O/TAXAP/378/2002 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 378 of 2002 With TAX APPEAL NO. 480 of 2006 with TAX APPEAL NO. 481 of 2006 With TAX APPEAL NO. 1169 of 2006 with TAX APPEAL NO. 1170 of 2006 With TAX APPEAL NO. 1188 of 2006 With TAX APPEAL NO. 454 of 2000 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge? COMMISSIONER OF INCOME TAX Appellant(s) Versus Page 1 of 25 O/TAXAP/378/2002 JUDGMENT HARSIDDH SPECIFIC FAMILY TRUST Opponent(s) Appearance: MR MANISH BHATT, SENIOR COUNSEL WITH MRS MAUNA M BHATT, ADVOCATE for Appellant(s) MR SN SOPARKAR, SENIOR COUNSEL WITH MR BS SOPARKAR & MRS SWATI SOPARKAR, ADVOCATES for Opponent(s) CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 04/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with impugned order passed by Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as Tribunal ), revenue has preferred present Tax Appeals assailing following orders Tax Appeal Date of ITA No. Assessment No. Tribunal s Year order 378/2002 20.09.2001 5133/Ahd/1995 1992-93 454/2000 07/10/99 4843/Ahd/1995 1992-93 481/2006 09/06/05 222/Ahd/1999 1991-92 480/2006 12/07/05 940/Ahd/1999 1990-91 1169/2006 06/09/05 2176/Ahd/1999 1993-94 1170/2006 06/09/05 2177/Ahd/1999 1994-95 1188/2006 23.12.2005 128/Ahd/1996 1992-93 Page 2 of 25 O/TAXAP/378/2002 JUDGMENT 1.1 These matters were admitted by this Court for consideration of following substantial question/s of law: TAX APPEAL NO. 378 OF 2002 Whether on facts and in circumstances of case, Appellate Tribunal has erred in law in deleting addition made by Assessing Officer under section 32B(6) of Income Tax Act, 1961? TAX APPEAL NO. 454 OF 2000 1. Whether on facts and in circumstances of case, Appellate Tribunal has substantially erred in law in deleting addition made under section 32AB(6) of Act ? 2. Whether on facts and in circumstances of case, Appellate Tribunal has substantially erred in law in directing to allow separate relief under sections 80HH and 80I of Act? TAX APPEAL NOs. 480 & 481 OF 2006 Whether on facts and in circumstances of case, Appellate Tribunal was justified in law in upholding decision of CIT (A) directing to delete addition of Rs.40,00,000/- made as per provisions of Section 32AB(6) of Act ? TAX APPEAL NO. 1169 OF 2006 Whether on facts and in circumstances of case, Appellate Tribunal was justified in law in upholding decision of CIT (A) directing to delete addition of Rs. 15,00,000/- made as per provisions of Section 32AB(6) of Act ? TAX APPEAL NO. 1170 OF 2006 Whether on facts and in circumstances of Page 3 of 25 O/TAXAP/378/2002 JUDGMENT case, Appellate Tribunal was justified in law in upholding decision of CIT (A) directing to delete addition of Rs. 8,00,000/- made as per provisions of Section 32AB(6) of Act ? TAX APPEAL NO. 1170 OF 2006 Whether Tribunal is right in law and on facts in confirming order passed by CIT (A) deleting addition of Rs. 12,59,626/- made under section 32A(6) of Income Tax Act, 1961 ? 2. assessee firm is engaged in business of manufacturing detergent. So far as Tax Appeal Nos. 378/2002, 454/2000, 480/2006, 481/2006, 1169 & 1170 of 2006 are concerned, assessee filed its return of income for years in question declaring total income. assessee claimed deduction u/s 32AB of Act by depositing amounts in Investment Deposit Account with IDBI pursuant to Investment Deposit Account Scheme (hereinafter referred to as Scheme ) as per provisions of section 32AB(1)(a). Out of balance in said account, some amount was withdrawn by assessee and used for making repayment of loan against trucks and tankers contracted by it with SBI. remaining amount was used by assessee for repaying loans taken by it against security of plant and machinery. 2.1 During course of assessment proceedings, A.O rejected said claim and made appropriate additions in income of assessee. On appeal filed by assessee before CIT(A), CIT (Appeals) deleted addition made by Assessing Officer. On appeal before Tribunal by revenue, by impugned orders, Tribunal dismissing appeals, confirmed orders passed by CIT(A). Page 4 of 25 O/TAXAP/378/2002 JUDGMENT 2.2 So far as Tax Appeal No. 1188 of 2006 is concerned, return of income was filed on 30.06.1992 by assessee showing total loss. Thereafter, income was revised on 14.06.1993 and total income was shown as Rs. 1,69,970/-. assessing Officer during assessment proceedings disallowed claim of the assessee with regard to stamping expenses, bank guarantee expenses, Advocate fees, bank commission and bank interest. Assessing Officer worked out fresh total income at Rs. 6,05,470/- on 03.03.2005. On appeal filed by assessee before CIT(A), CIT (Appeals) allowed same. On appeal before Tribunal by revenue, by impugned order, Tribunal confirmed order passed by CIT(A). 