Commissioner Of Income Tax v. O/Taxap/378/2002 Judgment

IN THE 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 2006With 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 the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ COMMISSIONER OF INCOME TAX....Appellant(s) Versus O/TAXAP/378/2002 JUDGMENT HARSIDDH SPECIFIC FAMILY TRUST....Opponent(s) ================================================================ Appearance: MR MANISH BHATT, SENIOR COUNSEL WITH MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) MR SN SOPARKAR, SENIOR COUNSEL WITH MR BS SOPARKAR & MRS SWATI SOPARKAR, ADVOCATES for the Opponent(s) ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERIandHONOURABLE MR.JUSTICE K.J.THAKER Date : 04/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. Being aggrieved and dissatisfied with the impugned order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench (hereinafter referred to as ‘the Tribunal’), the revenue has preferred the present Tax Appeals assailing the following orders 1.1These matters were admitted by this Court for consideration of the following substantial question/s of law: TAX APPEAL NO. 378 OF 2002 Whether on the facts and in the circumstances of the case, the Appellate Tribunal has erred in law in deleting the addition made by the Assessing Officer under section 32B(6) of the Income Tax Act, 1961? TAX APPEAL NO. 454 OF 2000 1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in deleting the addition made under section 32AB(6) of the Act ? 2. Whether on the facts and in the circumstances of the case, the Appellate Tribunal has substantially erred in law in directing to allow separate relief under sections 80HH and 80I of the Act? TAX APPEAL NOs. 480 & 481 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of Rs.40,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1169 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of Rs. 15,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of Rs. 8,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 TAX APPEAL NO. 1169 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of Rs. 15,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in upholding the decision of CIT (A) directing to delete the addition of Rs. 8,00,000/- made as per the provisions of Section 32AB(6) of the Act ? TAX APPEAL NO. 1170 OF 2006 Whether the Tribunal is right in law and on facts in confirming the order passed by CIT (A) deleting the addition of Rs. 12,59,626/- made under section 32A(6) of the Income Tax Act, 1961 ? 2. The assessee firm is engaged in the business of manufacturing detergent. So far as Tax Appeal Nos. 378/2002, 454/2000, 480/2006, 481/2006, 1169 & 1170 of 2006 are concerned, the assessee filed its return of income for the years in question declaring total income. The assessee claimed deduction u/s 32AB of the Act by depositing amounts in the Investment Deposit Account with IDBI pursuant to Investment Deposit Account Scheme (hereinafter referred to as ‘the Scheme’) as per the provisions of section 32AB(1)(a). Out of the balance in the said account, some amount was withdrawn by the assessee and used for making repayment of loan against trucks and tankers contracted by it with SBI. The remaining amount was used by the assessee for repaying loans taken by it against the security of plant and machinery. 2.1During the course of assessment proceedings, the A.O rejected the said claim and made appropriate additions in the income of the assessee. On appeal filed by the assessee before CIT(A), the CIT (Appeals) deleted the addition made by the Assessing Officer. On appeal before the Tribunal by the revenue, by impugned orders, Tribunal dismissing the appeals, confirmed the orders passed by CIT(A). 2.2So far as Tax Appeal No. 1188 of 2006 is concerned, the return of income was filed on 30.06.1992 by the assessee showing total loss. Thereafter, the income was revised on 14.06.1993 and the total income was shown as Rs. 1,69,970/-. The assessing Officer during the assessment proceedings disallowed the claim of the the assessee with regard to stamping expenses, bank guarantee expenses, Advocate fees, bank commission and bank interest. The Assessing Officer worked out the fresh total income at Rs. 6,05,470/- on 03.03.2005. On appeal filed by the assessee before CIT(A), the CIT (Appeals) allowed the same. On appeal before the Tribunal by the revenue, by impugned order, Tribunal confirmed the order passed by CIT(A). 2.3Being aggrieved and dissatisfied with the impugned orders passed by the Tribunal, the revenue has preferred the present Tax Appeals for consideration of the aforesaid substantial question/s of law. 3.Mr. Manish Bhatt, learned Senior Standing Counsel appearing for the revenue has drawn the attention of this Court to the provisions of section 32AB, more particularly, sub-clause (6) of the Act and strongly contended that the Tribunal has erred by overlooking the fact that deduction u/s 32AB(1) is allowable only if the amount out of income chargeable to tax is deposited in Investment Deposit Account and is utilised during the previous year for the purchase of any new ship, new aircraft, new machinery or plant. He submitted that sub clause 6 of section 32AB carves out an exception that where the amount is withdrawn by the 3.Mr. Manish Bhatt, learned Senior Standing Counsel appearing for the revenue has drawn the attention of this Court to the provisions of section 32AB, more particularly, sub-clause (6) of the Act and