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2009 (2) TMI 252 - AT - Income TaxDeduction u/s. 80-IA - directions issued by the Jt. CIT to the AO u/s. 144A - Small Scale Industrial Undertaking - object of the assessee company is extraction of seeds for obtaining edible oils and refining thereof - provided certificate for commencement of business on 12th Dec.,1995 by the RoC - A new industrial undertaking for the extraction and refining of edible oil was set up - The main contention of the AO and Jt. CIT was that the assessee started production from AY 1997-98 itself, the year in which the assessee was not a small scale industry and therefore, he did not fulfil the conditions in the initial year - HELD THAT:- On perusal of the facts and material on record, the assessee has applied for a permanent registration certificate as a small scale industry u/s.11B of the Industries (Development and Regulation) Act, 1951 (IRDA for short) to the prescribed authority i.e., district industries center who declared the assessee as an industrial undertaking vide certificate dt. 30th March, 1998 which is conclusive under the provisions of IRDA. No dispute that the assessee has commenced the trial production on 1st Jan.,1997 but at the same time, the AO has ignored that the assessee has started the systematic activity of refining and from 28th Feb.,1998 falling in the AY 1998-99. Therefore, the registration certificate dt. 30th March, 1998 being the assessee an industrial undertaking as small scale industry was conclusive and was available as at 31st March, 1998 being the last day of the previous year relating to AY. 1999-2000. It is necessary to mention that the total amount of investment in plant and machinery should not exceed Rs. 60 lacs for an industrial undertaking to be a small scale industry vide notification dt. 2nd April, 1991 which limit was increased to Rs. 3 crores vide further notification dt. 9th Dec.,1997 during the previous year relating to impugned year. The said investment was below Rs. 3 crores as per audited balance sheet. Therefore, the assessee fulfilled the conditions being a small scale industry in the impugned year. CIT(A) has rightly observed that the assessee company has fulfilled all other conditions as required u/s. 80-IA The words "as on the last day of the previous year" for ascertaining the status of the small scale industry are used in the Act which clearly show that the status is required to be examined for each year and that too as at the end of the year. There is no condition in the Act that an industrial undertaking should fulfil all the conditions as laid down u/s. 80-IA(2) in the very initial year itself and not thereafter. The deduction u/s. 80-IA is an incentive to the assessee and incentive provisions has to be construed liberally as held by Supreme Court of India in the case of Bajaj Tempo Ltd. vs. CIT [1992 (4) TMI 4 - SUPREME COURT], CIT vs. Krishna Copper & Steel Rolling Mills [1991 (11) TMI 223 - SUPREME COURT] and CIT vs. Baby Marine Exports [2007 (3) TMI 206 - SUPREME COURT]. Therefore, we find no infirmity in the order of CIT(A). Thus ground No. 1 of the Revenue is dismissed. Disallowance of interest u/s. 40A(2)(b) @ 15 per cent instead of 18 per cent and confirming addition - HELD THAT:- We are convinced with the arguments of the ld AR as to prevailing market rate for the loans of the permanent in nature and long-term loans is between 18 per cent to 24 per cent whereas the cases compared by the AO are pertaining to the loans of the temporary in nature. Also the assessee has advanced (sic) the money for the purpose of business needs, is not under dispute. Therefore, in such circumstances and facts of the case, AO is not justified in considering the said payment of interest as excessive or unreasonable and the same is directed to be deleted. Thus ground No. 1 of the cross-objection of the assessee is allowed.
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