TMI Blog2019 (2) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80-IC. If that is the purpose of the legislature, we see no reason as to why 100% deduction of the profits and gains be not allowed to even those units who had availed this deduction on setting up of a new unit and have now invested huge amount with substantial expansion of those units. Judgment in the case of Mahabir Industries v. Principal Commissioner of Income Tax [2018 (5) TMI 1278 - SUPREME COURT OF INDIA] would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, in Mahabir Industries, it was held that if an assessee get 100% exemption under Section 80-IB of the Act for five years and thereafter carries out the substantial expansion because of which said assessee becomes entitled to exemption under the new provision i.e. Section 80-IC of the Act, the assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on the ground that there can be two initial assessment years, one for the purpose of Section 80-IB and other for the purposes of Section 80-IC of the Act. Once we find that there can be two initial assessment years, even as per the definition thereof in Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1784 OF 2019 (ARISING OUT OF SLP (C) NO. 23172 OF 2018) - - - Dated:- 20-2-2019 - CIVIL APPEAL NO(S). 1785 OF 2019 (ARISING OUT OF SLP (C) NO. 23176 OF 2018) CIVIL APPEAL NO(S). 1786 OF 2019 (ARISING OUT OF SLP (C) NO. 23179 OF 2018) CIVIL APPEAL NO(S). 1788 OF 2019 (ARISING OUT OF SLP (C) NO. 24678 OF 2018) CIVIL APPEAL NO(S). 1787 OF 2019 (ARISING OUT OF SLP (C) NO. 23414 OF 2018) CIVIL APPEAL NO(S).1789 OF 2019 (ARISING OUT OF SLP (C) NO. 24679 OF 2018) MISC. APPLICATION NO. 2880 OF 2018 IN CIVIL APPEAL NO. 7218 OF 2018 CIVIL APPEAL NO(S). 1790 OF 2019 (ARISING OUT OF SLP (C) NO. 5486 OF 2019) (ARISING OUT OF DIARY NO. 34756 OF 2018) MISC. APPLICATION NO. 2879 OF 2018 CIVIL APPEAL NO. 7222 OF 2018 MISC. APPLICATION NO. 2852 OF 2018 CIVIL APPEAL NO. 7236 OF 2018 MISC. APPLICATION NO. 2850 OF 2018 CIVIL APPEAL NO. 7215 OF 2018 MISC. APPLICATION NO. 2841 OF 2018 CIVIL APPEAL NO. 7221 OF 2018 MISC. APPLICATION NO. 2840 OF 2018 CIVIL APPEAL NO. 7217 OF 2018 MISC. APPLICATION NO. 2976 OF 2018 CIVIL APPEAL NO. 7223 OF 2018 CIVIL APPEAL NO(S). 1795 OF 2019 (ARISING OUT OF SLP (C) NO. 2296 OF 2019) CIVIL APPEAL NO(S).1796 OF 2019 (ARISING OUT OF SLP (C) NO. 1983 OF 2019) CIVIL APPEAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epresented. Since the appeals in respect of these assessees were decided in their absence, they filed miscellaneous applications for recall of the order, with prayer to decide the appeals afresh after giving hearing to them. Since, these assessees remained unrepresented, as even the notice was not served upon them, by a separate order passed in their cases, those applications have been allowed and their appeals being C.A. No. 7218, 7882, 7236, 7215, 7221, 7217 and 7223 of 2018 have been restored. Even the Revenue has filed few SLPs against the common judgment of the High Court as these SLPs were not filed earlier when batch of appeals was decided on 20th August, 2018 by this Court. Appeals arising out of these SLPs have also been heard along with other appeals in which the earlier judgment rendered has been recalled. All these appeals have been heard afresh and are being disposed of by the present judgment. 6. We have already taken note of the question of law that arises for determination. Factual background in which this question of law arises for consideration has been taken note of in the judgment dated 20th August, 2018 which may again be reiterated, in order to understand t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified therein, was entitled to certain deductions for a period commencing from 1st April, 1993. With effect from 1st April, 2000, the said provision was bifurcated with the insertion of another Section, i.e., 80-IB, dealing with certain industrial undertakings other than infrastructure development undertakings. Thereafter, the Legislator, in its wisdom, enacted a special provision, in respect of units established in certain special category States. Thus, Section 80-IC came to be inserted by virtue of Finance Act, 2003, applicable with effect from 1st April, 2004. At this point., It may only be noticed that correspondingly certain provisions of Section 80-IB were also amended/repealed. Deductions under the said Section were discontinued for the Assessment Years commencing from 1st April, 2004 (Sub-section (4) of Section 80- IB). 7. At this juncture, we would like to take note of the relevant provisions of Section 80-IC of the Act. Therefore, we extract below the relevant portion of this provision: [80-IC. Special provisions in respect of certain undertakings or enterprises in certain special category States.-(1) Where the gross total income of an assessee includes an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration specified in that Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 2 [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- xxx xxx xxx (ii) 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 profits and gains for five assessment years commencing 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. xxx xxx xxx (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 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no dispute about the same. From the year such substantial explanations were carried out by the assessees, the assessees demanded deduction @ 100%, instead of 25%/30% for the remaining period of 10 years which is the maximum period for which deduction is admissible. 