India Polyfibres Ltd. Vs. Assistant Commissioner of - Court Judgment

Excerpt:
1. this appeal by the assessee is directed against the order of the cit(a)-i, lucknow, dated 31-12-1993, for the assessment year 1988-89.2. the only issue pressed before us for adjudication in the present appeal relates to rejection of the claim for investment allowance. the grounds raised in this behalf are as under : "i. the learned commissioner of income-tax (appeals) [hereinafter referred to as the cit(appeals)] erred on facts and in law in confirming the disallowance of the appellants claim made for grant of investment allowance amounting to rs. 15,45,06,722 in the present year. ii. on the facts stated in the written submissions submitted before the learned cit(appeals) supported by full and complete evidence during the course of appellate proceeding the learned cit(appeals) ought to have held that the appellant was fully entitled to claim investment allowance of rs. 15,45,06,722 during the present year, because the plant and machinery was put to use by the appellant only during the present year. iii. the learned cit(appeals) erred in law and on fact in not holding that the appellant was entitled to the benefit of investment allowance of rs. 15,45,06,722 in the present case on the basis of 'commercial production' only and not trial production as held by the ahmedabad tribunal in the case of madhusudan vegetable products co. ltd. v. iac reported in 32 itd 103 wherein the hon'ble members have held that 'a trial production cannot be equated with commercial production and investment allowance is allowable only when the commercial production is commenced'." 3. the assessee, by status a company, is a joint sector unit promoted by pradeshiya industrial and investment corporation of u.p. (picup) and m/s. philip carbon black ltd. the company was incorporated in october 1982. the main object of the company was to manufacture polyester staple fibre (psf), a petro-chemical product, for use by the spinning mills to spin yarn for manufacture of polyester fabrics. for the year ending 31-12-1987, relevant to assessment year 1988-89, original return was filed declaring a net loss of rs. 41,86,81,530. the return was revised twice and in the second revised return filed on 27-3-1991, the net loss was declared at rs. 18,24,66,510. the assessee claimed investment allowance of rs. 15,45,06,722. in this behalf, it was explained that the machinery in question was installed in the previous year ending 31-12-1986, relevant to assessment year 1987-88 and it was first put to use on 4-1-1987, in the previous year relevant to the assessment year under consideration. after referred that the machinery was first put to use in december 1986 when the trial run had commenced.after analysing the relevant facts and referring to certain judicial decisions, he came to the conclusion that the assessee was not entitled to claim investment allowance in the year under consideration.3.1. in appeal before the ld. cit(a), the assessee challenged the aforesaid findings. at the outset, they explained the sequence of events. it was submitted that picup leased out the land to the assessee in 1986 and after taking possession of the same, various machineries were purchased for being installed at the plant site at barabanki. the installation of the machineries numbering more than a hundred could be completed only in early december 1986. individual machineries were put to trial test in the end of december 1986. after the trial test of each individual machinery, there was a further testing and synchronisation of all the machineries as a whole, which is technically called as 'hot test'. such testing and synchronisation finally culminated in the completion of the installation of the plant and equipments which were then put to use on 4-1-1987, for the first production run on test basis. even on 4-1-1987, when the equipments were first put to use, no actual production of psf resulted. the production took place on 12-1-1987 onwards. in support of this assertion, the 'log book' was referred to. it was argued that investment allowance is to be given in the year when commercial production starts. it was stressed that in the present case, commercial production had started only in the year under consideration hence the assessee was entitled to the investment allowance. the ld. cit(a) referred to the provisions of section 32a of the income-tax act, 1961, to the effect that the investment allowance is admissible in respect of the previous year in which the machinery or plant is installed or in succeeding year, if it is first put to use in the immediately succeeding year. it was observed that once a machinery is 'put to use', there was no need to show that any article or thing was actually produced by use of machinery. the ld. cit(a) observed that in the present case, the machinery was installed in the accounting year relevant to assessment year 1987-88 and it was also put to use in that very year, the same having admittedly been used for trial run in that year. in this connection, a reference was made to the fact that the cost of raw material and the stores consumed had been shown by the assessee at rs. 68.79 lacs in the previous year relevant to assessment year 1987-88. on behalf of the assessee, reliance was placed on a decision of the itat, ahmedabad bench, in the case of madhusudan vegetable products co. ltd. v. iac [1990] 32 itd 103 to canvass its point that the investment allowance is to be allowed when commercial production commences, which event, in the present case, took place during the previous year relevant to the assessment year under consideration and not in assessment year 1987-88. the ld. cit(a) held that the decision relied upon by the assessee was based on the peculiar facts of that case. to support this view, the ld. cit(a) referred to the observations of the other ld. member in the concurring judgment. in the result, the order of the assessing officer rejecting the assessee's claim for investment allowances was upheld. aggrieved by this order of cit(a), the assessee has come in appeal before the tribunal.4. before us, a paper book was filed which, inter alia, contained copies of annual reports for the years 1986 and 1987 incorporating the balance sheets for the years ended 31-12-1986 and 31-12-1987, tax audit report for the year ending 31-12-1987, copies of letters dated 13-5-1991, 3-7-1991 and 27-7-1991, addressed to the assessing officer, and copy of the written submissions made before the cit(a). while opening the case, shri. o.p. vaish, ld. counsel for the assessee, submitted that the facts of the case and the evidence filed before the authorities below, which are of a technical nature, have not been appreciated by them. in particular, he pointed out that the affidavit of shri narendra kumar, vice president (manufacturing) of the assessee-company, a technical person, filed before the assessing officer, under a letter dated 3-7-1991 (placed at pages 31 to 38 of the paper book) has not been considered by the assessing officer and the ld. cit(a). on a query from the bench that as to how the affidavit in question, sworn on 3-7-1991, could possibly by considered by the assessing officer when the assessment order itself was passed on 27-6-1991, the ld. counsel submitted that the relevant assessment records may be called for and examined. the records were perused on the next day of hearing and the ld. counsel was frank enough to admit that the affidavit dated 3-7-1991, copy of which is placed in the paper book, with a certificate from his office, "all the documents of this paper book have been filed before lower authorities. no new evidence is being adduced at this stage" was furnished after the assessment order was passed. in this view of the matter, the letter dated 3-7-1991 and the affidavit of shri narendra kumar will not be taken into consideration.4.1. at the outset, the ld. counsel contended that in the assessment order, the assessing officer has wrongly mentioned the accounting period of the assessee as 1-1-1987 to 31-12-1987. it was submitted that the profit and loss account of the assessee-company is for the period 15-1-1987 to 31-12-1987, as is evident from the narration in the 