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Shri Manjit Singh Bhatia, KBH Consultants & Engineers Optus International Versus The ITO, Ward 2 (3) , Chandigarh

2016 (5) TMI 1256 - ITAT CHANDIGARH

Disallowance of benefit of substantial expansion under section 80IC - CIT(A) confirming the deduction under section 80IC of the Act to the extent of 25% as against 100% - Held that:- 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. See Hycron Electronics V ITO. [2015 (6) TMI 725 - ITAT CHANDIGARH ] - Decided against assessee. - ITA No. 185/CHD/2016 - Dated:- 26-5-2016 - Sh .....

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Act to the extent of 25% as against 100%. 2. Briefly the facts of the case are that assessee is engaged in manufacturing of DVD players, SMPs Remotes, Lens and other electronic components. The assessee started production during financial year 2004-05 and claimed deduction under section 80IC of the Act for the first time in assessment year 2005-06 and claimed deduction @ 100% for the initial five assessment years starting with assessment year 2005-06. In the assessment year under appeal i.e. 2010 .....

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ricted to 25% only. 3. The assessee alongwith written submission before ld. CIT(Appeals) enclosed order of the Tribunal in ITA 798/CHD/2012 in the case of Hycron Electronics V ITO. It was admitted by the ld. counsel for the assessee that issue of deduction under section 80IC of the Act has been decided against the assessee. 4. The ld. CIT(Appeals) following the order of the Tribunal in the case of Hycron Electronics dismissed this ground of appeal of the assessee. 5. The ld. counsel for the asse .....

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. First we shall take the appeal of the assessee in ITA No. 798/Chd/2012 in the case of Hycron Electronics Vs. ITO. 4. In this appeal the assessee has raised the following grounds of appeal:- • Under the facts and circumstances of the case and in law, the order dated 11.06.2012 passed by the Ld. CIT(Appeals), Shimla u/s 250(6) of the Income Tax Act, 1961 is bad in law, illegal, without jurisdiction and void. • Under the facts and circumstances of the case and in law, Ld. CIT(Appeals), .....

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e undertaken during the 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. • Upholding that once an 'initial assessment .....

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hal Pradesh. 5. The brief facts of the case are that assessee firm was engaged in the business of manufacturing assembly and sub- assembly of electronic energy meters and allied products. The unit started commercial production from 17.1.2004. The assessee had claimed deduction u/s 80IC on the products of this unit @ 100% from assessment years 2004-05 to 2008-09. Subsequently, during financial year 2008-09, the assessee firm undertook substantial expansion by way of addition to plant and machiner .....

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% deduction from the eligible business profits from assessment years 2009-10 to 2013-14. Therefore, assessee was requested to justify the claim of 100% deduction even from assessment year 2009-10. 7. In response the detailed written reply was furnished which has been extracted by Assessing Officer and reads as under:- " Reference my appearance in the above said case wherein a query was raised regarding claim of assessee u/s 80IC. It was pointed out that substantial expansion is applicable t .....

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f the I.T. Act in the assessment year 2004-05. The necessary deduction was also claimed in the subsequent assessment yeas i.e. 2005-06, 2006-07, 2007-08 and 2008-09. The assessment for these years were decided under scrutiny and orders were passed u/s 143(3) of the Income Tax Act 1961. In the financial year 2008-09, the assessee unit came for substantial expansion as per the provision of section 80IC of the I.T. Act. In this regard, it may be submitted that the section 80IC was inserted by the F .....

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e 100% of such profits and gains for five assessment years connecting WITH THE INITIAL ASSESSMENT YEAR and thereafter 25% (or 30% where the assessee is a company) of the profits and gains. As per sub-section (6) of Section 80IC, no deduction shall be allowed to any Undertaking or Enterprise UNDER THIS SECTION I.E. 80-IC, where the total period of deduction INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION of under the second proviso to sub-section (4) of section 80-IB or under section 10-C .....

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on in the assessment year 2009-10 which is the year under assessment. Thus this the first year of claiming 100% deduction for substantial expansion as per provisions of section 80 IC. The undertaking is thus entitled to claim 100% deduction u/s 80IC of the I.T. Act for the next 5 assessment years provided that the overall period of claim of deduction does not exceed 10 assessment years. As per provisions of section 80IC, 100% deduction is available for 5 assessment years commencing with THE INIT .....

