TMI Blog2015 (7) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... ry Rickky For Respondents : Amarveer Singh ORDER T.R. Sood, Member (A) 1. The appeal by the assessee is directed against the order dated 04/06/2012, passed by the CIT(A) Shimla. ITA No. 1217/Chd/2011 2. In this appeal the assessee has raised the following grounds: 1. That the order of the Ld. Commissioner of Income Tax (Appeals), Shimla is defective both in law and facts of the case. 2. That the Ld. Commissioner of Income Tax (Appeals), Shimla is not justified in upholding the addition made by the Ld. Assessing Officer by disallowing the deduction of ₹ 59,32,287/- claimed by the appellant u/s. 80IC of the Income Tax Act 1961 on the ground that the appellant has during the year exceeded the total period of deduction as per section 80IC(6) of the I.T. Act 1961 as they have wrongly interpreted the provisions of section 80-IC(6). This addition is uncalled for and deserves to be deleted as the appellant made substantial expansion in the assessment year 2006-07 and started claiming deduction u/s. 80IC(2)(a)(ii) from the initial assessment year 2006-07 onwards u/s. 80IC(3) (ii) read with 80IC(8)(v) of the I.T. Act 1961. 3. After hearing both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired 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 absurdity or unintended consequences. Therefore, if the language of a particular Statute is clear then the same cannot be changed by applying different principles of interpretations. This is clear from the observations made by 'Hon'ble Apex Court' in the case of Orissa State Warehousing Corporation v. CIT 237 ITR 607 wherein it has been observed at page 604 605 of the report as under:- Let us, however, at this juncture, consider some of the oft cited decisions pertaining to 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latitudinarian rules of construction, which with their general tendency to 'give the taxpayer the breaks', are out of place where the legislation has a fiscal mission. 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 find out the real intention of the Legislature. In this regard, the observation of the Hon'ble Supreme Court in the celebrated judgement of K.P. Vergese 131 ITR 598 (supra) are relevant. We extract the Head note which reads as under:- A statutory provision must be so construed, if possible, that absurdity and mischief may be avoided. Where the plain literal interpretation of a statutory provision produces a manifestly absurd and unjust result which could never have been intended by the legislature, the court may modify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel of the assessee had referred to the decision of Hon'ble Karnataka High Court in the case of Dinakar Ullal v. CIT (supra) and decision of Hon'ble Supreme court in the case of Commissioner of Central Excise v. M/s. Rattan Melting Wire (supra) for the proposition that since circulars are not binding on the Courts, therefore, the same should not be considered for interpretation of a particular provision. As far as the decision in the case of Commissioner of Central Excise v. M/s. Rattan Melting Wire (supra) is concerned, this does not support the proposition 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 statutes, but when the Supreme Court or the High Court declares the law on the question arising for consideration, it would not be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest 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 claimed for the assessment year 1995-96, by the order impugned. 26. The Hon'ble Court discussed the matter and ultimately held that assessee was entitled to interest u/s. 244A and Circular No. 670 : was contrary to the provisions of section 244A. The court also observed that circular could be issued to clarify the provisions for removing the difficulties. Therefore, it is clear that question whether a circular can be considered in interpretation of a particular provision was never before 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 anoth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 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 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 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- (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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons(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, be notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii) Industrial Estate means such estates, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government. (iii) Industrial Growth Centre means such centres, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (iv) Industrial 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; (v) 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 expa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egan 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 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 expression 'and' can be joined only with the expression 'begun'. This is because 'begun' refers to something which has already started in the past whereas 'begins' connotes something which would commence in the present. Therefore, the expression 'and' can be correlated only with existing unit because as we have already seen a new unit which has been set up and begins production cannot simultaneously undergo substantial expansion also so as to become eligible for deduction under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, as notified by the Board in accordance with rules prescribed in this regard. Similar deduction shall be available to thrust sector industries, as specified in the Fourteenth Schedule. 49.3 The amount of deduction in case of undertakings or enterprises in the States of Sikkim, and the North-Eastern States shall be one hundred percent of the profits of the undertaking for ten assessment years. The amount of deduction in case of undertakings or enterprises in the States of Uttaranchal, Himachal Pradesh shall be one hundred percent of the profits of the undertaking for five assessment years, and thereafter twenty-five percent (thirty percent 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 allowed under any other section contained in Chapter VIA or in section 10A or 10B, in relation to the prof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 undertaking which was already present on the date when this provision was introduced. In any case the notification issued by the Govt. of India, Ministry of Commerce and Industry, Department of Industrial Policy and Promotion which is published in the Gazette of India removed all the doubts. This notification is relevant because this was issued with reference to same package announced by the Union Cabinet of India for the development of the hilly states. Section 5, reads as under;- Definitions: (a) .... (b) ..... (c) Existing Industrial Unit' means an industrial unit existing as on 7th January 2003. (d) .... (e) .... (f) .... 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 and North-Eastern states become redundant. As noted earlier, the 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 Section 80IC would also become redundant. Sub Section (4) clearly provides that the deduction is available to any undertaking or enterprise which is not formed by splitting or reconstruction of the business already in existence or it is not formed by transfer to new business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 present case (i.e. in case of Hycron Electronics) deduction has been claimed only of 10 years but on the date of hearing some other appeals were also listed wherein the deduction was claimed for more than 10 years adopting the same contention which has been made before us. In case of M/s. Mahavir Industries (ITA No. 127/Chd/2011 and ITA No. 791/Chd/2012) though those cases were adjourned because some other issues were also there but in those two cases assessee 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 12th year for assessment year 2009-10 (We may clarify that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars 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 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 even the Ld. authors in their Commentary of Income Tax Laws By Chaturvedi Pithisaria's - Sixth Edition has expressed the same opinion. The relevant extract at pages 6351 of the commentary reads as under;- No deduction possible for more than 10 assessment years.- Section 80-IC(6) also opens with a non obstante clause Notwithstanding anything contained in , and provides that no deduction shall be allowed to any undertaking or enterprise under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision 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 Customs (supra), it was observed as under:- The learned counsel for the appellant then contended that since there is an ambiguity about the meaning and purport of item-6 of the table appended 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 following words: Shri Narasimhamurty agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 not to be read with any latitude to the tax-payer or even with a wider connotation. 41. Therefore, it becomes clear that liberal interpretation of an incentive provision is possible if there is any doubt. As we have seen above that if various sub sections of section 80IC are read carefully it leaves no doubt that deduction was meant only for new units or in case of old units if substantial expansion was carried out in such old units and deduction was available only for a period of 10 years. Therefore, there is no question of giving any interpretation 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 Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision 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 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 by section 80IC of the Act if it starts commercial production in the substantially expanded unit before 01.04.2012. In this case the assessee shall be entitled to deduction of 100% of its profits upto A.Y. 2014-15 since the initial assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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