'notes on accounts' in schedule 15 of the printed balance sheet. it was claimed that the entire expenditure up to 15-1-1987, including that on trial production, has been capitalised. it was pointed out that this fact has been accepted by the assessing officer in para 13 of the assessment order. in this connection, our attention was invited to schedule 15 of the profit and loss account in which trial run expenditure up to 31-12-1986 has been shown at rs. 68.79 lacs and during the period 1-1-1987 to 15-1-1987 at rs. 152.77 lacs. proceeding further, he drew our attention to the submissions made before the cit(a) about installation, testing and trial run, etc., set out by the ld. cit(a) in para 3.1 of his order. proceeding further, he narrated the sequences of the relevant events, reproduced below, which, according to him, were extracted from the log book maintained by the production department of the company : "date events12-12-1986 : heating of dow vaporiser started. only dow headers were heated.12-12-1986 : exchange, prepolymeriser and finisher - pressure testing and leak rate testing in progress.15-12-1986 : testing of reaction vessels, i.e., exchanger, flasher, prepolymeriser & finisher in progress.17-12-1986 : dowtherm heating of flasher, prepolymeriser, finisher loop seals started.19-12-1986 : desired pre-starting temperatures of reaction vessels achieved.20-12-1986 : testing of exchanger system in progress.21-12-1986 : dmt system - melter & storage tank water test in progress.22-12-1986 : hot testing of various reaction vessels started.23-12-1986 : monomer line testing in progress.24-12-1984 : heating of monomer line started.25-12-1986 : calibration of various eg tanks (recycle eg hold tank, eg feed tank, etc.) in progress.26-12-1986 : testing of finisher system in progress. dmt charging in dmt hopper done for the first time.28-12-1986 : exchanger heating started. finisher system testing continues.29-12-1986 : problem developed in exchange heating, which were rectified and heating restarted.31-12-1986 : finisher system testing still in progress.melting of dmt started at 2130 hrs. after satisfactory testing of exchanger. problems faced.02-01-1987 : finisher system still not ok. dmt melting continued to fill storage tank.03-01-1987 : finisher system tested and found ok.04-01-1987 : 1900 hrs. - dmt (raw material) feed to exchanger started. 0050 hrs. - polymer draining from spinning started.05-01-1987 : problems faced in spinning. (not possible to string up tow in the piddler) as it was discovered that the size of the string up gun was small06-01-1987 : 1700 hrs. - dmt feet to exchanger stopped and gradually continuous polymerisation stopped (idling shut down) due to problem in spinning.07-01-1987 : modifications/checks in spinning started to overcome the problems noticed on the previous day.10-01-1987 : continuous polymerisation again started. 0715 hrs. - catalysed meg feed to exchanger started. 0800 hrs. - dmt feed to exchanger started. 1140 hrs. - polymer draining from spinning started.12-01-1987 : draw machine started with 1st creel. first polyester staple fiber trial production available on 12th january, 1987. product was tested in the relying upon the decision on the itat, cochin bench in madras spinners ltd. v. dy. cit [1993] 47 itd 213, the ld. counsel submitted that the log book is contemporaneous record and, therefore, its contents deserved to be accepted. he further submitted that a 'plant' is a combination of all items of machinery put together and not any individual item of machinery. it was stressed that from the details given above, it is quite evident that while the testing of the individual items of the plant was undertaken from 12-12-1986, the 'plant' as whole was tested only on 4-1-1987. according to the ld.counsel, the installation of the plant as a whole was complete only on 12-1-1987 when it was put to use and first psf trial production was available. it was contended that the ld. cit(a) has not considered the sequences of events in proper perspective and has not given any reason as to how the assessing officer conclusion was considered to be correct.4.2. the ld. counsel made serious attempt to distinguish 'trial run' from 'trial production'. according to him, the installation of a plant is complete only when the 'trial production' comes out. he invited our attention to the copy of central excise form no. ri-3 for the month of january 1987, placed at pages 10 to 13 of the paper book. out attention was invited to page 11 in which the opening balance quantity is shown at nil and the production was shown only in the current month of january 1987. relying on the decision of the calcutta high court in cit v. surama tubes (p.) ltd. [1993] 201 itr 124, the ld. counsel submitted that the installation of machinery is complete only when it is installed in full. shri vaish also submitted that a business is set up only when the machinery has been installed and is ready to commence production. in his connection, reliance was placed on the decision of gujarat high court in cit v. sarabhai sons (p.) ltd. [1973] 90 itr 318.strong reliance was placed on a decision of the itat, ahmedabad bench 'a' in madhusudan vegetable products co. ltd.'s case (supra), to plead that investment allowance is admissible when the commercial production commences. it was argued that section 32a is a beneficial provision and, therefore, should be construed liberally. in support of this contention, reliances was placed on the decision of the itat, pune bench in baramati grape industries ltd. v. dy. cit [1995] 53 itd 38. it was further submitted that if an incentive provision has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.in this behalf, reliance was placed on the decision of the hon'ble supreme court of india in bajaj tempo ltd. v. cit [1992] 196 itr 188/62 taxman 480. finally, it was submitted that since section 32a categorically states that investment allowances can be allowed either in the year of installation or in the previous year in which the machinery or plant was first put to use, it was clear that installation does not establish that the machinery was used. in this behalf, reliance was placed on a decision of the itat, delhi bench 'd' in sagar international (p.) ltd. v. ito [1993] 199 itr (suppl.) 1.4.3. another limb of the argument of the ld. counsel was that section 29 of the income-tax act provides that the income referred to in section 28 shall be computed in accordance with the provision contained in section 30 to 43d. section 32a forms part of these provisions and it follows that if there is no computation of income under section 28, as provided in section 29, the question of allowing deduction under section 32a does not arise. it was reiterated that in the present case no profit and loss account has been drawn for the previous year relevant to assessment year 1987-88 and, as such, the question of claiming and allowing any investment allowances in that year did not arise, the profit and loss account having been drawn for the first time from 15-1-1987. therefore, it was contended that the investment allowances can be allowed only in assessment year 1988-89 when the business had come into existence.4.4. it was vehemently argued the both in law and on facts, the assessee is entitled to the grant of investment allowance in the year under consideration.5. the submission of the ld. departmental representative was that as per provisions of section 32a, investment allowances is allowable in respect of the previous year in which the machinery or plant was installed or, in the previous year in which it was first put to use, provided the second event takes place in the immediately, succeeding previous year. according to the ld. departmental representative, the plant was installed in full by 31-12-1986, i.e., in the previous year relevant to assessment year 1987-88 and it had also started production in this very previous year. in this connection, the ld. departmental representative drew our attention to the directors' report to the shareholders for the year ending 31-12-1986 (placed at page 56a of the assessee's paper book), the relevant portion of which reads as under : your directors are pleased to report that trial production