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2016 (5) TMI 950 - ITAT CHANDIGARH

2016 (5) TMI 950 - ITAT CHANDIGARH - TMI - Claim of deduction u/s 80IC - Assessing officer restricted the claim of deduction u/s 80IC @ 25% as against 100% claimed by the assessee - Held that:- As relying on Hycron Electronics case [2015 (6) TMI 725 - ITAT CHANDIGARH ] assessee is entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years - Decided against assessee

Claim of Other Inco .....

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Tribunal passed in assessment year 2010-11 and set aside the order of C IT(A) and remand the issue to the file of the Assessing officer to decide the issue as per the directions and guidelines given by the Tribunal in assessee's case in assessment year 2010-11. As regards the dividend we agree with the findings of the CIT(A) that dividend has to be specificall y charged under the head "income from other sources" u/s 56 of the Act. Furthermore, in view of the decision of the Hon'ble Supreme Cour .....

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the case of C IT v Deepak Mittal (2013 (9) TMI 764 - PUNJAB & HARYANA HIGH COURT)held that the disallowance u/s 14A requires findings of incurring of expenditure where it is found that for earning exempt income, no expenditure has been incurred, disallowance u/s 14A cannot stand. When the assessee claims that he had not made any expenditure on earning exempt income, the Assessing officer in terms of sub section (2) of section 14A is required to collect such material evidence to determine, expen .....

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ant Member For the Appellant : Sh. Rajesh Sharma (authorized signatory) For the Respondent : Sh. Sushil Kumar ORDER Per H. L. Karwa, VP This appeal filed by the assessee is directed against the order of CIT(A)-Shimla dated 13.2.2015 relating to assessment year 2011-12. 2. Ground No.1 of the appeal is general in nature and, hence, no comments are being offered. 3. Ground No.2 of the appeal reads as under:- "2. Under the facts and circumstances of the case and in law, Ld. CIT(Appeals), Shimla .....

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e period beginning on 7th January 2003 and ending before 1st April 2012 and erroneously upholding that the benefit of 100% deduction u/s 80-IC of the Act for first five years in case of substantial expansion is available only to the units that existed and were operational as on 07.01.2003 and such benefit is not at all meant for the units that came into being on or after the introduction of the scheme of such deduction. III. Upholding that once an 'initial assessment year 1 is determined in .....

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ed, the facts of the case are that assessee derives income from manufacturing of assemblies and sub assemblies for electronics energy meters and allied produces. The Assessing officer noted that the assessee started its manufacturing activities w.e.f. 17.1.2014, i.e. during the financial year 2003-04 and had been claiming deduction u/s 80IC of the Income-tax Act, 1961 (in short 'the Act') from assessment year 2004-05 which was the first year of claiming the deduction u/s 80IC. The assess .....

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ears, therefore, it was entitled for claim of deduction u/s 80IC @ 25% for the 6 th year to 10th year ie. 2009-10 to 2013-14. Accordingly, the Assessing officer restricted the claim of deduction u/s 80IC @ 25% as against 100% claimed by the assessee. 5. On appeal, the C IT(A) upheld the order of the Assessing officer and, hence, the assessee is in appeal before the Tribunal. 6. After hearing both the parties, we find that the issue is squarely covered in favour of the Revenue and against the ass .....

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eful to deal with the various principles of interpretation as enunciated by various Courts. 23. It is settled that if the language of a particular Statute is clear then only literal meaning has to be given to such language as long the same does not result in absurdity or unintended consequences. Therefore, if the language of a particular Statute is clear then the same cannot be changed by applying different principles of interpretations. This is clear from the observations made by 'Hon'b .....

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court of law, has nothing to do with the reasonableness or unreasonableness of a provision of a statute except so far as it may h old it in interpreting what the Legislature has said. If the language of a statute be plain, admitting of only one meaning, the Legislature must be taken to have meant and intended what it has plainly expressed, and whatever it has in clear terms enacted must be enforced though it should not lead to absurd or mischievous results. If the language of this sub-section be .....

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earned judge observed (page 71): ". . . in a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used." The observations of Rowlatt J. as above stand accepted and approved by the House of Lords in a later decision, in the case of Canadian Eagle Oil also in a manner similar in IRC .....