2.3 Being aggrieved and dissatisfied with impugned orders passed by Tribunal, revenue has preferred present Tax Appeals for consideration of aforesaid substantial question/s of law. 3. Mr. Manish Bhatt, learned Senior Standing Counsel appearing for revenue has drawn attention of this Court to provisions of section 32AB, more particularly, sub-clause (6) of Act and strongly contended that Tribunal has erred by overlooking fact that deduction u/s 32AB(1) is allowable only if amount out of income chargeable to tax is deposited in Investment Deposit Account and is utilised during previous year for purchase of any new ship, new aircraft, new machinery or plant. He submitted that sub clause 6 of section 32AB carves out exception that where amount is withdrawn by Page 5 of 25 O/TAXAP/378/2002 JUDGMENT assessee and is utilised for purpose specified in scheme in circumstances other than circumstances specified in clauses (b), (c ) and (e) of sub-section 5(A) then that amount shall be deemed to be profits and gains of business or profession of that previous year. He submitted that in case of assessee, amounts were utilised to repay loans of SBI as well as for purchase of trucks and tankers which is certainly not in accordance with requirements of Section 32AB. He submitted that Tribunal has not adhered to provisions of section 32AB(1) of Act. 3.1 Mr. Bhatt has also drawn our attention to Clause 17.3 and 17.6 of CBDT Circular No. 461 dated 09.07.1986 and submitted that circular clearly envisages salient features of scheme. 3.2 Mr. Bhatt submitted that authorities below have erred in law and on facts in directing Assessing Officer to adopt status of assessee trust as individual and to allow deduction u/s 80L of Act. He submitted that authority below has erred in law in deleting disallowance in respect of interest paid to beneficiaries of assessee trust. 4. Mr. Nitin Mehta, learned advocate appearing for revenue adopted arguments advanced by Mr. Bhatt, learned Senior Counsel and further contended that for allowing deduction u/s 32AB of Act as per Investment Deposit Scheme, emphasis is on utilization for purposes specified. deduction is also admissible in Page 6 of 25 O/TAXAP/378/2002 JUDGMENT respect of amount deposited in deposit account but amount subsequently withdrawn from deposit account has to be utilized for purposes specified in scheme. He submitted that though repayment of term loan is one of purposes enumerated in scheme but benefit of deduction cannot be extended to term loans taken for any purposes other than for purchase of specified assets. 4.1 Mr. Mehta submitted that in present case term loans were not used for purchase of specified assets and therefore ultimate use of amount withdrawn is not in accordance with spirit of Section 32AB(1) and 32AB(4) of Act. He submitted that assessee is therefore not entitled to incentive as stipulated as per provisions of Section 32AB(1) of Act. 4.2 Mr. Mehta submitted that so far as questions raised in Tax Appeal No. 454 of 2000 are concerned, that for availing any benefit under provisions of Act new machinery ought to have been purchased after 01.01/08.1986 which is after scheme came into force. He has relied upon decision of Apex Court in case of Commissioner of Income Tax vs. Calcutta Knitwears reported in [2014] 362 ITR 673(SC). 5. Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. B.S. Soparkar, learned advocate for assessee supported impugned orders passed by Tribunal. He submitted that considering provisions of section 32AB, more particularly sub-clause (1) and (6) and provision of clause 9 of Scheme, it is clear that requirement is Page 7 of 25 O/TAXAP/378/2002 JUDGMENT repayment of principal amount of specified term loans and purpose of term loans is not elaborated further. 