10.Sub-section (3), as noted above, mentions the period of 10 years commencing with the initial Assessment Year. Subsection (6) puts a cap of 10 years, which is the maximum period for which the deduction can be allowed to any undertaking or enterprise under this section, starting from the initial Assessment Year. Another significant feature under sub-section (3) is that the deduction allowable is 100% of such profits and gains from an undertaking or an enterprise for five Assessment Years commencing with the initial Assessment Year and thereafter the deduction is allowable at 25% (or 30% where the assessee is a company) of the profits and gains. It brings out the following aspects: (a) Those undertakings or enterprises fulfilling the conditions mentioned in sub-section (2) of Section 80-IC become entitled to deduction under this provision. (b) This deduction is allowable from the initial Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of Section 80-IB, namely, in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Section 80-IB is materially different from Section 80-IC of the Act. Inasmuch as Section 80-IC is a special provision in respect of certain undertakings, all enterprises mentioned in Section 80-IC are limited in contrast with Section 80-IB, the deduction under this Section is available only when such undertakings or enterprises are established in particular States, Sikkim, Himachal Pradesh, Uttaranchal or any of the North-Eastern States. Therefore, definition of initial assessment year mentioned in Section 80-IB could not have been the basis of finding out the definition of initial assessment year which is different from the definition contained in Section 80-IB. Further, Sub-section (3) of Section 80-IC mentions about the deduction that is permissible, namely, 100% deduction of the profits and gains for first five years and 25% (or 30% where the assessee is a company) for the next five years. This sub-section, in any case, does not deal with the initial assessment year . 13.Learned counsel appearing for the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oducing article or things. The advantage of this provisions is also accrued to those existing units, if they carry out substantial expansion of their units by investing required capital, in the assessment year relevant to the previous year. Substantial expansion is defined in clause (ix) of sub-section (8) of Section 80-IC and it reads as under: (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; 17.As per the aforesaid definition, an existing unit would be treated as having carried out substantial expansion when there is 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 already noted above, in all these cases at hand, the assessees had initially set up new industry in the State of Himachal Pradesh of the nature specified under Section 80-IC of the Act. As a result, they became entitled to avail the concession provided i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld mean that total deduction under Section 80-IB as well as 80-IC is for a period of 10 years. 19.Having examined the scheme in the aforesaid manner, we arrive at the conclusion that the definition of initial assessment year contained in clause (v) of sub-section (8) of Section 80-IC can lead to a situation where there can be more than one initial assessment year within the said period of 10 years. As per sub-section (6), cap is on the 10 assessment years. It is not on quantum. We have also to keep in mind the purpose for which Section 80-IC was enacted. The purpose was to establish the business of the nature specified in the said provision in the specified States. This provision was, thus, aimed at encouraging the undertakings or enterprises to establish and set up such units in the aforesaid States to make them industrially advanced States as well. Undoubtedly, these are difficult States as most of these States fall in hilly areas. Therefore, cost of production and transportation may also go up. 20. When we keep in mind these objectives for which Section 80-IC was enacted, an irresistible conclusion would be to grant 100% deduction of the profits and gains even from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne's thought or that the assembly of legislatures consisting of persons of various shades of opinion purport to convey a meaning which may be obscure. It is impossible even for the most imaginative legislature to forestall exhaustively situations and circumstances that may emerge after enacting a statute where its application may be called for. Nonetheless, the function of the courts is only to expound and not to legislate. Legislation in a modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. The legislation is primarily directed to the problems before the legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from the very nature of things, it is impossible to anticipate fully the varied situations arising in future in which the application of the legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. The process of construction combines both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any intendment; that regard must be had to the clear meaning of the words and that the matter should be governed wholly by the language of the notification. Equity has no place in interpretation of a tax statute. Strictly one has to look to the language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering a taxation statute. 30. Justice G.P. Singh, in his treatise Principles of Statutory Interpretation (14th Edn. 2016 p. 879) after referring to Micklethwait, In re [Micklethwait, In re, (1855) LR 11 Ex 452 : 156 ER 908] ; Partington v. Attorney General [Partington v. Attorney General, (1869) LR 4 HL 100] , Rajasthan Rajya Sahakari Spg. Ginning Mills Federation Ltd. v. CIT [Rajasthan Rajya Sahakari Spg. Ginning Mills Federation Ltd. v. CIT, (2014) 11 SCC 672] , State Bank of Travancore v. CIT [State Bank of Travancore v. CIT, (1986) 2 SCC 11 : 1986 SCC (Tax) 289] and Cape Brandy Syndicate v. IRC [Cape Brandy Syndicate v. IRC, (1921) 1 KB 64] , summed up the law in the following manner: A taxing statute is to be strictly con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commencing with completion of substantial expansion , subject to maximum of ten years as per Section 80-IC(6). 47. A unit that started operating/existed before 7.1.2003 was entitled to 100% deduction for first five years under Section 80-IB(4). If this unit completes substantial expansion during the window period (7.1.2003 to 31.3.2012), it would be eligible for 100% deduction again for another five years under Section 80-IC(3)(ii), subject to ceiling of ten years as stipulated under Section 80-IC(6). We are inclined to agree with the aforesaid interpretation. 22.It would be pertinent to point out that in Para 20 of the judgment in Classic Binding Industries, this Court observed that if deduction @ 100% for the entire period of 10 years, it would be doing violence to the language of sub-section (6) of Section 80-IC. However, this observation came without noticing the definition of initial assessment year contained in the same very provision. 23. Having examined the matter in the aforesaid perspective, judgment in the case of Mahabir Industries v. Principal Commissioner of Income Tax Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018 would, in fact, hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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