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sed above. This court observed (page 9): "As long as there is no ambiguity in the statutory language, resort to any interpretative process to unfold the legislative intent becomes impermissible. The supposed intention of the Legislature cannot then be appealed to to whittle down the statutory language which is otherwise unambiguous. If the intendment is not in the words used. It is nowhere else. The need for interpretation arises when the words used in the statute are, on their own terms, a .....

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;. However, if some ambiguity is there in the language of a particular statute because of various reasons, the same is required to be construed so as to find out the real intention of the Legislature and then every possible material should be considered to find out the real intention of the Legislature. In this regard, the observation of the Hon'ble Supreme Court in the celebrated judgement of K.P. Vergese 131 ITR 598 (supra) are relevant. We extract the Head note which reads as under:- &quo .....

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7; [1964] 54 ITR 692 (HL) followed. Speeches made by the members of the legislature on the floor of the House when the Bill is being debated are inadmissible for the purpose of interpreting the statutory provision but the speech made by the mover of the Bill explaining the reason for its introduction can certainly be referred to for the purpose of ascertaining the mischief sought to be remedied by the legislation and the object and purpose for which the legislation is enacted. This is an accord .....

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ords of a section, particularly when the language of the section is clear and unambiguous but, being part of the statute, it prima facie furnishes some clue as to the meaning and purpose of the section." The highlighted portion clearly shows that every material which is logically relevant should be taken into account for ascertaining the true meaning of a particular provision. The same view was taken by Hon'ble Karnataka High Court in the case of CIT v N.K. Vaidya 224 ITR 186 (supra) an .....

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ot only binding on the Income- tax Department but are also in the nature of contemporanea exposition furnishing legitimate aid in the construction of a provision." 24. The Ld. counsel of the assessee had referred to the decision of Hon'ble Karnataka High Court in the case of Dinakar Ullal Vs. CIT (supra) and decision of Hon'ble Supreme court in the case of Commissioner of Central Excise Vs. M/s Rattan Melting & Wire (supra) for the proposition that since circulars are not bindin .....

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ourt or High Court in respect of particular provision. The Para 6 of this judgment make this point absolutely clear and reads as under:- "6. Circulars and instructions issued by the Board are no doubt binding in law on the authorities under the respective statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be appropriate for the Court to direct that the circular should be given effect to and not the view expressed i .....

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t; The above shows that circulars are not binding on the Court but the Court has right to look at the Circular and ultimately meaning of a provision as interpreted by the Court would prevail in comparison to the interpretation given in the circular. Therefore, if Circular is contrary to a provision as interpreted by the Court then the opinion of the Court would prevail. This decision nowhere lays down that circulars cannot be considered for interpretation of a particular provision. 25. In the ca .....

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wever, on a writ petition the order for rejection was quashed by a single judge and remitted the matter back for fresh consideration. On remand, the Commissioner who was vested with the jurisdiction under Instruction No.13 of 2006 in respect of claim upto ₹ 10 lakhs accepted the cause shown for delay in filing the return but denied interest on refund amount in view of the condition set out in Circular No. 670 dated 26 t h Oct 1993. Therefore, question before the Court was whether these ins .....

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12 of 2003 dated October 30,2003 and 13 of 2006 dated January 22,2006, of the Board, is inconsistent with sub-section (2) of section 244A of the Act? (ii) Whether in the facts and circumstances, the respondent was justified in denying interest on belated refund claimed for the assessment year 1995-96, by the order impugned." 26. The Hon'ble Court discussed the matter and ultimately held that assessee was entitled to interest u/s 244A and Circular No. 670 was contrary to the provisions o .....

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principle of interpretation i.e. whenever the particular provision is required to be interpreted, it should be interpreted after reading the whole provision and not the parts of a particular section. However, a provision has to be read in context of the overall scheme of the Act. It is also well settled that no provision can be interpreted in such a way which would render parts of the section otiose or meaningless. 28. Having considered the principles of interpretation above, let us consider th .....