in your company's plant at barabanki started towards the end of the year under review and commercial production by the middle of january 1987. all the equipments were erected by the third quarter and extensive pre-commissioning trials resulted in smooth and trouble-free commissioning. the product has been tested in some of the textile mills and has been found satisfactory. it is hoped to achieve full plant working capacity by the middle of the current year." it was argued that a machinery is 'put to use' when production of any kind starts and for this purpose there is no difference between the 'trial production' and 'commercial production'. this is so because no production of any kind can take place unless the plant is actually put to use. after referring to the directors' report, extracted above, it was stressed that by the third quarter of the year 1986, all the equipments were erected and extensive pre-commissioning trials had been successfully completed. the 'trial production' had come out by the end of the year which had even been tested by some of the textile mills. it was the 'commercial production' which was expected to come out by the middle of january 1987. these facts go a long way to show that the plant was put to use before 31-12-1986 and it had achieved some capacity by this date. in this connection, our attention was specifically invited to the consumption of raw material of substantial value for the trial production as per accounts for the year ending 31-12-1986. it was argued the non-realisation of any income from the goods manufactured in trial run is of no consequence.5.1. on the assessee's other plea that there was no computation of total income for assessment year 1987-88 and hence no question of claiming investment allowance, the submission of the ld. departmental representative was that for the assessment year 1987-88 the assessee had filed its return declaring 'nil' income without any supporting data and the assessment was made under section 143(1) of the i.t. act. it was not for the department to suggest nor was there any occasion to do so, that the assessee should have claimed investment allowance in assessment year 1987-88. it was stressed that unless the assessee made the claim and furnished necessary details, the question of computation of income, as it pleaded, did not arise. the ld. departmental representative thus strongly defended the order of the ld. cit(a).6. in reply, the ld. counsel for the assessee submitted that the directors' report is dated 21-2-1987. it was only meant to inform the shareholders of the current position prevailing on the date of the report. therefore, this report cannot be made the sole basis for deciding the issue involved. it was vehemently argued that a 'log book', which is a day-to-day record, is a better and more reliable documentary evidence. according to the ld. counsel, the particular portion of the directors' report, referred to by the ld. departmental representative, is not technically correct, may be because it is prepared not by technical persons but by accounts people.7. we have carefully considered the facts of the case, the material to which our attention has been invited and have given our anxious consideration to the arguments advanced by the learned counsels for the rival parties. in the provisions of section 32a of the it act, there is no ambiguity about the year in which investment allowance is to be granted and, therefore, we do not consider it necessary to reproduce the relevant provisions. it would suffice to say that investment allowance is ordinarily admissible in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed. if, however, the ship, machinery, aircraft or plant is first put to use in the immediately succeeding previous year, the investment allowances may be admissible in such succeeding previous year. the controversy in the present case revolves round the question as to when the machinery was first "put to use". section 32a does not define the expression "put to use". it is well-settled that where the definition of an expression or word has not been given in the statue, it must be construed in its popular sense and resort should not be made to any technical meaning. the expression "put to use" is an expression of every day use and, therefore, there is not need to look for a technical, legal or scientific meaning. in its ordinary sense and common parlance, the meaning attributable to the expression is that the item in question should be actually used for the purpose for which it is meant. the position can be better appreciated by taking an example.a pistol is "put to use" when a shot is fired from it. on the same analogy, a plant or machinery in a manufacturing unit would be said to have been put to use when the item for the manufacture of which it is meant, comes out. just as in the case of pistol the fact that the shot was fired in the air or at some animal or human being is not relevant, for the use of machinery it is not relevant whether only trial production has come out or it was commercial production. in other words, for deciding whether for the purposes of section 32a the machinery is put to use or not, distinction need not be made, between the trial production and commercial production, particularly because in the section the emphasis is on use and the type or purpose of use is not spelt out. incidentally it may be mentioned that this proposition finds support from the decision of the itat, cochin bench, in the case of madras spinners ltd. (supra), referred to by the assessee itself, of course in some other context. in this case, the erection of the comber was started on 25-3-1986, and the first trial run of the comber was done on 31-3-1986. both these dates fell in the previous year relevant to assessment year 1986-87. in the trial run the brush motor shaft was cut and, therefore, it had to be repaired. the second trial run was done on 2-4-1986. the tribunal held that the first trial run of the comber having been done on 31-3-1986, the machinery was "put to use", though for a few hours, and the assessee was entitled to depreciation and investment allowances in assessment year 1986-87.7.1. adverting to the facts of the present case, no doubt the sequence of important events narrated by the assessee indicates that the first polyester staple fibre trial production was available only on 12-1-1987 but this fact is clearly in contradiction with the facts as they emerged from the directors' report to the shareholders. it may be pointed out that in their report for the year ending 31-12-1986 dated 21-2-1987, the directors informed the shareholders in unequivocal term that trial production started towards the end of the year 1986 and that the commercial production had come out by the middle of january 1987.they have gone to the extent of saying that the product has been tested in some of the textile mills and found satisfactory. there could not be any doubt about the fact that the product, to which this reference has been made, is the trial product. the question for consideration is, which of the two documents - the log book or the directors' report - should be considered to be more reliable. no doubt, a log book is a contemporaneous record and a presumption could be drawn, as has been held by the cochin bench of the tribunal in the case of madras spinners ltd. (supra), relied upon by the ld. counsel for the assessee, that the entries therein represent the state of affairs but then this presumption is a rebuttable one. it has to be borne in mind that a log book is prepared by the assessee itself and the possibility of making entries in the manner that suits the assessee, cannot be ruled out. it may be mentioned that in the aforesaid case, the conclusion of the tribunal that the log book depicted the true picture was based on a clear finding recorded by the tribunal that it could not be said that the general manager had occasion to fabricate the entries in the log book, because he was not aware of assessing officer's visit to the factory. therefore, this decision cannot help the assessee unless it proved, beyond any doubt, that the log book was maintained in the normal course of activities. on the other hand, a directors' report