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TMI Blog2017 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice Sanjay Karol, ACJ And Mr. Justice Ajay Mohan Goel, JJ. For the Appellants : Mr. Bishwajit Bhattacharyya, Senior Advocate, with Mr. Gaurav Jain, Mr. Vishal Mohan, Mr. C.N. Singh, Mr. Rakesh Kumar Thakur, Mr. Gaurav Sharma, and Mr. Anuj Nag, Advocates For the Respondents : Mr. Vinay Kuthiala, Senior Advocate, with Ms Vandana Kuthiala & Mr. Diwan Singh Negi, Advocates JUDGMENT Sanjay Karol, Acting Chief Justice The moot issue involved in these appeals, inter alia, is as to whether an "undertaking or an enterprise" (hereinafter referred to as the Unit), established after 7th January, 2003, carrying out "substantial expansion" within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC of the Income Tax Act. Also, if so, then for what period. 2. Since it is a legal issue, by consent, only brief facts of ITA No.20 of 2015, titled as M/s Stovekraft India v. Commissioner of Income Tax, are being referred to. 3. Appellant M/s Stovekraft India (hereinafter referred to as the assessee) started its business activity/came into operation with effect from 6.1.2005 and treating the Financial Year 2005 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax (Appeals), Shimla, Himachal Pradesh (hereinafter referred to as the Appellate Authority), concurred with the findings of the Assessing Officer. 10. The Income Tax Appellate Tribunal vide order dated 27.5.2015 (Annexure A-3, Page 60) not only affirmed such findings but also supplemented the reasons, by holding that the assessee's claim being allowed would only render the provisions of sub-section (6) of Section 80-IC of the Act to be otiose. 11. Assessee lays challenge to such findings, by filing the present appeal, under Section 260A of the Act, which stands admitted on the following substantial questions of law: "i) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that benefit of deduction under Section 80IC @100% of profit was not available to units set up after 7.1.2003, on undertaking substantial expansion from the year of completion of substantial expansion? ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that units set up after 7.1.2003 would not be entitled to enlarged deduction under Section 80IC of the Act @100% of profit, even on undertaking substantial expans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant clauses of Section 80-IC, itself, which read as under: "80IC. Special provisions in respect of certain undertakings or enterprises in certain special category States :- (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub- section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise,- .............. (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, [2007], in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. (7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. (8) For the purposes of this section,- ................ (v) "initial assessment year" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufacture or produce articles or things, or commences operation or completes substantial expansion; ................... (vii) "North-Eastern States" means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura; .................. (ix) "substantial expansion" means increase in the investment in the plant and machinery by at least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken;" (Emphasis supplied) 18. The Section applies to an undertaking or an enterprise. What is an "undertaking" or an "enterprise" (already referred to as Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly units established prior to 7.1.2003 shall be entitled to the benefits under Section 80-IC. The definition of "initial assessment year" is disjunctive and not conjunctive. The initial assessment year has to be subsequent to the year in which the "Unit" completes substantial expansion or commences manufacturing etc., as the case may be. 22. A bare look at Explanation (b) of Section 80-IB (11C) and Section 80-IB(14)(c) would reflect that, earlier [till Section 80-IC was inserted w.e.f. 1.4.2004], "substantial expansion" was not included in the definition of "initial assessment year". Earlier definition had used words "starts functioning", "company is approved", "commences production", "begins business", "starts operating", "begins to provide services". But Section 80-IC (8)(v) changed wordings [of "initial assessment year"] to "begins to manufacture", "commences operation", or "completes substantial expansion". Thus, legislature consciously extended the benefit of "initial assessment year" to a unit that completed substantial expansion. 23. This is absolutely in conjunction and harmony with clause (b) of sub-section (2) of Section 80-IC, which postulates two things - (a) an unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder clause (b) sub-section 2 of Section 80- IC, to be of significance. The only rider imposed is by virtue of sub-section (6) of Section 80-IA, which caps the deduction with respect to Assessment Years to which a unit is entitled to. 28. Of course, one thing is certain. Also, we are clear that under no circumstances, an assessee can claim deductions, be it under Section 80-IC, 80-IB or 10-C of the Act, for a period exceeding ten years, as is sought to be urged by some of the assessees. 29. What was the intent and the object sought to be achieved by the Legislature by inserting the new Section. To our mind, it was to promote and enhance activities envisaged under the Fourteenth Schedule, which could also be by carrying out substantial expansion of the "Unit". It is to give incentives to "Units" for setting up or expanding in special category States. 