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TMI Blog1996 (7) TMI 200X X X X Extracts X X X X X X X X Extracts X X X X ..... not be allowed since it had not satisfied the conditions regarding employment of 10 or more workers. However, during this year, the assessee has satisfied this condition. Hence the claim was made before the Assessing Officer. The Assessing Officer has rejected the claim of the assessee on two grounds; viz. (1) that condition for claiming the exemption has not been satisfied by the assessee in the initial year, and (2) the assessee is having a small machinery and most of the work is got done from outside parties. The matter was carried before the CIT(A). The CIT(A) after relying on the ratio laid down by the Bombay High Court in the case of Addl. CIT v. Sussen Textile Ball Bearings Ltd. [1986] 26 Taxman 414 upheld the action of the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is pertinent to mention that the provisions of section 80-I are beneficial provisions and were enacted to promote the economic growth. It is well settled law by now that a provision in a taxing statute granting incentive for promoting growth and development should be construed liberally. Since a provision for promoting an economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. Reference may be made to the judgment of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188/62 Taxman 480. Keeping in view the legal position, while interpreting the beneficial provision, we shall now examine the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uces articles or things, the undertaking employs ten or more workers in a manufacturing process carried on with the aid of power, or employs twenty or more workers in a manufacturing process carried on without the aid of power. " From the perusal of the above conditions, we are of the view that first and second condition have to be seen with reference to the first assessment year. Word "formed" mentioned by the Legislature in first two conditions indicates that these conditions can only be satisfied in the initial year. However, the last two conditions, in our opinion, must be satisfied in respect of each year. Otherwise, absurd results would follow. 5.2 With reference to condition Nos. (iii) and (iv) one can think of three propositions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such construction would defeat the object of the Legislature rather than to advance the same. For example, the object of condition No. (iii) is that such a claim should not be allowed where there is a manufacture of article mentioned in Eleventh Schedule. There may be a case where the assessee starts manufacturing of article not satisfied in the Eleventh Schedule and thus fulfilling the conditions in the initial year, but later on may stop such manufacturing and start manufacturing of prohibited articles mentioned in the Eleventh Schedule. In such a situation, according to the second proposition, the assessee will be entitled to claim under section 80-I in the subsequent years, even though it is manufacturing prohibited articles. Similar p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision which imposes a further limitation, viz. if the condition laid down in the section is not satisfied in a particular year of commencement of manufacture or production, the benefit of tax holiday will not be available even if such condition is satisfied in the course of any subsequent four years. So the interpretation made by the Court in that case is clearly applicable to the present case. 7. The lower authorities seems to have been influenced by the provision of sub-section (5) which provides that exemption is to be given in respect to initial assessment years and seven subsequent years. In our opinion, this sub-section only provides a block of period for which deduction can be allowed. It nowhere mentions that conditions laid down ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l will have to consider is only the position as it was at the time of the formation of the new industrial undertaking, because what the Tribunal will have to consider is only the position as it was at the time of the formation of the new industrial undertaking, because under the aforementioned provision it is the situation at the time of the formation of the new industrial undertaking which is relevant to determine whether the industrial undertaking which is relevant to determine whether the industrial undertaking was disentitled to the partial exemption granted u/s 84(1) as it stood during the relevant time by reason of the provision of clause (i) or (ii) of sub-sec. (2) thereof. " [Emphasis supplied] In the present case, we are not co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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