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TMI Blog2024 (6) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... (7) TMI 1826 - SUPREME COURT ] - Whether the notification No. 61/2016/F.No.142/13/2015, TPL issued by the Central Board of Direct Taxes on 20.07.2016 keeps the operation of the provisions u/s 32AD of the I.T. Act in abeyance till 20/07/2016? AM while upholding the order of the learned CIT (A) was of the opinion that in the gazette notification published on 20th July, 2016, it is clearly mentioned that the notification shall come into force on the date of publication in the official gazette i.e. 20.07.2016 AND noted that the section was inserted by the Finance Act 2015 w.e.f. 1.4.2016. The impugned financial year is 2015-16 and the impugned financial year is prior to the insertion of the section - assessee has claimed deduction u/s 32AD which was not in force for the relevant financial year. JM held assessee shall be allowed deduction of a sum equal to 15% of the actual cost of such new asset for the A.Y relevant to the previous year in which such new asset is installed - the amendment shall take effect from 1.4.2016 and will accordingly apply in relation to A.Y 2016-17 and subsequent years. Further, the section clearly indicates that such a deduction is allowable for the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such ambiguity must be interpreted in favour of that which is exempt. Since section 32AD is a beneficial provision and since the assessee falls in the beneficial provision, therefore, the provision as well as the notification needs to be interpreted liberally i.e. in favour of the assessee and the assessee is entitled to deduction u/s 32AD. Order of Third Member - a) The notification issued by CBDT on 20.07.2016 does not keep the operation of the provisions u/s 32AD of the Act in abeyance till 20.07.2016 b) The notification stating that it shall come into force as on the date of its publication in the official gazette cannot override the provisions of section 32AD(1) of the Act. Thus agree with the order proposed by the learned JM that the assessee is entitled to deduction u/s 32AD. - SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER For the Appellant : S/Shri Y. Ratnamkar B. Satyanarayana Murthy For the Respondent : Shri Y.V.S.T. Sai ORDER PER L.P. SAHU, A.M.: 1. This appeal filed by the assessee is directed against CIT(A) 4, Hyderabad s order dated 28/06/2019 for AY 2016-17 involving proceedings u/s 143(3) of the Income Tax Act, 1961; in sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8/- and sought justification for the same with reference to the date of gazette notification being applicable from 2016-17. In this connection, the AO referred to the provisions of section 32AD, which read as under: 32AD. (1) Where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new asset for the assessment year relevant to the previous year in which such new asset is installed. 2.1 The AO's contention was that according to the above provisions, the enterprise is to be set up in any backward area as notified by the Central Government in this behalf. The Government has issued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aimed u/s 32AD. During the appeal proceedings the appellant s AR submitted written submission, which are as under. 1. The appellant Company is engaged in the business of generation of Solar power and supply the same to the need industries. It has set up two power plants one at peerampally Village and second one at Kothagudi Village, both in Vikarabad Mandal, Ranga Reddy District during the year relevant to the Assessment year 2016-17. For the purpose of these units, the Appellant Company acquired and installed machinery. The appellant claimed at deduction of Rs. 13,02,71,498 u/s 34AD of the Income Tax Act in the return for the Assessment year 2016-17. 2. In response to the enquiry in the scrutiny assessment the Appellant Company explained that it has acquired and installed Plant and Machinery in the units set up in the back ward areas for the purpose of generation of solar power. It was also brought to the Notice of the Assessing officer that the appellant company is entitled to the deduction in the assessment for the Assessment Year 2016-17 even though the notification declaring the Ranga Reddy District in the state of Telangana as backward area was issued on 2nd July, 2016. