TMI Blog2018 (3) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... for other purposes and on which we do not wish to pronounce; but, we are only concerned in this case with the question whether the assessee is entitled to the benefit under Section 10B and, in our view, the assessee is not entitled. Therefore, that the assessee had embarked upon an exercise, which is turned out to be futile, cannot be an argument, which will advance the case of the assessee. Therefore answer the question of law in favour of the appellant / revenue and against the respondent / assessee. The order of the Tribunal will stand set aside in regard to the claim under Section 10B of the Act. Having regard to the fact that we have found that the respondent / assessee was not entitled to the benefit under Section 10B and also having regard to the fact that the assessment order reflects that documents were produced in support of the claim under Section 80IC, but, in view of the impossibility to claim the both together, the claim under Section 80IC had been given up, we would think that it will be in the fitness of things that we remit the matter back to the Assessing Officer for consideration of the case of the assessee under Section 80IC of the Act for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iming the benefit of deduction provided under Section 80HHC from the year 1992. In the year 2003-2004, the assessee started claiming and was granted the benefit of 100 per cent deduction of its profits and gains from export under Section 80IC of the Act. The assessee was given the benefit of 100 per cent deduction in terms of Section 80IC for a period of five years. According to the learned counsel for the appellant, in terms of Section 80IC, the percentage of deduction suffers a reduction after a period of five years and it is, thereupon, that the assessee has switched over to Section 10B of the Act. Sub-section (1) of Section 10B of the Act reads as follows: 10B. Special provisions in respect of newly established hundred per cent export oriented undertakings.-(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 10B. He would also submit that the Court may place proper emphasis on the heading of the Section. In other words, he highlights the fact that the intention of the Legislature could be gathered from the heading and even if there is no specific reference to the words new industrial undertaking in the body of the Section, reference should be made to the heading to resolve the ambiguity, which may arise from the actual wording of the Section. 7. Per contra, Mr. Pulak Raj Mullick, learned counsel for the respondent / assessee would seek to support the order of the Tribunal, which upheld the order of the first appellate authority. He would submit that, having regard to the scheme of the Act and having regard to the fact that Section 10B figures in Chapter III of the Act and, what is more, further having reference to the judgment of the Apex Court in Commissioner of Income Tax others vs. Yokogawa India Ltd., reported in (2017) 391 ITR 274, the Court may consider the impact of the same and grant relief to the assessee. He would submit that assessment is to be carried out year-wise. The unit was, no doubt, existent; but that is irrelevant for the purpose of claiming benefit u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for the purpose of resolving the dispute, we refer to it and extract the same as under: Circular No.1/2005, dated 06.01.2005 CIRCULAR INCOME-TAX ACT Certain clarification regarding Tax holiday under section 10B of the Income-Tax Act to 100% Export Oriented Undertaking. CIRCULAR NO. 1/2005, DATED 6-1-2005 1. Section 10B of the Income-Tax Act provides for 100% deduction of profits derived by a hundred per cent Export Oriented Undertaking, from export of articles or things or computer software manufactured or produced by it. The deduction is available for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software. However, no deduction under section 10B is available after assessment year 2009-10. 2. The deduction under section 10B is available to an undertaking which fulfils all the following conditions:- (i) it manufactures or produces any article or thing or computer software; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence except in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. (ii) Undertaking B set up in Domestic Tariff Area, begins to manufacture or produce computer software in financial year 1996-97 relevant to assessment year 1997-98. It gets approval as 100% EOU in financial year 2007-08 relevant to assessment year 2008-09. No deduction under section 10B shall be admissible to undertaking B as the period of 10 years expires in financial year 2005-06 relevant to assessment year 2006-07, prior to its approval as 100% EOU. (iii) Undertaking C is set up in Domestic Tariff Area in the financial year 2000-01 relevant to assessment year 2001-02 and engaged in the business of providing computer related services, other than those notified by the Board for the purposes of section 10B. In financial year 2002-03, it acquires more than 20% of old plant and machinery and starts manufacturing computer software. It also gets approval as 100% EOU in financial year 2002-03. Undertaking C shall not be eligible for deduction under section 10B, as there has been transfer of old plant and machinery. (iv) Undertaking D is set up and starts produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10B. Special provision in respect of newly established hundred per cent export oriented undertakings.