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its and gains, as specified in sub- section(3). (2) This section applies to any undertaking or enterprise,- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning. (i) on the 23rd day of December, 2002 and ending before .....

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ntegrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, in any Export Processing Zone or Integrated Infrastructure .....

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oduces any article or thing, specified in the Fourteenth Schedule or commences any operations specified in that Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, [2007], in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April 2012, in the State of Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending be .....

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lause (a) or sub- clause (ii) of clause (b), of sub-section (2),one hundred per cent of such profit and gains for five assessment years commencing with the initial assessment year and thereafter twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains. (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely:- (i) it is not formed by splitting up, or the reconstruction, of a business already in existenc .....

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f section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (5) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section 10A or section 10B, in relation to the profits and gains of the undertaking or enterprise. (6) Notwithstanding anything contained in this .....

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n. (8) For the purposes of this section,- (i) "Industrial Area" means such areas, which the Board, may, be notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii) "Industrial Estate" means such estates, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. (iii) "Industrial Growth Centre" means such cen .....

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o manufactures or produce articles or things, or commences operation or completes substantial expansion; (vi) "Integrated Infrastructure Development Centre" means such centres, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government (vii) " North-Eastern States" means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura; (viii) " Software Techno .....

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ans such parks, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. 29. Sub section (1) of the above provision is a general provision and does not require any interpretation. Sub Section [2] is the enabling provision which provides for the types of undertakings and circumstances where deduction under section 80IC would be allowed. It allows deduction to various undertakings which have either begun or .....

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n itself, therefore, the deduction was available on substantial expansion by old undertakings as well as new undertakings during the window period. However, there is no force in this interpretation. Sub section (2) begins with the expression "this section applies to any undertaking or enterprise which has begun or begins" this itself shows that provision made even the existing undertakings entitled for the deduction because the expression 'begun' would refer to the undertaking .....

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w period then the same cannot possibly undertakes substantial expansion also simultaneously. The expression 'and" would refer to the cumulative condition that is both parts of the conditions need to be complied. The expression 'and' can be joined only with the expression 'begun'. This is because 'begun' refers to something which has already started in the past whereas 'begins' connotes something which would commence in the present. Therefore, the expressi .....

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etation needs to be looked into. This provision was brought into the statute indisputably in the light of the "incentive package" announced by the Union Cabinet. Through this incentive package not only income tax concession but excise concessions and some subsidies like transport subsidy and capital subsidy were also provided to various industries in the hilly stated comprising states of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern states to boost the economies of these hill .....

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s, in order to give boost to the economy in these States. With a view to give effect to these new packages a new section 80-IC has been inserted to allow a deduction for ten years from the profits of new undertaking or enterprise or existing undertakings or enterprises on their substantial expansion, in the States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States. For this purpose, substantial expansion is defined as increase in the investment in the plant and machinery by at lea .....

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ment Centre or Industrial Growth Centre or Industrial Estate, or Industrial Park, or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with rules prescribed in this regard. Similar deduction shall be available to thrust sector industries, as specified in the Fourteenth Schedule. 49.3 The amount of deduction in case of undertakings or enterprises in the States of Sikkim, and the North-Eastern States shall be one hundred per cent of the profits of th .....

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inclusive of the period of deduction under this section or under section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. Further, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section 10A or 10B, in relation to the profits and gains of the undertaking or enterprise. 49.5 A new Thirteenth Schedule has been inserted in the Income-tax Act to specify the list of articles and things, w .....

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orth- Eastern region including Sikkim, with effect from the 1st day of April, 2004. 49.6 These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years. 31. The circular makes it clear that section 80IC was inserted to give effect to the new package announced by the Union Cabinet. The Circular further clarifies that this section provides for deduction for a period of 10 years from the profits of new undertaking .....

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, To have life or animation To be in present force, Activity, or effect at a given time, as in speaking of "existing" contracts, creditors debts, laws, rights or liens. For us relevant meaning would be 'To be in present force' As per Oxford Dictionary 'exist' is defined as under Exist : 1 (not used in the progressive tenses) to be real; to be present in a place or situation: Does life exist on other planets? The problem only exists in your head, Jane. Few of these monke .....