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said undertaking or enterprise during the period beginning from the 1st April, 2015 to 31st March 2020. This deduction shall be available over and above the existing deduction available under section 32AC of the Act. Accordingly if an undertaking is set up in the notified backward areas in the states of Andhra Pradesh or Telangana by a Company, it shall be eligible to claim deduction under the existing provisions of section 32AC of the Act as well as under the proposed section 32AD it fulfills the conditions (such as investment above a specified threshold) specified in the said section 32AC and conditions specified under the proposed Section 32AD. The phase new asset has been defined as plant or machinery but does not include- (vii) Any plant or machinery which before its installation by the assessee was used either within or outside India by any other person. (viii) Any plant or machinery installed in any office premises or any residential accommodation including accommodation in the nature of a guest house, (ix) Any office appliances including computers or computer software. (x) Any vehicle. (xi) Any ship or aircraft; or (xii) Any plant or machinery, the whole of the actual c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is very clear, the notification cannot restrict or impair the meaning or benefit provided in the Section. The object of the Section is in the shape of appropriate fiscal measures, for the tax incentives to Industrial Units in the State of Andhra Pradesh, and the state of Telangana and to promote industrialization and economic growth in both the States. The benefit it is given for Units set up during the period of 5 years. The object of the Notification is only to indicate the backward areas. If the unit is set up in that area during the period specified in the Section, it is eligible to the benefit. 7. I have carefully examined the provisions of sec 32AC/32AD and the gazette notification issued by the CBDT, New Delhi. As it can be seen from the provisions of sec 32AD, it is quite clear that the enterprise should have been set up in any backward area notified by the Central Government. The notification to this effect was issued on 20th July, 2016 and it is mentioned clearly that the applicability of it comes into effect from the date of publication in the official gazette. Therefore, the areas notified in this gazette are treated as backward areas only from the date of publicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the F.Y.2015-16 and claimed deduction u/s. 32AD at Rs. 13,02,72,498/- for asst. year 2016-17 c) A notification was issued u/s.32AD dt.2017-2016 notifying R.R.Dist. as backward area. d) The return of income was filed on 10/10/2016 by which date the notification was already issued. e) The assessment for asst. year 2016-17 was completed on 28/12/2018 6 The plea of the revenue that the assessee is not entitled to the allowance u/s. 32AD because there was no notification as on 31/3/2016 and it came into effect on 2017/2016 is not tenable for the following reasons. a) Neither the section nor the notification states that the deduction u/s. 32AD is allowable only for the period starting from the date of notification. b) The purport of the section 32AD is to give the benefit for the period of 5 years. Once notified the benefit accrues for full 5 years c) Section 94 of the A.P. Reorganization Act provides for fiscal measures including tax incentives to the successor states (Telangana A.P.) for development of backward areas and to promote industrialization and Economic growth in both states. The Special Economic measures in part-X of the A.P. Re-organization Act cannot be diluted by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-serve the reason of law. 10. Kind attention is invited to the decision of Gujarat High Court in Kishorebhai Harjibhai Patel V. ITO reported in 417 ITR page 547. The relevant observations at page-574 are extracted below for ready reference: Section 54F is a beneficial provision and is applicable to an assessee when the old capital asset is replaced by a new capital asset in the form of a residential house. Once an assessee falls within the ambit of a beneficial provision , then the said provision should be liberally interpreted. The Supreme Court in the case of CCE V.Favourite Industries (2012) 16 GSTR 184(SC); (2012) 7 SCC 153 has succinctly observed thus (page 191 of 16 GSTR) At page-575 It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly once it is found that the applicant satisfies the same, the exemption notification should be construed liberally. 11 Applying these principles to the facts of the appellant's case a) The assessee set up an undertaking for manufacture or production of article after 1st April, 2015 b) The undertaking was set up in a notified backward area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 (date of notification) and ending before the 1st day of April, 2020 in the said backward area. then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new asset for the assessment year relevant to the previous year in which such new asset is installed. 