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TMI Blog2016 (3) TMI 1341X X X X Extracts X X X X X X X X Extracts X X X X ..... h the order of CIT(A) and we uphold the same. Accordingly, assessee’s appeal is dismissed. - ITA No.9/Chd/2016 - - - Dated:- 21-3-2016 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER For the Appellant : Shri Sunil Kumar For the Respondent : Shri Manoj Mishra, DR ORDER PER RANO JAIN, A.M.: The appeal filed by the assessee is directed against the order of learned Principal Commissioner of Income Tax-2, Chandigarh dated 7.12.2015, relating to assessment year 2011-12, passed under section 263 of the Income Tax Act, 1961 (in short the Act ). 2. The grounds of appeal raised by the assessee read as under : [1]. That the Order of the Lrd. Pr. Commissioner of Income Tax - II, Chandigarh is defective both in Law and Facts of the case. [2]. That the Lrd. Pr. Commissioner of Income Tax -II, Chandigarh has not been justified in holding the Assessment framed by the Lrd. Assessing Officer as being erroneous and prejudicial to the interest of Revenue. [3]. That the Lrd. Pr. Commissioner of Income Tax - II, Chandigarh has not been justified in cancelling the original Assessment U/s 263 which was framed U/s 143(3) inspite of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving considered the principles of interpretation above, let us consider the provision of section 80IC in the light of the above principles laid down by the Hon'ble Supreme Court. Section 80IC reads as under:- Section 80IC 80-IC (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,- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth 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 any Export Processing Zone or Integrated Infrastructure Development Centre or Indus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2),one hundred per cent of such profit and gains for five assessment years commencing with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains. (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely:- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an undertaking which is formed as a result of there-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.- The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (5) Notwithstanding anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India in the Ministry of Commerce and Industry; (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; (x) Theme Park means such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. 29. Sub section (1) of the above provision is a general provision and does not require any interpretation. Sub Section [2] is the enabling provision which provides for the types of undertakings and circumstances where deduction under section 80IC would be allowed. It allows deduction to various undertakings which have either begun or begins manufacturing of any article or things not being any article or thing specified in Schedule xiii and also undertakes substantial expansion. These deductions were available in different states during different window periods which have been referred to in clause (i), (ii) (iii) of this sub section. The contention on behalf o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so provided to various industries in the hilly stated comprising states of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern states to boost the economies of these hilly states. Circular No.7 was issued by the CBDT on 5.9.2003 in this respect and the Circular reads as under:- Circular No. 7/2003 dated 05.09.2003 49. New provisions allowing a ten years tax holiday in respect of certain undertakings in the States of Himachal Pradesh, Sikkim, Uttaranchal and North-Eastern States. 49.1 The Union Cabinet has announced a package of Fiscal and non-fiscal concessions for the special category States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States, in order to give boost to the economy in these States. With a view to give effect to these new packages a new section 80-IC has been inserted to allow a deduction for ten years from the profits of new undertaking or enterprise or existing undertakings or enterprises on their substantial expansion, in the States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States. For this purpose, substantial expansion is defined as increase in the investment in the plant and machinery by at least 50% of the book val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive in respect of the undertakings or enterprises in the State of Himachal Pradesh or in North-Eastern region including Sikkim, with effect from the 1st day of April, 2004. 49.6 These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years. 31. The circular makes it clear that section 80IC was inserted to give effect to the new package announced by the Union Cabinet. The Circular further clarifies that this section provides for deduction for a period of 10 years from the profits of new undertaking or enterprise or existing undertaking or enterprise on their substantial expansion (see highlighted portion of the circular). The contention of the Ld. Counsel of the assessee was that word existing qualifies only the undertaking or enterprises and does not mention any particular date for carrying out substantial expansion. We find no merit in this contention. The word existing is defined in the dictionaries are as under:- 32. Black Law Dictionary 6th Edition:- Exist : To live, To have life or animation To be in present force, Activity, or effect at a given time, as in speaking of exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of clause (a) and sub clause (i) (iii) of clause (b). Now sub clause (i ) and (iii) of clause (a) of sub section (2) refers to the window period in case of State of Sikkim, North-Eastern States whereas sub clause (ii) refers to the window period in case of State of Himachal Pradesh and State of Uttaranchal. Similarly, sub clause (i) (iii) of clause (b) refers to window period in case of State of Sikkim and North-Easter States whereas sub clause (ii) refers to the window period in case of State of Himachal Pradesh and Uttaranchal. Now clause (ii) of sub section (3) provides for 100% deduction on such profits for five assessment years commencing with initial assessment year and thereafter 25% (or 30% where the assessee is a company) of the profits and gains. Therefore, it is absolutely clear that in case of state of Sikkim and North-Eastern states, Legislature was very clear that in case of new undertaking or in case of substantial expanded undertaking deduction is to be allowed @ 100% for whole of the ten years whereas in case of State of Himachal Pradesh and Uttaranchal the deduction was to be allowed @ 100% only for first five years and thereafter it was only 25%. If the Legi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in shall be deemed to have been complied with. From the above it becomes clear that if 20% of the Machinery from the old unit was used in the new unit then such unit would not be eligible for deduction under this Section that is section 80IC. Now for carrying out substantial expansion the investment in Plant Machinery is required to be made by atleast 50%. So if 50% fresh machinery is added to the new unit then it will violate Sub Section (4) of Section 80IC, therefore, interpretation canvassed on behalf of the assessee is not possible because Section 80IC(4) would become redundant and such an interpretation is not possible. 