strongly contended that the Tribunal has erred by overlooking the fact that deduction u/s 32AB(1) is allowable only if the amount out of income chargeable to tax is deposited in Investment Deposit Account and is utilised during the previous year for the purchase of any new ship, new aircraft, new machinery or plant. He submitted that sub clause 6 of section 32AB carves out an exception that where the amount is withdrawn by the assessee and is utilised for the purpose specified in the scheme in circumstances other than the circumstances specified in clauses (b), (c ) and (e) of sub-section 5(A) then that amount shall be deemed to be the profits and gains of business or profession of that previous year. He submitted that in the case of the assessee, the amounts were utilised to repay the loans of SBI as well as for purchase of trucks and tankers which is certainly not in accordance with the requirements of Section 32AB. He submitted that the Tribunal has not adhered to the provisions of section 32AB(1) of the Act. 3.1Mr. Bhatt has also drawn our attention to Clause 17.3 and 17.6 of the CBDT Circular No. 461 dated 09.07.1986 and submitted that the circular clearly envisages the salient features of the scheme. 3.2Mr. Bhatt submitted that the authorities below have erred in law and on facts in directing the Assessing Officer to adopt the status of the assessee trust as individual and to allow deduction u/s 80L of the Act. He submitted that the authority below has erred in law in deleting the disallowance in respect of interest paid to beneficiaries of the assessee trust. 4.Mr. Nitin Mehta, learned advocate appearing for the revenue adopted the arguments advanced by Mr. Bhatt, learned Senior Counsel and further contended that for allowing deduction u/s 32AB of the Act as per the Investment Deposit Scheme, the emphasis is on utilization for the purposes specified. The deduction is also admissible in respect of the amount deposited in the deposit account but the amount subsequently withdrawn from the deposit account has to be utilized for the purposes specified in the scheme. He submitted that though the repayment of the term loan is one of the purposes enumerated in the scheme but the benefit of the deduction cannot be extended to term loans taken for any purposes other than for purchase of specified assets. 4.1Mr. Mehta submitted that in the present case the term loans were not used for the purchase of specified assets and therefore the ultimate use of the amount withdrawn is not in accordance with the spirit of Section 32AB(1) and 32AB(4) of the Act. He submitted that the assessee is therefore not entitled to the incentive as stipulated as per the provisions of Section 32AB(1) of the Act. 4.2Mr. Mehta submitted that so far as questions raised in Tax Appeal No. 454 of 2000 are concerned, that for availing any benefit under the provisions of the Act new machinery ought to have been purchased after 01.01/08.1986 which is after the scheme came into force. He has relied upon the decision of the Apex Court in the 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 the assessee supported the impugned orders passed by the Tribunal. He submitted that considering the provisions of section 32AB, more particularly sub-clause (1) and (6) and the provision of clause 9 of the Scheme, it is clear that the requirement is repayment of principal amount of specified term loans and the purpose of term loans is not elaborated further. 5.Mr. S.N. Soparkar, learned Senior Counsel appearing with Mr. B.S. Soparkar, learned advocate for the assessee supported the impugned orders passed by the Tribunal. He submitted that considering the provisions of section 32AB, more particularly sub-clause (1) and (6) and the provision of clause 9 of the Scheme, it is clear that the requirement is repayment of principal amount of specified term loans and the purpose of term loans is not elaborated further. 5.1Mr. Soparkar has taken this Court to the findings of both the authorities and submitted that in view of the concurrent findings of both the authorities below wherein the authorities have come to the conclusion that the loan is taken after 1986 which is a term loan and the amount withdrawn is used for repayment of term loan which is contracted after 31.03.1989. He has also relied upon the recent decision of the Apex Court in the case of Commissioner of Income-Tax vs. Calcutta Knitwears reported in [2014] 362 ITR 673 (SC). He has also relied upon another decision of the Apex Court in the case of Mysore Minerals Ltd. vs. Commissioner of Income-Tax reported in [1999] 239 ITR 775 and submitted that the Apex Court has held that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred 5.2Mr. Soparkar submitted that so far as question no. 2 raised in Tax Appeal No. 454 of 2000 is concerned, the same is squarely governed by the decision of the Apex Court in the 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 the view taken by this Court in the case of Commissioner of Income tax vs. Amod Stamping reported in [2005] 274 ITR 176. 6.We have heard learned advocates for both the sides. To appreciate the moot question raised in the present set of appeals, it shall be necessary to have a look at the provisions of Section 32AB of the Act. The same is reproduced hereunder: “32AB. Investment Deposit Account.