15 The notification cannot cut down or curtail the scope of deduction granted by the section. Kind reference is invited to the following passage of the Supreme Court judgement in CIT vs.Sirpur Paper Mills reported in 237 ITR page-41. At page 45 relevant portion of the judgement is extracted below for ready reference. The Section states that the deduction shall be wholly allowed. It permits the Board to specify conditions but conditions cannot have the effect of curtailing the scope of the deduction granted by the section. The amplitude of the deduction permitted by the section cannot be cut down under the guise of imposing a 'condition . In fact, this is not a condition but an impermissible attempt in rewrite the section' . It is submitted that the revenue's contention falls within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the Parliament has imposed a condition that the backward areas are to be notified by the Central Government. Unless this condition is met, an assessee would not be eligible to claim exemption with regard to additional investment allowance u/s 35AD of the Income Tax Act. 3. The argument raised by the AR of the assessee on his view of interpretation of the Act by Revenue (that the provision is advanced to date of notification), whether an area would be forward merely because a notification with regard to backward area is not issued, the mandate arising from Andhra Pradesh Re-organisation Act, the recitals in CBDT Circular explaining the provisions of Finance Bill, the theory of promissory estoppel and disregard to vested rights are based upon incorrect interpretation of law and non-application of the issue of conditional legislation. Hence, the arguments of the assessee are untenable. The case law relied upon by the assessee on statutory interpretation, liberal view of exemption provisions and ambiguity are also not applicable. 4. It is humbly submitted that the undersigned filed a paper-book containing relevant case laws on 10.2.2021. In the case of ITC Bhadrachalam Paper Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior thereto. 7. In the case of Universal Pipes Pvt Ltd [ Writ Appeal No.393/2010], the Hon'ble Guwahati High Court held that the subordinate legislation cannot be retrospective unless the parent legislation authorises the authority concerned to make the legislation with retrospective effect. It is submitted that in the present case, there is no such authorisation by Parliament. 8. In the case of M/s Sri Vijayalakshmi Rice Mills [1976 AIR 1471], the Hon'ble Supreme Court held that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date on which it is in force and not from any prior date. 9. In the case of HP State Electricity Regulatory Commission [CA No.6128 to 6133/2019], Hon'ble Supreme Court held that it is a well settled proposition of law that enactments dealing with substantive rights are primarily prospective unless it is expressly or by necessary intention or implication given retrospectivity. In the said case, a vested right was sought taken away retrospectively. It is humbly submitted that in the present case, no vested right was granted to the assessee till the date of notif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause the assessee sets up a unit in an area on speculative basis the assessee cannot claim additional investment allowance from a date prior to the date of notification, more so when the notification clearly stated that the notification is effective from 20.7.2016. 13. It is also humbly submitted that the Constitutional Bench of Hon'ble Supreme Court in the case of Dilip Kumar Company [(2018) 95 taxmann.com 327J held that exemption notification should be interpreted strictly. Besides, there is no ambiguity as sought out to be made by the assessee because the conditional legislation will be operative only when the notification is issued. Even if there is ambiguity, the benefit will flow to Revenue as per the above referred decision. 14. It is humbly submitted that the case-law relied upon by the assessee in the case of Mavilayi Service Cooperative Band Ltd [123 Taxmann.com 161(SC)J is not applicable to facts of the present case because the issue under dispute in the said case was related to a Circular No.14j2006 of CBDT and not that of conditional legislation. Also the dispute was on treating a Primary Agricultural Cooperative Society as Bank. In the said decision, a limited r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the matter of interpretation of exemption notification published under taxation statutes and in this area also, the decisions are galore. 15. In doing so, the principles of interpretation have been evolved in common law. It has also been the practice for the appropriate legislative body to enact Interpretation Acts or General Clauses Act. In all the Acts and Regulations, made either by the Parliament or Legislature, the words and phrases as defined in the General Clauses Act and the principles of interpretation laid down in General Clauses Act are to be necessarily kept in view. If while interpreting a Statutory law, any doubt arises as to the meaning to be assigned to a word or a phrase or a clause used in an enactment and such word, phrase or clause is not specifically defined, it is legitimate and indeed mandatory to fall back on General Clauses Act. Notwithstanding this, we should remember that when there is repugnancy or conflict as to the subject or context between the General Clauses Act and a statutory provision which falls for interpretation, the Court must necessarily refer to the provisions of statute. 