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reference to this provision, this would refer to an undertaking which was already present on the date when this provision was introduced. In any case the notification issued by the Govt. of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion which is published in the Gazette of India removed all the doubts. This notification is relevant because this was issued with reference to same package announced by the Union Cabinet of India for the development of the hil .....

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ongwith sub-section (3) of section 80IC. As noted earlier, sub section (2) is enabling provision which provides for deduction in certain kind of undertakings, i.e. new unit set up or the existing units which carries out substantial expansion during the particular window period which are given in clauses (i), (ii) & (iii) of sub section (2). The sub section (3) provides for rates of deduction. It is useful to note that clause (i) of sub section (3) provides for 100% deduction for a period of .....

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r States whereas sub clause (ii) refers to the window period in case of State of Himachal Pradesh and Uttaranchal. Now clause (ii) of sub section (3) provides for 100% deduction on such profits for five assessment years commencing with initial assessment year and thereafter 25% (or 30% where the assessee is a company) of the profits and gains. Therefore, it is absolutely clear that in case of state of Sikkim and North-Eastern states, Legislature was very clear that in case of new undertaking or .....

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in case of State of Sikkim & North-Eastern states under sub clause (i) and for the state of Himachal Pradesh & Uttaranchal under sub clause (ii) 100% for first five years and thereafter 25% for next five years. The concept of substantial expansion remains same under sub section (2) for both types of states i.e state of Sikkim and North-Eastern states and State of Himachal Pradesh and Uttranchal. If the extended benefit of substantial expansion was to be separately allowed in case of Stat .....

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ion has to be 100% for first 5 years and 25% thereafter. 34. There is a force in the contention of Ld. CIT/DR that if the interpretation contended on behalf of the assessee was to be adopted then Sub Section (4) of Section 80IC would also become redundant. Sub Section (4) clearly provides that the deduction is available to any undertaking or enterprise which is not formed by splitting or reconstruction of the business already in existence or it is not formed by transfer to new business of machin .....

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ed does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with." From the above it becomes clear that if 20% of the Machinery from the old unit was used in the new unit then such unit would not be eligible for deduction under this Section that is section 80IC. Now for carrying out substantial expansion the investment in .....

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(4) of section 80IB and section 10A and 10B. It was contended before us that since there is no restriction in carrying out of substantial expansion in the new units and as such substantial expansion can be carried out any number of times. If this interpretation is accepted then sub section (6) would be rendered otiose or meaningless because if a unit was set up on the commencement of this section and the same claims deduction @ 100% and later on every five years a substantial expansion is carri .....

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nance of law. At the cost of repetition, we would like to emphasize that no principle of interpretation can be adopted which leads to a situation where a particular part of the section becomes totally redundant. In fact though it was contended that in the present case (i.e. in case of Hycron Electronics) deduction has been claimed only of 10 years but on the date of hearing some other appeals were also listed wherein the deduction was claimed for more than 10 years adopting the same contention w .....

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sions, deduction was claimed for the 12 t h year for assessment year 2009-10 (We may clarify that reference to these cases is made because of particular contention and we are not expressing any opinion on the merits of these appeals here). Therefore, the contention of the assessee that any number of expansions are allowed is not possible in view of the restriction given in section 80IC(6). 36. The above situation as pointed by the Revenue also becomes clear if the provision of section 80IC is co .....

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rofits and gains derived from such industrial undertaking: Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assesee is a company-operative society) subject to fulfillment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the Ist day of April, 1993 and ending on the 31st day of March, [2004]: Provided .....

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nterprise referred to in sub-section (2) of section 80-IC." 37. The careful perusal of the above provision would show that before the introduction of section 80IC which is before us for consideration, the deduction to the backward states was available in terms of section 80IB(4). The third proviso makes it clear that after 31.3.2004, this deduction will be available only u/s 80IC. The sub section further makes it clear that deduction would be @ 100% for the first five years and thereafter @ .....