-(1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head “Profits and gains of business or profession”, has, out of such income,— (a) deposited any amount in an account (hereafter in this section referred to as deposit account) maintained by him with the Development Bank before the expiry of six months from the end of the previous year or before furnishing the return of his income, which-ever is earlier; or (b) utilised any amount during the previous year for the purchase of any new ship, new aircraft, new machinery or plant, without depositing any amount in the deposit account under clause (a),in accordance with, and for the purposes specified in, a scheme (hereafter in this section referred to as the scheme) to be framed by the Central Government, or if the assessee is carrying on the business of growing and manufacturing tea in India, to be approved in this behalf by the Tea Board, the assessee shall be allowed a deduction (such deduction being allowed before the loss, if any, brought forward from earlier years is set off under section 72) of— (i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised; or (ii) a sum equal to twenty per cent of the profits of business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less : Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the case may be, any member of such firm, association of persons or body of individuals: (i) a sum equal to the amount, or the aggregate of the amounts, so deposited and any amount so utilised; or (ii) a sum equal to twenty per cent of the profits of business or profession as computed in the accounts of the assessee audited in accordance with sub-section (5), whichever is less : Provided that where such assessee is a firm, or any association of persons or any body of individuals, the deduction under this section shall not be allowed in the computation of the income of any partner, or as the 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 the assessment year commencing on the 1st day of April, 1991, or any subsequent assessment year. (i) Omitted (ii) “new ship” or “new aircraft” includes a ship or aircraft which before the date of acquisition by the assessee was used by any other person, if it was not at any time previous to the 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 the assessee was used outside India by any other person, if the following conditions are fulfilled, namely :— (a) such machinery or plant was not, at any time previous to the date of such installation by the 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 the total income of any person for any period prior to the date of the installation of the machinery or plantbytheassessee; (iv) “Tea Board” means the Tea Board established under section 4 of the Tea Act, 1953 (29 of 1953). (3) The profits of business or profession of an assessee for the purposes of sub-section (1) shall be an amount arrived at after deducting an amount equal to the depreciation computed in accordance with the provisions of sub-section (1) of section 32 from the amounts of profits computed in accordance with the requirements of Parts II and III of the Schedule VI to the Companies Act, 1956 (1 of 1956), as increased by the aggregate of— (i) the amount of depreciation; (ii) the amount of income-tax paid or payable, and provision therefor; (iii) the amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (iv) the amounts carried to any reserves, by whatever name called; (v) the amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities; (vi) the amount by way of provision for losses of subsidiary companies; and (vii) the amount or amounts of dividends paid or proposed, if any debited to the profit and loss account; and as reduced by any amount or amounts withdrawn from reserves or provisions, if such amounts are credited to the profit and loss account . (4) No deduction under sub-section (1) shall be allowed in respect of any amount utilised for the purchase of— (a) any machinery or plant to be installed in any office premises or residential accommodation, including any accommodation in the nature of a guest-house; (b) any office appliances (not being computers); (c) any road transport vehicles; (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previousyear; (e) any new machinery or plant to be installed in an industrial undertaking, other than a small-scale industrial undertaking, as defined in section 80HHA, for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule. (b) any office appliances (not being computers); (c) any road transport vehicles; (d) any machinery or plant, the whole of the actual cost of which is allowed as a deduction (whether by way of depreciation or otherwise) in computing the income chargeable under the head “Profits and gains of business or profession” of any one previousyear; (e) any new machinery or plant to be installed in an industrial undertaking, other than a small-scale industrial undertaking, as defined in section 80HHA, for the purposes of business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule. (5) The deduction under sub-section (1) shall not be admissible unless the accounts of the business or profession of the assessee for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant as defined in the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant : Provided that in a case where the assessee is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this sub-section if such assessee gets the accounts of such business or profession audited under such law and furnishes the report of the audit as required under such other law and a further report in the form prescribed under this sub-section. (5A) Any amount standing to the credit of the assessee in the deposit account shall not be allowed to be withdrawn before the expiry of a period of five years from the date of deposit except for the purposes specified in the scheme or in the circumstances specified below :— (a) closure of business; (b) death of an assessee; (c) partition of a Hindu undivided family; (d) dissolution of a firm; (e) liquidation of a company. Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this sub-section shall affect the operation of the provisions of sub-section (5AA) or sub-section (6) in relation to any withdrawals made from the deposit account either before or after the expiry of a period of five years from the date of deposit. (5AA) Where any amount, standing to the credit of the assessee in the deposit account, is withdrawn during any previous year by the assessee in the circumstance specified in clause (a) or clause (d) of sub-section (5A), the whole of such amount shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year, as if the business had not closed or, as the case may be, the firm had not been dissolved. (5B) Where any amount standing to the credit of the assessee in the deposit account is utilised by the assessee for the purposes of any expenditure in connection with the business or profession in accordance with the scheme, such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession”. (5B) Where any amount standing to the credit of the assessee in the deposit account is utilised by the assessee for the purposes of any expenditure in connection with the business or profession in accordance with the scheme, such expenditure shall not be allowed in computing the income chargeable under the head “Profits and gains of business or profession”. (6) Where any amount, standing to the credit of the assessee in the deposit account, released during any previous year by the Development Bank for being utilised by the assessee for the purposes specified in the scheme or at the closure of the account 75 [[incircumstancesotherthanthe circumstances specified in clauses (b), (c) and (e) of sub-section (5A), is not utilised in accordance with , and within the time specified in,] the scheme, either wholly or in part, the whole of such amount or, as the case may be, part thereof which is not so utilised shall be deemed to be the profits and gains of business or profession of that previous year and shall accordingly be chargeable to income-tax as the income of that previous year. (7) Where any asset acquired in accordance with the scheme is sold or otherwise transferred in any previous year by the assessee to any person at any time before the expiry of eight years from the end of the previous year in which it was acquired, such part of the cost of such asset as is relatable to the deductions allowed under sub-section (1) shall be deemed to be the profits and gains of business or profession of the previous year in which the asset is sold or otherwise transferred and shall accordingly be chargeable to income-tax as the income of that previous year: Provided that nothing in this sub-section shall apply— (i) where the asset is sold or otherwise transferred by the assessee to Government, a local authority, a corporation established by or under a Central, State or Provincial Act or a Government company as defined in section 617 of the Companies Act, 1956(1of1956);or (ii) where the sale or transfer of the asset is made in connection with the succession of a firm by a company in the business or profession carried on by the firm as a result of which the firm sells or otherwise transfers to the company any asset and the scheme continues to apply to the company in the manner applicable to the firm. Explanation.—The provisions of clause (ii) of the proviso shall apply only where— (i) all the properties of the firm relating to the business or profession immediately before the succession become the properties of the company; (ii) all the liabilities of the firm relating to the business or profession immediately before the succession become the liabilities of the company; and (iii) all the shareholders of the company were partners of the firm immediately before the succession. (8) The Central Government may, if it considers it necessary or expedient so to do, by notification in the Official Gazette, omit any article or thing from the list of articles or things specified in the Eleventh Schedule. (9) The Central Government may, after making such inquiry as it may think fit, direct, by notification in the Official Gazette, that the provisions of this section shall not apply to any class of assessees, with effect from such date as it may specify in the notification. (10) Where a deduction has been allowed to an assessee under this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year. Explanation.—In this section,— (a) “computers” does not include calculating machines and calculating devices; (10) Where a deduction has been allowed to an assessee under this section in any assessment year, no deduction shall be allowed to the assessee under sub-section (1) of section 32A in the said assessment year (hereinafter referred to as the initial assessment year) and a block of further period of four years beginning with the assessment year immediately succeeding the initial assessment year. Explanation.