TMI Blog2017 (12) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ng or commences operation and for a “Unit”, which completes substantial expansion, Initial Assessment Year means Assessment Year relevant to the previous year, in which it completes substantial expansion. This very important aspect of the matter has been completely overlooked by the Assessment Officer as well as the Appellate Authority. Therefore, the conclusion arrived at by all the authorities below, that new industrial Units cannot carry out substantial expansion to claim benefits envisaged under Section 80 IC is perverse and not sustainable in law. Thus held (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto 1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. (b) Such of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 80-IC of the Income Tax Act. Also, if so, then for what period. 2. Since it is a legal issue, by consent, only brief facts of ITA No.20 of 2015, titled as M/s Stovekraft India v. Commissioner of Income Tax, are being referred to. 3. Appellant M/s Stovekraft India (hereinafter referred to as the assessee) started its business activity/came into operation with effect from 6.1.2005 and treating the Financial Year 2005-2006 (Assessment Year 2006- 2007), as initial assessment year, claimed deduction on profits @ 100% under Section 80-IC of the Income Tax Act, 1961 (hereinafter referred to as the Act). Sometime in the Financial Year 2009-2010, the assessee carried out substantial expansion of the Unit and by treating the said Financial Year to be the initial assessment year , further claimed deduction @ 100%, instead of 25%, under Section 80-IC of the Act. 4. We need not deal with the factual aspect any further, save and except that the assessee s contention of further claim of deduction @ 100% with effect from Financial Year 2009-2010 after undertaking substantial expansion , so carried out in the year 2009-2010, did not find favour with the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t benefit of deduction under Section 80IC @100% of profit was not available to units set up after 7.1.2003, on undertaking substantial expansion from the year of completion of substantial expansion? ii) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in holding that units set up after 7.1.2003 would not be entitled to enlarged deduction under Section 80IC of the Act @100% of profit, even on undertaking substantial expansion within the specified period? iii) Whether on the facts and in the circumstances of the case, the Tribunal erred in disallowing the benefit of substantial expansion under Section 80IC to the units that came into existence after 7.1.2003 by stating that initial assessment year cannot be re-fixed for such units? iv) Whether on the facts and in the circumstances of the case, the Tribunal erred in law in not following the decision of the coordinate benches of the Tribunal, without referring the matter to the larger bench? 12. At this juncture, we deem it appropriate to deal with the relevant statutory provisions. 13. Chapter-VI-A, Part-C of the Act deals with deductions in respect of certain income. 14. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le 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 operation 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 before the 1st day of April, 2007, in any of the North-Eastern States. (3) The deduction referred to in sub-section (1) shall be (i) in the case of any undertaking or enterprise referred to in sub-clauses (i) and (iii) of clause (a) or sub-clauses (i) 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; (ii) in the case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura; (ix) substantial expansion means increase in the 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; (Emphasis supplied) 18. The Section applies to an undertaking or an enterprise. What is an undertaking or an enterprise (already referred to as Unit) is not defined under the Section/Act and we need not dwell thereupon, for it is not an issue before us. However, what is of importance is the stipulation under sub-clause (ii) of clause (b) of sub-section 2 of Section 80-IC, insofar as State of Himachal Pradesh is concerned. If between 7.1.2003 and 1.4.2012, a Unit has begun or begins to manufacture or produce any article or thing, specified in the Fourteenth Schedule or commences any operation and undertakes substantial expansion during the said period, then by virtue of sub- section (3), it shall be entitled to deduction at the rate of 100% of profits and gains for five assessment years, commencing from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved , commences production , begins business , starts operating , begins to provide services . But Section 80-IC (8)(v) changed wordings [of initial assessment year ] to begins to manufacture , commences operation , or completes substantial expansion . Thus, legislature consciously extended the benefit of initial assessment year to a unit that completed substantial expansion. 23. This is absolutely in conjunction and harmony with clause (b) of sub-section (2) of Section 80-IC, which postulates two things (a) an undertaking or an enterprise has begun , it is in the past tense or (b) begins , which is in presenti. Significantly, what is important is the word and prefixed to the words undertakes substantial expansion during the period 7.1.2003 to 1.4.2012. 24. Words commencing with the initial Assessment Year are relevant. It is the trigger point for entitling the unit, subject to the fulfillment of its eligibility for deduction @ 100%, for had it not been so, there was no purpose or object of having inserted the said words in the Section. If the intent was only to give 100% deduction for the first five years and thereafter at the rate of 25% for next five ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities envisaged under the Fourteenth Schedule, which could also be by carrying out substantial expansion of the Unit . It is to give incentives to Units for setting up or expanding in special category States. 