20. In applying rule of plain meaning any hardship and inconvenien ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position of plain meaning rule or clear and unambiguous rule with respect of tax law. The plain meaning rule suggests that when the language in the statute is plain and unambiguous, the Court has to read and understand the plain language as such, and there is no scope for any interpretation. This salutary maxim flows from the phrase cum inverbis nulla ambiguitas est, non debet admitti voluntatis quaestio . Following such maxim, the courts sometimes have made strict interpretation subordinate to the plain meaning rule 4, though strict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is selfcontradictory. 27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion u/s of Rs. 13,02,71,498/- u/s 32AD of the Act on the ground that the Notification issued by the Govt. of India vide its No. 61/2016, dated 20th July, 2016 is applicable to the assessee for the impugned AY under consideration. The AO denied the claim of the assessee and the same was confirmed by the CIT(A). After careful reading of section 32AD quoted supra, it is very clear that unit set up should be from 1st April, 2015 and the same shall be declared as backward areas. But, in the Gazette notification published on 20th July, 2016, it is clearly mentioned that the notification shall come into force on the date of its publication in the official gazette i.e. on 20th July, 2016. It is also interesting to note that the section was inserted by the Finance Act. 2015 w.e.f 01.04.2016. The impugned FY is 31st March, 2016, (2015-16) as per the insertion of this section, the impugned FY is prior to insertion of the section. The assessee has claimed the deduction u/s 32AD which was not in force for the relevant FY. The Act is very clear in this regard. On perusal of the judgment of the Hon ble Supreme Court in the case of Dilip Kumar Company (supra), there is no ambiguity in the Act tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication in the Official Gazette. I shall only refer to the elaborate arguments advanced by either side before us, with requisite brevity. 3. Arguments advanced on behalf of the assessee are that, the assessee set up an undertaking for manufacture or production of article after 1st April, 2015, the undertaking was set up in a notified backward area of the state of Telangana, and the new assets are acquired and installed for the purpose of said undertaking during the period beginning from 01/04/2015 to 31/3/2016, thereby meeting the criteria fixed by section 32AD(1) of the Act, thus the eligibility criteria laid down in the section is satisfied. According to the Ld. DR, once the exemption criteria is satisfied, the notification should be interpreted liberally. According to him, once a notification is issued u/s. 32AD specifying the area to be a backward area it relates back to 11/4/2015 onwards, and there are no further restricting words to support that the allowance shall be available for the period after the date of notification of the backward area. Section 32AD of the I.T. Act being a beneficial provision and when the assessee falls in the beneficial provision the provision or t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to some lesser period. 7. He further argued that if it is interpreted that the notification has the effect of restricting the deduction u/s. 32AD for the period subsequent to the date of notification or relates back to 1.4.2015, from which date Section 32AD of the Act is introduced, are made applicable, there is an ambiguity and the matter is not free from doubt; and that in such a situation where there is an ambiguity or the matter could be answered both ways or two views are possible, the Hon'ble Supreme Court has been repeatedly holding that the issue will have to be interpreted in favour of the tax payer. While making a particular reference to the decision of the Hon ble Supreme Court in the case of Government of Kerala vs. Mother Superior Adoration Convent (2021) 3 I.T 75, he submitted that this becomes all the more relevant as the section 32AD of the Act is a beneficial provision intended to give relief to the tax payer, promote rapid industrialisation in the successor states pursuant to the bifurcation of A.P.State, and forms part of the promise held out by the Central Government while effecting bifurcation. According to him, to apply the test for ascertaining the purp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The revenue seeks to contend that under section 32AD the benefit of investment allowance should be restricted only to the period after the publication of notification of the backward area. In other words, the 5 years period for which the benefit is available under statute is sought to be reduced to a period lesser than 5 years. Inasmuch as the section does not speak of eligibility criteria to be the acquisition and installation after the notification, but specifically stipulates as 01/04/2016, it does not admit of any doubt. Lastly he submits that in a long list of cases, the decisions of the Hon'ble Supreme Court stated that when in ambiguity or when two views are possible the issue has to be answered in favour of the tax payer. 