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2012 (12) TMI 722 - AT - Income TaxClaim of deduction u/s 80HH - denial - Held that - Provision providing exemption, concession or exceptions in a fiscal statute has to be interpreted strictly. A person who claims exemption or concession, is required to establish clearly that he is covered by provision concerned and as per this decision of the constitutional Bench, in the case of any ambiguity, benefit will give go to the State. Section 80HH states that an industrial undertaking has to begin manufacture or production in a backward area. Mere intention to begin manufacture or production and making investment would not suffice for that purpose CIT(Appeals) fell in error in giving very liberal interpretation to Section 80HH and holding that assessee s intention and investment to start an industry would suffice and actual manufacture or production could have been started even after the location went out of backward areas. There has to be actual manufacture or production. Hon ble Apex Court in the case of CCE v. Hari Chand Shri Gopal 2010 (11) TMI 13 - SUPREME COURT OF INDIA unequivocally held that provision providing exemption, concession or exceptions in a fiscal statute has to be interpreted strictly. A person who claims exemption or concession, is required to establish clearly, therefore set aside the orders of CIT(Appeals) and hold that assessee was not eligible to claim deduction under Section 80HH - against assessee.
Issues Involved:
1. Claim of deduction under Section 80HH of the Income-tax Act, 1961. 2. Retrospective amendment and its impact on the eligibility of backward areas. 3. Interpretation of beneficial provisions and the principle of estoppel against the State. 4. Validity and applicability of the notification issued by the Central Government. Issue-wise Detailed Analysis: 1. Claim of Deduction under Section 80HH of the Income-tax Act, 1961: The main issue in these appeals is the claim of deduction under Section 80HH of the Income-tax Act, 1961, made by the assessee for the assessment years 1992-93, 1993-94, and 1994-95. The assessee, engaged in the manufacture of polymerisation initiators, had set up an undertaking in Cuddalore, which was declared a backward area in 1984. Despite initiating steps for establishing the industrial unit and making substantial investments, the Assessing Officer (A.O.) disallowed the claim for deduction under Section 80HH, as the production started only in December 1986, after the amendment to the Act. 2. Retrospective Amendment and its Impact on the Eligibility of Backward Areas: The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986, introduced sub-section (11) to Section 80HH, which allowed the Central Government to specify backward areas through notification. The notification issued on 19.12.1986 excluded Cuddalore from the list of backward areas, effective from 1.4.1983. The CIT(Appeals) initially allowed the deduction, considering the substantial investments made by the assessee. However, the CIT(Appeals) later revised his order, denying the deduction based on the retrospective amendment and the notification. 3. Interpretation of Beneficial Provisions and the Principle of Estoppel Against the State: The CIT(Appeals) initially interpreted Section 80HH liberally, allowing the deduction based on the investments made by the assessee in a backward area. However, the revisionary order denied the deduction, considering the retrospective amendment and the notification. The Tribunal held that the principle of estoppel did not apply, as the assessee started production only in December 1986, after the amendment became effective. The Tribunal emphasized that the provision must be interpreted strictly, and actual manufacture or production in a backward area was required to claim the deduction. 4. Validity and Applicability of the Notification Issued by the Central Government: The notification issued on 19.12.1986, which excluded Cuddalore from the list of backward areas, was within the power of the Central Government as provided by the proviso to sub-section (11) of Section 80HH. The Tribunal held that unless the validity of the proviso was challenged and ruled in favor of the assessee by a competent court, the notification had to be given effect. The Tribunal concluded that the assessee was not eligible for the deduction under Section 80HH, as the production started after the area was excluded from the backward areas list. Conclusion: The Tribunal allowed the appeals of the Revenue, setting aside the orders of the CIT(Appeals) and holding that the assessee was not eligible for the deduction under Section 80HH. The appeals of the assessee were dismissed as infructuous, following the jurisdictional High Court's directions to reconsider the issues dealt with in the revisionary orders.
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