TaxTMI 
TaxTMI 
2000 (9) TMI 64
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....r purchase of machinery?" 2. In view of the judgment of the Division Bench of this Court in IT Appeal No. 191 of 2000 [ reported as CIT vs. Indo Nippon Chemical Co. Ltd. (2000) 164 CTR (Bom) 78] and IT Appeal No. 3 of 1999 decided on 14th Aug., 2000, the addition made to the closing stock on account of Modvat credit is ordered to be deleted. Accordingly, question No. 1 is answered in favour of the assessee and against the Department. Accordingly, this appeal on question No. 1 is dismissed. 3. On question No. 2, the facts are as follows : The assessee claimed the benefit of s. 32AB in respect of purchase of plant and machinery for Rs. 85,89,784. These amounts included advances paid towards purchase of plant and machinery of Rs. 13,8....
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....evant to the asst. yr. 1989-90 should be shown to have been utilised for purchase of new machinery or plant. He contended that giving an advance cannot constitute utilisation. He, therefore, contended that the AO was right in disallowing the claim of the assessee for deduction under s. 32AB. Mrs. Visanji, learned counsel for the assessee, on the other hand, contended that s. 32AB was a substitute for s. 32A under which machinery or plant was required to be acquired whereas, under s. 32AB the said condition was relaxed and under s. 32AB deductions were allowable if the assessee deposited the requisite amount out of the income of the current year in an account maintained by the development bank or such amount is utilised towards purchase of m....
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....vestment deposit account. This was one of the measures introduced by way of corporate tax reform. Pursuant to the said change, the modality of allowing deduction for encouraging investments in new plant and machinery came to be introduced. Hence, it is clear that s. 32AB was a substitute for s. 32A. The new scheme was made applicable to all existing types of assessees as also to professionals and leasing companies which have not leased out machinery to industrial undertakings. In other words, the deduction was made admissible to all assessees who carried on eligible business as per s. 32AB(2). However, the benefits under the investment deposit account scheme were made available only if there are profits in the eligible business. The Board's....
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....hinery may be taken in a subsequent year. If we accept the Department's contention then the scheme of s. 32AB will fail. The advance is required to have a nexus with the income of the current year. If an assessee gives an advance for purchase of machinery from the current year's income, he cannot be denied the benefit of s. 32AB on the ground that the advance is not utilisation because in the year in which the advance is effected, the assessee will be denied deduction on the ground that it is non-utilisation and if the balance amount is paid in the subsequent year, the assessee will be denied deduction on the ground that it has not come out of the income of the current year. Similarly, if in a given case, under the contract, the assessee is....