e., the money is sent only for claiming deduction, and it is got back underhand and below the table, from the seller at another time, then, no doubt the section has no application. But these are not the facts here. On the other hand, the assessee who genuinely utilises money for purchase of machinery, in one year, and then theoretically speaking, without having it installed at all, because, say, of circumstances arising out of business necessities, is forced to sell the machinery directly from the seller to a third party in a subsequent previous year, even then, the claims for deduction of the assessee are not vitiated, as section 32AB, sub-s. (7), looks after the situation, and an appropriate part relatable to the claimed deduction is added to the assessee’s business income in the subsequent previous year, when the machinery is passed on to the third party. What we say in the paragraph immediately next preceding, is by way of obiter, but the discussion is helpful in answering Mr. Dutta’s objections. As such we find nothing wrong in law in the order of the Tribunal. The question is accordingly answered in the affirmative and in favour of the assessee. Parties and all others concerned to act on a signed copy of this dictated order on the usual undertakings.
[Citation : 258 ITR 393]