—In this section,— (a) “computers” does not include calculating machines and calculating devices; (b) “Development Bank” means— (i) in the case of an assessee carrying on business of growing and manufacturing tea in India, the National Bank for Agriculture and Rural Development established under section 3 of the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981); (ii) in the case of other assessees, the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964) and includes such bank or institution as may be specified in the scheme in this behalf.” [Emphasis Supplied] 6.1It shall also be relevant to reproduce Clause 9 of the Investment Deposit Account Scheme and the same reads as under: “Utilisation of the amounts for the purposes of section 32AB. 9. (1) An assessee, whose total income-includes income chargeable to tax under the head Profits and gains of business or profession, may utilise (a) the whole or any part of the amount deposited by him in a deposit account under clause (a) of sub-section (1) of section 32AB of the Income-tax Act, or (b) any amount out of such income, without depositing the same under clause (a) of sub-section (1) of section 32AB of the Income-tax Act, in accordance with this Scheme, for any of the following purposes, namely: (I) purchase of new ship or new aircraft or new machinery or new plant for the purposes of the business or profession carried on by the depositor; (ii) purchase of new computers to be installed either in the office or at a place where the depositor carries on business or profession; (iii) repayment of the principal amount of term loans contracted after the 31st March, 1986, and taken for a period of three years or more from a financial corporation which is engaged in providing long-term finance for industrial development in India or from a scheduled bank or from any such other institution as the Central Government may, by notification in the Official Gazette, specify in this behalf. (2)(a) Withdrawal from the deposit may be made by a depositor not more than once in every three calendar months, by making an application in Form D: Provided that no such application shall be granted unless the depositor has, for a minimum period of one year prior to the date of such withdrawal, in his account a minimum balance of an amount which is not less than the amount to be withdrawn.(b) On receipt of the request for withdrawal, the deposit office shall, as soon as may be, pay the amount to the depositor through a credit to the designated account. (c) The amount credited to the designated account under clause (b) shall be utilised by the depositor within fifteen working days from the date of such credit for the purpose for which the amount has been withdrawn; and the amount or any part thereof which has not been so utilised shall be refunded to the Development Bank and on such refund, the amount or part thereof, as the case may be, shall be treated as a fresh deposit in the account for the purposes of withdrawal under clause (a) of sub-paragraph (2) of paragraph 9 above.” which is not less than the amount to be withdrawn.(b) On receipt of the request for withdrawal, the deposit office shall, as soon as may be, pay the amount to the depositor through a credit to the designated account. (c) The amount credited to the designated account under clause (b) shall be utilised by the depositor within fifteen working days from the date of such credit for the purpose for which the amount has been withdrawn; and the amount or any part thereof which has not been so utilised shall be refunded to the Development Bank and on such refund, the amount or part thereof, as the case may be, shall be treated as a fresh deposit in the account for the purposes of withdrawal under clause (a) of sub-paragraph (2) of paragraph 9 above.” 7.A plain reading of section 32AB of the Act and the Scheme shows that as in the case of assessee, if the withdrawn money is utilized for repayment of principal amount of term loans contracted after 1986 and taken for a period of three years or more from the specified financial corporation, no addition u/s 32AB can be made. As per the scheme the amount withdrawn by the assessee can be utilised for purchase of new ship, new aircraft, new machinery or new plant or new computer. The amount can also be utilized for repayment of principal amount of term loan contracted after 31.03.1986 and the condition for the same is that the term loan must have been taken for a period of three years or more from a Financial Corporation which is engaged in providing long term finance for industrial development in India or from a Scheduled Bank or from any other institution as the Central Government may notify. 7.1In the present cases, we find that that all the conditions mentioned in the scheme are fulfilled. The scheme nowhere provides that term loan should be only for plant and machinery. The only condition provided by the scheme is that the term loan should be contracted for more than three years and it should be from a scheduled bank or a financial corporation. It is a special benefit given to industries to boost their production and to update their machineries and keep the industry abreast with new technology and to see that the industry does not carry on its business with old machinery and that the industry equips itself with the latest plant and machinery. Therefore, in order to take benefit of the beneficiary legislation, the assessee firm has every right to plan its tax payment accordingly. Essentially, it entitles an assessee carrying on a business or profession to reduce his taxable income by the sum utilised by him for purchase of new plant and machinery and or deposited with the Industrial Development Bank of India for such utilisation. 