TaxTMI 
TaxTMI 
2003 (2) TMI 50
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....convenience, we prefer to answer this appeal question-wise. Question No. 1 reads as follows: Question No. 1: "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner of Income tax (Appeals) in directing the Assessing Officer to allow the claim of the asses see under section 32AB of the Income-tax Act, 1961, in spite of the fact that the assessee had failed to furnish the prescribed particulars of machineries and also the audit account under section 32AB(5) in support of its claim?" The argument advanced on behalf of the Department on the above question was that under section 32AB(5) deduction was not admissible unless the assessee furnishes, along with his return of income, the audit report in the prescribed form, duly signed and verified by the accountant. It was argued that in this case, the audit report was not submitted along with the return of income and, therefore, the assessee was not entitled to deduction under section 32AB. There is no merit in this argument. Firstly, this argument is not there in the above quoted question. Secondly, in this case, the assessee had claimed deduction....
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....ented capitalised cost of plant and machinery and, therefore, it represented internal capitalisation. According to the Assessing Officer such internal capitalisation would not attract the relief under section 32AB because, according to the Assessing Officer, section 32AB(1)(b) contemplates purchase of new machinery or plant. Therefore, the Assessing Officer rejected the relief under section 32AB to the assessee. According to the Assessing Officer, the assessee should have purchased the machinery. According to the Assessing Officer, the assessee did not purchase the machinery. According to the Assessing Officer, the machinery was assembled by the assessee itself. Therefore, the Assessing Officer denied the relief to the assessee. We do not find any merit in the argument of the Department. If an assessee manufactures a machine itself and transfers the same at cost to its business of manufacture and claims that it has purchased the machinery, it is certainly entitled to relief under section 32AB(1)(b). If an assessee, by making necessary arrangements for purchase from outside, is entitled to claim deduction under section 32AB, then one fails to understand why an assessee who manufactu....
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.... 32AB. That the assessee was entitled to deduction under section 32AB even if the assessee had manufactured the machine itself and had transferred the same at cost to its business of manufacture. Therefore, if the assessee, by capitalising machinery manufactured by itself, transfers the same at cost to its business of manufacture, then the assessee would be entitled to relief under section 32AB(1)(b). Further, under section 32AB we do not find any restriction to the effect that the amount should be spent only from the current years profit. Section 32AB only stipulates that the amount should be spent out of income which is chargeable to tax. In the circumstances, question No. 3 is answered in the affirmative i.e., in favour of the assessee and against the Department. Question No. 4: "4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in confirming the order of the Commissioner (Appeals) in holding that deduction under section 80-I will be available to the assessee in spite of the fact that the unit started manufacturing prior to April 1, 1988 ?" In this case, we are concerned with the assessment year 1988-89. Section 80-I falls in C....
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....t deduction under section 80-I shall not be available if the assessee is engaged in manufacture of an article specified in the Eleventh Schedule. The Explanation to item 22 is not a substantive provision. It has to be read with item 22. The Eleventh Schedule lists out certain articles which are luxury items. Therefore, Parliament, in its wisdom, thought that deduction under section 80-I should not be granted for manufacture of these items. Computers, therefore, cannot be equated to office appliances or luxury items. The purpose of giving an Explanation to item 22 is only to clarify ambiguities in item 22. Even without the specific exclusion, computers could not have formed part of office machines and apparatus. One cannot compare computers with typewriters, calculating machines, intercoms, teleprinters, etc. In the circumstances, the assessee was entitled to deduction under section 80-I even though it started manufacturing prior to April 1, 1988. Accordingly, question No. 4 is answered in the affirmative, i.e., in favour of the assessee and against the Department. Question No. 5: "5. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in ....