TaxTMI 
TaxTMI 
1996 (9) TMI 164
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....nt Allowance of Rs. 15,45,06,722 during the present year, because the Plant and Machinery was put to use by the appellant only during the present year. III. The learned CIT (Appeals) erred in law and on fact in NOT holding that the appellant was entitled to the benefit of Investment Allowance of Rs. 15,45,06,722 in the present case on the basis of 'Commercial Production' only and not trial production as held by the Ahmedabad Tribunal in the case of Madhusudan Vegetable Products Co. Ltd. v. IAC reported in 32 ITD 103 wherein the Hon'ble members have held that 'a trial production cannot be equated with commercial production and Investment Allowance is allowable only when the Commercial Production is commenced'. " 3. The assessee, by status a company, is a joint sector unit promoted by Pradeshiya Industrial and Investment Corporation of U.P. (PICUP) and M/s. Philip Carbon Black Ltd. The company was incorporated in October 1982. The main object of the company was to manufacture polyester staple fibre (PSF), a petrochemical product, for use by the spinning mills to spin yarn for manufacture of polyester fabrics. For the year ending 31-12-1987, relevant to assessment year 1988-89, orig....
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....at the investment allowance is admissible in respect of the previous year in which the machinery or plant is installed or in succeeding year, if it is first put to use in the immediately succeeding year. It was observed that once a machinery is 'put to use', there was no need to show that any article or thing was actually produced by use of machinery. The ld. CIT(A) observed that in the present case, the machinery was installed in the accounting year relevant to assessment year 1987-88 and it was also put to use in that very year, the same having admittedly been used for trial run in that year. In this connection, a reference was made to the fact that the cost of raw material and the stores consumed had been shown by the assessee at Rs. 68.79 lacs in the previous year relevant to assessment year 1987-88. On behalf of the assessee, reliance was placed on a decision of the ITAT, Ahmedabad Bench, in the case of Madhusudan Vegetable Products Co. Ltd. v. IAC [1990] 32 ITD 103 to canvass its point that the investment allowance is to be allowed when commercial production commences, which event, in the present case, took place during the previous year relevant to the assessment year under ....
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....nting period of the assessee as 1-1-1987 to 31-12-1987. It was submitted that the profit and loss account of the assessee-company is for the period 15-1-1987 to 31-12-1987, as is evident from the narration in the 'Notes on accounts' in Schedule 15 of the printed balance sheet. It was claimed that the entire expenditure up to 15-1-1987, including that on trial production, has been capitalised. It was pointed out that this fact has been accepted by the Assessing Officer in para 13 of the assessment order. In this connection, our attention was invited to Schedule 15 of the profit and loss account in which trial run expenditure up to 31-12-1986 has been shown at Rs. 68.79 lacs and during the period 1-1-1987 to 15-1-1987 at Rs. 152.77 lacs. Proceeding further, he drew our attention to the submissions made before the CIT(A) about installation, testing and trial run, etc., set out by the ld. CIT(A) in para 3.1 of his order. Proceeding further, he narrated the sequence of the relevant events, reproduced below, which, according to him, were extracted from the Log Book maintained by the Production Department of the company : " Date Events 12-12-1986 : Heating of Dow Vaporiser started. Only....
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....oduction available on 12th January, 1987. Product was tested in the Laboratory. " Relying upon the decision on the ITAT, Cochin Bench in Madras Spinners Ltd v. Dy. CIT [1993] 47 ITD 213, the ld. counsel submitted that the Log Book is a contemporaneous record and, therefore, its contents deserved to be accepted. He further submitted that a 'plant' is a combination of all items of machinery put together and not any individual item of machinery. It was stressed that from the details given above, it is quite evident that while the testing of the individual items of the plant was undertaken from 12-12-1986, the 'plant' as a whole was tested only on 4-1-1987. According to the ld. counsel, the installation of the plant as a whole was complete only on 12-1-1987 when it was put to use and first PSF trial production was available. It was contended that the ld. CIT(A) has not considered the sequence of events in proper perspective and has not given any reason as to how the Assessing Officer's conclusion was considered to be correct. 4.2 The ld. counsel made serious attempt to distinguish 'trial run' from 'trial production'. According to him, the installation of a plant is complete only whe....
