2015 (9) TMI 331 - HC - Income Tax

Entitlement to relief under Section 80IA in respect of new 650 TPK Kiln - ITAT denied claim - Held that - There is no denial of the fact that by setting up a new Kiln, the maximum production capacity of the appellant was actually increased from what it was earlier. In other words, the activity undertaken by the appellant can, at best, be termed as one of expansion of an existing facility. Unfortunately for the Revenue, clause (i) of sub-section (2) of section 80 IA does not use the expression expansion . To deny the benefit to the appellant, under clause (i) of sub-section (2), it should fall either under the category of splitting up of existing unit or under the category of reconstruction of the existing unit . Both in the case of splitting up and in the case of reconstruction, there is no expansion. The expression expansion , as such, is not used in clause (i).It is not the case of the Revenue that the case of the appellant is covered either by clause (ii) or that the appellant does not satisfy the conditions prescribed in any of the three clauses viz., (iii), (iv) or (v). Therefore, the presumption on the part of the respondent that the benefit under section 80 IA would not apply unless there is a new Undertaking is not traceable to sub-section (2). Clause (b) of sub-section (2) of section 80 IA defines an industrial undertaking to have the same meaning as assigned to it in the Explanation to section 33B. The case of the appellant certainly falls under the category of business of manufacture or processing of goods within the meaning of expression under the Explanation to section 33B. Therefore, the meaning to be assigned to the expression industrial undertaking as appearing in section 80 IA also stands satisfied in this case. - Decided in favour of the assessee

Summary

Issues:
1. Interpretation of Section 80 IA of the Income Tax Act for assessment years 1996-97 and 1994-95.
2. Eligibility of the appellant for relief under Section 80 IA.
3. Determination of whether the new Kiln qualifies as an independent and viable unit for the deduction under Section 80 IA.

Analysis:

Issue 1:
The appeals challenged the orders of assessment and the Commissioner of Income Tax Appeals regarding the benefit of Section 80 IA for the assessment years 1996-97 and 1994-95. The Tribunal upheld the orders, leading to the appeals before the High Court.

Issue 2:
The primary contention was whether the appellant was entitled to relief under Section 80 IA. The assessing officer focused on whether the industrial undertaking set up by the appellant qualified as a new unit, essential for the deduction under Section 80 IA. The officer found that the new unit's survival depended on the existing unit, leading to the disallowance of the claim for deduction.

Issue 3:
The High Court analyzed Section 80 IA, emphasizing that the expression "new" was not a prerequisite for an industrial undertaking to qualify for the deduction. The court highlighted the conditions under sub-section (2) of Section 80 IA, emphasizing that the appellant's case did not fall under the conditions that would disqualify them from claiming the benefit. The court noted that the appellant's activity was an expansion of an existing facility, not reconstruction or splitting up as presumed by the assessing officer. The court also referenced relevant case laws to support its interpretation of Section 80 IA.

In conclusion, the High Court ruled in favor of the assessee, stating that the appellant was entitled to the benefit under Section 80 IA for the assessment years in question. The court emphasized that the plain language of the section, read with relevant explanations, did not require any additional interpretation to determine the eligibility for the deduction.