is given a statutory recognition, for the obvious reason that for the healthy functioning of a corporate democracy, right of information to members of a company is necessary. section 217 of the companies act, 1956 prescribes the information which must be made available by the board of directors to a member. one such information, as per sub-section (1) of section 217, is in respect of the state of the company's affairs. a director may incur liability to individual shareholder who acts in reliance upon a negligent or mis-statement made in the directors' report. penalty for failure to take reasonable steps to comply with the provisions of section 217(1) to (4) is prescribed in sub-sections (5) and (6). in the circumstances, we are of the opinion that in the present case, it is the directors' report which has to be relied upon in preference to the log book. as mentioned above, the directors' report clearly states that trial production had come out by 31-12-1986 which implies that the whole of the machinery in question was put to use in the year ending 31-12-1986. in this connection, it would be pertinent to point out that as per schedule c of the accounts for the year ending 31-12-1986, raw material of the value of rs. 68.79 lakhs was consumed. the details in this behalf are given as under :"(1) trial run expenses : it implies that on trial run, finished goods were obtained but these had no realisable value obviously because the finished goods were given for testing to spinning mills, free of cost. in the circumstances, nothing further is required to prove that the machinery as a whole was put to use before 31-12-1986.7.2. coming to the argument of the assessee that since there was no computation of total income for the assessment year 1987-88, investment allowances has necessarily to be allowed in assessment year 1988-89, it may be mentioned that for the purpose of computing the yearly profits and losses under the income-tax act, each year is a separate self contained unit and, therefore, the deductions admissible for the period before the commencement or after the end of the previous year are not relevant. in the present case, though the assessee had filed its return for the assessment year 1987-88, no claim was made for deduction under section 32a of the income-tax act. the deduction under section 32a is not an automatic statutory deduction and can be allowed only on fulfilling the requisite conditions. therefore, it was for the assessee to make the claim and establish that the conditions precedent are satisfied and then only the allowances under section 32a could be granted in that year. the grant of investment allowances does not depend upon drawing of a profit and loss a/c and, as such, even if the assessee had preferred not to draw the profit and loss account for the assessment year 1987-88, it could still made a claim in the return for investment allowance. it will not be a logical proposition that if a claim legally admissible in a particular year is not made in that year, if could be claimed in any other year on the sweet will of the assessee. in the circumstances, we do not find any merit in the argument of the assessee.7.3. the hon'ble supreme court in the case of bajaj tempo ltd. (supra) which decision has been referred to by the itat, pune bench in the case of baramati grape industries ltd. (supra), observed that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally and the restriction on it too has to be construed in a manner so as to advance the objective of the provision and not to frustrate it, but as has been held by the apex court in petron engg. construction (p.) ltd. v. cbdt [1989] 175 itr 523/[1988] 41 taxman 294, this does not mean that such liberal construction should be done by doing violence to the plain meaning of such exemption provision. in cit v. n.c. budharaja & co. [1993] 204 itr 412/70 taxman 312, the apex court has reiterated that the principle of liberal interpretation, which advances the purpose and object underlying the provisions cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. it would not be reasonable or permissible for the court to rewrite the section or to substitute words of its own for the actual words employed by the legislature because the underlying object of any provision has to be gathered on a reasonable interpretation of the language employed by the legislature. in cit v. cellulose products of india ltd. [1991] 192 itr 155/59 taxman 138 also the apex court has observed that it is only when there is any genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being formed that the rule of liberal interpretation may be taken recourse to. we are of the opinion that in the case before us, there is no scope of any genuine doubt about the interpretation of the expression 'put to use' and no two opinions are capable of being formed. the rule of liberal interpretation has, therefore, no application in the present case.8. in his arguments, the ld. counsel of the assessee has raised certain issues like period of p & l a/c for the assessment year 1988-89, implication of the entries made in the excise register, date on which the business can be said to have been set up, etc. in our opinion, these aspects are in no way relevant for deciding the issue before us.9. the decisions referred to and relied upon by the ld. counsel for the assessee, other than those which have already been referred to, are discussed hereunder : in this case, on the basis of material available before it, the tribunal first recorded a finding of fact that the plant and machinery was actually put to use only in the year in which the investment allowance was claimed. this is evident from the order of the other ld. member in the concurring judgment, extracts of which are given below : "the machinery in respect of which the investment allowance has been claimed was actually and physically used in the period relevant to assessment year 1982-83. therefore, the assessee is entitled to that allowance for the assessment year 1982-83." "for the same reasons, it is unnecessary to enter into the question of commercial or trial production in the earlier assessment year." we are of the view that on the facts before us, the aforesaid decision of the ahmedabad bench does not help the assessee. the ratio of this decision is that section 32a does not require that the machinery or plant should be installed in the year in which it is acquired, for the purpose of claiming investment allowance. if the installation of a machinery or plant is spread over more than a year, the relevant year for grant of investment allowance would be the year in which the installation is completed. the controversy in this case was totally different and hence the decision is not relevant for the case before us. the question before their lordships was as to when the business was 'set up'. it was held that the business could not be said to be set up till the machinery had been installed and the factory was ready to commence business. in the case before us, there is a no dispute about the setting up of business and, therefore, this decision does not in any way help the assessee. in this decision, it has been held that since section 32a categorically states that investment allowance could be allowed either in the year of installation or in the previous year in which machinery or plant was first put to use, it is clear that while the user of machinery presupposes installation, 'installation' does not mean that the machinery was used. in view of our finding that the machinery in this case was put to use in the previous year relevant to assessment year 1987-88, it implies that the installation also was completed in that previous year. therefore, this decision does not in any way support the assessee's case that it is entitled to the grant of investment allowance in assessment year 1988-89.10. to conclude, while we appreciate the valiant effort put in by shri.o.p. vaish, ld. counsel, to retrieve the assessee's case, we are unable to concur with him. we would commend the approach accorded by the ld.sr. departmental representative, shri. h.d. dwivedi to the issue, while representing the state, which helped us in appreciating the facts more effectively.

