TMI Blog2011 (3) TMI 1024X X X X Extracts X X X X X X X X Extracts X X X X ..... is the period for which his entitlement would accrue. The provisions contained in section 80-IB nowhere stipulate any condition that such a claim has to be made in the first year failing which there would be forfeiture of such claim in the remaining years. It is not the case of the assessee that he should be allowed to avail of this claim for 10 years from the assessment year 2004-05. The assessee has realized his mistake in not claiming the benefit from the first assessment year 1998-99. At the same time, the assessee forgoes the claim up to the assessment year 2003-04 and is making the same only for the remaining period. There is no reason not to give the benefit of this claim to the assessee if the conditions stipulated under section 80-IB of the Income-tax Act are fulfilled. In favour of assessee. Whether it is incumbent upon the assessee that it is registered under the Industries (Development and Regulation) Act for claiming the benefit under sub-section (3) of section 80-IB - Held that:- Registration under the Industries (Development and Regulation) Act will be of no consequence for availing of the benefit under section 80-IB of the Income-tax Act - Since the Central Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the date of manufacture of these articles, i.e., the assessment year 1998-99, which was the first year of the assessee's manufacture, the assessee did not claim the deduction under the said provision in that assessment year. Obviously, since this claim was not raised in that assessment year, it could not be examined as to whether the assessee fulfilled the conditions prescribed in section 80-IB of the Act for claiming exemption under the said provision. The assessee did not claim this benefit even in succeeding years. Section 80-IB of the Act further provides that once an industrial undertaking which fulfils the condition stipulated therein gets the benefit, the same is available for 10 successive assessment years. The appellant claimed the benefit under the aforesaid provision for the first time in the assessment year in question, i.e., the assessment year 2004-05. Of course, at the same time, the appellant pleaded that even if the appellant had not claimed this benefit for the past years, it should be allowed to him from 2004-05 till the remaining period of 10 years, i.e., up to 2007-08. This was on the premise that had the claim been allowed and given in the assessment year 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated in sub-section (2) thereof. One of the conditions, with which we are concerned, is that the assessee manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India. Special provision is made in respect of those industrial undertakings which fulfil the conditions prescribed in sub-section (2) of section 80-IB of the Income-tax Act, if such industrial undertaking happens to be a small scale industry. This is incorporated in sub-section (3) of section 80-IB of the Income-tax Act. In such a case, the amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years. 6. If the assessee fulfils the requirement of small scale industrial under taking (which aspect shall be dealt while answering the other question of law), it is not in dispute that the assessee would have qualified for this deduction from the assessment year 1998-99. Had the assessee cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his purpose is defined in clause (g) of sub-section (14) of section 80-IB of the Income-tax Act reproduced above. As per this provision, small scale industrial undertaking is regarded as "small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act". The Industries (Development and Regulation) Act is enacted to provide for development and regulation of certain industries. For the purpose of regulating those industries in the meaning prescribed under the Act, industrial undertaking is defined in section 3(d) to mean any undertaking pertaining to a scheduled industry carried on in one or more factories by any person or authority including the Government. The First Schedule attached to the said Act specifies those industries. In order to regulate these scheduled industries, section 10 mandates that all existing industrial undertakings have to get registered under this Act. Section 11 of the Industries (Development and Regulation) Act deals with new industrial undertaking which would come into existence after the passing of the Act and establish any new industrial undertaking, except under and in accordance with a licence issued in that behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) plant and machinery, or (ii) land, buildings, plant and machinery ; (b) the nature of ownership of the industrial undertaking ; (c) the smallness of the number of workers employed in the industrial undertaking ; (d) the nature, cost and quality of the product of the industrial undertaking ; (e) foreign exchange, if any, required for the import of any plant or machinery by the industrial undertaking ; and (f) such other relevant factors as may be prescribed." 10. Section 29B of the Industries (Development and Regulation) Act gives power to the Central Government to exempt, inter alia, such small scale industrial undertakings from the provisions of the Industries (Development and Regulation) Act. 11. As is clear from the reading of section 11B of the Industries (Development and Regulation) Act, it is for the Central Government to specify the requirements which shall be complied with by the industrial undertaking to enable it to be regarded for the purpose of the said Act as small scale industrial undertaking. Appropriate exercise in this behalf has been carried out by the Central Government by issuing notification dated December 10, 1997. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or on hire purchase. (b) Worth of the said asset does not exceed Rs. 3 crores. The prescription of Rs. 3 crores was reduced to Rs. 1 crore vide amendment notification dated December 4, 1995. 13. It is not in dispute that the appellant-assessee fulfils these requirements. However, as mentioned above, the benefit is denied only on the ground that it is not registered under the provisions of the Industries (Development and Regulation) Act. We are of the considered opinion that the registration under the Industries (Development and Regulation) Act will be of no consequence for availing of the benefit under section 80-IB of the Income-tax Act. Clause (g) of sub-section (14) of section 80-IB of the Income-tax Act only mandates that such an industrial undertaking should be regarded as a small scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act. As per section 11B of the Industries (Development and Regulation) Act, it is for the Central Government to lay down the conditions which are required to be fulfilled as regards small scale industries. In the aforesaid notification, the conditions which are mentioned for being regarded as small s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be fulfilled by the industrial undertaking to qualify itself as small scale industrial undertaking. Since the Central Government has to prescribe such conditions by notification in view of the provisions of section 11B of the Industries (Development and Regulation) Act, the Legislature in its wisdom deemed it fit to incorporate those conditions for the purpose of the Income-tax Act as well. This issue came up for consideration before the Gujarat High Court, albeit, in the context of depreciation which is to be allowed to an assessee under section 32 of the Income-tax Act. We may point out that Explanation 3 of section 32(1) of the Income-tax Act also gives special benefit to the small scale industrial undertaking and reads as under : "(3) an industrial undertaking shall be deemed to be a small-scale industrial undertaking, if the aggregate value of the machinery and plant installed, as on the last day of the previous year, for the purpose of the business of the undertaking does not exceed seven hundred and fifty thousand rupees ; and for this purpose the value of any machinery or plant shall be,- (a) in the case of any machinery or plant owned by the assessee, the actual po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for that reason, it will have to be held that for the purpose of determining whether an industrial undertaking is a smallscale undertaking or not, resort had to be taken to the Explanation to section 32(1)(vi) and not to any other provision of law whereby an industrial undertaking was to be regarded as a small-scale industrial undertaking for other purposes. The Tribunal was, therefore, in error in proceeding on the basis that since the assessee was registered as a small-scale industrial undertaking with the Small Scale Industries Department, the benefit of section 32(1)(vi) was available to it irrespective of different provision made by that Explanation in that behalf." 17. The upshot of the aforesaid discussion is to answer this question of law in favour of the assessee, as otherwise, there is no dispute that the assessee fulfils the eligibility conditions prescribed under section 80-IB of the Income-tax Act and is to be regarded as a small scale industrial undertaking. We direct the Assessing Officer to give the benefit of deduction claimed by the assessee under section 80-IB of the Income-tax Act for the assessment year in question, i.e., 2004-05. 18. This appeal is a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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