10. Sum and substance of the argument of the Ld. AR is that any notification issued by the Central Government, pursuant to the intention of the legislature, must be in conformity with the provision and it shall not in any way delay or abridge the effectiveness of the provision. He, therefore, submits that the notification shall be read as part and parcel of the provision itself, which came into force on 01/04/2016 giving benefit to the acquisitions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions reported B.K. Srinivasan Another [1987 AIR 1059], Mangalam Timber Products vs State of Orissa [(2008) 18 VST (Orissa)], Universal Pipes Pvt Ltd [ Writ Appeal No.393/2010], M/s Sri Vijayalakshmi Rice Mills [1976 AIR 1471], Hon'ble Supreme Court in HP State Electricity Regulatory Commission [CA No.6128 to 6133/2019], Agri Trade India Services Pvt Ltd [132 (2006) DLT 500], Garikapatti Veeraya [1957 AIR 540], and Keshavan Madhava Menon [1951 AIR 128]. Lastly he placed reliance on the decision of the Constitutional Bench of Hon'ble Supreme Court in the case of Dilip Kumar Company [(2018) 95 taxmann.com 327], in support of his contention that taxing statute has to be considered liberally while exemption notification has to be construed strictly. Sum and substance of his argument is that inasmuch as the provisions under Section 32AD(1) of the Act are ineffective and not implementable until and unless the notification issued specifying the backward areas infuses life into it, such a provision has to be effective only after the notification is issued and, therefore, while strictly interpreting so, the assessee must be held not eligible to claim the deduction for the additional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 and 01/04/2020. In fact, the CBDT circular reported in 379 ITR at page No.51, vide para No. 14.4 makes is amply clear that the amendment shall take effect from 01/04/2016 and will accordingly apply in relation to AY.2016-17 and subsequent years. Further, the Section clearly indicates that such a deduction is allowable for the previous years between 2015-16 and 2019-20 corresponding to the Assessment Years 2016-17 to 2020-21. Applicability of Section 32AD(1) of the Act to the Assessment Years 2016-17 is, thus, beyond any controversy. 16. Coming to the nature of notification dated 20/07/2016 issued by the CBDT, Revenue argues that this is a case of conditional legislation because, the Parliament imposed the condition that the backward areas are to be notified by the Central Government, without which, no effect could be given to this section. According to the learned AR, no power is invested in the executive to legislate upon the time of Section coming into force, but the executive has only to supply the details as to which areas constitute backward areas. 17. Conditional legislation is understood to mean the legislation, which is complete in all respects, but leaves to the execut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion in which it is so laid or the session immediately following, the Assembly agrees in making any modification in the order or in the annulment of the order, the order shall thereafter have effect only in such modified form, or shall stand annulled, as the case maybe, so however, that any such modification or annulment shall be without prejudice to the validity of anything previously done under that order. 20. This conditional aspect is conspicuous in case of Section 32AD(1) of the Act by its absence and the section does not deal with any empowerment of the executive to either promulgate or exempt any class of persons or properties or areas from the operation of the section. Section itself says that subject to the twin conditions as to setting up the undertaking in the backward areas and acquiring and installing the new asset, all the assessees are entitled to claim the additional investment allowance in the AYs 2016-17 to 2020-21. Both the counsel adverted to the principle that a taxing provision has to be interpreted liberally and any exemption notification has to be interpreted strictly, the benefit of doubt in the former case going to the assessee whereas to the Revenue in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act shall come into force with effect from 01/04/2015. Legislature does not empower the Executive to notify the provision coming into force at any later point of time. When the letter of law is clear and otherwise, assuming that Section 32AD(1) of the Act will be effective only from the date of notification would lead to unintended consequences. If we go by the interpretation of the Revenue, it will lead to a situation, where the assessee set up the undertaking and acquires and installs the new asset on or after 01/04/2015, but before 20/07/2016 would not be