9911796707
TMI Blog2019 (7) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to in sub-section 1 shall be restricted to 100% of such profit and gains for five assessment years commences with the initial assessment year and thereafter 25% of the profit and gains. 2. The Ld. CIT(A) erred in law and fact by not appreciated the fact that section 801C of the I.T. Act, 1961 has been enacted in order to promote industrial growth and employment generation in a backward area either through commencement of manufacturing or production by a new industrial unit or substantial expansion by a pre-existing industrial unit. The law has been enacted in such a way that the preexisting undertaking or enterprises do not suffer from any handicap merely on account of the fact that they were existing prior to the introduction of section 80IC. The condition of substantial expansion has made a pre-requisite for allowing deduction u/s 80IC in the case of old undertaking or enterprise. It is however, clear that there is no overlapping of the two kinds of undertaking or enterprises made eligible for deduction u/s 801C. These are two distinct categories with distinct conditions of eligibility laid down for deduction u/s 801C. Since the preexisting unit cannot possibly crossover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of deduction u/s 80IC of the Act, is based on the fact not disputed by Revenue, that the assessee had undertaken substantial expansion of its plant & machinery during the year. However, the AO rejected the contention of the assessee for 100% deduction u/s 80IC of the Act and allowed deduction @ 25 % of the profits from the eligible business and disallowed the remaining 75%, amounting to Rs. 69,93,427/-. 3. The assessee filed appeal before the CIT(A), who vide order dated 19.02.2018 deleted the addition and allowed the assessee's appeal holding as under:- 7. Decision 7.1 "The undisputed facts are that Assessee is deriving income from manufacturing of LPG Gas Stove under the name & style M/s Supershine Domestic Appliances. The Assessee started business from 28.11.2006 and current year was the 8th year of the business. Assessee claimed deduction of Rs. 92,04,570/- @ 100 % of profit uls 801C of the I.T. Act. Assessee's concern is located in Distt. Solan, Himachal Pradesh. The initial assessment year in which the deduction claimed was AY 2007-08. The Assessee made substantial expansion of its plant & machinery on 31.03.2012 and as claimed, the substantial expansion was reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, and proper understanding of the issue, we deem it appropriate to reproduce the relevant clauses of Section 80-le, itself, which read as under:- "80IC. Special provision in respect of certain undertakings or enterprise 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 provision 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 thin, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thin, 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 1 st day of April, [2007], in the State of Sikk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, or under the second proviso to subsection (4) 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-section (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;" 18. The Section applies to an undertaking or an enterprises. What is an "undertaking or an "enterprise" (already referred to as Unit) is not defined under the Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07.01.2003 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 80-18 (11C) and Section 80-IB(14)(C) would reflect that, earlier [till Section 80-IC was inserted w.e.f. 01.04.2004J "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 undertaking or an enterprise has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 80-1A, 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 provision of a taxing statute must be resolved in favour of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... injustice, then such construction should be preferred to the literal construction. (Commissioner of income Tax v. J.H. Got/a, (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 hiving 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, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ot accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning." 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, l.e. the units which stand established prior to 07.01.2003 (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 higher rates is available only to such of those units, which fulfill such object by carrying out "sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year" and thereafter @ 25%. "Initial assessment year", as per Section 80-IC (8)(v) means, year in which the unit begins/commences to manufacture/produce or completes "substantial expansion" [As per Section 80-IC(8)(ix)). 48. Applying the aforesaid interpretation, we find there can be different fact situations, some of which, we have tried to illustrate; (iO 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 then 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 deduction @ 100% subject to the cap of ten assessment years, (iii) the assessee establishes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Authority/Tribunal are not base 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 1.04.2012. The distinction created by the said Authorities is not borne out from the provisions of Section 80 IC. In other words, there is no prohibition that a Unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be entitled to benefit of deduction at different rated 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 or 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 year, [Section 80- 1C(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 108 of the Act [Section 80-18(5)]. 56. Substantial questions of law are answered accordingly." 7.2 The reliance is also placed on the decision of Hon'ble ITAT, Delhi Bench 'H' in the case of Tirupati LPG Industries Ltd. vs. DCIT in ITA No. 991/Del/2013 (AY 2009-10) CircIe-2, Dehradun. The relevant part of this decision is quoted below: "The only dispute that arises for our consideration is the Interpretation of the term ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledge, the appeal of the Appellant is allowed in view of judicial discipline." 4. The present appeal before us is filed by the Revenue against the aforesaid impugned order dated 19.02.2108 of the Ld.CIT(A). At the time of hearing before us, Ld. DR submitted that the issue in dispute is covered in favour of the Revenue by order of Hon'ble Supreme Court in the case of CIT vs Classic Binding Industries in Civil Appeal No. 7208 of 2018. Ld. Counsel for the assessee, on the other hand contended that the manufacturing unit of the assessee is located in Himachal Pradesh which falls under the jurisdiction of Hon'ble High Court of Himachal Pradesh. He has further submitted that the issue in dispute is also covered in favour of the assessee vide order dated 28.11.2017 of the Hon'ble High Court of Himachal Pradesh in the case of following six orders:- 1. ITA No.20/2015 M/s. Stovekraft India ......Appellant versus Commissioner of Income Tax .....Respondent 2. ITA No.21/2015 M/s. Stovekraft India ......Appellant versus Commissioner of Income Tax .....Respondent 3. ITA No.22/2015 Cutting Edge Technologies ......Appellant versus Commissioner of Income Tax .....Responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries v. Principal Commissioner of Income Tax would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, in Mahabir Industries, it was held that if an assessee get 100% exemption under Section 80-IB of the Act for five years and thereafter carries out the substantial expansion because of which said assessee becomes entitled to exemption under the new provision i.e. Section 80-IC of the Act, the assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on the ground that there can be two initial assessment years, one for the purpose of Section 80-IB and other for the purposes of Section 80-IC of the Act. Once we find that there can be two initial assessment years, even as per the definition thereof in Section 80-IC itself, the legal position comes at par with the one which was discussed in Mahabir Industries. 24.The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition 'initial assessment year' contained in Section 80-IC itself and instead based its con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has, in order in the case Pr. CIT vs M/s. Aarham Softronics (supra) already considered order in the case of CIT vs Classic Binding Industries (supra) and has over-ruled the order in the case of CIT vs Classic Binding Industries (supra). Therefore, respectfully following the order of Hon'ble Supreme Court in the case of Pr. CIT vs M/s. Aarham Softronics (supra), we dismiss the grounds of appeal; and decide the issues in dispute in the present appeal before us in favour of the assessee. We reject the contention of the Ld.DR that order of Hon'ble Supreme Court does not lay down correct law in the case of Pr. CIT vs M/s. Aarham Softronics (supra). For this purpose, we take guidance from Article 141 of Constitution of India, under which the law declared by the Hon'ble Supreme Court shall be binding on all Courts within the territory of India. Further, we rely on judicial precedents in the cases of Union of India vs Kantilal Hemantram Pandya AIR 1995 Hon'ble Supreme Court 1349 [in which it was held that law laid down by the Hon'ble Supreme Court is binding on all courts and tribunals]; state of Orissa vs Dhaniram Lohar AIR 2004 Hon'ble Supreme Court 1794 [in which it was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
