TMI Blog2019 (7) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... ch an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years. We find that the order of Hon ble Supreme Court in the case of Pr. CIT vs M/s. Aarham Softronics (supra) being passed by a Larger Bench of the Hon ble Supreme Court has stronger force as a precedent as compared to decision of Hon ble Supreme Court in the case of CIT vs Classic Binding Industries [ 2018 (8) TMI 1209 - SUPREME COURT] - Decided in favour of assessee. - ITA No:- 4080/Del/2018 - - - Dated:- 18-7-2019 - Shri Kuldip Singh, Judicial Member And Shri Anadee Nath Misshra, Accountant Member For the Assessee : Shri V.K. Tulsiyan, CA For the Revenue : Shri Surender Pal, Sr. DR ORDER PER ANADEE NATH MISSHRA, AM This appeal has been filed by Revenue against the order of Learned Commissioner of Income Tax (Appeals)-12, [ Ld. CIT(A) , for sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gible to claim deduction u/s 80IA has the option to choose the initial/first year, he shall be entitled to claim deduction for ten consecutive years from the year in respect of which he has exercised such option subject to the fulfilment of the conditions prescribed in the section. 4. The Ld. CIT(A) erred in law and on fact in interpreting Section 80IC of the I.T. Act in manner whereby substantial expansion in the new units is interpreted on basis of deduction at the rate of 100% which will lead to absurdity as that would mean that deduction would become perpetual as long as assessee has carried out substantial expansion but such interpretation would render provisions of sub section 6 of Section 80IC otiose/meaningless/redundant and therefore such interpretation cannot be permitted. 5. The Ld. CIT(A) erred in law and on fact in accepting claim of deduction of assessee u/s 80IC of IT Act by allowing changing of initial assessment year, whereas as per Clause V of Sub section 8 of Section 80IC it can be either on commencement c operation or at completion of substantial expansion but it cannot be both. The appellant reserves hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 801C of the Act. My attention has been drawn towards the decision of Hon'ble High Court of Himachal Pradesh, Shimla in the case of Mis Stovekraft India vs. CIT Others decided on November 28, 2017. The relevant part of the decision is quoted below: 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. Section 80-IA was inserted by the Finance (No.2) Act. 1991, with effect from 01.04.1991. By virtue of said Section, the gross total income (profits and gains) of an assessee derived from any business of an industrial undertaking, so specified therein, was entitled to certain deduction for a period commencing from 01.04.1993. 15. With effect from 01.04.2000, the said provision was bifurcated with the insertion of another Section, i.e. 8018, dealing with certain industrial undertaking other than infrastructure development undertaking . What is relevant is that by virtue of sub-section (4) of this newly inserted Section, in the case of an industrial undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taranchal; 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 I sub-section (1) shall be- (i) In the case of any undertaking or enterprise referred to in subclauses (i) and (iii) of clause (a) or sub-clauses (i) and (iii) or clause (b), or 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 subclause (ii) or 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. (4) This section applies to any undertaking or enterprise which fulfils all the following conditions, namely: (i) It is not formed by splitting up, or the reconstruction, of a business already in existence: P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plies to an undertaking or an enterprises. 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 07.01.2003 and 01.04.2012, a Unit has begun or begins to manufacture or produce any article or thin, 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 initial assessment year and thereafter at the rate of 25% of the profits and gains. The only restriction being that such substantial expansion is not formed by splitting up, or reconstruction, of the business already in existence. At this stage, we may note under sub- section (6) of Section 80-IC, there is a cap with regard to the total period for which a Unit is entitled to such deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 07.01.2003 to 01.04.2012. 24. Words commencing with the initial Assessment Year are relevant. It is the trigger point for entitling the units, 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 years, the Legislatures would not have inserted the said words. They would have plainly said, 'for the first initial five years a unit would be entitled to deduction at the rate of 100% and for the remaining five year at the rate of 25%'. 25. Thus, the question, which fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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 provision 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 therein, Mr. Kuthiala, learned Senior Counsel, invites our attention to the decision rendered by the Apex Court in Orissa State Warehousing Corporation v. Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as chosen to in absence thereof the words would be given such meaning as they are susceptible of in ordinary parlance, maybe, by hiving 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 made the provision meaningful. 38. In Bhim Singh, Maharao of Kota v. Commissioner of income Tax, Rajasthan-II, Jaipur (2017) 1 SCC 554, the Apex Court observed: It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is simple, clear and unambiguous. 41. We may notice that the Act does not create distinction between the old units, l.e. the units which stand established prior to 07.01.2003 (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 8O-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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lustrate; (iO a Unit established prior to 7.1.2003, claiming deduction under Section 80-IB, post insertion of Section 80-IC carries out substantial expansion, 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 then 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, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the Central Excise Laws as well as Ministry of Commerce and Industry (Department of Industrial Policy and Promotion), Government of India and Department of Income Tax. While doing so, the said authorities erred in not appreciating 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 1.04.2012. 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number or multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 7.1.20013 upto 1.4.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten year, [Section 80- 1C(6)]. (g) units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 108 of the Act [Section 80-18(5)]. 56. Substantial questions of law are answered accordingly. 7.2 The reliance is also placed on the decision of Hon'ble ITAT, Delhi Bench 'H' in the case of Tirupati LPG Industries Ltd. vs. DCIT in ITA No. 991/Del/2013 (AY 2009-10) CircIe-2, Dehradun. The relevant part of this decision is quoted below: The only dispute that arises for our consideration is the Interpretation of the term 'initial assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not in the knowledge, the appeal of the Appellant is allowed in view of judicial discipline. 4. The present appeal before us is filed by the Revenue against the aforesaid impugned order dated 19.02.2108 of the Ld.CIT(A). At the time of hearing before us, Ld. DR submitted that the issue in dispute is covered in favour of the Revenue by order of Hon ble Supreme Court in the case of CIT vs Classic Binding Industries in Civil Appeal No. 7208 of 2018. Ld. Counsel for the assessee, on the other hand contended that the manufacturing unit of the assessee is located in Himachal Pradesh which falls under the jurisdiction of Hon ble High Court of Himachal Pradesh. He has further submitted that the issue in dispute is also covered in favour of the assessee vide order dated 28.11.2017 of the Hon ble High Court of Himachal Pradesh in the case of following six orders:- 1. ITA No.20/2015 M/s. Stovekraft India Appellant versus Commissioner of Income Tax ..Respondent 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Supreme Court whereas the order of Hon ble Supreme Court in the case of CIT vs Classic Binding Industries (supra) was passed by two Hon ble judges of Hon ble Supreme Court. We further find that the Hon ble Supreme Court in aforesaid order in the case of Pr. CIT vs M/s. Aarham Softronics (supra) has already considered the decision of the CIT vs Classic Binding Industries (supra) and has over-ruled the decision in the case of CIT vs Classic Binding Industries (supra) in the following word:- 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 would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gains. (d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again. However, this 100% deduction would be for remaining three years, i.e. 8th, 9th and 10th assessment years. 4.2. In view of the foregoing, we find that the order of Hon ble Supreme Court in the case of Pr. CIT vs M/s. Aarham Softronics (supra) being passed by a Larger Bench of the Hon ble Supreme Court has stronger force as a precedent as compared to decision of Hon ble Supreme Court in the case of CIT vs Classic Binding Industries (supra). Moreover, Hon ble Supreme Court has, in order in the case Pr. CIT vs M/s. Aarham Softroni ..... X X X X Extracts X X X X X X X X Extracts X X X X
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