TaxTMI 
TaxTMI 
2006 (3) TMI 107
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.... and the withdrawal of investment allowance granted is justified ? and 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in not considering the acquisition of the dredger in 1990 subsequent to the creation of the reserve as being sufficient compliance with the provisions of section 32A to the extent of its cost and whether, on the facts and in the circumstances of the case, the appellant having acquired three vessels subsequent to the acquisition of the vessel in respect of which investment allowance was granted to it cannot be deemed to have complied with the requirement of section 32A of the Income-tax Act and consequently, become eligible to the benefit of investment allowance under section 32A of the Income-tax Act?" The facts leading to the above questions of law are as under: The relevant assessment years are 1986-87, 1987-88 and 1994-95. The assessee is a company wholly owned by the Government of Tamil Nadu, engaged in the business of plying/chartering ship facilities. Some of the ships are owned by it and others are chartered. The plying is mainly between internal ports of India. The chief commodity carried is coal which is taken....
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....sp; 1993-94 8,58,75,046 5. 1994-95 21,16,52,404 ------------- Total 42,52,64,784 ---------------------------------------- The Assessing Officer originally allowed the claim of the investment allowance of the assessee-company in the assessment years 1986-87, 198788 and 1994-95, but subsequently he invoked the provisions of section 155 read with section 154 and withdrew the investment allowance granted earlier on the ground that the assessee-company had not utilised the reserve for the acquisition of ships within the period of ten years. Aggrieved by the order of the Assessing Officer, the assessee-company filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) dismissed the appeal and confirmed the order of the Assessing Officer. Aggrieved by the same, the appellant filed an appeal to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal confirmed the order of the lower authority and dismissed the appeal filed by the ....
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....red in March 1987, was Rs. 40,00,26,286. Further it was argued that section 32A is a beneficial and incentive provision and hence, the court must interpret liberally and he relied on the Supreme Court judgment reported in Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188. Learned counsel for the Department submitted that the acquisition of the ships could not be held to have been made by utilising the investment allowance reserves which came to be created much later. The creation of investment allowance reserve thus being a much later occurrence, rules out the possibility of these reserves having been utilised for the ships at an earlier stage. Hence, the utilisation of reserve could not have preceded the creation of reserve itself. We heard both counsel. The details regarding the value of the asset as well as creation of reserve are as under: ----------------------------------------------------------- Dates and Particulars Price 1. A. availed events of (Rs.) asset ----------------------------------------------------------- August 1995 M. V. Tami....
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....e cannot expect any further concession. According to section 32A, the first occurrence should be the purchase of eligible asset followed by the creation of investment allowance reserve at a specified percentage of the cost of the ship. The next step would be the utilisation of the investment allowance reserve in the purchase of new eligible asset within a specified period of ten years next following the previous year in which the ship was acquired. In the present case, the assessee had purchased the new ships ("M. V. Tamil Periyar" and "M. V. Tamil Kamaraj") well before the creation of the investment allowance reserve in respect of the original ship, namely, "M. V. Tamil Anna". The argument of learned counsel for the assessee that the purchases of the vessels "M. V. Tamil Periyar" and "M. V. Tamil Kamaraj" during the year 1986-87 are to be treated as out of the investment allowance reserve created much later, appears to be putting the cart before the horse. No doubt the investment allowance reserve created need not be earmarked and kept apart to be utilised only in the purchase of the new ship but can be utilised for the purposes of the business as specified in the section itself.....
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.... original ship in purchase of a new ship, the assessee is entitled to lose the benefit given under section 32A originally. In the present case, the assessee had not purchased the new ship after the creation of the reserve in respect of the ship originally purchased. On the other hand, even before the creation of the reserve, in respect of the original ship, purchase had been completed (spread over the various assessment years). The assessee-company had acquired new ships and is trying to link those purchases to the subsequent creation of the reserve, in respect of the old ship. n the light of the above reasoning, we are of the view that the acquisition of the ships "M. V. Tamil Periyar" and "M. V. Tamil Kamaraj" could not be held to have been made by utilising the investment allowance reserve which came to be created much later. A non-existent reserve could not be said to have been utilised. In other words, the utilisation of reserve could not have preceded the creation of reserve itself. Therefore, we find no error or infirmity in the order of the Tribunal and hence we hold that the orders of the lower authority in all these years as regards the withdrawal of the benefit given un....