entitled to claim the deduction provided by the section. If it were the legislative intention to deny the additional investment allowance to such class of assessees till the date of notification, nothing prevented the legislature from specifying so in the Section stating that and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the date of notification and ending before the first day of April, 2020 in the said backward area . However, the legislative intention is clear in the expression that and acquires and installs any new asset for the purposes of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e executive is not about bringing the provision into force or to grant any exemptions in respect of any persons or properties. Such aspect has been taken care by the provision itself. The executive is required only to supplement the provision by specifying the backward areas by way of notification. Hence, the decision in ITC, Bhadrachalam (supra), has, therefore, no application to the facts of the case. 28. Next case on which the Revenue places heavy reliance is the case of Dileep Kumar (supra). In such case, the Hon'ble Apext Court concluded that 52. To sum up, we answer the reference holding as under (1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands over ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed to be provided. It is further stated that with a view to ensure that the manufacturing units which are set up by availing this proposed incentive actually contribute to economic growth of these backward areas by carrying out the activity of manufacturing for a substantial period of time, it is proposed to provide suitable safeguards for restricting the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply to the amalgamating or demerged company or the predecessor in a case of amalgamation or demerger or business reorganization but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be. It is therefore clear that in order to give effect to Section 94 of the A.P. Reorganization Act, for fiscal measures including tax incentives to the successor states, namely Talangana and Andhra Pradesh for development of backward areas and to promote industrialization and economic growth, Section 32AD(1) of the Act is enacted. 31. Provision u/s. 32AD(1) of the Act in unequivocal terms states that the assessee is entitled to additional investment allowance for the assessment year relevant to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not only amount to investing the executive with the power to re-write the provisions made by legislature, but would subordinate the will of legislature to the intentions of executive. Such a course if impermissible under law. It is, therefore, imperative to read down the notification dt.20/07/2016 in conformity with the provisions under Section 32AD(1) of the Act so as to give effect to the legislative intention in tune with the objective of enacting Section 32AD(1) of the Act vis- -vis Section 94 of the Andhra Pradesh Re- organisation Act. On this premise, I find that the notification dt.20/07/2016 shall be read as a part of Section 32AD(1) of the Act and its coming into force would relate back to the date of Section 32AD(1) of the Act coming into force. 33. For these reasons, I am are of the considered opinion that since the assessee set up the undertaking in the notified backward area in the state of Telangana after 01/04/2015, such part of the assets acquired and installed subsequent to 01/04/2015 and before 31/03/2016 are qualified for deduction in terms of Section 32AD(1) of the Act. 34. In the result, the appeal of the assessee is allowed. Order pronounced in the open cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of notification i.e. on 20th July, 2016 only can be treated as backward area, the Assessing Officer held that the assessee cannot claim deduction prior to the date of notification. Accordingly, the Assessing Officer rejected the claim of deduction u/s 32AD at Rs. 13,02,71,498/-. 4. In appeal, the learned CIT (A) upheld the action of the Assessing Officer. While doing so, he held that as per the provisions of section 32AD, the enterprise should be set up in any backward area notified by the Central Govt. The notification to this effect was issued on 20th July,2016 and it is clearly mentioned that the applicability of it comes into effect from the date of publication in the official gazette. Therefore, the areas notified in the gazette are treated as backward areas only from the date of the publication i.e. w.e.f. 20th July, 2016 . However, the assessee has claimed the investment allowance u/s 32AD for the financial year 2015-16 relevant to A.Y 2016-17 wherein the notification has not come into force at all. He further held that even though this provision has come into effect from 1.4.2016, the Govt. of India, Ministry of Finance, CBDT has released the gazette notification on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M, if such conditions are satisfied, the assessee shall be allowed deduction of a sum equal to 15% of the actual cost of such new asset for the A.Y relevant to the previous year in which such new asset is installed. He further noted that the CBDT vide its circular reported in 379 ITR at page No.51, vide para-No.14.4 makes it amply clear that the amendment shall take effect from 1.4.2016 and will accordingly apply in relation to A.Y 2016-17 and subsequent years. Further, the section clearly indicates that such a deduction is allowable for the previous years between 2015-16 and 2019-20 corresponding to the A.Ys 2016-17 to 2020-21. Thus, applicability of section 32AD(1) of the Act to the A.Ys 2016-17 is beyond any controversy. 