- (1) Subject to the provisions of this section, any profits and gains derived by an assessee from a hundred per cent export-oriented undertaking (hereafter in this section referred to as the undertaking) to which this section applies shall not be included in the total income of the assessee. (2) This section applies to any undertaking which fulfils all the following conditions, namely:- (i) it manufacturers or produces any article or thing; (ia) in relation to an undertaking which begins to manufacture or produce any article or thing on or after the 1st day of April, 1994, its exports of such articles and things are not less than seventy-five per cent of the total sales thereof during the previous year; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re- establishment, reconstruction or revival by the assessee of the business of any such industrial undertaking as is referred to in section 33B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Apex Court in Commissioner of Income Tax others vs. Yokogawa India Ltd., reported in (2017) 391 ITR 274. In the said case, no doubt, the court was dealing with Section 10A and the correct meaning and interpretation of Section 10A was the principal issue. We notice the following questions, which were formulated by the court in para 3 of the judgment: 3. The broad question indicated above may be conveniently dissected into the following specific questions arising in the cases under consideration. (i) Whether Section 10A of the Act is beyond the purview of the computation mechanism of total income as defined under the Act. Consequently, is the income of a Section 10A unit required to be excluded before arriving at the gross total income of the Assessee? (ii) Whether the phrase total income in Section 10A of the Act is akin and pari materia with the said expression as appearing in Section 2(45) of the Act? (iii) Whether even after the amendment made with effect from 1.04.2001, Section 10A of the Act continues to remain an exemption Section and not a deduction section? (iv) Whether losses of other 10A Units or non 10A Units can be set off against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Assessment Year 2008-09, by carrying out Substantial Expansion of the existing unit, as provided u/s 80 IC of Income Tax Act. 16. Therefore, we may take it that it is beyond the pale of dispute that the assessee was established in the year 1950. It was engaged in the manufacture of handicrafts, which included artificial swords, artificial helmets, etc. There is a specific statement that the assessee was exporting such handicrafts overseas. This is probablised by the claim, which was successfully made under Section 80HHC of the Act from the year 1992- 1993. From Assessment Year 2004-2005, there is also no dispute that the assessee was claiming benefit under Section 80IC. Section 80IC, inter alia, reads as follows: 80-IC. Special provisions in respect of certain undertakings or enterprises in certain special category States. - (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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in the way of the assessee claiming the benefit even if it makes available period of deduction beyond a period of 10 years. Reference also made to Sub-section (6)(iii) of Section 10B, which according to the assessee, would militate against the contention of the Department, as there is no reference to Section 80IC. Sub-section (6)(iii) of Section 10B, inter alia, provides that no deduction shall be allowed under Section 80HH or Section 80HHA or Section 80I or Section 80IA or Section 80IB, in respect of profits and gains; but, there is no reference to Section 80IC. As far as this aspect is concerned, we may, at once, discountenance such a plea for the reason that, under Section 80IC itself, we have noted that under Sub-section (5) it is provided that simultaneous deduction under Section 80IC and Section 10B is prohibited. We would be attributing superfluity to the Legislation, as it is unnecessary to replicate what was already provided under Section 80IC. 20. Now, we must consider the Circular, which has been produced by the learned counsel for the assessee. The Circular is dated 06.01.2005. It, apparently, was on the basis of necessity for a clarification that it came to be i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the court and it is for the court to undertake the task of construing the statutory provision. 