INCOME TAX OFFICER, WARD-3(1), HYDERABAD V. REGENCY CERAMICS LIMITED, HYDERABAB

ITA 1337/HYD/2024

AI Insights

The case involves multiple appeals by the Income Tax Officer against Regency Ceramics Limited concerning the assessment years 1998-99 to 2002-03. The primary issue was the denial of deduction under Section 80IA r.w.s 33B of the Income Tax Act, 1961, by the Assessing Officer, which was later contested and allowed by the CIT(A). The Tribunal's decision focused on whether the assessee's business, which suffered extensive damage from a cyclone, was eligible for deductions under the specified sections due to the reconstruction or revival of its business.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 397992 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-B
• Assessment Year: 1999-2000
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Additional evidence; Revised return; Search and seizure
• Section: 143(3); 32; 80HHC

Judgement Text

"आयर अपीलीय न्यायाधिकरण में, हैदराबाद ‘बी’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ B ‘ Bench, Hyderabad श्री मंजूनाथ जी, माननीय लेखा सदस्य एवं श्री रवीश सूद, माननीय न्याययक सदस्य SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER (Through Hybrid Hearing) आयकरअपीलसं./I.T.A. No. 1350/Hyd/2024 (निर्धारण वर्ा/ Assessment Year: 1998-1999 ) & आयकरअपीलसं./I.T.A. Nos. 1337, 1338, 1339, 1340 /Hyd/2024 (निर्धारण वर्ा/ Assessment Years:1999-2000 to 2002-2003 ) Income Tax Officer, Ward-3(1), Hyderabad. Vs. Regency Ceramics Limited, Hyderabad. PAN: AABCR0720Q (अपीलधर्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Sri M V Swaroop, Advocate राजस्व का प्रतततितित्व/ Department Represented by : Mrs. M. Narmada, CIT-DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 30/04/2025 घोषणा की तारीख/ Date of Pronouncement : 02/06/2025 O R D E R PER BENCH: The captioned appeals filed by the revenue are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (Delhi) (in short, “CIT(A)”), dated 23/10/2024, which in turn arises from the respective orders 2 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 passed by the A.O. under Section 143(3) r.w.s 254 of the Income Tax Act, 1961 (in short “the Act”), dated 26/12/2008 for Assessment Years 1998-99 to 2002-03. As common issues are involved in the present appeals, therefore, the same are being disposed off vide a consolidated order. 2. We shall first take up the appeal for A.Y 1998-99 in ITA No. 1350/Hyd/2024, and the order therein passed by us shall apply mutatis mutandis for disposing off the remaining appeals. The Revenue has assailed the impugned order on the following grounds of appeal before us: “1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in directing to allow the deduction U/s. 80IA r.w.s 33B though there was no reconstructed or revived of business units as per the provisions of section 33B of the IT Act, 1961. 3. The Ld. CIT(A) ought to have appreciated the fact that the word ‘extensive’ damage as mentioned in section 33B means ‘large in amount of scale’ but as per the insurance claim received damage was to the extent of 5 to 6% of assets and stock. 4. The Ld. CIT(A) ought to have appreciated the fact that there was no discontinuation of business activities of the company instead there was increase in production during the year. 5. Any other ground that may be craved to be added, amended during the course of hearing.” 3. Succinctly stated, the assessee company which is engaged in the business of manufacturing ceramic tiles had filed its original return of 3 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 income for A.Y 1998-99, declaring an income of Rs. 5,26,22,429/- under the normal provisions (after claiming set off of brought forward losses) and “book profit” under Section 115JA of the Act at Rs. 1,63,35,580/-. Thereafter, the assessee company on 01/02/199 filed a revised return of income, wherein after raising a claim of 100% deduction under Section 80IA r.w.s 33B of the Act as per clause (v) of subsection (2) of section 115JA of the Act the “book profit” under section 115JA was reduced to NIL. 4. Thereafter, the JCIT(Assessment), Special Range-6, Hyderabad framed the assessment vide his order passed under Section 143(3) of the Act, dated 28/02/2001, determining the “book profit” at Rs. 5,77,42,084/- and the taxable income thereon @ 30% at Rs. 1,73,22,625/-. The A.O., while doing so, had not allowed the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act. Having computed the “book profit” at Rs. 5,77,42,084/-, the A.O. did not even allow the claim of the assessee company for deduction under Section 80HHC of the Act. 5. On appeal, the CIT(A) vide his order dated 11/08/2002 confirmed the “book profit” determined by the A.O. under Section 115JA of the Act. On further appeal, the Tribunal (in the first round of litigation) vide 4 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 its common order dated 21/09/2007 in ITA Nos. 528 & 737/H/2002, 643 & 644/H/2003 and 883/H/2005 for the AYs 1998-99 to 2002-03 remitted the matter back to the file of the A.O. for verifying certain aspects, viz., (i) the deduction claimed by the assessee company under Section 80IA r.w.s 33B of the Act while computing the “book profit”; and; (ii) the additional ground regarding deduction under Section 80HHC for the A.Y 1998-99 for fresh examination as per law. 6. Consequent to the order passed by the Tribunal, the Deputy Commissioner of Income Tax, Cirlce-3(1), Hyderabad took up the assessment and called upon the assessee company to justify its claim for deduction under Section 80IA r.w.s 33B of the Act. In reply, it was the claim of the assessee company that as per clause (v) of sub-section (2) of section 115JA of the Act while computing the “book profits”, the amount of profit derived by an industrial undertaking, as referred to in sub-clause (b) or sub-clause (c) of clause (iv) of sub-section (2) of section 80IA is to be reduced from the “book profits”. It was, thus, the claim of the assessee company that while