TMI Blog2012 (7) TMI 655X X X X Extracts X X X X X X X X Extracts X X X X ..... on 1.1.1994. We observe that said period of ‘ten Assessment Years’ can’t cover the Assessment Year in hand which is in fact the 12th Assessment Year from the date of manufacturing. - Decided against the assessee. - ITA No.1789/M/2009, ITA No.3227/M/2010 - - - Dated:- 30-5-2012 - SHRI B. RAMAKOTAIAH, SHRI S.S. GODARA, JJ. Appellant by : Shri P.J. Pardiwala Madhur Agarwal Respondent by: Shri Goli Srinivasa Rao O R D E R PER S.S. GODARA, J.M: ITA No. 1789/M/2009(AY: 2005-06) The assessee has preferred the instant appeal against the order of Ld. CIT (A) dated 24.12.2008. 2. In the instant appeal, there are two grounds. Ground No. I is regarding sec.36 (1)(iii) of the Income Tax Act (hereinafter referred to as the Act). Ground No. II is regarding deduction u/s 10B of the Act. 3. During the pendency of the instant appeal, the assessee has also filed an application on 12.10.2010 praying for admissions of additional grounds III to V. 4. When the case was taken up, learned AR prayed for admission of the additional grounds by exercising jurisdiction under the Income Tax Act Rules. In the opinion of the learned AR, since the admission of the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Munjal sales vs. CIT. He prayed for acceptance of the ground. 10. On the other hand, the learned DR has relied on the findings arrived at by the Ld. CIT (A) in the impugned order. He prayed for rejection of the appeal. 11. We have heard both the learned representatives. It is evident from the referred record that the assessee was having interest free funds available more than investments in question. The case law cited by the learned AR i.e., CIT vs. Bombay Samachar pertained to deduction in respect of interest on borrowed capital. Similarly, Munjal Sales Corporation, law is regarding business expenditure. 12. In addition to this, in the case of Reliance Utilities and Power Ltd. (supra), the Hon ble Jurisdictional High Court has held that when sufficient interest free funds are available with an assessee to meet the investments in question and at the same time if the assessee raises a loan, presumption in such an eventuality is that investments are from the interest free funds. Further, Hon ble High Court also settled the law that if, both interest free and interest bearing funds are available then the presumption would arise that investments are from the interest free funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 2004-05. 18. In the alternative, the assessee claimed that it had set up a new unit in the FY 2000- 01 relevant to the AY 2001-02. Therefore, it was entitled for deduction in respect of profit from the new unit. 19. The AO did not accept the assessee s explanation. Opined that the first proviso to sec. 10B could not be read in isolation. But, it had to be read with the entire statutory provision. Conjointly. 20. Accordingly, the AO after referring to the provision, returned a finding that deduction under the said statute is only for unexpired period of aforesaid ten consecutive Assessment Years. Meaning thereby, ten consecutive Assessment Years beginning with the Assessment Year relevant to the previous year when the undertaking in question begins manufacture or produce articles or things as the case may be. 21. Further, the AO held that the assessee s contention was not allowable in view of the substitution in the Finance Act, 2000 which provided allowability of provision for unexpired period of aforesaid ten consecutive AYs. Per AO, the assessee who was covered by the unamended section could not claim a deduction for period surpassing ten consecutive Assessment Years fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in software technology parts for five years out of the block of initial eight years, subject to fulfillment of certain conditions. The proposed amendment seeks to extnd the period of tax holiday from five years to ten years in order to give added thrust to exports. Clause 4 seeks to similarly extend the five year tax holiday period to ten years to the export oriented units under section 10B of the Income Tax Act. 27. Taking cue from the above said explanation, learned AR has submitted that in case of denial of deduction in hand the legislative intent in extending the tax rebate from five to ten consecutive years would stand denied. Hence, he prayed for acceptance of the ground in hand. 28. On the other hand, learned DR appearing for the revenue highlighted amended provision 10B (3) which reads as under: 10B(3): The profits and gains referred to in sub-section (1) shall not be included in the total income of the assessee in respect of any [ten] consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture of produce articles or things. 