1. This appeal by the assessee for the assessment year 1988-89 is directed against order of Commissioner of Income-tax (CIT in short) holding assessment order dated July 6, 1989 as erroneous and prejudicial to the interest of the Revenue under Section 263 of the Income-tax Act. In the above assessment order, the Assessing Officer had allowed deduction of Rs. 20, 98, 332 under Section 32AB for investment in purchase of machinery installed by the assessee in its factory at A-99, Noida. The deduction was held by the learned CIT to be wrongly allowed in the following circumstances.
2. The assessee-company in the previous year relevant to assessment year 1988-89 carried on business of manufacture and export of leather and electronic goods at three units. The position of profit/loss of each unit was as under: -1. Factory at A-99, Noida. a (-) 14,89,936 loss The learned CIT on consideration of relevant provisions of Section 32AB held that deduction under the said section was permissible only out of "eligible business" income of the concern. He treated factory at 99-A, Noida as a separate industrial undertaking and "eligible business" in terms of Sub-sections (1) and (2) of Section 32AB. As this unit had no profit, the deduction Under Section 32AB, in his view, was wrongly allowed. In reaching this conclusion, learned CIT referred to provision of Section 32AB with particular reference to definition of "eligible business". The case of CIT v. Shantilal Agarwalla [l983] 142 ITR 778 (Pat.) relied upon by the assessee was held to be not applicable to the facts of the case. Similarly, the other decision in the case of CIT v.Canara Workshops (P.) Ltd. [1986] 161 ITR 320 (SC), was held as not supporting the case of the assessee. The CIT accordingly held that deduction of Rs. 20, 98, 332 was wrongly allowed to the assessee and the assessment to the above extent should be enhanced. The assessee is aggrieved and has come up in appeal before the Appellate Tribunal.
3. We have heard submissions of both the parties at length. Shri M. S.Syali, learned representative of the assessee drew our attention to provisions of Section 32AB and argued that CIT's view in the impugned order was based on mis-reading of statutory provision. The learned CIT has imposed condition not provided in Section 32AB. The deduction for investment on machinery was allowable out of profits and gains of business of the "assessee" and not out of any branch or undertaking where the machinery was installed. This, according to Shri Syali was clear from Section 32AB as applicable to the relevant assessment year as also from Circular of CBDT No. 550 dated 1-1-1990 which explained the amendments made subsequently w. e. f. assessment year 1991-92. In this connection Shri Syali further drew our attention to decision of Tribunal in the case of Punjab Con-cast Steel Ltd. v. Asstt. CIT[1994] 49 ITD (Chd.) 430. In the said case, the Chandigarh Bench of the Tribunal at page 440 of the report noted the . submissions of the assessee that Section 32AB was an independent section applicable to an assessee and not to an undertaking. Shri Syali also referred to International Research Park Laboratories Ltd. v. Asstt. CIT [1994] 50 ITD 37 (Delhi) (SB). (No decision is available at above page). It was further argued by Shri Syali that provision of Sub-sections (5A), (7) and (10) of Section 32 AB made it absolutely clear that the deduction was to be allowed out of income of the assessee and not of any particular unit or an industrial undertaking. Shri Syali also argued that assessee had mixed account of all units and this would be clear from the assessment order. There was interlacing and interconnection between the three units run by the assessee and on account of interdependence, none of the units was independent.
4. The D. R. fully supported the impugned order of CIT. He read out and emphasised what is observed in para 12. 6 of the impugned order. He argued that assessee did not have income in the eligible business and, therefore, action under Section 263 was correct and fully justified.
5. We have given careful thought to the submissions advanced before us.
Benefit in the shape of investment deposit account under Section 32AB was introduced through Finance Act, 1986 w. e. f. 1-4-1987. Under the provision out of its total income chargeable under the head "profits and gains of business", the assessee was to deposit or utilise out of above income to get deduction @ 20% of eligible income.
6. The provision of Section 32AB as applicable in the relevant assessment year is as follows: - 32AB. (1) Subject to the other provisions of this section, where an assessee, whose total income includes income chargeable to tax under the head 'profit 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, whichever is earlier; or (b) utilise 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 the section referred to as the scheme) to be framed by the Central Government, or if the assessee is arrying 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 eligible businessr profession as computed in the accounts of the assessee audited in accordance with Sub-section (5), (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.) (2) (i) 'eligible business or profession' shall mean business or profession, other than- (a) the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule carried on by an industrial undertaking, which is not a small-scale industrial undertaking as defined in Section 80HHA; (b) the business of leasing or hiring of machinery or plant to an industrial undertaking, other than a small-scale industrial undertaking as defined in Section 80HHA, engaged in the business of construction, manufacture or production of any article or thing specified in the list in the Eleventh Schedule; (3) The profits of eligible business or profession of an assessee for the purposes of Sub-section (1) shall, - (a) in a case where separate accounts in respect of such eligible business or profession are maintained, 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 n and in of the Sixth Schedule to the Companies Act, 1956 (1 of 1956) (as increased by the aggregate of- (ii) the amount of income-tax paid or payable, and provision there for; (iii) the amount of surtax paid or payable under the Companies (Profits) Surtax Act, 1964 (7 of 1964); (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 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; and (b) in a case where such separate accounts are not maintained or are not available, be such amount which bears to the total profits of the business or profession of the assessee after allowing depreciation in accordance with the provisions of Sub-section (1) of Section 32, the same proportion as the total sales, turnover or gross receipts of the eligible business or profession bear to the total sales, turnover or gross receipt of the business or profession carried on by the assessee.** ** **** ** ** (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 to 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: (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: 7. There is no dispute that assessee did make investment in priority industry, out of its income. The learned CIT withdrew the deduction as according to him the investment at A-99, Noida was not made out of income of unit (industrial unit) at Noida. The said unit had no income and, therefore, the Assessing Officer wrongly allowed the deduction to the assessee.
