ORDER
O.K. Narayanan, Accountant Member
1. This is an appeal filed by the assessee. The relevant assessment year is 1987-88. The appeal is directed against the order of the CIT(A)-XXII at Mumbai passed on 09-08-2000 and arises out of the proceedings completed by the assessing authority Under Section 155 of the Income-tax At, 1961.
2. During the previous year relevant to the assessment year under appeal, the assessee company had purchased plant and machinery worth Rs. 22,60,913. Thereupon, the assessee company claimed an amount of Rs. 5,65,228 by way of deduction under Investment Allowance. In order to qualify to make the said claim, the assessee had made a corresponding Investment Allowance Reserve for an amount of Rs. 4,30,000. In the assessment the deduction as claimed by the assessee was allowed by the assessing authority.
3. According to the assessee company, in compliance of the provisions of Section 32A(4), the assessee had utilised the said amount of reserve in acquiring specified assets during the previous years relevant to the assessment years 1991-92, 1992-93 and 1993-94. The machinery purchased by the assessee company were computers and other allied equipments. The said machineries were acquired by the assessee company before the expiry of the stipulated period of 10 years.
4. During the previous year relevant to the assessment year 1990-91, the assessee company had purchased a boiler entitled for depreciation at 100%. The assessee had claimed depreciation at 100% and the same was allowed. While accounting for the purchase of the said boiler, the assessee company has passed a transferring entry whereby the Investment Allowance Reserve of Rs. 4,30,000 created during the previous year relevant to the assessment year 1987-88 has been transferred to the ‘utilisation account’, thereby giving an impression in its accounts that the said reserve was utilised for purchasing the boiler.
5. The assessing officer on the basis of the above entry passed by the assessee company in its accounts for the previous year relevant to the assessment year 1990-91 initiated proceedings Under Section 155(4A) holding it as a case of violation of provisions relating to Investment Allowance Reserve and withdrew the said allowance of Rs. 5,65,228 and added back the same to the income of the assessee in his order dated 17-05-1993. The revised income was confirmed by the CIT(A) in first appeal. Therefore, the second appeal before the Tribunal.
6. The specific ground raised by the assessee, therefore, in this appeal reads as below:
The learned Commissioner of Income-tax (Appeals) erred in law in upholding the action of the learned Joint Commissioner of Income-tax in invoking the provisions of Section 155(4A) of the Act, thereby withdrawing the investment allowance of Rs. 5,65,228/- on the alleged ground that the appellant had utilized the Investment Allowance Reserve of Rs. 4,30,000/- for purposes prohibited by Section 32A of the Act.
7. We heard Shri Nitesh Joshi, the learned Counsel appearing for the assessee company and Shri Ravi Jain, the learned departmental representative appearing for the revenue. Shri Nitesh Joshi contended that the transfer entry was inadvertently passed by the assessee company during the previous year relevant to the assessment year 1990-91 and in fact the said entry did not reflect any utilisation of the ‘Investment Allowance Reserve’ amount other than in the manner prescribed by the law. The learned Counsel submitted that whether an assessee is entitled for a deduction or not depends on the provisions of law applicable thereto and not on the view which the assessee might take nor the existence or absence of entries in the books of account of the assessee will be decisive or conclusive in the matter. He relied on the decision of the Supreme Court in the case of Kedarnath Jute Manufacturing Co Ltd. v. CIT, Central Calcutta 82 ITR 363.
8. We considered the issue in detail. The boiler purchased by the assessee company was entitled for 100% depreciation. There is no dispute on the fact. The assessee was allowed the said 100% depreciation. Therefore, there is no provocation for the assessee to make use of any investment allowance reserve for the purpose of acquiring the said boiler. The status of the boiler acquired by the assessee stands alone and independent in deciding the matters of deduction under Income-tax Act. Therefore, there is no substance in coming to a conclusion that the investment allowance reserve created by the assessee during the previous year relevant to the assessment year 1987-88 was in fact utilised for the acquisition of the boiler. On the other hand, the records support the case of the assessee that the said Investment Allowance Reserve relating to the assessment year 1987-88 was utilised by the assessee company for acquiring computers and allowed equipments during the previous years relevant to the assessment years 1991 -92, 1992-93 and 1993-94.
8. It is true that the assessee had passed a misleading accounting entry. But whether the said entry may be justified in the context of the accounting policy followed by the assessee company or for the requirements under the Companies’ Act, the entry is not relevant here. As held by the Hon’ble Supreme Court in the case of Kedarnath Jute Manufacturing Co Ltd. v. CIT, Central Calcutta 82 ITR 363 it is not the accounting entries that decide a matter for the purpose of computation of income under the Income-tax Act. It is the substance that has to be looked into. An income does not cease to be income or an expense does not cease to be expense only for the reason that the assessee has passed a wrong accounting entry in its books of account. As far as the present case is concerned, the acquisition of the boiler and claiming of 100% depreciation is a self contained deduction by itself and, there was no occasion for the assessee to bring the acquisition of the boiler under the umbrella of ‘Investment Allowance Scheme’. It is quite independent and different. Therefore, the accounting entry passed by the assessee company does not ipso facto transfer the ‘reserve account’ to ‘utilisation account’ so as to hold that the said reserve was actually utilised by the assessee company for acquiring the boiler. Therefore, in the circumstances, we are of the considered view that the withdrawal of the investment allowance granted by the assessing authority for the assessment year 1987-88 is not justified. Therefore, the order of the assessing authority passed Under Section 155 is cancelled and the original assessment is restored with reference to the investment allowance.
9. In result, this appeal is allowed.