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....e is no computation of income under section 28, as provided in section 29, the question of allowing deduction under section 32A does not arise. It was reiterated that in the present case no profit and loss account has been drawn for the previous year relevant to assessment year 1987-88 and, as such, the question of claiming and allowing any investment allowance in that year did not arise, the profit and loss account having been drawn for the first time from 15-1-1987. Therefore, it was contended that the investment allowance can be allowed only in assessment year 1988-89 when the business had come into existence. 4.4 It was vehemently argued that both in law and on facts, the assessee is entitled to the grant of investment allowance in the year under consideration. 5. The submission of the ld. Departmental Representative was that as per provisions of section 32A, investment allowance is allowable in respect of the previous year in which the machinery or plant was installed or, in the previous year in which it was first put to use, provided the second event takes place in the immediately succeeding previous year. According to the ld. Departmental Representative, the plant was inst....
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....s return declaring 'nil' income without any supporting data and the assessment was made under section 143(1) of the I.T. Act. It was not for the Department to suggest nor was there any occasion to do so, that the assessee should have claimed investment allowance in assessment year 1987-88. It was stressed that unless the assessee made the claim and furnished necessary details, the question of computation of income, as is pleaded, did not arise. The ld. Departmental Representative thus strongly defended the order of the ld. CIT(A). 6. In reply, the ld. counsel for the assessee submitted that the Directors' report is dated 21-2-1987. It was only meant to inform the shareholders of the current position prevailing on the date of the report. Therefore, this report cannot be made the sole basis for deciding the issue involved. It was vehemently argued that a 'log book', which is a day-to-day record, is a better and more reliable documentary evidence. According to the ld. counsel, the particular portion of the Directors' report, referred to by the ld. Departmental Representative, is not technically correct, may be because it is prepared not by technical persons but by accounts people. 7....
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....position finds support from the decision of the ITAT, Cochin Bench, in the case of Madras Spinners Ltd., referred to by the assessee itself, of course in some other context. In this case, the erection of the comber was started on 25-3-1986, and the first trial run of the comber was done on 31-3-1986. Both these dates fell in the previous year relevant to assessment year 1986-87. In the trial run the brush motor shaft was cut and, therefore, it had to be repaired. The second trial run was done on 2-4-1986. The Tribunal held that the first trial run of the comber having been done on 31-3-1986, the machinery was "put to use", though for a few hours, and the assessee was entitled to depreciation and investment allowance in assessment year 1986-87. 7.1 Adverting to the facts of the present case, no doubt the sequence of important events narrated by the assessee indicates that the first polyester staple fibre trial production was available only on 12-1-1987 but this fact is clearly in contradiction with the facts as they emerged from the Directors' report to the shareholders. It may be pointed out that in their report for the year ending 31-12-1986 dated 21-2-1987, the Directors informe....
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....it is the Directors' report which has to be relied upon in preference to the log book. As mentioned above, the Directors' report clearly states that trial production had come out by 31-12-1986 which implies that the whole of the machinery in question was put to use in the year ending 31-12-1986. In this connection, it would be pertinent to point out that as per Schedule C of the accounts for the year ending 31-12-1986, raw material of the value of Rs. 68.79 lakhs was consumed. The details in this behalf are given as under : " (1) Trial run expenses : Consumption of raw material and stores (000) Indigenous 38.13 Imported 30.66 ------------ Less : Realisable value 68.79 of finished goods ------------ " It implies that on trial run, finished goods were obtained but these had no realisable value obviously because the finished goods were given for testing to spinning mills, free of cost. In the circumstances, nothing further is required to prove that the machinery as a whole was put to use before 31-12-1986. 7.2 Coming to the argument of the assessee that since there was no computation of total income for the assessment year 1987-88, investment allowance has necessarily to be....
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....able or permissible for the Court to rewrite the section or to substitute words of its own for the actual words employed by the Legislature because the underlying object of any provision has to be gathered on a reasonable interpretation of the language employed by the Legislature. In CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155/59 Taxman 138 also the Apex Court has observed that it is only when there is any genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being formed that the rule of liberal interpretation may be taken recourse to. We are of the opinion that in the case before us, there is no scope of any genuine doubt about the interpretation of the expression 'put to use' and no two opinions are capable of being formed. The rule of liberal interpretation has, therefore, no application in the present case. 8. In his arguments, the ld. counsel of the assessee has raised certain issues like period of P & L A/c for the assessment year 1988-89, implication of the entries made in the Excise register, date on which the business can be said to have been set up, etc. In our opinion, these aspects are in no way relevant for dec....