Judgment:
1. This appeal by the assessee is directed against the order of the CIT(A)-I, Lucknow, dated 31-12-1993, for the assessment year 1988-89.

2. The only issue pressed before us for adjudication in the present appeal relates to rejection of the claim for investment allowance. The grounds raised in this behalf are as under : "I. The learned Commissioner of Income-tax (Appeals) [hereinafter referred to as the CIT(Appeals)] erred on facts and in law in confirming the disallowance of the appellants claim made for grant of Investment Allowance amounting to Rs. 15,45,06,722 in the present year.

II. On the facts stated in the written submissions submitted before the learned CIT(Appeals) supported by full and complete evidence during the course of appellate proceeding the learned CIT(Appeals) ought to have held that the appellant was fully entitled to claim Investment Allowance of Rs. 15,45,06,722 during the present year, because the Plant and Machinery was put to use by the appellant only during the present year.

III. The learned CIT(Appeals) erred in law and on fact in NOT holding that the appellant was entitled to the benefit of Investment Allowance of Rs. 15,45,06,722 in the present case on the basis of 'Commercial Production' only and not trial production as held by the Ahmedabad Tribunal in the case of Madhusudan Vegetable Products Co.

Ltd. v. IAC reported in 32 ITD 103 wherein the Hon'ble members have held that 'a trial production cannot be equated with commercial production and Investment Allowance is allowable only when the Commercial Production is commenced'." 3. The assessee, by status a company, is a joint sector unit promoted by Pradeshiya Industrial and Investment Corporation of U.P. (PICUP) and M/s. Philip Carbon Black Ltd. The company was incorporated in October 1982. The main object of the company was to manufacture polyester staple fibre (PSF), a petro-chemical product, for use by the spinning mills to spin yarn for manufacture of polyester fabrics. For the year ending 31-12-1987, relevant to assessment year 1988-89, original return was filed declaring a net loss of Rs. 41,86,81,530. The return was revised twice and in the second revised return filed on 27-3-1991, the net loss was declared at Rs. 18,24,66,510. The assessee claimed investment allowance of Rs. 15,45,06,722. In this behalf, it was explained that the machinery in question was installed in the previous year ending 31-12-1986, relevant to assessment year 1987-88 and it was first put to use on 4-1-1987, in the previous year relevant to the assessment year under consideration. After referred that the machinery was first put to use in December 1986 when the trial run had commenced.

After analysing the relevant facts and referring to certain judicial decisions, he came to the conclusion that the assessee was not entitled to claim investment allowance in the year under consideration.

3.1. In appeal before the ld. CIT(A), the assessee challenged the aforesaid findings. At the outset, they explained the sequence of events. It was submitted that PICUP leased out the land to the assessee in 1986 and after taking possession of the same, various machineries were purchased for being installed at the plant site at Barabanki. The installation of the machineries numbering more than a hundred could be completed only in early December 1986. Individual machineries were put to trial test in the end of December 1986. After the trial test of each individual machinery, there was a further testing and synchronisation of all the machineries as a whole, which is technically called as 'hot test'. Such testing and synchronisation finally culminated in the completion of the installation of the plant and equipments which were then put to use on 4-1-1987, for the first production run on test basis. Even on 4-1-1987, when the equipments were first put to use, no actual production of PSF resulted. The production took place on 12-1-1987 onwards. In support of this assertion, the 'log book' was referred to. It was argued that investment allowance is to be given in the year when commercial production starts. It was stressed that in the present case, commercial production had started only in the year under consideration hence the assessee was entitled to the investment allowance. The ld. CIT(A) referred to the provisions of section 32A of the Income-tax Act, 1961, to the effect that the investment allowance is admissible in respect of the previous year in which the machinery or plant is installed or in succeeding year, if it is first put to use in the immediately succeeding year. It was observed that once a machinery is 'put to use', there was no need to show that any article or thing was actually produced by use of machinery. The ld. CIT(A) observed that in the present case, the machinery was installed in the accounting year relevant to assessment year 1987-88 and it was also put to use in that very year, the same having admittedly been used for trial run in that year. In this connection, a reference was made to the fact that the cost of raw material and the stores consumed had been shown by the assessee at Rs. 68.79 lacs in the previous year relevant to assessment year 1987-88. On behalf of the assessee, reliance was placed on a decision of the ITAT, Ahmedabad Bench, in the case of Madhusudan Vegetable Products Co. Ltd. v. IAC [1990] 32 ITD 103 to canvass its point that the investment allowance is to be allowed when commercial production commences, which event, in the present case, took place during the previous year relevant to the assessment year under consideration and not in assessment year 1987-88. The ld. CIT(A) held that the decision relied upon by the assessee was based on the peculiar facts of that case. To support this view, the ld. CIT(A) referred to the observations of the other ld. Member in the concurring judgment. In the result, the order of the Assessing Officer rejecting the assessee's claim for investment allowances was upheld. Aggrieved by this order of CIT(A), the assessee has come in appeal before the Tribunal.

4. Before us, a Paper Book was filed which, inter alia, contained copies of annual reports for the years 1986 and 1987 incorporating the balance sheets for the years ended 31-12-1986 and 31-12-1987, tax audit report for the year ending 31-12-1987, copies of letters dated 13-5-1991, 3-7-1991 and 27-7-1991, addressed to the Assessing Officer, and copy of the written submissions made before the CIT(A). While opening the case, Shri. O.P. Vaish, ld. counsel for the assessee, submitted that the facts of the case and the evidence filed before the authorities below, which are of a technical nature, have not been appreciated by them. In particular, he pointed out that the affidavit of Shri Narendra Kumar, Vice President (Manufacturing) of the assessee-company, a technical person, filed before the Assessing Officer, under a letter dated 3-7-1991 (placed at pages 31 to 38 of the Paper Book) has not been considered by the Assessing Officer and the ld. CIT(A). On a query from the Bench that as to how the affidavit in question, sworn on 3-7-1991, could possibly by considered by the Assessing Officer when the assessment order itself was passed on 27-6-1991, the ld. counsel submitted that the relevant assessment records may be called for and examined. The records were perused on the next day of hearing and the ld. counsel was frank enough to admit that the affidavit dated 3-7-1991, copy of which is placed in the Paper Book, with a certificate from his office, "all the documents of this Paper Book have been filed before lower authorities. No new evidence is being adduced at this stage" was furnished after the assessment order was passed. In this view of the matter, the letter dated 3-7-1991 and the affidavit of Shri Narendra Kumar will not be taken into consideration.