computing the “book profit” U/s. 115JA it had claimed deduction under Section 80IA r.w.s 33B of the Act. Thereafter, the A.O. framed the set-aside assessment vide his order passed under Section 143(3) r.w.s 254 of the Act, dated 26/12/2008, 5 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 determining the total income of the assessee company at Rs. 5,23,21,014/- and “book profit” at Rs. 5,77,42,084/- under Section 115JA of the Act. The A.O. while framing the set-aside assessment, did not allow the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act. 7. Aggrieved, the assessee company carried the matter in appeal before the CIT(A), who dismissed the same. 8. On further appeal, it was the claim of the assessee company before the Tribunal (in the second round of litigation) that it had obtained a confirmation from the authorities of Customs and Central Excise Department, wherein they had categorically certified that the assessee company had stopped production during the period 07/11/1996 to 21/12/1996. The assessee company had filed the aforesaid “confirmation” as additional evidence with the Tribunal vide its petition dated 23/01/2021. After necessary deliberations, the Tribunal once again set-aside the order of the CIT(A), and restored the matter to his file for fresh adjudication of the claim of the assessee company for deduction U/s. 80IA r.w.s 33B of the Act. 9. The CIT(A) during the course of the set-aside proceedings, after deliberating at length on the facts involved in the case before him based 6 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 on which the assessee company had raised the claim for deduction under Section 80IA r.w.s 33B of the Act, observed that the assessee company that was engaged in manufacturing and sale of ceramic tiles had commenced its production initially on 01/05/1986 and continued the same. The CIT(A) observed that the factory of the assessee company situated at Yanam was on 06th November 1996 hit by a massive cyclone which devastated the entire coastal area of Andhra Pradesh and Yanam. It was further observed by him that in Yanam, the buildings and plant and machinery in the factory of the assessee company were extensively damaged. Elaborating on the damage caused, the CIT(A) observed that the devastating cyclone which had struck Yanam on 06/11/1996 evening and continued till the early hours of 07/11/1996 caused extensive damage to the buildings, plant and machinery in the factory of the assessee company. It was observed by him that the asbestos roof sheets of the main factory building ad measuring 8640 square meters and the asbestos roof sheets of all the non-factory buildings ad measuring 13325 square meters were all blown off/broken to pieces. Further, the machinery installed in the main factory and the auxiliary buildings were open to the sky at the onset of the cyclone. The CIT(A) further observed that the plant and machinery of the assessee’s factory were exposed to the fury of heavy and incessant rain that followed the 7 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 cyclone, and all electrical motors and electrical equipment were submerged in flood waters. It was further observed by him that as at the time when the cyclone had hit the factory was working with all the three kilns in operation and in hot condition, the heavy downpour had suddenly quenched the hot furnace resulting in cracking up of refractory, breakage of ceramic rollers and damaging the insulation. It was further observed by him that the entire buildings, plant and machinery, electrical equipment, motors etc. in the factory of the assessee company were extensively damaged and there was a complete stoppage of production from the date of the cyclone i.e, 06.11.1996 to 20.12.1996 when production was recommenced in Kiln II. The production in Kiln I recommenced on 22.12.1996. On the other hand, there was no production in Kiln III till the end of the year and the same had recommenced only on 15/04/1997. Considering the aforesaid facts, the CIT(A) observed that there was a complete stoppage of production in the assessee’s unit from the evening of 06.11.1996 to 20.12.1996 i.e. for 15 days. 10. Apropos the quantitative details of production during the relevant period, the CIT(A) observed that the production of ceramic tiles in the month of November 1997 of 50,834 Sq. Mtrs. was only for the period of 8 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 six days i.e., from 01.11.1996 till the evening of 06.11.1996 in all three kilns. Further, the quantity of production of 53,669 Sq. Mtrs. for the month of December 1996 was the production that was achieved from Kiln 1 and Kiln II from 20.12.1996 & 22.12.1996 to 31.12.1996, while there was no production in Kiln III since it was restarted only on 15.04.1997. 11. The CIT(A) further observed that the surveyors of the Insurance company had assessed the damages to the building, plant & machinery and quantified the total cost of repairs for restructuring at Rs. 4,39,75,689/-. Also, it was observed by him that the Statutory Auditors of the assessee company had certified that an amount of Rs. 254.87 lacs and 184.89 lacs were incurred by the assessee company for the reconstruction of the plant & machinery and buildings in the “Schedule 19” attached to the balance sheet for the year 1996-97 and “Schedule 18” attached to the balance sheet for the year 1997-98, respectively, as against the W.D.V of the “Fixed assets” of Rs. 3608.38 lacs as per its books of account on 01.04.1996 which worked out to 12.18% of the W.D.V of the assets. 12. The CIT(A) based on his aforesaid observations concluded that the buildings, plant & machinery of the factory of the assessee company 9 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 were extensively damaged due to the cyclone on 06.11.1996, which had resulted in the discontinuance of its business. It was further observed by him that the assessee company had enclosed a Certificate no. 235/2014, dated 11.07.2014 issued by the Office of Superintendent of Customs and Central Excise, Yanam Range, wherein it was categorically stated that the assessee company had stopped its production during the period 07th November 1996 to 21st November 1996. 