30. It is a settled principle of law that exigibility to tax is different from the concept of exemption/ concession. [Padinjarekkara Agencies Ltd. vs. State of Kerala, (2008) 3 SCC 597 (Two Judges)] 31. It is also a settled principle of law that doubt, if any, in the construction of provisions of a taxing statute must be resolved in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than injustice, then such construction should be preferred to the literal construction. (Commissioner of Income Tax v. J.H. Gotla, (1985) 4 SCC 343). 36. Further, Mr. Kuthiala invites our attention to another Report, which we find profitable to reproduce the following observations made by the Apex Court in State of W.B. v. Kesoram Indjustries Ltd. and others, (2004) 10 SCC 201: "138.It is well settled that it is for the legislature to draft a piece of legislation by making the choicest selection of words so as to give expression to its intention. The ordinary rule of interpretation is that the words used by the legislature shall be given such meaning as the legislature has chosen to in absence thereof the words would be given such meaning as they are susceptible of in ordinary parlance, maybe, by having recourse to dictionaries. However, still, the interpretation is the exclusive privilege of the legislation avoiding absurdity, unreasonableness, incongruity and conflict. As is with the words used so is with the language employed in drafting a piece of legislation.........." 37. In Bajaj Tempo Ltd., Bombay v. Commissioner of Income Tax, Bombay City-III, Bombay, (1992) 3 SCC 78, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any writing: be it a statute, a contract or anything else. But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning"" (Emphasis laid by underlining the portion) 40. In our considered view, circulars are no more than external aids in interpretation of a statute. Insofar as interpreting the statute is concerned, we are not obliged to even look into the same, for language of the Section is simple, clear and unambiguous. 41. We may notice that the Act does not create distinction between the old units, i.e the units which stand established prior to 7.1.2003 (the cutoff date), and the new units established thereafter. 42. Artificial distinction sought to be inserted by the Revenue, in our considered view, only results into discrimination. The object, intent and purpose of enactment of the Section in question is only to provide incentive for economic development, industrialization and enhanced employment opportunities. The continued benefit of deduction at hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction for first five years under Section 80-IB(4). If this unit completes substantial expansion during the window period (7.1.2003 to 31.3.2012), it would be eligible for 100% deduction again for another five years under Section 80-IC(3)(ii), subject to ceiling of ten years as stipulated under Section 80-IC(6). 48. Applying the aforesaid interpretation, we find there can be different fact situations, some of which, we have tried to illustrate; (i) a "Unit" established prior to 7.1.2003, claiming deduction under Section 80-IB, post insertion of Section 80-IC carries out substantial expansion, would be entitled to deduction only under Section 80-IC, at the admissible percentage, for the remaining period, which in any case when combined, cannot exceed ten years, (ii) just as in the case of the present assessee, a unit established after 7.1.2003, carries out substantial expansion only in the 8th year of its establishment, for the first five years would have already claimed deduction @ 100%; for the 6th and 7th years @ 25%, and then for the period post substantial expansion, in our considered view, the initial year of assessment being in the 8th year, would be entitled for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intent and purpose of insertion of Section 80 IC. 53. In fact, we find that the conclusions arrived at by the Assessing Officer as well as the Appellate Authority/ Tribunal are not based on correct appreciation and interpretation of the statutory provisions. While arriving at their respective conclusions, in interpreting Section 80 IC, they have relied upon Notifications under the Central Excise Laws as well as Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Government of India and Department of Income Tax. While doing so, the said authorities erred in not appreciating that Section 80 IC of the Act is a self contained and a complete code in itself, which, for the purpose of its interpretation, did not require assistance of any Notification(s), much less that of other Department. 54. In fact, we find the said Authorities to have erred in creating an artificial distinction between the "Units" set up before 7.1.2003 and after 7.1.2003 while holding that such of the "Units", which were set up after 7.1.2003, were not entitled to deduction @ 100% even if they undertook substantial expansion between the period 7.1.2003 and 1.4.2012. The distinction cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 7.1.20013 upto 1.4.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)]. (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- IB(5)]. 56. Substantial questions of law are answered accordingly. 57. No other point is urged. 58. On facts, we may clarify that the Revenue has not disputed, (a) the units having carried out substantial expansion within the definition of the Section, (b) their entitlement and ex ..... X X X X Extracts X X X X X X X X Extracts X X X X
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