4.1. At the outset, the ld. counsel contended that in the assessment order, the Assessing Officer has wrongly mentioned the accounting period of the assessee as 1-1-1987 to 31-12-1987. It was submitted that the profit and loss account of the assessee-company is for the period 15-1-1987 to 31-12-1987, as is evident from the narration in the 'Notes on accounts' in Schedule 15 of the printed balance sheet. It was claimed that the entire expenditure up to 15-1-1987, including that on trial production, has been capitalised. It was pointed out that this fact has been accepted by the Assessing Officer in para 13 of the assessment order. In this connection, our attention was invited to Schedule 15 of the profit and loss account in which trial run expenditure up to 31-12-1986 has been shown at Rs. 68.79 lacs and during the period 1-1-1987 to 15-1-1987 at Rs. 152.77 lacs. Proceeding further, he drew our attention to the submissions made before the CIT(A) about installation, testing and trial run, etc., set out by the ld. CIT(A) in para 3.1 of his order. Proceeding further, he narrated the sequences of the relevant events, reproduced below, which, according to him, were extracted from the Log Book maintained by the Production Department of the company : "Date Events12-12-1986 : Heating of Dow Vaporiser started. Only Dow headers were heated.12-12-1986 : Exchange, prepolymeriser and Finisher - Pressure testing and leak rate testing in progress.15-12-1986 : Testing of reaction vessels, i.e., Exchanger, Flasher, Prepolymeriser & Finisher in progress.17-12-1986 : Dowtherm heating of Flasher, Prepolymeriser, Finisher loop seals started.19-12-1986 : Desired pre-starting temperatures of Reaction vessels achieved.20-12-1986 : Testing of Exchanger system in progress.21-12-1986 : DMT System - Melter & Storage tank water test in progress.22-12-1986 : Hot testing of various Reaction vessels started.23-12-1986 : Monomer line testing in progress.24-12-1984 : Heating of monomer line started.25-12-1986 : Calibration of various EG tanks (Recycle EG hold tank, EG feed tank, etc.) in progress.26-12-1986 : Testing of Finisher system in progress. DMT charging in DMT hopper done for the first time.28-12-1986 : Exchanger heating started. Finisher system testing continues.29-12-1986 : Problem developed in Exchange heating, which were rectified and heating restarted.31-12-1986 : Finisher system testing still in progress.

Melting of DMT started at 2130 hrs. after satisfactory testing of Exchanger. Problems faced.02-01-1987 : Finisher system still not OK. DMT melting continued to fill storage tank.03-01-1987 : Finisher system tested and found OK.04-01-1987 : 1900 hrs. - DMT (Raw Material) feed to Exchanger started.

0050 hrs. - Polymer draining from Spinning started.05-01-1987 : Problems faced in spinning. (Not possible to string up tow in the Piddler) as it was discovered that the size of the string up gun was small06-01-1987 : 1700 hrs. - DMT feet to Exchanger stopped and gradually continuous Polymerisation stopped (idling shut down) due to problem in spinning.07-01-1987 : Modifications/Checks in spinning started to overcome the problems noticed on the previous day.10-01-1987 : Continuous Polymerisation again started.

0715 Hrs. - Catalysed MEG feed to Exchanger started.

0800 Hrs. - DMT feed to Exchanger started.

1140 Hrs. - Polymer draining from spinning started.12-01-1987 : Draw machine started with 1st creel.

First Polyester Staple Fiber trial production available on 12th January, 1987. Product was tested in the Relying upon the decision on the ITAT, Cochin Bench in Madras Spinners Ltd. v. Dy. CIT [1993] 47 ITD 213, the ld. counsel submitted that the Log Book is contemporaneous record and, therefore, its contents deserved to be accepted. He further submitted that a 'plant' is a combination of all items of machinery put together and not any individual item of machinery. It was stressed that from the details given above, it is quite evident that while the testing of the individual items of the plant was undertaken from 12-12-1986, the 'plant' as whole was tested only on 4-1-1987. According to the ld.counsel, the installation of the plant as a whole was complete only on 12-1-1987 when it was put to use and first PSF trial production was available. It was contended that the ld. CIT(A) has not considered the sequences of events in proper perspective and has not given any reason as to how the Assessing Officer conclusion was considered to be correct.

4.2. The ld. counsel made serious attempt to distinguish 'trial run' from 'trial production'. According to him, the installation of a plant is complete only when the 'trial production' comes out. He invited our attention to the copy of Central Excise Form No. RI-3 for the month of January 1987, placed at pages 10 to 13 of the Paper Book. Out attention was invited to page 11 in which the opening balance quantity is shown at nil and the production was shown only in the current month of January 1987. Relying on the decision of the Calcutta High Court in CIT v. Surama Tubes (P.) Ltd. [1993] 201 ITR 124, the ld. counsel submitted that the installation of machinery is complete only when it is installed in full. Shri Vaish also submitted that a business is set up only when the machinery has been installed and is ready to commence production. In his connection, reliance was placed on the decision of Gujarat High Court in CIT v. Sarabhai Sons (P.) Ltd. [1973] 90 ITR 318.

Strong reliance was placed on a decision of the ITAT, Ahmedabad Bench 'A' in Madhusudan Vegetable Products Co. Ltd.'s case (supra), to plead that investment allowance is admissible when the commercial production commences. It was argued that section 32A is a beneficial provision and, therefore, should be construed liberally. In support of this contention, reliances was placed on the decision of the ITAT, Pune Bench in Baramati Grape Industries Ltd. v. Dy. CIT [1995] 53 ITD 38. It was further submitted that if an incentive provision has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it.

In this behalf, reliance was placed on the decision of the Hon'ble Supreme Court of India in Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480. Finally, it was submitted that since section 32A categorically states that investment allowances can be allowed either in the year of installation or in the previous year in which the machinery or plant was first put to use, it was clear that installation does not establish that the machinery was used. In this behalf, reliance was placed on a decision of the ITAT, Delhi Bench 'D' in Sagar International (P.) Ltd. v. ITO [1993] 199 ITR (Suppl.) 1.

4.3. Another limb of the argument of the ld. counsel was that section 29 of the Income-tax Act provides that the income referred to in section 28 shall be computed in accordance with the provision contained in section 30 to 43D. Section 32A forms part of these provisions and it follows that if there is no computation of income under section 28, as provided in section 29, the question of allowing deduction under section 32A does not arise. It was reiterated that in the present case no profit and loss account has been drawn for the previous year relevant to assessment year 1987-88 and, as such, the question of claiming and allowing any investment allowances in that year did not arise, the profit and loss account having been drawn for the first time from 15-1-1987. Therefore, it was contended that the investment allowances can be allowed only in assessment year 1988-89 when the business had come into existence.

