1. This appeal is by the assessee and relates to the assessment year 1977-78.
2. One set of the grounds of appeal contest the computation of relief available to the assessee under Section 80J of the Income-tax Act, 1961 ('the Act'). The ITO had made the computation holding that the amendment made by the Finance (No. 2) Act, 1980, being retrospective, was applicable to the assessment year in question. The contention of the assessee that the validity of the retrospective amendment was under challenge and, therefore, the computation should not be upheld, did not find acceptance of the Commissioner (Appeals) who rejected the claim.
The assessee is in appeal before us on this point and it was brought to our notice by the learned counsel that for the succeeding assessment years, i.e., 1978-79, 1979-80 and 1980-81, a similar issue had arisen and he has taken us through our order in IT Appeal Nos. 221, 222 and 226 (Hyd.) of 1982, dated 18-7-1983. There we have considered the contentions of the revenue and the assessee and the various judicial pronouncements relied on by the parties. We had stated that after having considered the judgments relied on, the Benches of the Tribunal were eventually following the view which was approved of by the Gujarat High Court in CIT v. Surat District Co-operative Milk Producers' Union Ltd. [IT Application No. 81 of 1982, dated 28-3-1983], wherein the Gujarat High Court had approved of the action of the Tribunal in setting aside the order of the first appellate authority and restoring the matter to him for decision afresh in conformity with any decision the Supreme Court may render on the point relating to the challenge of amendment to Section 80J. In view of such decision, the orders of the Commissioner (Appeals) for those years had been set aside and the matter restored to his file for decision afresh. For this year also, the facts being identical, we set aside the decision of the Commissioner (Appeals) on this point and restore the matter to his file. He would decide the point afresh in conformity with any decision the Supreme Court may render on the point at issue.
3. This brings us to the next set of grounds. The assessee, for the assessment year under consideration, when filing the income-tax return on 30-7-1977, had claimed investment allowance on various items of machinery. Such allowance as claimed came to Rs. 58,057. The investment allowance reserve created by the assessee came to Rs. 43,543.
Subsequently, a letter was sent to the ITO dated 22-7-1978. This letter invited attention to the computation made relating to the investment allowance reserve earlier and the assessee stated that the reserve to be created actually should have been Rs. 61,087 and not Rs. 43,543 which was created by mistake and there was a shortfall of Rs. 17,544 in the reserve required to be created and the assessee undertook to create a further reserve in the accounts of the succeeding assessment year, i.e., 1978-79 and, therefore, the assessee sought for permission to do this. This request was made by the assessee singe the assessee had not claimed investment allowance originally on a diesel engine generator, the value of which was Rs. 93,505. Thereafter, the assessee sought for permission to raise the investment allowance reserve to Rs, 72,100 and since the reserve originally created was only Rs. 43,543, to make good the deficit by creation of reserve of Rs. 28,557 in the accounts relating to the assessment year 1978-79. This was because investment allowance was sought to be claimed in respect of motor cars of the value of Rs. 58,732. The additional reserve was duly created in the accounts for the year relevant to the assessment year 1978-79. The ITO referred to the two revised statements filed by the assessee claiming increased investment allowance. Regarding motor cars, the ITO held that road transport vehicles were excluded from the benefit of investment allowance under proviso (b) to Section 32A(1) of the Act and, hence, the assessee was not entitled to the allowance because the statutory reserve originally created was only Rs. 43,543 which was 75 per cent of the investment allowance of Rs. 58,057 as claimed in the return. The assessee would be entitled to investment allowance, the ITO stated, only if an amount equal to 75 per cent of such allowance which was to be actually allowed, was debited to the profit and loss account and credited to the reserve account of the year vide the provisions of Section 32A(4)(ii). The ITO referred to the permission sought by the assessee for creation of balance of reserve in the following year.
According to the ITO, the provisions of Section 32A did not contemplate any situation where the assessee could be permitted to make good a deficiency in reserve to be created. The assessee, it is stated, relied on the Explanation to Section 32A(4) but the ITO held that the Explanation envisaged an entirely different situation, i.e., where the amount debited to the profit and loss account and credited to the reserve account was not less than the amount required to be so credited on the basis of the return made by the assessee but a higher deduction in respect of investment allowance became allowable from the total income as proposed to be computed by the ITO under Section 143 of the Act. In this regard he stated : In effect the Income-tax Officer can permit the assessee to make good the deficiency in the reserve in a subsequent year in cases where there is no sufficient income as per books in the relevant assessment year to cover the entire statutory reserve to be created and on regular assessment, the income determined by the Income-tax Officer is at a high figure which can fully cover the statutory reserve. The facts in the assessee's case are different. There was enough income in this year to cover the entire statutory reserve to be created but the assessee has not created it. It cannot, therefore, take shelter under the Explanation discussed above. There being ample profits in the instant case during the accounting year, there is a lapse on the part of the assessee in fulfilling the basic requirement of creating the reserve at 75 per cent of the investment allowance entitled to be claimed. The said Explanation do not envisage any lapses arising out of any mistake on the part of the assessee, even if it be bona fide and as such the assessee cannot seek to redress its lapse relying on the Explanation.