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se in the case of its starting manufacturing between the period 07.01.2003 and ending before 01.04.2012 and in this case the initial assessment year would be the year when it starts its production. Similarly in the case of substantial expansion, the initial assessment year would start from the year when substantial expansion is completed. In such cases, the assesee would not be entitled for the claim of any deduction beyond a period of 10 assessment years as it had already availed 100% deduction .....

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Central Excise Authorities. He concluded that on the basis of these two Circulars it is very clear that substantial expansion could be carried only by the existing units. He also referred to the provisions of clause (v) of sub section (8) of section 80IC which defines initial assessment year. According to him, this section makes it clear that there could be only one initial assessment year for claiming of benefit u/s 80IC. He also referred to sub-section (6) of section 80IC which prescribed the .....

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on or after the introduction of the scheme i.e. 07.01.200. Keeping the above discussion in mind, the assessee's claim of substantial expansion and on that basis, reckoning the Asst. Year 2009-10 to be the initial Asst. Year is denied. In view of this Asst. Year 2004-05, relating to the previous year in which the assessee firm had commenced its business operation / activity on the basis of setting up of its new industrial undertaking is held to be the initial Asst. Year and that of Asst. Year .....

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nd definition of initial assessment year, it becomes amply clear that assessee was eligible for 100% deduction from assessment year 2009-10. In any case there was no provision restricting the deduction of 100% only to 5 years except sub-section (6) of section 80IC which only provides that total period of deduction should not exceed 10 years. It was further contended that benefit of deduction u/s 80IC was available not only to pre-existing unit on the day of introduction of this section which und .....

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of deduction shall be available to all enterprises which undertake substantial expansion. 10. It was further pointed out that clause (25)(ii)(d) of Form No. 10CCB which states "If the existing business had undertaken substantial expansion, please specify......" clearly shows that Form prescribed by the Legislature requires information on whether the existing undertaking has undertaken substantial expansion. In any case when the provision was very clear the process of interpretation co .....

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provision should be liberally construed so as to advance the exemption provision. In this regard reliance was placed on the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd 196 ITR 188 (SC), CIT v Kullu Valley Transport Co. P. Ltd. 77 ITR 518 (SC) and Mysore Minerals Ltd v CIT 239 ITR 775 (SC). 12. It was also contended that reference could not be made to the Circular issued by Central Excise Authorities because the language used in the Central Excise Act was different from .....

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section 80IC to new units commencing manufacturing on or after 7 January of 2003 or to the existing units involving substantial expansion after that date eligible for such incentive. The Ld. CIT(A) thereafter referred to para No. 49 of Circular No. 7/2003 issued by the Board on 5.9.2003. According to her the plain reading of section 80IC along with circular made it abundantly clear that Special provision of Section 80IC were applicable to two kinds of undertaking or enterprises which are as und .....

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ng or enterprise which manufactures or produces any article or thing, not being any article or thing specified in the thirteenth Schedule or which manufactures or produces any article or thing specified in the Fourteenth Schedule, which means an already existing (prior to 7th day of Jan., 2003) undertaking or enterprise which was manufacturing or producing any articles or thing prior to the 7th day of Jay., 2003 and which undertakes substantial expansion during the period beginning on the 7day o .....

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before the 1srt day of April, 2012 in the State of Himachal Pradesh as per the conditions stipulated in section 80IC. However, deduction u/s 80IC is also available to the new undertakings or enterprises which undertake the manufacture or production of the specified articles or thing during the period beginning on the 7th day of Jan., 2003 and ending before the 1st day of April, 2012 in the State of Himachal Pradesh. Thus the law has been enacted in such a fashion that the pre-existing undertaki .....

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r deduction u/s 80IC. These are two distinct categories with distinct conditions of eligibility laid down for deduction under u/s 80IC. Since the pre-existing units cannot possibly crossover into the zone of new undertakings or enterprises, the new undertakings also obviously cannot be allowed to cross over into the zone meant for the old, pre-existing undertakings. The rules of the game have to be the same for all the participants or stakeholders. The use of the word "OR" in clause (a .....