4.4. It was vehemently argued the both in law and on facts, the assessee is entitled to the grant of investment allowance in the year under consideration.

5. The submission of the ld. Departmental Representative was that as per provisions of section 32A, investment allowances is allowable in respect of the previous year in which the machinery or plant was installed or, in the previous year in which it was first put to use, provided the second event takes place in the immediately, succeeding previous year. According to the ld. Departmental Representative, the plant was installed in full by 31-12-1986, i.e., in the previous year relevant to assessment year 1987-88 and it had also started production in this very previous year. In this connection, the ld. Departmental Representative drew our attention to the Directors' report to the shareholders for the year ending 31-12-1986 (placed at page 56A of the assessee's Paper Book), the relevant portion of which reads as under : Your Directors are pleased to report that trial production in your Company's plant at Barabanki started towards the end of the year under review and commercial production by the middle of January 1987. All the equipments were erected by the third quarter and extensive pre-commissioning trials resulted in smooth and trouble-free commissioning.

The product has been tested in some of the textile mills and has been found satisfactory. It is hoped to achieve full plant working capacity by the middle of the current year." It was argued that a machinery is 'put to use' when production of any kind starts and for this purpose there is no difference between the 'trial production' and 'commercial production'. This is so because no production of any kind can take place unless the plant is actually put to use. After referring to the Directors' report, extracted above, it was stressed that by the third quarter of the year 1986, all the equipments were erected and extensive pre-commissioning trials had been successfully completed. The 'trial production' had come out by the end of the year which had even been tested by some of the textile mills. It was the 'commercial production' which was expected to come out by the middle of January 1987. These facts go a long way to show that the plant was put to use before 31-12-1986 and it had achieved some capacity by this date. In this connection, our attention was specifically invited to the consumption of raw material of substantial value for the trial production as per accounts for the year ending 31-12-1986. It was argued the non-realisation of any income from the goods manufactured in trial run is of no consequence.

5.1. On the assessee's other plea that there was no computation of total income for assessment year 1987-88 and hence no question of claiming investment allowance, the submission of the ld. Departmental Representative was that for the assessment year 1987-88 the assessee had filed its return declaring 'nil' income without any supporting data and the assessment was made under section 143(1) of the I.T. Act. It was not for the Department to suggest nor was there any occasion to do so, that the assessee should have claimed investment allowance in assessment year 1987-88. It was stressed that unless the assessee made the claim and furnished necessary details, the question of computation of income, as it pleaded, did not arise. The ld. Departmental Representative thus strongly defended the order of the ld. CIT(A).

6. In reply, the ld. counsel for the assessee submitted that the Directors' report is dated 21-2-1987. It was only meant to inform the shareholders of the current position prevailing on the date of the report. Therefore, this report cannot be made the sole basis for deciding the issue involved. It was vehemently argued that a 'log book', which is a day-to-day record, is a better and more reliable documentary evidence. According to the ld. counsel, the particular portion of the Directors' report, referred to by the ld. Departmental Representative, is not technically correct, may be because it is prepared not by technical persons but by accounts people.

7. We have carefully considered the facts of the case, the material to which our attention has been invited and have given our anxious consideration to the arguments advanced by the learned counsels for the rival parties. In the provisions of section 32A of the IT Act, there is no ambiguity about the year in which investment allowance is to be granted and, therefore, we do not consider it necessary to reproduce the relevant provisions. It would suffice to say that investment allowance is ordinarily admissible in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed. If, however, the ship, machinery, aircraft or plant is first put to use in the immediately succeeding previous year, the investment allowances may be admissible in such succeeding previous year. The controversy in the present case revolves round the question as to when the machinery was first "put to use". Section 32A does not define the expression "put to use". It is well-settled that where the definition of an expression or word has not been given in the statue, it must be construed in its popular sense and resort should not be made to any technical meaning. The expression "put to use" is an expression of every day use and, therefore, there is not need to look for a technical, legal or scientific meaning. In its ordinary sense and common parlance, the meaning attributable to the expression is that the item in question should be actually used for the purpose for which it is meant. The position can be better appreciated by taking an example.

A pistol is "put to use" when a shot is fired from it. On the same analogy, a plant or machinery in a manufacturing unit would be said to have been put to use when the item for the manufacture of which it is meant, comes out. Just as in the case of pistol the fact that the shot was fired in the air or at some animal or human being is not relevant, for the use of machinery it is not relevant whether only trial production has come out or it was commercial production. In other words, for deciding whether for the purposes of section 32A the machinery is put to use or not, distinction need not be made, between the trial production and commercial production, particularly because in the section the emphasis is on use and the type or purpose of use is not spelt out. Incidentally it may be mentioned that this proposition finds support from the decision of the ITAT, Cochin Bench, in the case of Madras Spinners Ltd. (supra), referred to by the assessee itself, of course in some other context. In this case, the erection of the comber was started on 25-3-1986, and the first trial run of the comber was done on 31-3-1986. Both these dates fell in the previous year relevant to assessment year 1986-87. In the trial run the brush motor shaft was cut and, therefore, it had to be repaired. The second trial run was done on 2-4-1986. The Tribunal held that the first trial run of the comber having been done on 31-3-1986, the machinery was "put to use", though for a few hours, and the assessee was entitled to depreciation and investment allowances in assessment year 1986-87.

7.1. Adverting to the facts of the present case, no doubt the sequence of important events narrated by the assessee indicates that the first polyester staple fibre trial production was available only on 12-1-1987 but this fact is clearly in contradiction with the facts as they emerged from the Directors' report to the shareholders. It may be pointed out that in their report for the year ending 31-12-1986 dated 21-2-1987, the Directors informed the shareholders in unequivocal term that trial production started towards the end of the year 1986 and that the commercial production had come out by the middle of January 1987.