8. On consideration of rival submissions advanced by the parties, we are unable to subscribe to the view taken by learned CIT. On a plain reading of both the clauses defining "eligible business", it is not possible for us to hold that" eligible business" means the business of the undertaking where machinery was installed and not of businesses of the assessee. We do not see any restriction placed on the assessee as per the definition of the "eligible business" to invest only out of income of a particular unit.
The definition of "eligible business" is exclutory definition. Every business other than the one excluded under Clauses (a) and (b) is "eligible business" qualified for deduction under the section. Certain specified businesses like construction, manufacture or production of any article or thing specified in the list in the XI Schedule carried by an industrial undertaking which is not a small scale, is excluded under Clause (a). The other Clause (b) excludes business of leasing or hiring of machinery or plant to the industrial undertaking mentioned in Clause (a). The term "industrial undertaking" has been used in Clauses (a) and (for)only with reference to categories of business falling in exclutory clauses. Any business not falling in said exclutory clauses is automatically treated as an "eligible business". There is no justification to restrict meaning of "eligible business" to the unit where machinery is installed though the same is not covered by exclutory clauses referred to above. The "eligible business" as per the definition has wider import - only thing to be seen being whether it falls within the activities covered by Clauses (a) and (b) of the definition. We, therefore, see nothing in the definition or any other portion of the section to suggest that deduction Is to be allowed only out of the profit of a unit or undertaking where machinery is installed and not out of the profits of the assessee.
9. We have further compared provision of Section 32AB with other provisions like Sections 10A, 80E, etc., granting incentives to the assessee. In all such sections, the Legislature specifically stated that deduction is to be computed with reference to profits derived by an industrial undertaking and not by an assessee. Reference is also invited to the case of Canara Workshop (P.) Ltd,. (supra), the decision of Supreme Court referred to by learned CIT. In that case, the Hon'ble Supreme Court was concerned with the application of Section 80E and held that while applying provision of above section, profits and gains earned by an industry mentioned in that section cannot be reduced by loss suffered by another industry or industries owned by the assessee.
Thus, only profits and gains to particular industry and not of the assessee are to be taken into account for purposes of Section 80E. But this analogy cannot be blindly applied to all provisions irrespective of the language employed, context and purpose of the provision. Shri Syali conceded that definition of "eligible business" did not serve the intended purpose and was deleted through the Finance Act, 1989 but this deletion was made effective from assessment year 1991-92 onwards. Prior to 1991 -92 and when the definition was applicable, the definition was to be given effect to. It could not be ignored. It is settled law that in a taxing Act one has to look merely to what is clearly said. There is no room for any intendment. What is stated here is made more than clear by the CBDT in Circular No. 550, dated 1-11990.
10. There is further intrinsic evidence in the section itself which suggests that deduction under the section is to be allowed out of total income of the assessee and not out of profits and gains of a particular industry. Shri Syali brought to our notice the following circumstances: - (1) The deduction is to be allowed out of "income chargeable to tax under the head profits & gains of business or profession" and not out of profits and gains of any particular undertaking.
(2) While working out "eligible profit", the amount of dividend paid or proposed is to be added. The dividend of a company can be declared with reference to total income and not with reference to profit of particular unit of a company.
(3) Income-tax paid or payable is also to be added. Income-tax can only be computed with reference to total income of the assessee and not on income of any particular unit or source.
(4) Clause (3)(b) refers to total profits of business or profession of the assessee. It does not refer to profit of any unit or undertaking.
(5) The statutory provision further requires deduction to be allowed before adjustment of brought forward losses under Section 72 of the Income-tax Act. The said section can be applied only to losses of business of assessee and not to losses from a particular undertaking.
(6) Proviso prohibiting double deduction in case of a firm, association of persons, body of individuals also suggest that total income of the assessee is to be taken into account.
11. Thus on consideration of language, text and context as also scheme of Income-tax Act, we hold that deduction under Section 32AB is to be allowed out of total income of the assessee.
Therefore, we cancel the order passed by learned CIT and restore that of the Assessing Officer.