I may add that the creation of the additional reserve of Rs. 28,557 in the assessment year 1978-79 is a patent mistake which is against law, because the assessee is entitled to investment allowance for the assessment year 1977-78 and, hence, it should have created additional reserve only in its accounts for the assessment year 1977-78, if necessary, by altering the accounts. Several High Courts have ruled including the Andhra Pradesh High Court in Veerabhadra Iron Foundry v. CIT  69 ITR 425 that it was not necessary that entries should be made in the accounts on or before the last day of the accounting year or even before the preparation of profit and loss accounts. It was open to the assessee to make the entries at any time before the assessment is completed. Unfortunately in the assessee's case the revised entries for creation of the additional reserve were not made in its accounts for the assessment year 1977-78. On this point alone the assessee loses the benefit of investment allowance relating to this additional reserve. I, therefore, restrict the investment allowance under Section 32A to a sum of Rs. 58,057 for which only the statutory reserve was created by the assessee in its accounts of this year.
4. The assessee appealed and contended that motor cars were not road transport vehicles. According to the assessee, only vehicles used for transportation of goods or people for consideration could be classified as road transport vehicles. The Commissioner (Appeals) was of the view that motor cars were clearly road transport vehicles and no allowance under Section 32A could be allowed on such assets. Apart from this, the Commissioner agreed with the ITO that creation of an additional reserve in the assessment year 1978-79 could not entitle the assessee to investment allowance on the diesel engine generator and the motor cars because reserve attributable to the value of such items had not been created in the accounts of the previous year under consideration.
5. Before us, the learned counsel submitted that under the provisions of Section 32A(1)(b), grant of investment allowance was prohibited only in respect of 'road transport vehicles'. He relied on the definitions in Section 2 of the Motor Vehicles Act, 1939, set out below : 2. Definitions.-In this Act, unless there is anything repugnant in the subject or context,- (16) 'motor car' means any motor vehicle other than a transport vehicle, [omnibus], road-roller, tractor, motor cycle or invalid carriage ; (17) 'motor cycle' means a two-wheeled motor vehicle, the unladen weight of which inclusive of the unladen weight of any detachable side car, having an extra wheel, attached to motor vehicle, does not exceed 600 kilograms ; (18) 'motor vehicle' means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer ; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises ; (25) 'public service vehicle' means any motor vehicle used or adapted to be used for the carriage of passengers for hire or reward and includes a motor cab, contract carriage and stage carriage ; ** ** ** (33) 'transport vehicle' means a public service vehicle or a goods vehicle ; According to him, the term 'road transport vehicle' had not been defined in the 1961 Act, and, therefore, the definition in the Motor Vehicles Act would become applicable. He emphasized that under Section 2(53) of the Motor Vehicles Act, 'transport vehicle' means a public service vehicle and under Section 2(25) public service vehicles would include only those motor vehicles used for the carriage of passengers for hire or reward. Since the cars in the present case were not used for hire or reward but were used only for the company's purposes for carrying personnel, he stated that the cars were not public service vehicles and since they were not public service vehicles, they could not be transport vehicles and when they could not be transport vehicles, they certainly could not be 'road transport vehicles'.
8. The learned departmental representative, on the other hand, submitted that the definitions in the Motor Vehicles Act were applicable only to such Act and we could not import such definitions to the 1961 Act for determining whether a motor car was a road transport vehicle or not. He stated that as commonly understood, a motor car was clearly a road transport vehicle and the question whether car was given on hire or was operated by the assessee itself for its own purposes would not make any difference.
7. We have considered the rival submissions. Section 2(33) of the Motor Vehicles Act defines transport vehicles to mean not only public service vehicles but also goods vehicles. Goods vehicle has been defined in Section 2(8) of the said Act as under : 'goods vehicle' means any motor vehicle constructed or adapted for use for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods solely or in addition to passengers ; Thus, if at any time, in addition to passengers, goods were also carried, even if the vehicle was not let out on hire and even if the carrying of goods was an isolated instance, the vehicle in question would become a goods vehicle. In the present case, if there was such occurrence, the motor car would have become a goods vehicle under the Motor Vehicles Act and the moment it became a goods vehicle, it would become a transport vehicle within the meaning of Section 2(55) and then it would become a 'road transport vehicle'. [For the proposition that even one or two isolated instances of transport of goods would render a vehicle a transport vehicle, see the decision In re, Manager, Indian Express AIR 1945 Mad. 440, referred to in State v. Ismail Alisaheb Awate AIR 1966 Bom. 119.] We are inclined to agree with the learned departmental representative that we cannot go by a definition applicable to a particular Act which gives a highly technical meaning to determine whether a motor car would be a road transport vehicle or not. A motor car is utilised for transporting passengers whether it be for hire or not. It plies on the road and, therefore, in our view, would fall within the concept of road transport vehicles within the meaning of Section 32A(1)(b). To hold otherwise would mean that a lorry would be a road transport vehicle because it is intended to carry and carries goods and a concern possessing a lorry will not be granted investment allowance on the cost thereof because it is clearly a road transport vehicle within the meaning of the Motor Vehicles Act but investment allowance would be allowable to a motor car maintained by the concern. We do not consider that such a distinction was intended to be drawn. We, therefore, hold that the motor car, being a 'road transport vehicle' would not be entitled to investment allowance.