5.1 Mr. Soparkar has taken this Court to findings of both authorities and submitted that in view of concurrent findings of both authorities below wherein authorities have come to conclusion that loan is taken after 1986 which is term loan and amount withdrawn is used for repayment of term loan which is contracted after 31.03.1989. He has also relied upon recent decision of Apex Court in case of Commissioner of Income-Tax vs. Calcutta Knitwears reported in [2014] 362 ITR 673 (SC). He has also relied upon another decision of Apex Court in case of Mysore Minerals Ltd. vs. Commissioner of Income-Tax reported in [1999] 239 ITR 775 and submitted that Apex Court has held that where there are two possible interpretations of taxing provision one which is favourable to assessee should be preferred 5.2 Mr. Soparkar submitted that so far as question no. 2 raised in Tax Appeal No. 454 of 2000 is concerned, same is squarely governed by decision of Apex Court in case of Joint Commissioner of Income-Tax vs. Mandideep Eng. And Pkg. Ind. P. Ltd reported in [2007] 292 ITR 1 (SC) which has considered view taken by this Court in case of Commissioner of Income tax vs. Amod Stamping reported in [2005] 274 ITR 176. 6. We have heard learned advocates for both sides. To appreciate moot question raised in present set of appeals, it shall be necessary to have look at provisions Page 8 of 25 O/TAXAP/378/2002 JUDGMENT of Section 32AB of Act. same is reproduced hereunder: 32AB. Investment Deposit Account.- (1) Subject to other provisions of this section, where assessee, whose total income includes income chargeable to tax under head Profits and gains of business or profession , has, out of such income, (a) deposited any amount in account (hereafter in this section referred to as deposit account) maintained by him with Development Bank before expiry of six months from end of previous year or before furnishing return of his income, which-ever is earlier; or (b) utilised any amount during previous year for purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in deposit account under clause (a), in accordance with, and for purposes specified in, scheme (hereafter in this section referred to as scheme) to be framed by Central Government, or if assessee is carrying on business of growing and manufacturing tea in India, to be approved in this behalf by Tea Board, assessee shall be allowed deduction (such deduction being allowed before loss, if any, brought forward from earlier years is set off under section 72) of (i) sum equal to amount, or aggregate of amounts, so deposited and any amount so utilised; or (ii) sum equal to twenty per cent of profits of business or profession as computed in accounts of assessee audited in accordance with sub- section (5), whichever is less : Provided that where such assessee is firm, or any association of persons or any body of individuals, deduction under this section shall not be Page 9 of 25 O/TAXAP/378/2002 JUDGMENT allowed in computation of income of any partner, or as case may be, any member of such firm, association of persons or body of individuals: Provided further that no such deduction shall be allowed in relation to assessment year commencing on 1st day of April, 1991, or any subsequent assessment year. (2) For purposes of this section, (i) Omitted (ii) new ship or new aircraft includes ship or aircraft which before date of acquisition by assessee was used by any other person, if it was not at any time previous to date of such acquisition owned by any person resident in India; (iii) new machinery or plant includes machinery or plant which before its installation by assessee was used outside India by any other person, if following conditions are fulfilled, namely : (a) such machinery or plant was not, at any time previous to date of such installation by assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under this Act in computing total income of any person for any period prior to date of installation of machinery or plant by assessee; (iv) Tea Board means Tea Board established under section 4 of Tea Act, 1953 (29 of 1953). (3) profits of business or profession of assessee for purposes of sub-section (1) shall Page 10 of 25 O/TAXAP/378/2002 JUDGMENT be amount arrived at after deducting amount equal to depreciation computed in accordance with provisions of sub-section (1) of section 32 from amounts of profits computed in accordance with requirements of Parts II and III of Schedule VI to Companies Act, 1956 (1 of 1956), as increased by aggregate of (i) amount of depreciation; (ii) amount of income-tax paid or payable, and provision therefor; (iii) amount of surtax paid or payable under Companies (Profits) Surtax Act, 1964 (7 of 1964); (iv) amounts carried to any reserves, by whatever name called; (v) amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; (vi) amount by way of provision for losses of subsidiary companies; and (vii) amount