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xpansion has the effect of creating a great anomaly, because this interpretation will result in a disadvantageous situation for the pre-existing undertakings. While the newly established undertakings shall be in a position to avail to 100% deduction for a continuous period of 10 years if they carry out substantial expansion after five years of the commencement of manufacture or production; the pre-existing undertakings shall be able to avail of 100% deduction only for a period of five years afte .....

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e two different streams of taxation with their own independent laws, and therefore, Circular No. 49 of 2003 issued by the Excise Authorities could not be relied. In this regard she observed that explanation to Finance Act 2003 makes it absolutely clear that these provisions were being inserted on the basis of a package announced by Union Cabinet which consisted of fiscal and non- fiscal coverage for special category of states of Sikkam, Himachal Pradesh, Uttranchal and North-Eastern states in or .....

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clause 25 (ii)(d) of Form No. 10CCB and pointed out that even the Form does not help the assessee's case. She observed that in fact clause 25 of Form 10CCB helps the Revenue's point of view that provisions of section 80IC were separately applicable to two types of businesses i.e. new business and existing business which has undergone substantial expansion. Finally, it was concluded vide para 4.11 as under:- "4.11 In view of discussion above it is evident that the provisions of secti .....

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ant regarding the rule of liberal interpretation or regarding the harmonious construction of provisions are intended to give rise to unnecessary controversy." 18. On the basis of above analysis, the action of the Assessing Officer was upheld. 19. Before us Ld. Counsel for the assessee Shri Pavan Ved led the arguments because many other counsels were also present who were representing other group cases. Shri Rakesh Gupta who was representing many appeals particularly in ITA No. 866 to 869/Ch .....

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ection have been fulfilled. • There is no restriction or limitation u/s 80IC that only Industrial unit which had come into being before the commencement of this section would be eligible for the benefit of substantial expansion. Therefore, the Assessing Officer should have adopted a Rule of Interpretation which was beneficial to the assessee while interpreting these incentive provisions. According to him assessee could make any number of expansions and claim deduction for more than 10 years .....

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der Central Excise Act by the Excise Authorities is also not proper because this Circular is not issued u/s 119 of the Income Tax Act. Further this circular refers to the expansion of capacity by 25% whereas under the Income tax Act what is required is 50% increase in investment under the head 'plant and machinery' • In any case, Circulars are not binding on the Courts and Circular and same should not be considered in interpretation of provisions. In this regard reliance was placed .....

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the present case on interpretation of the provisions of the Act. Secondly, there was certain inconsistency in the notification because while defining the existing industrial unit, it was stated that same would mean as unit existing on 7.1.2003 but when the word 'substantial expansion' was defined, the words used was of an 'industrial unit' and not an 'existing industrial unit'. Thirdly, notification cannot override the section which provides the legislature intent. Fourt .....

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ording to CBDT, both situations may exist in a particular case. • A reference was made to clause (v) of sub-section (8) of section 80IC which defines 'initial assessment' year and it was pointed out that initial assessment year was with reference to both manufacturer and substantial expansion because the word 'or' has been used between the two expression which clearly shows that it is a disjointed sentence and refers to both situations. • Reliance was also placed on the .....

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d on decision of Ahmedabad Bench of the Tribunal in the case of Sintex Industries Ltd in ITA No. 310/Ahd/2014. • A reference was also made to sub section (6) to section 80-IC which prescribes over all limits of deduction for 10 years. It was contended that this limit was with reference to the time period and not to the rate of deduction. • Reliance was also placed on the decision of Chandigarh Bench of the Tribunal in the case of DCIT Chandigarh Vs. S.K. Paryavaran Engineers (P) Ltd., .....

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stly, it was contended that incentive provision should be construed liberally in view of the decision of Hon'ble Supreme Court in the case of Bajaj Tempo Ltd v CIT 196 ITR 188 (SC). 20. On the other hand Ld. CIT-DR, Dr. Amarveer Singh made detailed submissions and has also filed written submissions. The contentions of the Revenue can be summarized as under:- i) The new incentives scheme for various hilly states was cleared by the Union Cabinet and comprised of various incentives in the form .....