29. In addition to this, learned DR has relied on case law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B(1) of the Act does not use the words newly established undertaking . Only in the heading, the words newly established hundred per cent export-oriented undertakings have been mentioned. It is well-settled law that headings or titles prefixed to sections or group of sections can be referred to in construing an Act of the legislation, only when the enacting words are ambiguous, but when the language of the section is clear, then the heading cannot be used to give a different effect to clear words in the section. In our view, there is no ambiguity in sec. 10B of the Act, which provides exemption to certain newly established hundred per cent export oriented undertakings, on fulfilling certain conditions, for a period of ten consecutive assessment years. The initial year is the year in which the eligible undertaking begins to manufacture or produce articles or tings or computer software. Sec. 10B of the Act does not provide any restriction that in each of the years of claim, the export-oriented undertaking should be newly established. Indeed, relevance of newly established undertaking is only to identify the initial yer of the period of ten years for which the assessee is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal income of the assessee. 33.1. In our humble opinion, the first part of the legislation cannot be read in isolation. The entire stature or provision has to be read or referred conjointly. A word here or clause there cannot be relied on by excluding the entire provision. Thereafter the object of the legislation has to be interpreted in this true intent. The provision in hand nowhere lays down that the benefit of tax concession has to be from the date when the assessee concerned avails benefit for the first time. 34. As facts are very much clear, in view of the legislation above said, we are constrained to observe that ten consecutive Assessment Years start from Assessment Year relevant to the previous year in which the undertaking begins manufacture / production. The assessee herein commenced its production on 1.1.1994. We observe that said period of ten Assessment Years can t cover the Assessment Year in hand which is in fact the 12th Assessment Year from the date of manufacturing. 35. The assessee s reliance on the explanation in ITR statutes (supra), in our opinion is contrary to the legislative intention above said. The said explanation has to be read so as to mean th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dispute the factual as well as legal position stated above. In view of these facts and circumstances, we are of the opinion that since the legislation itself has granted relief to the assessee in case of payment of TDS, the impugned finding cannot hold ground. Hence, we accept this ground. 42. Ground No.IV:- In this ground, the assessee has challenged the disallowance of set of carried forward depreciation of Rs. 12,20,31,583/- on the ground that the same has been allowed to be carried forward by the rectification order dated 31.03.2005 for the assessment year 2002-03 and the order of Ld. CIT (A) dated 3.5.2006 against the business income of the assessment year. 42.1. In support of the ground, learned AR has drawn our attention to the page nos. 19, 25 and 27 of the paper book. Page no.19 of the paper book is rectification application u/s 154 of the Act filed before the ACIT, Mumbai by the assessee. In this, the Income Tax Officer has found that the assessee s contention was correct. Allowed undisbursed depreciation available for set off vide order dated 31.3.2005. 42.2. In the light of this order, learned AR has submitted that the case be sent to the Assessing Officer fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company regarding which the Ld. CIT (A) had confirmed. 55. Learned AR qua these grounds has also consisted that findings qua ground no.1 of the earlier appeal ITA No. 1789/M/2010 covers these grounds as well. 56. Learned DR has not seriously disputed the prayer made. 57. After perusing the findings and in view of the fact that we have allowed the identical ground hereinabove i.e. ground no.1, we accept these grounds accordingly. 58. Ground No.5:- The learned AR has stated at the Bar that he does not wish to press ground no.5 regarding disallowance u/s 94(1) of the Act. 59. We order accordingly. 60. Ground No.6:- In this ground, the assessee has impugned the order of Ld. CIT (A) confirming the disallowance regarding deduction for various payments u/s 40(a)(ia) of the Act. 61. Both the learned representatives are ad idem that our detailed findings hereinabove in the connected appeal ITA No. 1789/M/2010 ground no.3, are squarely applicable qua this ground. 62. Appreciating, the fair stand of both the learned representatives, we accept this ground in the light of our findings in the assessee s appeal decided hereinabove. 63. Ground No.7:- In this ground, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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