or amounts of dividends paid or proposed, if any debited to profit and loss account; and as reduced by any amount or amounts withdrawn from reserves or provisions, if such amounts are credited to profit and loss account . (4) No deduction under sub-section (1) shall be allowed in respect of any amount utilised for purchase of (a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in nature of guest-house; (b) any office appliances (not being computers); (c) any road transport vehicles; (d) any machinery or plant, whole of actual cost of which is allowed as deduction (whether by way of depreciation or otherwise) in computing income chargeable under head Profits and gains of business or profession of any one previous year; Page 11 of 25 O/TAXAP/378/2002 JUDGMENT (e) any new machinery or plant to be installed in industrial undertaking, other than small-scale industrial undertaking, as defined in section 80HHA, for purposes of business of construction, manufacture or production of any article or thing specified in list in Eleventh Schedule. (5) deduction under sub-section (1) shall not be admissible unless accounts of business or profession of assessee for previous year relevant to assessment year for which deduction is claimed have been audited by accountant as defined in Explanation below sub-section (2) of section 288 and assessee furnishes, along with his return of income, report of such audit in prescribed form duly signed and verified by such accountant : Provided that in case where assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with provisions of this sub-section if such assessee gets accounts of such business or profession audited under such law and furnishes report of audit as required under such other law and further report in form prescribed under this sub-section. (5A) Any amount standing to credit of assessee in deposit account shall not be allowed to be withdrawn before expiry of period of five years from date of deposit except for purposes specified in scheme or in circumstances specified below : (a) closure of business; (b) death of assessee; (c) partition of Hindu undivided family; (d) dissolution of firm; (e) liquidation of company. Explanation. For removal of doubts, it is Page 12 of 25 O/TAXAP/378/2002 JUDGMENT hereby declared that nothing contained in this sub- section shall affect operation of provisions of sub-section (5AA) or sub-section (6) in relation to any withdrawals made from deposit account either before or after expiry of period of five years from date of deposit. (5AA) Where any amount, standing to credit of assessee in deposit account, is withdrawn during any previous year by assessee in circumstance specified in clause (a) or clause (d) of sub-section (5A), whole of such amount shall be deemed to be profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as income of that previous year, as if business had not closed or, as case may be, firm had not been dissolved. (5B) Where any amount standing to credit of assessee in deposit account is utilised by assessee for purposes of any expenditure in connection with business or profession in accordance with scheme, such expenditure shall not be allowed in computing income chargeable under head Profits and gains of business or profession . (6) Where any amount, standing to credit of assessee in deposit account, released during any previous year by Development Bank for being utilised by assessee for purposes specified in scheme or at closure of account 75 [[in circumstances other than circumstances specified in clauses (b), (c) and (e) of sub-section (5A), is not utilised in accordance with , and within time specified in,] scheme, either wholly or in part, whole of such amount or, as case may be, part thereof which is not so utilised shall be deemed to be profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as income of that previous year. Page 13 of 25 O/TAXAP/378/2002 JUDGMENT (7) Where any asset acquired in accordance with scheme is sold or otherwise transferred in any previous year by assessee to any person at any time before expiry of eight years from end of previous year in which it was acquired, such part of cost of such asset as is relatable to deductions allowed under sub-section (1) shall be deemed to be profits and gains of business or profession of previous year in which asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as income of that previous year: Provided that nothing in this sub-section shall apply (i) where