9. So far as the nature of the notification dated 20/07/2016 issued by the CBDT is concerned, the learned JM held that the notification is neither taxing nor exempting the tax either in full or in part to any class of assessees but it only specifies the detail requisites for implementation of the section. Therefore, issuance of notification, in question, by the CBDT is only pursuant to the delegated legislation, but not a conditional legislation. 10. So far as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uired and installed by the assessee. It is applicable for 5 A.Ys i.e. from A.Y 2016-17 to 2020-21. Referring to the above provision, he submitted that the two requirements spelt out by the said section are: a) Setting up an undertaking or enterprise for manufacture or production of an article or thing after 1st day of April, 2015 in any notified backward area in the state of Telangana. b) The new assets are acquired and installed for the purpose of the said undertaking or enterprise during the period beginning from the 1st of April, 2015 and ending on 31st March, 2020. 12) Referring to the Memorandum explaining the provisions of the Finance Bill, 2015 reported in 371 ITR St 307 and the CBDT circular reported in 379 ITR (St.) 50 (Para 14.2) he drew the attention of the Bench to the same and submitted that the only requirement is that it should be a notified backward area and neither the section nor the circular stipulates that the deduction of 15% shall be allowed only for the period after the notification of backward area. 13) Coming to the case of the assessee, the learned Counsel for the assessee submitted that the assessee company set up two solar power plants one at Peerampalli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, he submitted that reference should be made to section 94 of the A.P. Reorganization Act, 2014 which provides for fiscal measure including tax incentives to successor states. These are the special economic measures to be taken in the form of tax incentives to successor states a promise under which the reorganization was effected. 16.1) Referring to the CBDT circular No.19 of 2015 dated 27.11.2015 reported in 379 ITR (statutes-19), he submitted that the circular while specifying the conditions does not state that the deduction u/s 32AD is available only from the period after the date of issue of notification. Referring to the Memorandum explaining the provisions reported in 371 ITR (Statute 307) he submitted that it is nowhere stated that the additional investment allowance will be available only after the period from the date of notification as a backward area. 17) He submitted that the special economic measures including tax incentives to the successor states is a part of the commitment of the Central Govt. under the A.P. Reorganization Act, 2014. He submitted that these incentives are available for a period of 5 years and the incentives so offered by the Central Government can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 237 ITR 41, the learned Counsel for the assessee drew the attention of the Bench to the relevant observation of the Hon'ble Supreme Court at page 45 which reads as under: This section states that the deduction shall be wholly allowed. It permits the Board to specify conditions but conditions cannot have the effect of curtailing the scope of the deduction granted by the section. The amplitude of the deduction permitted by the section cannot be cut down under the guise of imposing a condition . In fact, this is not a condition but an impermissible attempt in rewrite the section . 23) He submitted that the contention of the Revenue falls within the above passage of the judgment of the Hon'ble Supreme Court. He submitted that the Revenue cannot impost or read conditions into the notification which will have the effect of re-writing the statutory provisions and reducing the 5-year period. 