8. The question that survives is whether investment allowance would be admissible in respect of the generator. It is clearly machinery on which investment allowance was permissible if the other statutory requirements are satisfied. The only requirement which was not satisfied, according to the ITO, was that there was a deficit in reserve created which was made good only in the accounts for the immediately succeeding year. The learned counsel for the assessee relied on the decision of the Tribunal, Chandigarh Bench, in Swastika Metal Works v. ITO (1983) 3 ITD 119 1972. There, the Tribunal had taken the view that since there was no time limit prescribed for making the claim for investment allowance as long as the adequate statutory reserve was created before the assessment was completed, in the current year's books, of account, the ITO should allow the investment allowance. In this regard, the Tribunal had drawn an analogy with reference to provisions under which development rebate was allowed and judicial pronouncements thereon as well as circulars of the CBDT. The learned departmental representative opposed this plea and submitted that under the provisions of Section 32A(4)(ii), reserve equal to 75 per cent of the investment allowance to be actually allowed had to be 'debited to the profit and loss account of the previous year' and 'in respect of which the deduction is to be allowed' and credited to a reserve account. Therefore, he stated that the statute clearly enjoined that the debit had to be to the profit and loss account of the previous year. There was an implied limitation, viz., if in a manner known to law the assessee could not amend the profit and loss account of the particular previous year, then the assessee was precluded from making the debit and stood precluded from creating the reserve and claiming the consequent investment allowance. He, therefore, submitted that the decision of the Tribunal relied on clearly merited reconsideration.
9. The decision of the Tribunal referred to clearly applies to the facts of the present case and as a matter of judicial discipline, there being no contrary decision, we would follow the same. However, we proceed to decide the issue independently of the aforesaid decision also. The Explanation to Section 32A(4) which permits in certain circumstances creation of a reserve in the accounts of the subsequent year, reads as under : Where the amount debited to the profit and loss account and credited to the Investment Allowance Reserve Account under this Sub-section is not less than the amount required to be so credited on the basis of the amount of deduction in respect of investment allowance claimed in the return made by the assessee under Section 139, but a higher deduction in respect of the investment allowance is admissible on the basis of the total income as proposed to be computed by the Income-tax Officer under Section 143, the Income-tax Officer shall, by notice in writing in this behalf, allow the assessee an opportunity to credit within the time specified in the notice or within such further time as the Income-tax Officer may allow, a further amount to the Investment Allowance Reserve Account out of the profits and gains of the previous year in which such notice is served on the assessee or of the immediately preceding previous year, if the accounts for that year have not been made up ; and, if the assessee credits any further amount to such account within the time aforesaid, the amount so credited shall be deemed to have been credited to the Investment Allowance Reserve Account of the previous year in which the deduction is admissible and such amount shall not be taken into account in determining the adequacy of the reserve required to be created by the assessee in respect of the previous year in which such further credit is made : Provided that such opportunity shall not be allowed by the Income-tax Officer in a case where the difference in the total income as proposed to be computed by him and the total income as returned by the assessee arises out of the application of the proviso to Sub-section (1) of Section 145 or Sub-section (2) of that section or the omission by the assessee to disclose his income fully and truly.
The assessee in the present case had claimed investment allowance in the return filed under Section 139 of the Act of Rs. 58,057. The assessee had also debited to the profit and loss account of the previous year, now under consideration, Rs. 43,543 and created an appropriate reserve. Therefore, the amount debited to the profit and loss account and credited to the Investment Allowance Reserve Account was not less than the amount required to be credited on the basis of the amount of deduction in respect of investment allowance claimed in the return made by the assessee under Section 139. The assessee has been assessed on a sufficiently high total income and higher deduction in respect of investment allowance is admissible on the basis of the total income as proposed to be computed by the ITO. In such an event, under the Explanation, the ITO, by a notice in writing, should allow the assessee an opportunity to create within the time allowed the further reserve, if the accounts of the year have been made up, by debiting the accounts of the year in which the notice has been served.
In the present case factually, the reserve created by the assessee was adequate and fully covered the investment allowance claimed in the return filed under Section 139. Thereafter, the assessee did not file any revised return but only made the revised claims for grant of higher investment allowance by filing statements. These statements are not equivalent to make a claim in the return. It is a claim de hors the return under Section 139. Therefore, the assessee was not shut out from claiming the privilege allowed by the aforesaid Explanation. The assessee sought for permission. According to the ITO, the question of granting permission did not arise. Before the assessment was made, the assessee created a reserve. In these circumstances, we consider that the requirement of the, Explanation on the facts of the case stood satisfied. The assessee would therefore, be entitled to the grant of investment allowance in respect of the generator. It would be open to the ITO to check up and verify the correctness of all figures before the grant of investment allowance on this asset.