asset is sold or otherwise transferred by assessee to Government, local authority, corporation established by or under Central, State or Provincial Act or Government company as defined in section 617 of Companies Act, 1956 (1 of 1956); or (ii) where sale or transfer of asset is made in connection with succession of firm by company in business or profession carried on by firm as result of which firm sells or otherwise transfers to company any asset and scheme continues to apply to company in manner applicable to firm. Explanation. provisions of clause (ii) of proviso shall apply only where (i) all properties of firm relating to business or profession immediately before succession become properties of company; (ii) all liabilities of firm relating to business or profession immediately before succession become liabilities of company; and (iii) all shareholders of company were partners of firm immediately before succession. Page 14 of 25 O/TAXAP/378/2002 JUDGMENT (8) Central Government may, if it considers it necessary or expedient so to do, by notification in Official Gazette, omit any article or thing from list of articles or things specified in Eleventh Schedule. (9) Central Government may, after making such inquiry as it may think fit, direct, by notification in Official Gazette, that provisions of this section shall not apply to any class of assessees, with effect from such date as it may specify in notification. (10) Where deduction has been allowed to assessee under this section in any assessment year, no deduction shall be allowed to assessee under sub-section (1) of section 32A in said assessment year (hereinafter referred to as initial assessment year) and block of further period of four years beginning with assessment year immediately succeeding initial assessment year. Explanation. In this section, (a) computers does not include calculating machines and calculating devices; (b) Development Bank means (i) in case of assessee carrying on business of growing and manufacturing tea in India, National Bank for Agriculture and Rural Development established under section 3 of National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (ii) in case of other assessees, Industrial Development Bank of India established under Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank or institution as may be specified in scheme in this behalf. [Emphasis Supplied] 6.1 It shall also be relevant to reproduce Clause 9 of Investment Deposit Account Scheme and same reads as Page 15 of 25 O/TAXAP/378/2002 JUDGMENT under: Utilisation of amounts for purposes of section 32AB. 9. (1) assessee, whose total income-includes income chargeable to tax under head Profits and gains of business or profession, may utilise (a) whole or any part of amount deposited by him in deposit account under clause (a) of sub-section (1) of section 32AB of Income-tax Act, or (b) any amount out of such income, without depositing same under clause ( a) of sub- section (1) of section 32AB of Income-tax Act, in accordance with this Scheme, for any of following purposes, namely: (I) purchase of new ship or new aircraft or new machinery or new plant for purposes of business or profession carried on by depositor; (ii) purchase of new computers to be installed either in office or at place where depositor carries on business or profession; (iii) repayment of principal amount of term loans contracted after 31st March, 1986, and taken for period of three years or more from financial corporation which is engaged in providing long-term finance for industrial development in India or from scheduled bank or from any such other institution as Central Government may, by notification in Official Gazette, specify in this behalf. (2)(a) Withdrawal from deposit may be made by depositor not more than once in every three calendar months, by making application in Form D: Provided that no such application shall be granted unless depositor has, for minimum period of one year prior to date of such withdrawal, in his account minimum balance of amount Page 16 of 25 O/TAXAP/378/2002 JUDGMENT which is not less than amount to be withdrawn. (b) On receipt of request for withdrawal, deposit office shall, as soon as may be, pay amount to depositor through credit to designated account. (c) amount credited to designated account under clause (b) shall be utilised by depositor within fifteen working days from date of such credit for purpose for which amount has been withdrawn; and amount or any part thereof which has not been so utilised shall be refunded to Development Bank and on such refund, amount or part thereof, as case may be, shall be treated as fresh deposit in account for purposes of withdrawal under clause (a) of sub-paragraph (2) of paragraph 9 above. 