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TMI Blog2018 (5) TMI 1278X X X X Extracts X X X X X X X X Extracts X X X X ..... n sub-section (6) of Section 80-IC and it is limited to those industrial undertakings or enterprises which are set-up in the North-Eastern Region. By making specific provision of this kind, the Legislature has shown its intent, namely, where the industry is not located in North- Eastern State, the period for which deduction is availed earlier by an assessee under Section 80-IA and Section 80-IB will not be reckoned for the purpose of availing benefit of deduction under Section 80-IC of the Act. Thus, it was wrong on the part of the AO not to allow deduction to the assessee under Section 80-IC for the Assessment Years 2008-09 and 2009-2010. - Decided in favour of assessee. - Civil Appeal No (s). 4765-4766 of 2018, Civil Appeal No. 4767 of 2018 - - - Dated:- 18-5-2018 - Mr. A.K. Sikri And Mr. Ashok Bhushan JJ. For the Appellant(s) : Mr. Jay Savla, AOR, Ms. Renuka Sahu, Adv. And Mr. Jasdeep Singh Dhillon, Adv. For the Respondent(s) : Mrs. Anil Katiyar, AOR JUDGMENT A.K.SIKRI, J. A short question of law arises for consideration in these appeals. All the appeals are filed by the same party, namely, Mahabir Industries (hereinafter referred to as the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and thereafter twenty-five per cent. First proviso thereto states that total period of deduction is not to exceed ten consecutive Assessment Years. Second proviso is a specific provision for industries in the North-Eastern Region to which we shall advert to at the appropriate stage. Sub-section (2) enumerates the conditions which are to be fulfilled by such industrial undertakings in order to qualify for deductions from profits and gains under that provision. 3. As mentioned above, for the Assessment Years 1998-99 and 1999-2000 (i.e. two Assessment Years), the assessee was allowed deduction under Section 80-IA. From the Assessment Year 2000-01 to Assessment Year 2005-06, the assessee claimed deduction under Section 80-IB. 4. Interestingly, another provision in the form of Section 80-IC was inserted by Finance Act, 2003 w.e.f. April 1, 2004. As per this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in sub-section (3) of Section 80-IC. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 7. This question has been decided in favour of all the assessees. However, insofar as the assessee herein is concerned, keeping in view that there is a ceiling of ten years as stipulated under Section 80-IC(6), the High Court has held that ten years period shall be counted from the Assessment Year 1998-99 when the assessee had claimed deduction for the first time under Section 80-IA and, therefore, deductions for the Assessment Years 2008- 09 and 2009-2010 would not be allowed. This is clear from the following discussion in the High Court judgment: 46. The moment substantial expansion is completed as per Section 80-IC (8)(ix), the statutory definition of initial assessment year [Section 80-IC(8)(v)] comes into play. And consequently, Section 80-IC(3)(i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as per law. Carrying out Substantial expansion in the Assessment Year 2004-2005, now claims deduction @ 100% w.e.f. Assessment Year 2004-05 again substantially expands in the Assessment Year 2008-2009 can claim 100% deduction w.e.f. 2008-2009, (vi) the assessee sets up a unit in the year 2005-2006 and does not undergo substantial expansion at all can claim deduction under Section 80-IC. 8. As can be discerned, all other aspects are decided in favour of the assessees except what is illustrated at (i) and (iv). However, the effect thereof is that insofar as appeals of the assessee herein are concerned, they are dismissed on the ground that it cannot claim deduction under Sections 80-IC, 80-IB or 10C for a period exceeding ten years. 9. In this backdrop, the questions of law which have been framed by the assessee in these appeals are the following: (a) Whether the Hon ble High Court was justified in holding that the petitioner was not entitled to deduction under Section 80-IC of the Act by virtue of provision sub-section (6), when the same was not even applicable to the petitioner? (b) Whether the Hon ble High Court was justified in holding that the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars, no further deduction is admissible. (b) When the deduction is given under second proviso to sub-section (4) of Section 80-IB. The said second proviso reads as under: Provided further than in the case of such industries in the North-Eastern Region, as may be notified by the Central Government, the amount of deduction shall be hundred per cent. of profits and gains for a period of ten assessment years, and the total period of deduction shall in such a case not exceed ten assessment years. This provision pertains to those industries which are in the North-Eastern Region. (c) When the deduction is claimed under Section 10C. It is again a special provision in respect of certain industrial undertakings in North-Eastern Region. 11. The assessee in the instant case has not got deduction under Section 80-IC for a period of ten years as he started claiming deduction under this provision w.e.f. Assessment Year 2006-07. Situation Nos. (b) and (c) mentioned above would not apply to the assessee as it s undertaking/enterprise is not established in North-Eastern Region. It is, thus, clear that the High Court has failed to appreciate that the provisions of Section 80-IC(6) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of availing benefit of deduction under Section 80-IC of the Act. 13. Learned counsel for the Revenue could not dispute that sub-section (6) of Section 80-IC would get attracted when the industry is located in the North-Eastern Region. Having faced with this situation, he raised an altogether different argument for consideration by referring to Section 15C of the Income Tax Act, 1922 (hereinafter referred to as the 1922 Act ), which was also a provision which granted exemption from income in respect of newly established industrial undertaking. He submitted that this Court in Textile Machinery Corporation Limited, Calcutta v. The Commissioner of Income Tax, West Bengal, Calcutta (1977) 2 SCC 368 has held that the true test for ascertaining whether industrial undertaking is formed by reconstruction of business already in existence (which was the expression used in Section 15C of 1922 Act), is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is a new and identifiable undertaking separate and distinct from existing business. In fine, the endeavour of learned senior counsel was that the assessee can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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