TMI Blog2016 (8) TMI 734X X X X Extracts X X X X X X X X Extracts X X X X ..... against the order of the ld CIT (A), Shimla, HP dated 12.02.2006 for the Assessment year 2011-12. 2. The assessee has raised the following grounds of appeal:- 1. That the order of the Learned Commissioner of Income Tax (Appeals), Shimla is defective both in law and facts of the case. 2. That the Learned Commissioner of Income Tax (Appeals). Chandigarh is unjustified upholding the order of the Ld. Assessing Officer regarding restricting the claim deduction us 80IC to 25% as against 100% claimed by the appellant being the n assessment year on the basis of substantial expansion done during the FY 2010-11 fulfilling the requisite conditions u/s 801C of IT. Act. 1961. This disallowance is uncalled for and deserves to be deleted. 3. That the Learned Commissioner of Income Tax (Appeals). Chandigarh is unjustified in upholding the order of the Ld. Assessing Officer concluding that the benefit of substantial expansion is available only to the pre-existing units i.e. the units that existed and were operational as on 07-01-2003 and not to the appellant which came in existence after 07-01-2003 which is discriminatory and unjustified as the section does not specify so that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its holding that the assessee is eligible for deduction for first five year @ 100 % and subsequently during holiday period @ 25 % of the profit derived from industrial undertaking. The matter was carried before the ld CIT(A), who in turn following the decision of the coordinate bench of ITAT in case of Hycron Electronics Vs. ITO in ITA No. 798/Chd/2012 has dismissed the claim of the assessee for 100% deduction. Therefore assessee is in appeal before us. 5. Before us both the parties agreed that now the issue is squarely covered against the assessee in view of the above decision of the coordinate bench. 6. We have carefully considered the rival contentions and also perused the decision of the coordinate bench in case of Hycron Electronics Vs. ITO, wherein the coordinate bench in para 22 to 49 has held as under:- 22. We have 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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Distillery Co. Ltd. v. The King [1946] Hon'ble Apex Court 119; [1945] 2 All ER 499. Lord Thankerton also in a manner similar in IRC v. Ross and Coulter (Bladnoch Distillery Co. Ltd. [1984] 1 All ER 616 at page 625 observe: 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 appealed 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, ambivalent and do not manifest the intention of the Legislature... Artificial and unduly latitudinarian rules of construction, which with their general tendency to give the taxpayer the breaks , are out of place where the legislation ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acie 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) and observations contained in the head note reads as under:- The legislative history of a fiscal statute could be traced and considered to understand its scope. The courts are permitted to travel beyond the words used in a statute, to find out the purpose for 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 High Court in the case of Dinakar Ullal Vs. CIT (supra) and decision of H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... last date of filing the return was 31.3.1997 but the return was filed late on 8th September 1997. The assessee sought condonation of delay by an application filed on 21st 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 ₹ 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 26th Oct 1993. Therefore, question before the Court was whether these instructions were contrary to the provision of section 244A of the Act which provided for payment of interest on refunds. This becomes absolutely clear from the question framed by Hon'ble Court which is contained at placitum 6 and reads as under:- (i) Whether 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 se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the 1st day of April, [2007], 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 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 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 Development Centre or Industrial Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Act, 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 the second proviso to sub-section (4) of section 80-IB or 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,- (i) Industrial Area means such areas, which the Board, may, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any article or thing specified in Schedule xiii and also undertakes substantial expansion. These deductions were available in different states during different window periods which 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 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 which were already existing and began the manufacture before the window period mentioned in the sub section. The last line of the sub section reads and undertakes substantial expansion during the period beginning........ . This would naturally refer to the undertaking which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 least 50% of the book value of the 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. 49.2 The section provides that the deduction shall 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 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- East ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 monkeys still exist in the wild. On his retirement the post will cease to exist. The charity exists to support victims of crime. 2- (on sth) to live, especially in a difficult situation or with very little money: We existed on a diet of rice. 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 under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure was very clear that in case of new undertaking or in case of substantial expanded undertaking deduction is to be allowed @ 100% for whole of the ten years whereas in case of State of Himachal Pradesh and Uttaranchal the deduction was to be allowed @ 100% only for first 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. 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 State of Himachal Pradesh and State of Uttaranchal, then meaning of substantial expansion as given under sub section (2) which is same for the state of Sikkim an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tended 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 carried out then according to the interpretation canvassed on behalf of the assessee, such unit would again become entitled to 100% deduction for another five years and further block of five years every time substantial expansion 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 fact though it was contended that in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be hundred per cent of profits and gains for a period of ten assessment 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 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 @ 25%. Further, the first proviso makes it clear that deduction will not exceed 10 consecutive assessment years. The second proviso further makes it clear that in the case of states of North-Eastern regions, the deduction would be @ 100% for all the 10 years. Thus, even in the earlier provision only in case of North-Easter states, the deduction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly 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% for first five years in case of units situated in the State of Himachal Pradesh (since all the cases before us are situated in the State of Himachal Pradesh) and thereafter 25% deduction for another five years on the 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 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 of Central Excise and Cus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xception 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 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 the assessee, but the fact remains and the law is well-settled on this score that in the matter of interpretation of the taxing statutes the law courts would not be justified in introducing some other expressions which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 100% for five years and then deduction was claimed @ 30% on the profits in the next year. The assessee undertook substantial expansion in financial years 2004-05 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 7.1.2003. 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 Power Products was formed on 23.05.2009. The firm commenced commercial production in March, 2010. Shri Abhishek Bhargav while planning to join the firm as partner by acquiring 20% share of profit and enhancing additional manufacturing facility by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/State in which located :-------------------- (b) Khasra No. of the undertaking or enterprise :-------------------- (Also indicate the Board s Notification No. ) (c) If the eligible business is new, please give the date of commencement of production or 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 unde ..... 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