TaxTMI 
TaxTMI 
TaxTMI 
2011 (2) TMI 1247
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....ovisions of Section 32AB of the Income Tax Act, 1961 and submitted that until and unless such machinery is acquired or installed in the premises of the assessee, such investment was not admissible by way of allowance. Per contra, Shri Shrivastava, learned senior counsel appearing on behalf of assessee submitted that earlier provision was for investment allowance after purchase of machinery and making investment for the purchase of machinery, but after 1985-86, a new provision Section 32AB was introduced in the statute book with effect from 1.4.1987 which provides that if an assessee for the purchase of machinery deposits the amount by way of earnest money or as an advance for the purchase of machinery, such amount shall be treated as an investment deposit and assessee is entitled for deduction of the said amount. He has placed reliance to judgments of a Division Bench of Bombay High Court in Commissioner of Income Tax vs. Antifriction Bearings Corporation Ltd. (2000) 246 ITR 295 Bombay and also to Commissioner of Income Tax vs. Tribeni Tissues Ltd. (2002) 258 ITR 393 Calcutta, Commissioner of Income Tax, Lucknow vs. U.P. Asbestos Ltd (2008) 174 TAXMAN 45 (All.) and Circular....
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.... such income- (a) deposited any amount in any account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, which ever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without deposing any amount in the deposit account, under Clause (a), in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction {(such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72)}- (i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised; or (ii) a sum equal to twenty per cent of the profits of business or profession as computed in the accounts of the a....
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....pect of- (a) any machinery or plant installed in any office premises or any residential accommodation, including any accommodation in the nature of a guest house; (b) any office appliances or road transport vehicles; (c) any ship, machinery or plant in respect of which the deduction by way of development rebate is allowable under section 33; and (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head "Profits and gains of business or profession" of any one previous year. Explanation:- For the purposes of this sub-section, "actual cost" means the actual cost of the ship, aircraft, machinery or plant to the assessee as reduced by that part of such cost which has been met out of the amount released to the assessee under sub-section (6) of section 32AB. We have read both the provisions, it is apparent that Section 32A provides investment allowance in respect of machinery which was acquired or installed or put to use in the immediately succeeding previous year and the assessee was entitled by way of investment....
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....e of clause (b) of section 32AB. The C.B.D.T Circulars which are relied on by the learned counsel for assessee also support his contention. In Circular dated 9.7.1986, the C.B.D.T. considering the amendment in the Finance Act, 1986 directed as under:- (c) The acquisition of a ship or an aircraft or installation of plant and machinery, as the case may be, during the previous year is a condition precedent for availing of the benefit of the existing investment allowance, whereas the deduction under the new provisions can be availed of even before the ship or aircraft is acquired or the plant or machinery has been installed by making a deposit with the designated Development Bank. (d) The investment allowance is allowed at 25 per cent of the actual cost of the plant, machinery, ship or aircraft to the assessee. As against this, under the new scheme, the entire cost of the ship or aircraft or plant or machinery will qualify for deduction, if the same is up to 20 per cent of the profits of the eligible business or profession. The aforesaid Circular further provides that:- 17.4 The other salient features of the scheme of the investment deposit accou....