22. The fact that the assessee has not claimed the benefit, though entitled as it alleges under Section 80IC, has been relied upon by the Tribunal. We must, first, examine whether this will be finally determinative of the issue to be considered and answered. The fact that there is a legal embargo against simultaneously claiming the benefit of deduction under Section 10B and Section 80IC and the fact further that the assessee, in a particular case, has not claimed the benefit under Section 80IC, would not be determinative of the issue as to whether the assessee is entitled to the benefit under Section 10B. The issue to be decided is whether, in the facts, which are not in dispute, the assessee is entitled to the benefit under Section 10B of the Act. Therefore, the reliance placed on the fact that the assessee has not claimed the benefit under Section 80IC would, in our view, amount to posing the wrong test. 23. The actual question to be considered is, on a true construction of the Section with reference to the facts which are not in dispute, whether, having regard to the express p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to us by the learned counsel for the assessee. 27. In Commissioner of Central Excise, Bolpur vs. M/s Ratan Melting Wire Industries (Civil Appeal No. 4022 of 1999), the matter came up before a Constitution Bench having regard to certain observations made by a Constitution Bench in Collector of Central Excise vs. Dhiren Chemical Industries, reported in (2002) 2 SCC 127. The question was finally decided, as we notice, in the following manner: 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 in a decision of this Court or the High Court. So far as the clarifications/circulars issued by the Central Government and of the State Government are concerned they represent merely their understanding of the statutory provisions. They are not binding upon the court. It is for the Court to declare what the particular provision of statute says and it is not for the Executive. Looked ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 11 in SCC) was incorporated to ensure that in cases where benefits of exemption notification had already been granted, the Revenue would remain bound. The purpose was to see that such cases were not reopened. However, this did not mean that even in cases where the Revenue/Department had already contended that the benefit of an exemption notification was not available, and the matter was sub judice before a court or a tribunal, the court or tribunal would also give effect to circulars of the Board in preference to a decision of the Constitution Bench of this Court. Where as a result of dispute the matter is sub judice, a court/tribunal is, after Dhiren Chemical case, bound to interpret as set out in that judgment. To hold otherwise and to interpret in the manner suggested would mean that courts/tribunals have to ignore a judgment of this Court and follow circulars of the Board. That was not what was meant by para 9 of Dhiren Chemical case. 28. Here, we are not faced with any decision of the Apex Court as such, as there is no ruling on the point in issue. The further decision, which is relied on by the learned counsel for the assessee, is the unreported judgment of the Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the question was whether they could get the benefit. We have already referred to illustration no. 2. If the illustration is applied, it is clear that the order of the Tribunal becomes unsustainable. Therefore, we would have to examine whether this part of the Circular is in accord with the statutory provision. We say so because the respondent / assessee points out the provision in the Circular, which says that the benefit would not be available beyond 2009-2010, as being ultra vires to Section 10B of the Act, insofar as Section 10B purports to limit the right to claim the benefit under Section 10B up to the year 2012. It is to be noticed that the Circular must be appreciated in the context of the question, which fell for consideration, namely, whether in a case, where a unit was already in existence and it acquires the status of a 100 per cent export oriented undertaking later on, it could get the benefit of deduction beyond 10 years from the time when it initially commenced production. In the example, which was illustration no. 2, it is because the assessee would have commenced production in 1995-1996 that on expiry after 2005-2006, he would not be entitled to get the benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute, the purport was only to give the benefit for a period of 10 years from the date on which the undertaking commenced production. The words are clear and there is no room for any interpretation, as contended for by the learned counsel for the assessee. Merely getting the status of a 100 per cent export oriented undertaking in the year 2007, in our view, in other words, would not result in a change in the date of beginning of production by the said unit. In fact, the Circular, to the extent it proceeds to extend the period, appears to be beneficial to the assessee and it could possibly be a case of being a clarification, which is beneficial to the assessee. On an interpretation of the Section, which is a task which is unavoidable for the Court, even if there is a Circular, in which matter we agree with the assessee, the assessee, which becomes a 100 per cent export oriented undertaking by virtue of the approval, could claim the benefit; but, in no case, can it go beyond 10 years from the date on which it originally started producing the goods. 32. Thus, in fact, we would think that the Circular, insofar as illustration no. 2 is concerned, which we have referred to, cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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