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2018 (3) TMI 435 - HC - Income TaxExemption under Section 10B - eligibility criteria - whether deduction can be claimed for a period of 10 consecutive years beginning with the previous year in which the assessee begins manufacture of the products, the assessee could in this case claim the right to enjoy the benefit of Section 10B for a period of 10 years from 20.06.2007 when it was approved as a 100 per cent export oriented undertaking? - simultaneous benefit under Section 80IC claimed - Held that - The mere fact that the assessee (it may be noticed, who had in fact enjoyed the benefit of deduction under Section 80HHC from 1992-1993 and, thereafter, took further benefit under Section 80IC from 2004-2005 for a period of 5 years) thought it fit to apply and get the approval within the meaning of Section 10B cannot bind the income tax authorities to take a view contrary to the one, which we have taken, as merely obtaining the status of a 100 per cent export oriented undertaking cannot clothe the assessee with the right to claim benefit of deduction beyond 10 years, as we have explained. May be, it has impact for other purposes and on which we do not wish to pronounce; but, we are only concerned in this case with the question whether the assessee is entitled to the benefit under Section 10B and, in our view, the assessee is not entitled. Therefore, that the assessee had embarked upon an exercise, which is turned out to be futile, cannot be an argument, which will advance the case of the assessee. Therefore answer the question of law in favour of the appellant / revenue and against the respondent / assessee. The order of the Tribunal will stand set aside in regard to the claim under Section 10B of the Act. Having regard to the fact that we have found that the respondent / assessee was not entitled to the benefit under Section 10B and also having regard to the fact that the assessment order reflects that documents were produced in support of the claim under Section 80IC, but, in view of the impossibility to claim the both together, the claim under Section 80IC had been given up, we would think that it will be in the fitness of things that we remit the matter back to the Assessing Officer for consideration of the case of the assessee under Section 80IC of the Act for the assessment year in question.
Issues Involved:
1. Whether the assessee is entitled to claim deduction under Section 10B of the Income Tax Act, 1961, given the specific provisions and the history of claiming deductions under Sections 80HHC and 80IC. 2. Whether the approval as a 100% Export Oriented Unit (EOU) in 2007 entitles the assessee to the benefit under Section 10B for ten years starting from the approval date. 3. The applicability and interpretation of Circular No. 1/2005 dated 06.01.2005 concerning the eligibility for deduction under Section 10B for units set up in Domestic Tariff Area (DTA) and later converted to 100% EOUs. 4. The impact of previous claims under Sections 80HHC and 80IC on the eligibility for deductions under Section 10B. 5. The interpretation of the statutory provisions of Section 10B in light of the legislative intent and judicial precedents. Detailed Analysis: 1. Entitlement to Deduction under Section 10B: The primary issue was whether the assessee, who had been claiming deductions under Sections 80HHC and 80IC, could claim deduction under Section 10B. The court noted that Section 10B allows deductions for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things. The assessee's unit was established in 1950 and had been claiming deductions under Section 80HHC from 1992-1993 and under Section 80IC from 2004-2005 to 2008-2009. The court held that the assessee could not claim deductions under Section 10B as the period of 10 years had long expired since the commencement of production. 2. Approval as a 100% EOU: The assessee argued that the approval as a 100% EOU in 2007 should allow it to claim deductions under Section 10B for ten years starting from the approval date. The court, however, emphasized that the deduction period under Section 10B starts from the year the unit begins production, not from the date of approval as a 100% EOU. The court found that the unit had commenced production much earlier, and thus, the period for claiming deductions under Section 10B had expired. 3. Circular No. 1/2005: The court examined Circular No. 1/2005, which clarified that a unit set up in DTA and later converted into a 100% EOU is eligible for deduction under Section 10B from the year it gets approval as a 100% EOU. However, the deduction is available only for the remaining period of ten consecutive assessment years from the year the unit begins production. The court found that the circular supported the view that the deduction period could not extend beyond ten years from the commencement of production, aligning with the statutory provisions. 4. Previous Claims under Sections 80HHC and 80IC: The court noted that Section 80IC explicitly prohibits claiming deductions under any other section, including Section 10B, simultaneously. The assessee had claimed deductions under Section 80HHC and Section 80IC in the past, which further complicated its eligibility under Section 10B. The court concluded that the history of claiming deductions under these sections did not entitle the assessee to claim under Section 10B beyond the stipulated period. 5. Interpretation of Section 10B: The court interpreted Section 10B strictly, emphasizing that the deduction period begins with the year the unit starts production. The court rejected the argument that the approval as a 100% EOU could reset the commencement date for the deduction period. The court also noted that the legislative intent was to limit the deduction period to ten years from the start of production, and any interpretation extending this period would be contrary to the statute. Conclusion: The court held that the assessee was not entitled to claim deductions under Section 10B as the period for such deductions had expired. The approval as a 100% EOU in 2007 did not entitle the assessee to a fresh deduction period under Section 10B. The court set aside the Tribunal's order and remitted the matter back to the Assessing Officer for consideration of the assessee's claim under Section 80IC for the assessment year in question. The appeal was allowed in favor of the revenue, and the question of law was answered against the assessee.
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