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next five years. 38. Further, it should be noted that sub section (6) starts with non obstante clause and therefore, in no case the deduction could be for period exceeding 10 years and in this regard we may note that even the Ld. authors in their Commentary of Income Tax Laws By Chaturvedi & Pithisaria's - Sixth Edition has expressed the same opinion. The relevant extract at pages 6351 of the commentary reads as under;- "No deduction possible for more than 10 assessment years.- Sect .....

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n clause (v) of sub section (8) of section 80IC uses the expression 'or' therefore, it can be construed that it relates to both situations separately i.e. for new unit and substantial expanded unit. We find no force in this contention. The initial assessment year has been defined and the expression 'or' has been used in respect of new units by stating 'commences operation' or 'complete substantial expansion'. Here the expression 'or' is to be read as a mut .....

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n an organization. Later on, he quits the job and starts the practice in legal profession and ultimately he is elevated as a Judge. Then in such a situation it cannot be said that initially 'A' was working in a organization and then initially he was in the profession and then elevated as a Judge. Initially can be used only once as a matter of usage of English language. Therefore, reading of the above provision clearly shows that intention of the legislature was very clear to allow 100% f .....

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toms (supra) by the Revenue is not correct because that provision was rendered under Indirect Tax Act. We find no force in these submissions. Every decision of the Hon'ble Supreme Court or for that matter of any High Court has to be seen for the ratio laid down in a particular decision and it does not matter under which particular Act such principles has been decided. No doubt the incentive provisions are required to be interpreted liberally but in case of M/s Novapan India Ltd v Collector o .....

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r of Commercial Taxes & Ors., [1992) Suppl. 1 S.C.C, 21, a Bench of this Court comprising M.N. Venkatachaliah, J. (as the learned Chief Justice then was) and S.C Agrawal, J. stated the relevant principle in the following words: "Shri Narasimhamurty again relied on certain observations in CCE v. Parle Exports (P)Ltd. [1989] 1 SCC 345, in support of strict construction of a provision concerning exemptions. There is support of judicial opinion to the view that exemptions from taxation have .....

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he language employed. It must, however, be borne in mind that absurd results of construction should be avoided." The choice between a strict and a liberal construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning is not manifest on the plain words of the statute. It the words are plain and clear and directly convey the meaning, there is not .....

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ed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of its must go to the State". The Hon'ble Supreme Court in Orissa State Warehousing Corporation's case (supra) has laid down that "While it is true that in the event of there being any doubt in the matter of interpretation of a fiscal statute, the same goes in favour of t .....

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tion is an exception to the general rule and since the same is opposed to the natural tenor of the statute, the entitlement for exemption, therefore, ought not to be read with any latitude to the tax-payer or even with a wider connotation." 41. Therefore, it becomes clear that liberal interpretation of an incentive provision is possible if there is any doubt. As we have seen above that if various sub sections of section 80IC are read carefully it leaves no doubt that deduction was meant onl .....

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ed to the deduction but assessee is simply asserting before us that there is no restriction for deduction in case of substantial expansion of new units. In our opinion, that is not enough because absence of restriction does not mean that particular deduction was allowable. 42. We also find force in the submissions of Ld. CIT-DR that if interpretation given by the assessee is to be accepted, the provision would become discriminatory for two classes of undertakings i.e. new units and old units. Be .....

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rved that main dispute is on the definition of 'initial assessment year'. The provisions of sub section (2) and sub section (3) as discussed in detail above have been totally ignored and, therefore, this decision, in our opinion, is per inquerim and cannot be followed. 44. The Ld. counsel has also relied on the decision in the case of S.R. Paryavaran Engineers Pvt Ltd (supra) of the Chandigarh Bench. The facts in that case are that assessee has claimed deduction u/s 80IB in assessment ye .....

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mply because assessee has quoted a wrong section. On the appeal filed by Revenue, the deduction was held to be allowable because substantial expansion was carried out in a unit which was already in existence as on 7.1.2003. Therefore, in our opinion, this decision does not provide any assistance to the case of the assessee. 45. The Ld. Counsel has also relied on the decision of Abhishek Bhargav AAR No. 1097 of 2011 (supra). The facts in that case are that a partnership firm namely M/s. Himachal .....