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he scheme cleared by the Union Cabinet, therefore, it is important to consider all the material emanating from this scheme i.e. circulars issued by CBDT, circulars issued by the Central Excise Authorities as well as the subsidy scheme issued by Ministry of Commerce and Industry, Department of Industrial Policy and Promotion, Govt. of India. The word 'existing unit' is not mentioned in section 80IC but this can be ascertained easily if the section is properly construed. In any case, the C .....

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ns to manufacture or produce an article or thing or undertake substantial expansion with reference to the State of Himachal Pradesh between 7 t h day of January 2003 and ending on 31 s t day of March, 2012. This itself shows that substantial expansion could have been carried out only on or after 7.1.2003 by an industrial undertaking or enterprise which existed prior to 7.1.2003. iii) It was submitted that deduction provided u/s 80IC in fact was extension of the provision already existing u/s 80I .....

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y) and all the profits and gains derived from such industrial undertaking. It was pointed out that in the case of deduction u/s 80IB(4), there was a second proviso in the section by which it is clarified that the 100% deduction was available for 10 assessment years in case such undertakings which were located in North-Eastern region. Similar provision is made u/s 80IC(3)(ii). Thus, it is clear that provisions of section 80IC(3) is only an extension of section 80IB(4) and through section 80IC, on .....

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to the state of Himachal Pradesh and state of Uttaranchal whereas section 80IC(a)(iii) and (b)(iii) are applicable to the North- Eastern states and when this is compared with the rate of deduction provided under sub section (3) of section 80IC, it would be noted that under sub section 3(ii) the rate has been given @ 100% for five years for the States of Himachal Pradesh and Uttaranchal and thereafter 25% for next 5 years whereas under sub section 3(i) the rate has been given at 100% in the North .....

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sion used in section 80IC(3)(ii) thereafter would become redundant in the case of State of Himachal Pradesh. v) A reference was made to the definition of the 'initial assessment year' u/s 80IC(8)(v). It was pointed out that as per this section there could be only one initial assessment year for the purpose of section 80IC. This become very clear because the Legislature has used exclusionary word "OR' before the words 'complete substantial expansion' therefore, initial as .....

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d for a claim of deduction then there cannot be second initial assessment year for claim under the same section by the same undertaking. It was contended that if the decision by the Delhi Bench of the Tribunal in the case of Triputi LPG Industries Limited Vs. DCIT (supra) is accepted; the fact that there was no bar on carrying out the number of substantial expansions and every year of substantial expansion would become initial assessment year. If, this theory is accepted and going by the same an .....

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he restriction provided in sub section (4) of section 80IC because such substantial expansion would amount to reconstruction of the business. vii) If the interpretation adopted by the assessee was to be followed, the same would result in discrimination between the new units and the existing units. The new units would become eligible for 100% deduction for the first five years then again for 100% deduction for another set of five years on carrying out the substantial expansion whereas the existin .....

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new undertaking and secondly in the case of an existing business which undertakes substantial expansion. ix) It was contended that assessee has raised the contention that condition on carrying out substantial expansion was during the widow period. However if this interpretation is accepted then the consequences would be that in the guise of expansion by investing a very small sum, the assessee would claim deduction of 100% for whole of the profits of such expanded undertaking which would mean th .....

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ra). It was pointed out that Supreme Court in another case of M/s Novapan India Ltd v Collector of Central Excise and Customs, Appeal (Civil) 3356 of 1984 has clearly held that it is not possible to agree with the submissions that if there was conflict of decision, then benefit of such ambiguity should go to the assessee. It was also vehemently contended that all the decisions of various High Courts and Supreme Court are unanimous in holding that Board has power to issue of Circular u/s 119 of t .....

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Karnataka High Court in the case of CIT Vs. M.S. Vaidya 224 ITR 186 (Karnataka). xi) A reference was also made to the decision relied on behalf of the assessee of the Chandigarh bench of the Tribunal in the case of DCIT Chandigarh Vs. S.K. Paryavaran Engineers (P) Ltd. (supra). It was pointed out that decision is totally distinguishable because in that case assessee claimed deduction u/s 80IB in 1999-2000 for the first time. Later on, after five years the assessee claimed benefit @ 30%. The ass .....

