2003 (3) TMI 13 - HC - Income Tax

Benefit u/s 80HHA? By the new Explanation (b) inserted by the Finance Act, 1999, with retrospective effect from 1st April 1978, an industrial undertaking shall be deemed to be a small-scale industrial undertaking which is, on the last date of the previous year regarded as a small-scale industrial unit under section 11B of the Industries (Development and Regulation) Act, 1951. - it is a matter for consideration by the Assessing Officer as to whether the assessee satisfies the provisions of clause (b) of the Explanation to section 80HHA added by the Finance Act, 1999, with retrospective effect from April 1,1978 - Assessing Officer to decide this question afresh in the light of Explanation (b) to section 80HHA inserted by the Finance Act, 1999, with retrospective effect from 1st April, 1978, and to pass a fresh assessment order in accordance with law

Summary

Issues:
1. Whether the cost of generator sets should be included in the investment in plant and machinery for the purpose of section 80HHA of the Income-tax Act?
2. Whether the assessee is entitled to the benefit of section 80HHA of the Income-tax Act?

Analysis:
The judgment by the High Court of Kerala addressed the issues referred by the Income-tax Appellate Tribunal regarding the interpretation of section 80HHA of the Income-tax Act, 1961. The case involved an assessee, a private limited company engaged in manufacturing PVC pipes, claiming the status of a small-scale industrial unit for deduction under section 80HHA for the assessment years 1991-92 and 1992-93. The Assessing Officer initially rejected the claim, stating that the investment in plant and machinery exceeded the limit specified in the section, thus denying the deduction claimed. The Commissioner of Income-tax (Appeals) and the Tribunal also dismissed the appeals, leading to the matter being referred to the High Court.

Upon hearing the case, it was noted that the provisions of section 80HHA had been amended with retrospective effect from April 1, 1978, by the Finance Act of 1999. This retrospective amendment changed the basis for determining the status of the assessee as a small-scale industrial undertaking. The court highlighted that the Assessing Officer and the appellate authorities had not considered the impact of the amended provisions, specifically Explanation (b) to section 80HHA, which deemed an industrial undertaking as small-scale based on certain criteria.

The court analyzed the conditions specified in sub-section (2) of section 80HHA, which outlined the requirements for a small-scale industrial undertaking to qualify for the deduction. It was emphasized that the introduction of Explanation (b) by the Finance Act, 1999, altered the criteria for determining the status of a small-scale industrial unit. As the Assessing Officer and the appellate authorities had not evaluated the case in light of this amendment, the court set aside their orders and directed the Assessing Officer to re-examine the matter considering the revised provisions. The court emphasized the need for the assessee to provide evidence to satisfy the requirements of the amended clause (b) of the Explanation to section 80HHA.

In conclusion, the High Court declined to answer the questions referred by the Tribunal, instructing the Assessing Officer to reassess the case based on the amended provisions of section 80HHA. The judgment highlighted the significance of the retrospective amendment and the necessity for a fresh assessment considering the revised criteria for determining the status of a small-scale industrial undertaking under the Income-tax Act.