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isions of section 80IC(2)(a)(ii) if it starts commercial production before 01.04.2012. The Authority held that the assessee was entitled to the benefit of substantial expansion in terms of and to the extent provided by section 80IC of the Act if it starts commercial production in the substantially expanded unit before 01.04.2012. In this case the assesse shall be entitled to deduction of 100% of its profits upto A.Y. 2014-15 since the initial assessment year was A.Y. 2010-11 and claim of deducti .....

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e of Sintex Industries Ltd v CIT (supra). In this case the deduction u/s 80IC was allowed by the Assessing Officer but later on a revisionary order was passed u/s 263 of the Act. The Bench mainly dealt with the provision of section 263 and in view of the decision of Hon'ble Supreme Court in the case of Malabar Industries Co Ltd v CIT 243 ITR 83 (SC) held that since view taken by the Assessing Officer is also possible view, therefore, assessment order was not erroneous. In fact the Bench refe .....

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sessee. 47. The last argument was in respect of column in Form No. 10CCB. The column 25 of Form No. 10CCB reads as under:- "25 (i) Whether the undertaking or enterprise is located in an area notified by the Board for the purposes of section 80-IC :-Yes -No (ii) If yes please indicate,- a. Name of the Export Processing Zone / Integrated Infrastructure Development Centre / Industrial Growth Centre/Industrial Park/Estate/Software Technology Park/Industrial Area/Theme Park and the District/Stat .....

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in which sub-stantial expansion took place. :- (iii) Value of increase in the plant and machinery in the year of substantial expansion. :- (e) Does the undertaking or enterprise manufacture or produce any article or thing specified in the Thirteenth Schedule. :-Yes -No (If yes, please specify the article or thing) :- (f) Does the undertaking or enterprise manufacture or Produce any article or thing specified in the Fourteenth Schedule. :-Yes -No (If yes, please specify the article or thing or o .....

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A) has correctly adjudicated this issue. 49. In view of the above detailed discussion we hold that the assessee before us i.e. M/s Hycron Electronics in ITA No. 798/Chd/2012 is entitled to only 25% of deduction during the present year because the assessee has already availed the period of full deduction @ 100% in the earlier five years i.e. from assessment years 2004-05 to 2008-09. In this background, we find nothing wrong with the order of Ld. CIT(A) and we uphold the same. Accordingly, assesse .....

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; 21,84,505/- being eligible for deduction U/s 80 1C of the IT Act. 1961. 8 The Assessing officer noted that assessee has shown amount of ₹ 21,84,505/- under the head "other income" and had claimed deduction u/s 80IC of the Act. The details of other income' are as under:- Particulars Amount (Rs.) Interest received on Margin money 2,20,282/- Dividend received 10,50,047/- Foreign Exchange Fluctuation 7,99,987/- Miscellaneous Receipt 1,14,089/- Sundry Credit balances written bac .....

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ng derived from manufacturing activities. The Assessing officer rejected the said contention of the assessee in view of the ratio laid down by the Hon'bl e Supreme Court in the case of Pandian Chemical v CIT (2003)262 ITR 278 (SC) and Liberty India Ltd. Vs. CIT (2009) 317 ITR 218((SC). Accordingly, the Assessing officer disallowed a sum of ₹ 21,84,505/- and added back the same to the total taxable income of the assessee. 10. On appeal, the CIT(A) upheld the order of the Assessing offic .....

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term business has different meaning than manufacturing. Moreover as per specific provisions u/s 56 of Income Tax Act, the interest earned on securities shall be chargeable as 'income from other source'. Similarly the dividend has to be specifically charged under the head 'income from other sources' u/s 56. 6.2 The assessee has claimed an income of ₹ 7,99,987/- on account of profit on fluctuation in foreign exchange part of profits derived from manufacturing activity for the .....

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hange rate fluctuation forms part of purchase transactions and when the payment of import purchase is made in convertible foreign exchange, the rupee equivalent of import purchase is liable to vary consequent upon the fluctuation in the rate of foreign exchange between the dates when the goods are imported and the date on which the payment has been made. Thus foreign exchange flucutiaont on receipt/payment is mainly on account of difference in rate of exchange at the time of booking the transact .....