7. plain reading of section 32AB of Act and Scheme shows that as in case of assessee, if withdrawn money is utilized for repayment of principal amount of term loans contracted after 1986 and taken for period of three years or more from specified financial corporation, no addition u/s 32AB can be made. As per scheme amount withdrawn by assessee can be utilised for purchase of new ship, new aircraft, new machinery or new plant or new computer. amount can also be utilized for repayment of principal amount of term loan contracted after 31.03.1986 and condition for same is that term loan must have been taken for period of three years or more from Financial Corporation which is engaged in providing long term finance for industrial development in India or from Scheduled Bank or from any other institution as Central Government may notify. 7.1 In present cases, we find that that all conditions Page 17 of 25 O/TAXAP/378/2002 JUDGMENT mentioned in scheme are fulfilled. scheme nowhere provides that term loan should be only for plant and machinery. only condition provided by scheme is that term loan should be contracted for more than three years and it should be from scheduled bank or financial corporation. It is special benefit given to industries to boost their production and to update their machineries and keep industry abreast with new technology and to see that industry does not carry on its business with old machinery and that industry equips itself with latest plant and machinery. Therefore, in order to take benefit of beneficiary legislation, assessee firm has every right to plan its tax payment accordingly. Essentially, it entitles assessee carrying on business or profession to reduce his taxable income by sum utilised by him for purchase of new plant and machinery and or deposited with Industrial Development Bank of India for such utilisation. 7.2 It is not in dispute that Board's Circular No. 461 dated 9-7-1986 has explained scope of provisions relating to deduction under section 32AB in para 17.3 thereof as under :- "17.3 One of reasons for our having high capital output ratio in industry is that tax concessions have so far favoured investment in assets per se rather than output generated from those assets. By new scheme relating to investment deposit account along with proposed high depreciation rates announced by F.M., retained earnings and internal resources generation of companies would improve. As mentioned in paras 5.12 to 5.18 of LTFP, investment allowance had tended to favour large and more established enterprises, partly Page 18 of 25 O/TAXAP/378/2002 JUDGMENT because such concerns could set off investment allowance against profits of old established units without waiting for profits from fresh investments. new scheme of investment deposit account will be neutral as between small and large companies and will also insulate timing of investment decisions from tax considerations. This measure should help to reduce premium on spending which taxation of business profit inevitably creates, and thus curb conspicuous extravagance in corporate sector. new scheme should also help to neutralise bias in favour of borrowing and needless capacity creation new scheme differs from existing provisions of investment allowance as under : (a) existing provisions of investment allowance apply to only those assessees- (i) who purchase ship or aircraft, which is first put to use in business of assessee ; or (ii) who instal new machinery or plant in industrial undertaking for purposes only of business of construction, manufacture or production of any article or thing not specified in Eleventh Schedule to Income-tax Act. In case of small-scale industrial undertaking, this benefit is not denied even if such undertaking produces non-priority item listed in Eleventh Schedule, like alcoholic spirits, tobacco preparations, cosmetics, etc. new scheme is applicable to all existing types of assessees as also to professionals and leasing companies which have not leased out machinery to those industrial undertakings other than small-scale industrial undertaking engaged in manufacture or production of articles or things listed in Eleventh Schedule to Income-tax Act. In other