Tribunal rules in favor of assessee, deletes deemed income under Income Tax Act.

The tribunal allowed the appeal, ruling in favor of the assessee by deleting the deemed income brought to tax under section 33AB(7) of the Income Tax Act, 1961. The tribunal held that the assessee had utilized the withdrawn amounts for intended purposes, in accordance with the Tea Development Scheme, 2007, despite a slight delay. Emphasizing a liberal interpretation of incentive provisions, the tribunal concluded that the revenue's action was unjustified. The order was pronounced on 19.02.2018.

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Issues Involved:
1. Applicability of section 33AB(7) of the Income Tax Act, 1961 against the assessee.
2. Interpretation of the term "utilized" within the context of section 33AB(7).

Issue-wise Detailed Analysis:

1. Applicability of Section 33AB(7):
The primary issue in this appeal is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in upholding the applicability of section 33AB(7) of the Income Tax Act, 1961 against the assessee. The assessee's main business involves the cultivation, manufacturing, and trading of tea. For the Assessment Year 2012-13, the assessee electronically filed a return declaring an income of Rs. 5,96,64,870/-. The Assessing Officer (AO) noted from the Tax Audit Report that there was an unutilized amount of Rs. 15,71,331/- from withdrawals made from the NABARD deposit account, which was not utilized before 31.3.2012 for its intended purpose. Consequently, the AO added this amount as deemed income under section 33AB(7).

2. Interpretation of the Term "Utilized":
The assessee argued that the withdrawn amount of Rs. 2,78,73,174/- was utilized within the financial year by placing orders and making substantial payments towards the procurement of various machineries. The assessee contended that the term "utilized" should be interpreted liberally, considering the utilization process had started before 31.3.2012. The CIT(A) upheld the AO's decision, leading to the appeal.

Detailed Analysis:

Utilization of Withdrawn Amounts:
The assessee had withdrawn Rs. 2,78,73,174/- from NABARD during the previous year ended 31.3.2012 and utilized Rs. 2,63,01,843/- before 31.3.2012 for procuring machinery and other assets. The remaining unutilized portion of Rs. 15,71,331/- was utilized before the due date for filing the return of income under section 139(1). The assessee argued that the utilization was in accordance with the Tea Development Scheme, 2007, and that the provisions of section 33AB(7) should be interpreted liberally.

Legal Precedents and Interpretation:
The tribunal referred to similar provisions under section 32AB(6) and the CBDT Circular No. 495 dated 22.9.1987, which clarified that amounts withdrawn and utilized within the period specified in the scheme should not be added to the assessee’s income. The tribunal emphasized that incentive provisions should be construed liberally, as held by the Hon’ble Supreme Court in Bajaj Tempo Ltd vs CIT and CIT vs Gwalior Rayon Silk Manufacturing Co. Ltd. The tribunal also noted that the entire utilization was made in accordance with the Tea Development Scheme, 2007, and there was no diversion of funds for non-business purposes.

Conclusion:
The tribunal concluded that the assessee had fulfilled the spirit of section 33AB(7) by utilizing the withdrawn amounts for intended purposes, albeit with a slight delay. The tribunal held that the action of the revenue in bringing the deemed income to tax under section 33AB(7) was not justified. The tribunal allowed the appeal, emphasizing that a provision for deduction, exemption, or relief should be construed reasonably and in favor of the assessee.

Final Order:
The appeal of the assessee was allowed, and the tribunal ordered the deletion of the deemed income brought to tax under section 33AB(7).

Order Pronounced:
The order was pronounced in the court on 19.02.2018.

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