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assessee are totally distinguishable on their own facts. 21. In the rejoinder, the submissions made by Ld. Shri Pavan Ved can be summarized as under:- a) It was submitted that the expression 'initial assessment year' has been defined in section 80IC(8)(v) which clearly provides that initial assessment year for a unit going for the substantial expansion is the year in which such expansion is completed and, therefore, in the case of the assessee, assessment year 2009-10 would be the initi .....

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on also 100% profit would be eligible. There cannot be a theory of segregation of profits into profits relatable to existing units and profits related of expanded units. Further, since substantial expansion has no relationship with capacity and it is related to investment, therefore, it was not practically possible to work out separately profits related to substantial expansion because though investment may be 50% but the same may lead to increase of capacity to say 10% or other percentage. c) T .....

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herefore, section 80IC should be interpreted to give benefit to the assessee on the basis of substantial expansion. e) The decision in the case of M/s Novapan India Ltd v Collector of Central Excise and Customs (supra) was related to an exemption and therefore, cannot be used while interpreting an incentive provision. In case of incentive provision, it is basically a promise by the Legislature that you make this investment we well give you this benefit" and therefore, can be in the form of .....

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ve considered the rival submissions including written submissions in the light of material on record, as well as judgments cited by the parties. Before we consider the relevant provisions which are required to be interpreted, it will be useful 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 ab .....

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o the interpretation of the fiscal statutes being the focal point of consideration in these appeals. Lord Halsbury as early as 1901, in Cooke v. Charles A. Vogeler Company [1901] AC 102 (HL) stated the law in the manner following: "a 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 Leg .....

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ise, or whether it leads to consequences just or unjust, beneficial or mischievous." The oft-quoted observations of Rowlattt J. in the case of Cape Brandy Syndicate v. IRC [1921] 1 KB 64 ought also to be noticed at this juncture. The learned 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 b .....

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ot;If the meaning of the provision is reasonably clear, the courts have no jurisdiction to mitigate such harshness." The decision of this court in Keshavji Ravji and Co. v. CIT[1990] 183 ITR 1 also lends concurrence to the views expressed 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 app .....

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on." Be it noted that individual cases of hardship and injustice do not and cannot have any bearing for rejecting the natural construction by attributing normal meaning to the words used since "hard cases do not make bad laws". 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 fin .....

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gislature, the court may modify the language used by the legislature or even do some violence to it, so as to achieve the obvious intention of the legislature and produce a rational construction. Luke v. IRC [1963] Hon'ble Apex Court 557; [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 e .....

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a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or to show what the section is dealing with. It cannot control the interpretation of the words 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 ma .....

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or which a particular provision is enacted; for this purpose, even the speech of the Finance Minister, while introducing the particular fiscal legislation could be looked into. The Circulars issued by the Central Board of Direct Taxes are not 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 Hi .....

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oposition made by the Ld. Counsel for the assessee. In that case the question was whether a circular issued by the Department which is generally binding on the authorities would take precedence over the interpretation made by the Supreme Court 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 .....

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court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked at form another angel, a circular which is contrary to the statutory provisions has really no existence in law." 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, .....

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the return was 31.3.1997 but the return was filed late on 8 t h September 1997. The assessee sought condonation of delay by an application filed on 21 s t Sept, 1998 by invoking section 119(2)(b) of the Act which was initially rejected. However, 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 ͅ .....

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ether the condition to deny interest on refund amount due to an assessee under the Act, while admitting an application to condone the delay in making a claim for belated refund under section 237 of the Act, as contained in Instruction No. 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 .....

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the Court and therefore, in our opinion, this judgement does not support the proposition that circular cannot be considered for the purpose of interpreting the particular provision. 27. It will be useful to state another very well settled 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 overal .....

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rtaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits 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 whic .....

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d in accordance with the scheme framed and notified by the Central Government in this regard, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated 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 Centra .....

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ard, in any of the North- Eastern States; (b) which has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces 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- • on the 23rd day of December, 2002 and ending before the 1st day of .....