30. It is a settled principle of law that exigibility to tax is different from the concept of exemption/ concession. [Padinjarekkara Agencies Ltd. vs. State of Kerala, (2008) 3 SCC 597 (Two Judges)] 31. It is also a settled principle of law that doubt, if any, in the construction of provisions of a taxing statute must be resolved in favour of the assessee. [The Indian Aluminium Co. Ltd. vs. The C.I.T., West Bengal, Calcutta, (1972) 2 SCC 150 (Five Judges); Star Industries vs. Commissioner of Customs (Imports), Raigad, (2016) 2 SCC 362 (Two Judges); and Eveready Industries India Limited vs. State of Karanataka, (2016) 12 SCC 551 (Two Judges)]. 32. It is also a settled principle of law that exemption being an exception has to be respected regard being had to its nature and purpose. [State of Haryana and others vs. Bharti Teletech Limited, (2014) 3 SCC 556 (Three Judges)]. 33. While arguing that Fiscal Statute has to be interpreted on the basis of the language used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure shall be given such meaning as the legislature has chosen to in absence thereof the words would be given such meaning as they are susceptible of in ordinary parlance, maybe, by having recourse to dictionaries. However, still, the interpretation is the exclusive privilege of the legislation avoiding absurdity, unreasonableness, incongruity and conflict. As is with the words used so is with the language employed in drafting a piece of legislation . 37. In Bajaj Tempo Ltd., Bombay v. Commissioner of Income Tax, Bombay City-III, Bombay, (1992) 3 SCC 78, the Apex Court observed that: A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. Since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. It is necessary to resort to a construction which is reasonable and purposive to make the provision meaningful. (Emphasis supplied) 38. In Bhim Singh, Maharao of Kota v. Commissioner of Income Tax, Rajasthan-II, Jaipur, (2017)1 SCC 554, the Apex Court observe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection is simple, clear and unambiguous. 41. We may notice that the Act does not create distinction between the old units, i.e the units which stand established prior to 7.1.2003 (the cutoff date), and the new units established thereafter. 42. Artificial distinction sought to be inserted by the Revenue, in our considered view, only results into discrimination. The object, intent and purpose of enactment of the Section in question is only to provide incentive for economic development, industrialization and enhanced employment opportunities. The continued benefit of deduction at higher rates is available only to such of those units, which fulfill such object by carrying out substantial expansion . 43. While supporting the view taken by the authorities below, Revenue seeks reliance upon the provisions of sub-clauses (i) (iii) of clause (b) of sub- section (2) of Section 80-IC, which provide for benefit of deduction @ 100% for ten assessment years. We do not comprehend as to how would that make any difference. This provision deals with the establishments established within the State of Sikkim or North Eastern States of India. 44. In our considered view, though Section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, would be entitled to deduction only under Section 80-IC, at the admissible percentage, for the remaining period, which in any case when combined, cannot exceed ten years, (ii) just as in the case of the present assessee, a unit established after 7.1.2003, carries out substantial expansion only in the 8th year of its establishment, for the first five years would have already claimed deduction @ 100%; for the 6th and 7th years @ 25%, and then for the period post substantial expansion, in our considered view, the initial year of assessment being in the 8th year, would be entitled for deduction @ 100%, subject to the cap of ten assessment years, (iii) the assessee establishes a unit after January 2003, say in the year 2005-06 and claims deduction under Section 80-IC for the first time in the assessment year 2006-2007 @ 100% of its profits. Thereafter, substantially expands the Unit in the year 2009-10, relevant to Assessment Year 2010-11 can claim deduction @ 100% for next five years subject to the cap of ten assessment years, (iv) an existing unit not claiming any deduction under Section 80-IA, 80-IB or 80-IC substantially expands in the year 2003 and claims deduction under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iating that Section 80 IC of the Act is a self contained and a complete code in itself, which, for the purpose of its interpretation, did not require assistance of any Notification(s), much less that of other Department. 54. In fact, we find the said Authorities to have erred in creating an artificial distinction between the Units set up before 7.1.2003 and after 7.1.2003 while holding that such of the Units , which were set up after 7.1.2003, were not entitled to deduction @ 100% even if they undertook substantial expansion between the period 7.1.2003 and 1.4.2012. The distinction created by the said Authorities is not borne out from the provisions of Section 80 IC. In other words, there is no prohibition that a Unit set up after 7.1.2003, having claimed deduction for first five years, cannot again claim deduction at such percentage within the prescribed period after undertaking substantial expansion. This we say so with a sense of conviction. Plain reading of the Statute demonstrates that there is no such bar in the statute as stands held by the authorities below. We further find that in fact both the authorities have misconstrued the definition of Initial Assessment Year ..... X X X X Extracts X X X X X X X X Extracts X X X X
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