7.2It is not in dispute that the Board's Circular No. 461 dated 9-7-1986 has explained the scope of the provisions relating to deduction under section 32AB in para 17.3 thereof as under :- 7.2It is not in dispute that the Board's Circular No. 461 dated 9-7-1986 has explained the scope of the provisions relating to deduction under section 32AB in para 17.3 thereof as under :- "17.3 One of the reasons for our having a high capital output ratio in the industry is that the tax concessions have so far favoured investment in assets per se rather than output generated from those assets. By the new scheme relating to investment deposit account along with the proposed high depreciation rates announced by the F.M., the retained earnings and internal resources generation of the companies would improve. As mentioned in paras 5.12 to 5.18 of the LTFP, the investment allowance had tended to favour the large and more established enterprises, partly capital output ratio in the industry is that the tax concessions have so far favoured investment in assets per se rather than output generated from those assets. By the new scheme relating to investment deposit account along with the proposed high depreciation rates announced by the F.M., the retained earnings and internal resources generation of the companies would improve. As mentioned in paras 5.12 to 5.18 of the LTFP, the investment allowance had tended to favour the large and more established enterprises, partly because such concerns could set off investment allowance against profits of old established units without waiting for profits from fresh investments. The new scheme of investment deposit account will be neutral as between small and large companies and will also insulate the timing of investment decisions from tax considerations. This measure should help to reduce the premium on spending which taxation of business profit inevitably creates, and thus curb the conspicuous extravagance in the corporate sector. The new scheme should also help to neutralise the bias in favour of borrowing and needless capacity creation The new scheme differs from the existing provisions of investment allowance as under : (a) The existing provisions of the investment allowance apply to only those assessees- (i) who purchase a ship or aircraft, which is first put to use in the business of the assessee ; or (ii) who instal new machinery or plant in an industrial undertaking for the purposes only of business of construction, manufacture or production of any article or thing not specified in the Eleventh Schedule to the Income-tax Act. In the case of small-scale industrial undertaking, this benefit is not denied even if such an undertaking produces a non-priority item listed in the Eleventh Schedule, like alcoholic spirits, tobacco preparations, cosmetics, etc. The new scheme is applicable to all existing types of assessees as also to the professionals and the leasing companies which have not leased out machinery to those industrial undertakings other than a small-scale industrial undertaking engaged in the manufacture or production of articles or things listed in the Eleventh Schedule to the Income-tax Act. In other words, the deduction is admissible to all the assessees who carry on ‘eligible business or profession’, which as per section 32AB(2) means business or profession other than the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule (in case it is not a small-scale industrial undertaking) and the business of leasing or hiring of machinery or plant to an industrial undertaking other than a small-scale industrial undertaking engaged in the business of low priority items as specified in the list in the Eleventh Schedule. It may be clarified that the business of construction is an eligible business for the purposes of this provision. other than the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule (in case it is not a small-scale industrial undertaking) and the business of leasing or hiring of machinery or plant to an industrial undertaking other than a small-scale industrial undertaking engaged in the business of low priority items as specified in the list in the Eleventh Schedule. It may be clarified that the business of construction is an eligible business for the purposes of this provision. (b) In order to encourage a more productive use of capital leading to a low cost economy, the benefits under the new investment deposit scheme shall be available only if there are profits in the eligible business or profession whereas the benefit of investment allowance is available even if there is no such profit, because the deduction is linked merely to the cost of the plant and machinery. (c ) The acquisition of a ship or an aircraft or installation of plant and machinery, as the case may be, during the previous year is a condition precedent for availing of the benefit of the existing investment allowance, whereas the deduction under the new provisions can be availed of even before the ship or aircraft is acquired or the plant or machinery has been installed by making a deposit with the designated Development Bank. (d) The investment allowance is allowed at 25 per cent of the actual cost of the plant, machinery, ship or aircraft to the assessee. As against this, under the new scheme, the entire cost of the