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TMI Blog2015 (8) TMI 616X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and circumstances of the case, the Hon'ble ITAT was justified in holding that interest paid to the persons specified in section 40A(2)(b) of I.T. Act, 1961 @ 15% is reasonable, whereas the average rate of interest paid by the assessee to Financial Institutions as well as banks is not more than 12%" 3. The appeal is admitted in respect of the substantial question of law No.(i) raised above. Question (ii) does not raise a substantial question of law as we will demonstrate later. We have dismissed the appeal in this regard. 4. Section 80-IB(3) and 14(g) of the Income Tax Act, 1961 reads as under:- "Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80-IB. ............................ (3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (or twelve consecutive assessment years where the assessee is a co-operative society) beginning with the initial assessment year su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garded as a small scale industrial undertaking for the purpose of IDR Act. One of the conditions for considering an industrial undertaking to be regarded as a small scale industrial undertaking was that its investment in fixed assets in plant and machinery did not exceed rupees three crores. Admittedly, the assessee's investment did not exceed rupees three crores. It, therefore, fell within the definition of the words "small-scale industrial undertaking" in Section 80-IB(14)(g). The assessee also fulfilled the other requirements. The assessee was, therefore, entitled to the deduction as provided in Section 80-IB. The amount of deduction in respect of this assessee was stipulated in sub-section(3)(ii) of Section 80-IB and "for a period of ten consecutive assessment years". The respondent-assessee was, therefore, allowed a deduction under Section 80-IB for the assessment years 2002-03 to 2005-06. 7. By a further notification dated 24.12.1999 issued under the IDR Act, the earlier notification dated 10.12.1997 was amended inter alia by substituting the words "rupees three crores" with the words "rupees one crore". The assessee, therefore, did not make a claim for deduction for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the deduction. There is nothing in the section that persuades us to imply such a condition even assuming we are entitled to do so. Had that been the intention, the legislature would have undoubtedly specified the same. 10. Mr. Mittal's reliance upon a judgment of the Karnataka High Court in Ace Multi Axes Systems Ltd. vs. Deputy Commissioner of Income Tax, [2014] 367 ITR 266 (KAR) is well founded. The Division Bench held: "2. The substantial question of law that arises for our consideration in this appeal is as under: "When once the eligible business of an assessee is given the benefit of deduction under Section 80-IB on the assessee satisfying the conditions mentioned in sub-section (2) of Section 80-IB, can the assessee be denied the benefit of the said deduction on the ground that during the said 10 consecutive years, it ceases to be a small scale industry?" 3. Section 80-IB is an incentive provision. It provides deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. For an industrial undertaking to be eligible for the said deduction, it has to fulfill all the conditions mentioned under sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted, if the undertaking satisfy all these conditions initially, the undertaking is entitled to the benefit of 10 consecutive years. The argument that, in the course of 10 years, if the growth of the industry is fast and it acquires machinery and the total value of the machinery exceeds Rs. 1 crore, it ceases to have the said benefit, do not follow from any of the provisions. It is true that there is no express provision indicating either way, what would be the position if the small scale industry ceases to be a small scale industry during the said period of 10 years. Because of that ambiguity, a need for interpretation arises. If we keep in mind the object of the Legislature providing for these incentives and when a period of 10 years is prescribed, that is the period, probably, which is required for any industry to stabilize itself. During that period the industry not only manufactures products, it generates employment and it adds to the wealth of the country. Merely because an industry stabilizes early, makes profits, makes future investment in the said business, and it goes out of the definition of the small scale industry, the benefit under section 80-IB cannot be denied. If s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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