- (1.) FOLLOWING question of law has been referred for opinion of this Court by the Tribunal, Chandigarh Bench, Chandigarh, "Whether, on the facts and circumstances of the case, the Tribunal was right in law in coming to the conclusion that the debt raised from the bank for the purchase of plant and machinery, which remained unpaid during the accounting period, was not to be taken into account for purposes of allowing deduction under s. 32AB of the IT Act to the assessee
(2.) FACTS noticed in the statement of case are that the assessee claimed deduction of Rs. 67,19,890 on account of additions made to plant and machinery during the year under consideration. The AO disallowed a part of the amount on the ground that the same was invested by raising loans. Deduction was allowed only to the extent of assessee's own funds. The AO noticed that the assessee had repaid a part of loan during the year which was also allowed as the assessee's own funds. This view has been affirmed by the Tribunal. Contention of the Revenue that s. 32AB(1) of the IT Act, 1961 (for short, 'the Act') did not permit deduction in respect of investment made in the purchase of plant and machinery from the borrowed funds, was upheld.
(3.) WE have heard learned counsel for the parties. Learned counsel for the assessee submits that view taken by the Tribunal is not a correct view. There was no requirement of utilising the amount for purchase of new machinery out of the profits of the assessee during the year. Only requirement was of utilising the amount during the year out of profits which may be available or out of loans which may be later repaid. The object of allowing deduction is to encourage investment. Reliance has been placed on judgments of Bombay High Court in CIT vs. Antifriction Bearings Corpn. Ltd. (2001) 165 CTR (Bom) 126 : (2000) 246 ITR 295 (Bom) and CIT vs. International Data Management Ltd. (2003) 182 CTR (Bom) 336 : (2003) 261 ITR 177 (Bom).;