ship or aircraft or plant or machinery will qualify for deduction, if the same is up to 20 per cent of the profits of the eligible business or profession. (e) Under the new provisions, the deduction is not admissible unless the accounts of the business or profession of the assessee, other than a company or a co-operative society have been audited by an accountant and the assessee furnishes along with the return of his income, the report of such audit in the prescribed form, duly signed and verified by such an accountant. No such audit is required as a condition for availing of the benefit of the existing investment allowance. (f ) Subject to the fulfilment of the required conditions, the benefit of investment allowance continues to be available if the sale or transfer of a ship or an aircraft or plant or machinery is made as per a scheme of amalgamation. Such deduction is not provided in the new scheme, because in the Indian context amalgamations usually arise infrequently and that too only to take care of losing concerns or as a device for tax planning. 7.3A perusal of clause 9 of the Scheme mentions that the withdrawal could either be utilised for purchase of new ship, aircraft, plant & machinery or computers to be installed either in office or at the business premises. In the alternative, the amount can also be used for repayment of principal amount of term loans which should have been contracted after 31.03.1986 taken from a specified financial institution including specified banks. It is required to be noted that the clause does not state that the term loan should be used for any specific purpose like purchase of new machinery etc. 8.It is clear that the provisions of Section 32AB was considered as more beneficial to the national economy and to the corporate sector. We are, therefore, of the opinion that unless it is impossible to do so, the provision of law should be interpreted in such a way that it encourages the growth of industry as envisaged in long term financial policy. In the present cases, the machinery is purchased in the year 1986 on a long term loan for more than three years. The assessee fulfills the conditions envisaged under clause 9 of the scheme. 9.In this regard, we are supported by the decision of the Apex Court in the case of Calcutta Knitwears (supra). The Apex Court in paragraphs 24 & 26 has observed as under: 8.It is clear that the provisions of Section 32AB was considered as more beneficial to the national economy and to the corporate sector. We are, therefore, of the opinion that unless it is impossible to do so, the provision of law should be interpreted in such a way that it encourages the growth of industry as envisaged in long term financial policy. In the present cases, the machinery is purchased in the year 1986 on a long term loan for more than three years. The assessee fulfills the conditions envisaged under clause 9 of the scheme. 9.In this regard, we are supported by the decision of the Apex Court in the case of Calcutta Knitwears (supra). The Apex Court in paragraphs 24 & 26 has observed as under: “24. We may gainfully refer to The Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 KB 64 at 71 which involved the Finance (No. 2) Act 1915 which imposed excess profits duty on trade or businesses commenced after the outbreak of the First World War in 1914. By subjecting the legislation to a strict literal interpretation, Rowlatt J. held that the Finance (No. 2) Act 1915, in isolation, did not apply to businesses that commenced after the outbreak of war in 1914 and observed as follows: “. . . the principle in favour of a strict literal approach . . . simply means that in a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” 26. Lord Granworth in Grundy v. Pinniger, (1852) 1 LJ Ch 405 has observed that: “To adhere as closely as possible to the literal meaning of the words used, is a cardinal rule from which if we depart we launch into a sea of difficulties which it is not easy to fathom.” That is to say, once the literal rule is departed, then any number of interpretations can be put to a statutory provision, each Judge having a free play to put his own interpretation as he likes. This would be destructive of the edifice of fiscal legislations which impose economic duties and sanctions. “ 9.1The Apex Court in the case of Mysore Minerals Ltd (supra) has held that section 32 of the Income-tax Act confers a benefit on the assessee and that the provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee securing the benefit intended to be given by the Legislature to the assessee. It is also well- settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred. 9.3Therefore, even if the submission made by learned advocate for the revenue is accepted, in view of the decision of the Apex Court referred hereinabove, we think it fit to answer the question in favour of the assessee when two interpretations are possible. Thus, we are of the opinion that the question regarding addition of amount under section 32AB(6) of the Act is required to be answered in the negative i.e. in favour of the assessee and against the revenue as the Tribunal has not erred in deleting the addition made by the Assessing Officer under section 32AB of the Act. 10.So far as question regarding allowing separate relief under sections 80HH and 80I of the Act is concerned, the question is squarely governed by the decision of this Court in the case of Commissioner of Income tax vs. Amod Stamping reporte