words, deduction is admissible to all assessees who carry on eligible business or profession , which as per section 32AB(2) means business or profession Page 19 of 25 O/TAXAP/378/2002 JUDGMENT other than business of construction, manufacture or production of any article or thing specified in list in Eleventh Schedule (in case it is not small-scale industrial undertaking) and business of leasing or hiring of machinery or plant to industrial undertaking other than small-scale industrial undertaking engaged in business of low priority items as specified in list in Eleventh Schedule. It may be clarified that business of construction is eligible business for purposes of this provision. (b) In order to encourage more productive use of capital leading to low cost economy, benefits under new investment deposit scheme shall be available only if there are profits in eligible business or profession whereas benefit of investment allowance is available even if there is no such profit, because deduction is linked merely to cost of plant and machinery. (c ) acquisition of ship or aircraft or installation of plant and machinery, as case may be, during previous year is condition precedent for availing of benefit of existing investment allowance, whereas deduction under new provisions can be availed of even before ship or aircraft is acquired or plant or machinery has been installed by making deposit with designated Development Bank. (d) investment allowance is allowed at 25 per cent of actual cost of plant, machinery, ship or aircraft to assessee. As against this, under new scheme, entire cost of ship or aircraft or plant or machinery will qualify for deduction, if same is up to 20 per cent of profits of eligible business or profession. (e) Under new provisions, deduction is not admissible unless accounts of business or profession of assessee, other than company or co-operative society have been audited by accountant and assessee furnishes along with Page 20 of 25 O/TAXAP/378/2002 JUDGMENT return of his income, report of such audit in prescribed form, duly signed and verified by such accountant. No such audit is required as condition for availing of benefit of existing investment allowance. (f ) Subject to fulfilment of required conditions, benefit of investment allowance continues to be available if sale or transfer of ship or aircraft or plant or machinery is made as per scheme of amalgamation. Such deduction is not provided in new scheme, because in Indian context amalgamations usually arise infrequently and that too only to take care of losing concerns or as device for tax planning. 7.3 perusal of clause 9 of Scheme mentions that withdrawal could either be utilised for purchase of new ship, aircraft, plant & machinery or computers to be installed either in office or at business premises. In alternative, amount can also be used for repayment of principal amount of term loans which should have been contracted after 31.03.1986 taken from specified financial institution including specified banks. It is required to be noted that clause does not state that term loan should be used for any specific purpose like purchase of new machinery etc. 8. It is clear that provisions of Section 32AB was considered as more beneficial to national economy and to corporate sector. We are, therefore, of opinion that unless it is impossible to do so, provision of law should be interpreted in such way that it encourages growth of industry as envisaged in long term financial policy. In present cases, machinery is purchased in year 1986 on long term loan for more than three years. assessee Page 21 of 25 O/TAXAP/378/2002 JUDGMENT fulfills conditions envisaged under clause 9 of scheme. 9. In this regard, we are supported by decision of Apex Court in case of Calcutta Knitwears (supra). Apex Court in paragraphs 24 & 26 has observed as under: 24. We may gainfully refer to Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 at 71 which involved Finance (No. 2) Act 1915 which imposed excess profits duty on trade or businesses commenced after outbreak of First World War in 1914. By subjecting legislation to strict literal interpretation, Rowlatt J. held that Finance (No. 2) Act 1915, in isolation, did not apply to businesses that commenced after outbreak of war in 1914 and observed as follows: . . . principle in favour of strict literal approach . . . simply means that in taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at language used. 26. Lord Granworth in Grundy