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and (iii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for ten assessment years commencing with the initial assessment year; • in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (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 assess .....

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the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.- The provisions of Explanations 1 and 2 to sub-section (3) of 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 inc .....

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under section 10C, as the case may be, exceeds the assessment years. (7) The provisions contained in sub-section (5) and sub-sections(7) to (12) of section 80-IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section. (8) For the purposes of this section,- • "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; &bull .....

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on in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; • "Initial assessment year" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufactures or produce articles or things, or commences operation or completes substantial expansion; • "Integrated Infrastructure Development Centre" means such centres, which the Board, may, by notification in the Off .....

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investment in the plant and machinery by at least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken; (x) "Theme Park" means 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 an .....

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hich have been referred to in clause (i), (ii) &(iii) of this sub section. The contention on behalf of the assessee is that since deduction is available to the undertaking which undertakes substantial expansion and since there is no restriction in this sub section 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 ex .....

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This would naturally refer to the undertaking which were already existing. If it is read the way the Ld. counsel of the assessee would like us to read then the provision would become unworkable because if there is an undertaking which is established during the window 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 expressi .....

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eduction under this section. 30. At this stage, it can be said that section has some confusion and some effort is required to understand the correct intention of the Legislature by keeping various principles of interpretation. Therefore, various principles of interpretation 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 .....

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akings in the States of Himachal Pradesh, Sikkim, Uttaranchal and North-Eastern States. 49.1 The Union Cabinet has announced a package of Fiscal and non-fiscal concessions for the special category States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States, 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 .....

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all be available to such undertakings or enterprises which manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule and which commence operation in any Export Processing Zone, or Integrated 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 rules prescribed in this regard. Similar ded .....

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t years, and thereafter twenty-five per cent (thirty per cent for companies ) for the next five assessment years. 49.4 The section also provides that no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction 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 al .....

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r the purposes of availing deduction under this section. Consequent to theses amendments, the provisions of section 10C and sub-section(4) of section 80-IB have been made inoperative in respect of the undertakings or enterprises in the State of Himachal Pradesh or in North-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 y .....

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rtaking or enterprises and does not mention any particular date for carrying out substantial expansion. We find no merit in this contention. The word 'existing is defined in the dictionaries are as under:- 32. Black Law Dictionary - 6th Edition:- Exist : To live, 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 .....

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ce. They can't exist on the money he's earning The above definition clearly shows that 'exist' would refer to something which is in force presently. 'Exist' would generally and in common sense refers to something which is already there. With 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, De .....

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; Thus the definition given above makes it clear that existing Industrial Unit would mean an unit which existed on 7.1.2003. 33. Even if the above controversy is ignored regarding existing unit, the intention of the Legislature become absolutely clear when sub section (2) is read alongwith 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 o .....

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in case of State of Sikkim, North-Eastern States whereas sub clause (ii) refers to the window period in case of State of Himachal Pradesh and State of Uttaranchal. Similarly, sub clause (i) & (iii) of clause (b) refers to window period in case of State of Sikkim and North-Easter 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 yea .....

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st five years and thereafter it was only 25%. If the Legislature wanted to extend the benefit in the case of substantial expansion separately then the rate of deduction in the clause (i) & (ii) of sub section (3) would not have been different i.e. 100% for whole of the 10 years 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 .....

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he provision cannot be interpreted in such a way that part of the section becomes redundant or otiose. Therefore, whatever doubts may be there in sub section (2) when it is read with sub section (3), those doubts are totally removed and it become absolutely clear that rate of deduction 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 Se .....

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ub Section (3) of Section 80 IA reads as under: "Explanation 2- Where in the case of an [undertaking] , any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred 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 .....

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e assessee is not possible because Section 80IC(4) would become redundant and such an interpretation is not possible. 35. Further, sub section (6) provides that in no case the total period of deduction could exceed the period of 10 years including deduction availed under sub section (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 ou .....

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pansion is carried out. If this interpretation is adopted then deduction would become almost perceptual as long as the assessee has carried out substantial expansion but in that case sub section (6) would loose its meaning. Such an unlimited period of deduction would not be in consonance 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 fa .....