35. Further, sub section (6) provides that in no case the total period of deduction could exceed the period of 10 years including deduction availed under sub section (4) of section 80IB and section 10A and 10B. It was contended before us that since there is no restriction in carrying out of substantial expansion in the new units and as such substantial expansion can be carried out any number of times. If this interpretation is accepted then sub section (6) would be rendered otiose or meaningless because if a unit was set up on the commencement of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erived from such industrial undertaking for five assessment years beginning with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from such industrial undertaking: Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assesee is a company-operative society) subject to fulfillment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the Ist day of April, 1993 and ending on the 31st day of March, [2004] : Provided further that 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: Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial expansion . Here the expression or is to be read as a mutually exclusive expression which refers to a particular situation by excluding the other situation. Therefore, initial assessment year would clearly commence either on commencement of operation or at completion of substantial expansion of existing unit. In any case the word initial cannot be used twice by referring to series of events. This can be understood with a very simple example. Let us say a person A passes out his examination of LLB and get employed as Legal Officer in an organization. Later on, he quits the job and starts the practice in legal profession and ultimately he is elevated as a Judge. Then in such a situation it cannot be said that initially A was working in a organization and then initially he was in the profession and then elevated as a Judge. Initially can be used only once as a matter of usage of English language. Therefore, reading of the above provision clearly shows that intention of the legislature was very clear to allow 100% for first five years in case of units situated in the State of Himachal Pradesh (since all the cases before us are situated in the State of Himachal Pradesh) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results of construction should be avoided. The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. It the words are plain and clear and directly convey the meaning, there is not need for any interpretation. We are, however, of the opinion that, on principle, the decision of the Court in Mangalore Chemicals and in Union of India v. Wood Papers, referred to therein represents the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee assuming that the said principle is good and sound- does not apply to the construction of an exception or an exempting provision; they have to be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of its must go to the State . The Hon ble Supreme Court in Oriss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs and again @ 100% on substantial expansion. Such discriminatory intention cannot be imputed to the Legislature. 43. Before us, reliance was also placed on the decision of Delhi Bench of the Tribunal in the case of Triputi LPG Industries Limited Vs. DCIT(supra). In this decision, the Bench has simply observed that main dispute is on the definition of initial assessment year . The provisions of sub section (2) and sub section (3) as discussed in detail above have been totally ignored and, therefore, this decision, in our opinion, is per inquerim and cannot be followed. 44. The Ld. counsel has also relied on the decision in the case of S.R. Paryavaran Engineers Pvt Ltd (supra) of the Chandigarh Bench. The facts in that case are that assessee has claimed deduction u/s 80IB in assessment year 1999-2000 @ 100% . The deduction was claimed @ 100% for five years and then deduction was claimed @ 30% on the profits in the next year. The assessee undertook substantial expansion in financial years 2004-05 2005-06 and claimed deduction at the rate of 100% on the basis of such substantial expansion in assessment year 2006-07. However, the deduction was wrongly claimed u/s 80IB instead ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Malabar Industries Co Ltd v CIT 243 ITR 83 (SC) held that since view taken by the Assessing Officer is also possible view, therefore, assessment order was not erroneous. In fact the Bench referred to the decision of Delhi Bench in the case of Triputi LPG Industries Limited Vs. DCIT (supra) without considering the provision of section 80IC in detail for reaching the conclusion that it is one of the possible view. Since we have already discussed the decision of Triputi LPG Industries Limited Vs. DCIT (supra) and found that all the provisions of the section were not discussed in that section and that is per inquerim, therefore, in our opinion, this order does not help the case of the assessee. 47. The last argument was in respect of column in Form No. 10CCB. The column 25 of Form No. 10CCB reads as under:- 25 (i) Whether the undertaking or enterprise is located in an area notified by the Board for the purposes of section 80-IC ---Yes ---No (ii) If yes please indicate,- a. Name of the Export Processing Zone / Integrated Infrastructure Development Centre / Industrial Growth C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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