v. Pinniger, (1852) 1 LJ Ch 405 has observed that: To adhere as closely as possible to literal meaning of words used, is cardinal rule from which if we depart we launch into sea of difficulties which it is not easy to fathom. That is to say, once literal rule is departed, then any number of interpretations can be put to statutory provision, each Judge having free play to put his own interpretation as he likes. This would be destructive of edifice of fiscal legislations which impose economic duties and sanctions. Page 22 of 25 O/TAXAP/378/2002 JUDGMENT 9.1 Apex Court in case of Mysore Minerals Ltd (supra) has held that section 32 of Income-tax Act confers benefit on assessee and that provision should be so interpreted and words used therein should be assigned such meaning as would enable assessee securing benefit intended to be given by Legislature to assessee. It is also well- settled that where there are two possible interpretations of taxing provision one which is favourable to assessee should be preferred. 9.3 Therefore, even if submission made by learned advocate for revenue is accepted, in view of decision of Apex Court referred hereinabove, we think it fit to answer question in favour of assessee when two interpretations are possible. Thus, we are of opinion that question regarding addition of amount under section 32AB(6) of Act is required to be answered in negative i.e. in favour of assessee and against revenue as Tribunal has not erred in deleting addition made by Assessing Officer under section 32AB of Act. 10. So far as question regarding allowing separate relief under sections 80HH and 80I of Act is concerned, question is squarely governed by decision of this Court in case of Commissioner of Income tax vs. Amod Stamping reported in [2005] 274 ITR 176 which has been considered by Apex Court in case of Joint Commissioner of Income-Tax vs. Mandideep Eng. And Pkg. Ind. P. Ltd reported in [2007] 292 ITR 1 (SC). Apex Court in case of Mandideep Eng. (supra) has Page 23 of 25 O/TAXAP/378/2002 JUDGMENT observed as under: "2. Madhya Pradesh High Court in J.P.Tobacco Products P.Ltd. v. CIT reported in (1998) 229 ITR 123 took view that both sections are independent and, therefore, deductions could be claimed both under sections 80HH and 80-I on gross total income. Against this judgment, special leave petition was filed in this Court which was dismissed on ground of delay on July 21, 2000 (see (2000) 245 ITR (St.) 71). decision in J.P.Tobacco Products P.Ltd. (1998) 229 ITR 123 (MP) was followed by same High Court in case of CIT v. Alpine Solvex P.Ltd. in I.T.A.No.92 of 1999 decided on Ma;y 2, 2000. Special leave petition against this was dismissed by this curt on January 12, 2001, (see (2001) 247 ITR (St.) 36). This view has been followed repeatedly by different High Courts in number of cases against which no special leave petitions were filed meaning thereby that Department has accepted view taken in these judgments. See CIT v. Nima Specific Family Trust reported in (2001) 248 ITR 29 (Bom); CIT v. Chokshi Contacts P.Ltd. (2001) 251 ITR 587 (Raj); CIT v. Amod Stamping (2005) 274 ITR 176 (Guj); CIT v. Mittal Appliances P.Ltd. (2004) 270 ITR 65 (MP); CIT v. Rochiram and Sons (2004) 271 ITR 444 (Raj); CIT v. Prakash Chandra Basant Kumar (2005) 276 ITR 664 (MP); CIT v. S.B.Oil Industries P.Ltd. (2005) 274 ITR 495 (P&H); CIT v. SKG Engineering P.Ltd. (2005) 119 DLT 673 = (2006) 285 ITR 423 (Delhi) and CIT v. Lucky Laboratories Ltd. (2006) 200 CTR 305 (All) Since special leave petitions filed against judgment of Madhya Pradesh High Court have been dismissed and Department has not filed special leave petitions against judgments of different High Courts following view taken by Madhya Pradesh High Court, we do not find any merit in this appeal. Department having accepted view taken in those judgments cannot be permitted to take contrary view in present case involving same point. Accordingly, civil appeal is dismissed. No costs" Page 24 of 25 O/TAXAP/378/2002 JUDGMENT 11. By following very same Judgment in case of Mandideep Eng. And Pkg. Ind. P. Ltd (supra), question no. 2 raised in Tax Appeal No. 454 of 2000 is answered in favour of assessee and against revenue. 12. For foregoing reasons, we answer questions raised in appeals in favour of assessee and against revenue. Appeals stand dismissed accordingly. (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 25 of 25 Commissioner of Income-tax v. Harsiddh Specific Family Trust