24) Referring to the decision of the Hon'ble Supreme Court in the case of Govt. of Kerala Another vs. Mother Superior Adoration Convent, vide Civil Appeal No.202 of 2012 order dated 1.3.2021, he submitted that the Hon'ble Supreme Court in the said decision has held that wherever there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to various decisions filed in the case law compilation, the learned DR submitted that exemption notification should be interpreted strictly and conditional legislation will be operative only when the notification is issued. He accordingly submitted that since order of the learned AM is in conformity with the law, the same should be applied and the appeal filed by the assessee be dismissed. He also relied on the following decisions: i) Sri B.K. Srinivasan Another Etc. Etc. vs. State of Karnataka Ors. reported in 1987 AIR 1059/1987 SCR(1)1054. ii) M/s. Universal Pipes (P) Ltd vs. The State of Assam 3 Ors. In Writ Appeal No.393 of 2010. iii) Sri Vijayalakshmi Rice Mills vs. State of Andhra Pradesh, reported in 1976 AIR 1471.1976 SCR (3) 775. iv) H.P State Electricity Regulatory Commission vs. H.P. State Electricity Board in Civil Appeal No.6128 of 2009. v) Agri Trade India Services Pvt. Ltd vs. Union of India Ors. reported in 132(2006) DLT 500/ELT 161 Del. vi) GarikapatiVeerayya vs. N. Subbaiah Choudhury, reported in 1957 AIR 540. vii) Keshavan Madhava Menon vs. The State of Bombay reported in 1951 AIR 128. 28) I have heard the rival arguments made by both the sides and perused the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PDCL, Corporate Office, Hyderabad to the Chief Engineer (Planning, Commercial Coordn.) TS TRANSCO Hyderabad and the Revenue is also not disputing the same. 30) I find the Memorandum explaining the provisions in the Finance Bill 2015 reported in 371 ITR (St.) 307 reads as under: Section 94 of the Andhra Pradesh Reorganization Act, 2014 inter alia provides that the Central Government shall take appropriate fiscal measures including offer of tax incentives to the State of Andhra Pradesh and the State of Telangana, to promote industrialization and economic growth in both the States. Manufacturing sector plays significant role in the economic growth of any region. Therefore, in order to encourage the setting up of industrial undertaking in the backward areas of the State of Andhra Pradesh and the State of Telangana, it is proposed to provide following income-tax incentives:- (A) Additional Investment Allowance It is proposed to insert a new section 32AD in the Act to provide for an additional investment allowance of an amount equal to 15% of the cost of new asset acquired and installed by an assessee, if- (a) he sets up an undertaking or enterprise for manufacture or production of any a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 2016-17 and subsequent assessment years. 31) I find the CBDT Circular No.19 of 2015, dated 27.11.2015 reported in 379 ITR (St.)50 reads as under: 14.2 Additional investment allowance 14.2.1 Section 32AD has been inserted in the Income-tax Act to provide for an additional investment allowance of an amount equal to 15 per cent of the cost of new asset acquired and installed by an assessee, if- (a) he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1st April, 2015 in any notified backward area in the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal; and (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from the 1st April, 2015 and ending on 31st March, 2020. 14.2.2 This deduction shall be available over and above the existing deduction available u/s 32AC of the Income Tax Act. Accordingly, if a company sets up an undertaking in the notified backward area in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, it shall be elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my opinion, is Yes and is applicable for financial year 2015-16 i.e. assessment year 2016-17. 33) So far as the remaining two questions referred to me are concerned, I find the assessee in the instant case has set up the undertaking or enterprise for manufacture or production of an article or thing after 1.4.2015 and the new asset has been acquired and installed for the said purpose, during the period beginning from 1.4.2015 from which the date the section 32AD is introduced. Therefore, I am of the considered opinion that the assessee is entitled for the allowance u/s 32AD. I find force in the argument of the learned Counsel for the assessee that neither the section nor the notification states that the deduction u/s 32AD is allowable only for the period starting from the date of notification. In my opinion, the purpose of section 32AD is to give the benefit for a period of 5 years and once the notification is issued, the benefit accrues for full 5 years. If the contention of the Revenue that the assessee is entitled to claim the benefit of section 32AD only w.e.f. the date of notification i.e. 20.07.2016 is accepted, then the condition of getting the benefit for a period 5 years f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta s contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5- Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154 at 162,163). 24. This being the case, it is obvious that the beneficial purpose of the exemption contained in Section 3(1)(b) must be given full effect to, the line of authority being applicable to the facts of these cases being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the r ..... 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