They have gone to the extent of saying that the product has been tested in some of the textile mills and found satisfactory. There could not be any doubt about the fact that the product, to which this reference has been made, is the trial product. The question for consideration is, which of the two documents - the log book or the Directors' report - should be considered to be more reliable. No doubt, a log book is a contemporaneous record and a presumption could be drawn, as has been held by the Cochin Bench of the Tribunal in the case of Madras Spinners Ltd. (supra), relied upon by the ld. counsel for the assessee, that the entries therein represent the state of affairs but then this presumption is a rebuttable one. It has to be borne in mind that a log book is prepared by the assessee itself and the possibility of making entries in the manner that suits the assessee, cannot be ruled out. It may be mentioned that in the aforesaid case, the conclusion of the Tribunal that the log book depicted the true picture was based on a clear finding recorded by the Tribunal that it could not be said that the General Manager had occasion to fabricate the entries in the log book, because he was not aware of Assessing Officer's visit to the factory. Therefore, this decision cannot help the assessee unless it proved, beyond any doubt, that the log book was maintained in the normal course of activities. On the other hand, a Directors' report is given a statutory recognition, for the obvious reason that for the healthy functioning of a corporate democracy, right of information to members of a company is necessary. Section 217 of the Companies Act, 1956 prescribes the information which must be made available by the Board of Directors to a member. One such information, as per sub-section (1) of section 217, is in respect of the state of the company's affairs. A Director may incur liability to individual shareholder who acts in reliance upon a negligent or mis-statement made in the Directors' report. Penalty for failure to take reasonable steps to comply with the provisions of section 217(1) to (4) is prescribed in sub-sections (5) and (6). In the circumstances, we are of the opinion that in the present case, it is the Directors' report which has to be relied upon in preference to the log book. As mentioned above, the Directors' report clearly states that trial production had come out by 31-12-1986 which implies that the whole of the machinery in question was put to use in the year ending 31-12-1986. In this connection, it would be pertinent to point out that as per Schedule C of the accounts for the year ending 31-12-1986, raw material of the value of Rs. 68.79 lakhs was consumed. The details in this behalf are given as under :"(1) Trial run expenses : It implies that on trial run, finished goods were obtained but these had no realisable value obviously because the finished goods were given for testing to spinning mills, free of cost. In the circumstances, nothing further is required to prove that the machinery as a whole was put to use before 31-12-1986.

7.2. Coming to the argument of the assessee that since there was no computation of total income for the assessment year 1987-88, investment allowances has necessarily to be allowed in assessment year 1988-89, it may be mentioned that for the purpose of computing the yearly profits and losses under the Income-tax Act, each year is a separate self contained unit and, therefore, the deductions admissible for the period before the commencement or after the end of the previous year are not relevant. In the present case, though the assessee had filed its return for the assessment year 1987-88, no claim was made for deduction under section 32A of the Income-tax Act. The deduction under section 32A is not an automatic statutory deduction and can be allowed only on fulfilling the requisite conditions. Therefore, it was for the assessee to make the claim and establish that the conditions precedent are satisfied and then only the allowances under section 32A could be granted in that year. The grant of investment allowances does not depend upon drawing of a profit and loss a/c and, as such, even if the assessee had preferred not to draw the profit and loss account for the assessment year 1987-88, it could still made a claim in the return for investment allowance. It will not be a logical proposition that if a claim legally admissible in a particular year is not made in that year, if could be claimed in any other year on the sweet will of the assessee. In the circumstances, we do not find any merit in the argument of the assessee.

7.3. The Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. (supra) which decision has been referred to by the ITAT, Pune Bench in the case of Baramati Grape Industries Ltd. (supra), observed that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally and the restriction on it too has to be construed in a manner so as to advance the objective of the provision and not to frustrate it, but as has been held by the Apex Court in Petron Engg. Construction (P.) Ltd. v. CBDT [1989] 175 ITR 523/[1988] 41 Taxman 294, this does not mean that such liberal construction should be done by doing violence to the plain meaning of such exemption provision. In CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412/70 Taxman 312, the Apex Court has reiterated that the principle of liberal interpretation, which advances the purpose and object underlying the provisions cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. It would not be reasonable or permissible for the Court to rewrite the section or to substitute words of its own for the actual words employed by the Legislature because the underlying object of any provision has to be gathered on a reasonable interpretation of the language employed by the Legislature. In CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155/59 Taxman 138 also the Apex Court has observed that it is only when there is any genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being formed that the rule of liberal interpretation may be taken recourse to. We are of the opinion that in the case before us, there is no scope of any genuine doubt about the interpretation of the expression 'put to use' and no two opinions are capable of being formed. The rule of liberal interpretation has, therefore, no application in the present case.

8. In his arguments, the ld. counsel of the assessee has raised certain issues like period of P & L A/c for the assessment year 1988-89, implication of the entries made in the Excise register, date on which the business can be said to have been set up, etc. In our opinion, these aspects are in no way relevant for deciding the issue before us.

9. The decisions referred to and relied upon by the ld. counsel for the assessee, other than those which have already been referred to, are discussed hereunder : In this case, on the basis of material available before it, the Tribunal first recorded a finding of fact that the plant and machinery was actually put to use only in the year in which the investment allowance was claimed. This is evident from the order of the other ld. Member in the concurring judgment, extracts of which are given below : "The machinery in respect of which the investment allowance has been claimed was actually and physically used in the period relevant to assessment year 1982-83. Therefore, the assessee is entitled to that allowance for the assessment year 1982-83." "For the same reasons, it is unnecessary to enter into the question of commercial or trial production in the earlier assessment year." We are of the view that on the facts before us, the aforesaid decision of the Ahmedabad Bench does not help the assessee.

The ratio of this decision is that section 32A does not require that the machinery or plant should be installed in the year in which it is acquired, for the purpose of claiming investment allowance. If the installation of a machinery or plant is spread over more than a year, the relevant year for grant of investment allowance would be the year in which the installation is completed.

The controversy in this case was totally different and hence the decision is not relevant for the case before us.

The question before their Lordships was as to when the business was 'set up'. It was held that the business could not be said to be set up till the machinery had been installed and the factory was ready to commence business.

In the case before us, there is a no dispute about the setting up of business and, therefore, this decision does not in any way help the assessee.

In this decision, it has been held that since section 32A categorically states that investment allowance could be allowed either in the year of installation or in the previous year in which machinery or plant was first put to use, it is clear that while the user of machinery presupposes installation, 'installation' does not mean that the machinery was used.

In view of our finding that the machinery in this case was put to use in the previous year relevant to assessment year 1987-88, it implies that the installation also was completed in that previous year. Therefore, this decision does not in any way support the assessee's case that it is entitled to the grant of investment allowance in assessment year 1988-89.

10. To conclude, while we appreciate the valiant effort put in by Shri.

O.P. Vaish, ld. counsel, to retrieve the assessee's case, we are unable to concur with him. We would commend the approach accorded by the ld.Sr. Departmental Representative, Shri. H.D. Dwivedi to the issue, while representing the State, which helped us in appreciating the facts more effectively.