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ee had commenced the operation on 8.5.1997 and claimed deduction u/s 80IB from assessment years 1998-99 to 2005-06. Later on, substantial expansion was carried out in assessment year 2005- 06 and on the basis of the contention that assessee is allowed to carry out any number of expansions, 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 .....

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ed in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning 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 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 c .....

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sment years, and the total period of deduction shall in such a case not exceed ten assessment years: Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise 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 deduct .....

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tion would be @ 100% for all the 10 years. Thus, even in the earlier provision only in case of North-Easter states, the deduction of 100% was allowable for 10 years whereas in the case of states of Himachal Pradesh, the deduction was allowable @ 100% for first five years and 25% for 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 .....

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total period of deduction inclusive of the period of deduction - under section 80-IC, or - under the second proviso to section 80-IB(4) or - under section 10C as the case may be, exceeds 10 assessment years." 39. Lastly, it was contended that initial assessment year as defined in 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 n .....

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bstantial expansion of existing unit. In any case the word 'initial' cannot be used twice by referring to series of events. This can be understood with a very simple example. Let us say a person 'A' passes out his examination of LLB and get employed as Legal Officer in 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 .....

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new units or the existing units where substantial expansion was carried out. 40. It has also been contended that incentive provision should be construed liberally. Further, it was contended with reference to the decision of M/s Novapan India Ltd vs Collector of Central Excise and Customs (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 .....

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ded to the Exemption Notification, the benefit of such ambiguity should go to the assessee manufacturer and the entry must be construed as taking in the MFPBs as well. It is not possible to agree with this submission. In Mangalore Chemicals& Fertilizers Ltd.. v. Deputy Commissioner 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 .....

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emption has to establish his case. Indeed, in the very case of Parle Exports (P) Ltd. relied upon by Shri Narasimhamurthy, it was observed. "While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided no violence is done to the 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 .....

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s the correct view of law. The principle that in case of ambiguity, a taxing statute should be construed in favour of the assessee - assuming that the said principle is good and sound- does not apply to the construction of an exception or an exempting provision; they have to be construed 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 i .....

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ich the legislature thought fit to omit. In the present context, there is no doubt as to the meaning of the words used in the section by reason of the language used, neither there is any difficulty in ascertaining the statutory intent. Incidentally, it cannot but be said that an exemption 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 w .....

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ion much less liberal interpretation to section 80IC when the reading of whole section makes the provision very clear. As observed in case of M/s Novapan India Ltd v Collector of Central Excise and Customs (supra) the burden was on the assessee to show under which clause he was entitled 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 restrict .....

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substantial expansion. Such discriminatory intention cannot be imputed to the Legislature. 43. Before us, reliance was also placed on the decision of Delhi Bench of the Tribunal in the case of Triputi LPG Industries Limited Vs. DCIT(supra). In this decision, the Bench has simply observed 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 dec .....

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p; 2005-06 and claimed deduction at the rate of 100% on the basis of such substantial expansion in assessment year 2006-07. However, the deduction was wrongly claimed u/s 80IB instead of section 80IC. The CIT(A) allowed the deduction by observing that deduction could not be denied simply 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. .....

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onal manufacturing facility by undertaking substantial expansion sought advance ruling on the issue whether the introduction of new partner would be treated as reconstruction of the existing business or the firm will be entitled to the benefit of substantial expansion as per the provisions 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 .....

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to deduction of 100% of its profit even after A.Y. 2014-15 i.e. for 2 more years beyond A.Y. 2014- 15 is left open and not decided by the AAR. Therefore this decision is totally distinguishable and does not help the case of the assessee. 46. The last decision relied on was in the case 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 prov .....

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le view. Since we have already discussed the decision of Triputi LPG Industries Limited Vs. DCIT (supra) and found that all the provisions of the section were not discussed in that section and that is per inquerim, therefore, in our opinion, this order does not help the case of the assessee. 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 Boa .....

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r manufacture of article or thing. :- (d) If the existing business has undertaken substantial expansion, please specify,- :- (i) The date of substantial expansion (ii) The total book value of plant and machinery (before taking depreciation in any year)as on first day of the previous year 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 artic .....

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