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fluctuation on foreign exchange is directly derived from manufacturing activity of industrial undertaking. Rather than establishing the nexus between profits on foreign exchange and manufacturing, assessee has been arguing that this fluctuation is on account of purchase transaction and imports. However, no evidence at any stage, establishing the above mentioned nexus, has been given by the assessee. The assessee failed to discharge primary onus of establishing the nexus between earning on foreig .....

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lish nexus between foreign exchange receipts and the manufacturing activity. Thus in absence of duly evidenced nexus between profits on foreign exchange fluctuation, and manufacturing activity of industrial undertaking, and interest, dividend, misc. receipts etc. to be specifically charged under the head 'other sources' as discussed above and not having first degree nexus with manufacturing activity, the action of the Assessing officer is upheld and this ground of assessee is dismissed.& .....

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back 13 The Tribunal relying on the decisions of the Hon'ble Supreme Court the case of Pandian Chemicals v CIT (2003) 262 ITR 278 (SC) and Liberty India Ltd v C IT (supra) held that expression 'derived from' has been used in section 80IC also, therefore, as far as interest received on margin money and interest received on other amounting to ₹ 2,85,876/- and ₹ 70,328/- are not entitled for deduction us/ 80IC of the Act. The Tribunal further observed that as far as the iss .....

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lly following the order of the Tribunal referred to above, we hold that interest received on margin money amounting to ₹ 2,20,282/- is not entitled for deduction u/s 80IC and Accordingly we uphold the order of CIT(A) to this extent. We may also observe here that the issue relating to Misc. receipts of ₹ 1,14,089/- and sundry credit balances returned back amounting to ₹ 99/-was not seriously argued and pressed before us. Accordingly, to the above extent, we uphold the order of C .....

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s of the CIT(A) that dividend has to be specificall y charged under the head "income from other sources" u/s 56 of the Act. Furthermore, in view of the decision of the Hon'ble Supreme Court in the case of Pandian Chemicals Ltd Vs. CIT (supra), and Liberty India Ltd. Vs. C IT (supra), the dividend received by the assessee has no direct nexus with the profits and gains derived from the manufacturing activity and industrial undertaking. Hence, this amount is not allowable for computat .....

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ear under consideration, the assessee had shown investments of ₹ 10,22,04,600/- as on 31.3.2011 in preferences equity shares. The Assessing officer asked the assessee to show cause as to why necessary disallowance should not be made u/s 14A of the Act. The assessee submitted a detailed reply vide its letter dated 2.1.2014 which is reproduced by the Assessing officer in the assessment order at pages 12 to 14 of the assessment order. The Assessing officer did not accept the contention of the .....

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mpt income. 16. We have considered the rival submissions and have also perused the materials available on record. It is noticed that the assessee vide its letter dated 2.1.2014 made the following submissions:- "It is submitted that the assessee had sufficient own funds during the previous year of making the investments. Further, it is pertinent to analyze the financial statements of the assessee of the year under reference. The total investments as on 31.3.2011 are rs 192.2 lacs against par .....

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t the assessee claimed that it had sufficient own funds during the previous year for making the investments. The assessee also clarified that total investments as on 31.3.2011 were ₹ 102.2 lakhs against the partners funds of ₹ 121.74 lakhs. Thus, the investments were covered by partners funds which were interest free funds and have no nexus with the borrowed funds and the investments. It appears that both the authorities below have not considered the above contentions of the assessee .....

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ht Enterprises Pvt. Ltd. Vs. C IT in ITA No. 624 of 2013 dated 24.7.2015 (O&M), wherein the Hon'ble High Court has observed as under:- "16. As we have noted earlier, the funds / reserves of the appellant were sufficient to cover the interest free advances made by it of ₹ 10.29 crores to its sister company. We are entirely in agreement with the judgement of the Bombay High Court in Commissioner of Income Tax Vs. Reliance Utilities & Power Ltd (2009) 313 ITR 340, Para-10, th .....

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e Delhi High Court in the case of Cheminvest Ltd v CIT in ITA No. 749/2014 dated 2.9.2015 held as under;- "23. In this context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression "does not form part of the total income" in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure inc .....

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