13. The CIT(A) after deliberating at length on the facts involved in the case before him, observed that as the buildings, plant & machinery of the factory of the assessee company were extensively damaged due to the cyclone on 06.11.1996 and its production was stopped, therefore, the reconstruction or revival of its business unit as per the provisions of section 33B of the Act rendered it eligible for claim of deduction under Section 80IA of the Act. The CIT(A) based on his aforesaid observations directed the A.O. to allow the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act. 14. The Revenue, being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. 15. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the lower authorities and the material available 10 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 16. Before proceeding further, we may herein observe that this is the third round of litigation before the Tribunal. Initially, the Tribunal (in the first round of litigation), while disposing off the appeals of the assessee company, had vide its common order passed in ITA Nos 528 & 737/H/2002, 643 & 644/H/2003 and 883/H/2005, dated 21/09/2007, inter alia, remitted the matter to the file of the A.O for verifying the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act while computing its “book profit” under Section 115JA of the Act. Consequent to declining by the A.O in the course of the set-aside proceedings of the assessee’s claim for deduction under Section 80IA r.w.s 33B of the Act, which thereafter was upheld by the CIT(A), the assessee company carried the matter before the Tribunal (in second round of litigation). On appeal, the assessee company had in the second round of litigation before the Tribunal, filed a Certificate no. 235/2014, dated 11.07.2014 issued by the Office of Superintendent of Customs and Central Excise, Yanam Range, wherein it was stated that the assessee company had stopped its production 11 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 during the period 07th November 1996 to 21st November 1996. The Tribunal after necessary deliberations set-aside the order of the CIT(A), and restored the matter to his file for fresh adjudication of the assessee’s claim for deduction under Section 80IA r.w.s 33B of the Act. The Tribunal while restoring the matter to the file of the CIT(A) had observed, as under: “4. We now advert to the sole issue raised in assessee’s grounds pertaining to disallowance of Section 80-IB deduction. The assessee’s case all along appears to be that the alleged eligible unit(s) at Yanam had stopped production during the period from 7th November, 1996 to 21st December, 1996. The factual position is no different in the other years as well as pin-pointed from the departmental side. We find in this backdrop that the taxpayer has also sought to place on record a certificate coming from the office of the Superintendent of Customs and Central Excise, Yanam range dt.11-07-2014 regarding its above stated unit(s) having stopped production by way of additional evidence. 5. Mr.Moharana vehemently argued in favour of the lower authorities’ findings that this assessee has not co-operated all along from assessment till date. The fact, however, remains that clinching fact has prima-facie emerged as per the excise authorities’ certificate giving an altogether a new direction to the case. We thus deem it appropriate to restore the assessee’s identical solitary substantive grievance raised in all these appeals back to the CIT(A) than the Assessing Officer keeping in mind the relevant assessment year involved herein is 1998- 99 onwards. It is made clear that the assessee or its authorised representative shall appear before the CIT(A) on or before 31st July, 2021 along with all the relevant evidence for necessary factual verification; at its own risk and responsibility, to be followed by three effective opportunities of hearing failing which our instant remand directions shall be deemed to have been vacated.” (emphasis supplied by us) 12 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 The CIT(A) on the matter having been restored to his file, had after necessary deliberations, vide his impugned order that has been assailed by the revenue before us, concluded that as the buildings, plant & machinery at the factory of the assessee company were extensively damaged due to the cyclone on 06.11.1996 and its production was stopped, therefore, the reconstruction or revival of its business unit as per the provisions of section 33B of the Act rendered it eligible for claim of deduction under Section 80IA of the Act. 17. The controversy involved in the present appeal lies in a narrow compass i.e., as to whether or not the assessee’s claim for deduction under Section 80IA r.w.s 33B of the Act had rightly been allowed by the CIT(A) vide his order passed in the course of the third round of proceedings before him. 18. Ostensibly, the entitlement of the assessee company for the claim of deduction under Section 80IA r.w.s 33B of the Act hinges around the solitary aspect i.e., as to whether or not the business of the industrial undertaking of the assessee company on being hit by the cyclone which had struct Yanam on 06/11/1996 evening, had due to extensive damage to or destruction of its building, machinery, plant or furniture that were used for purpose of its business was discontinued?. The 13 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 aforesaid aspect is material, for the reason, that though Section 80IA(2)((i) of the Act, for entitling an assessee to claim deduction under the said statutory provision, inter alia, contemplates a pre-condition that the industrial undertaking is not formed by splitting up, or the reconstruction, of a business already in existence, but by way of a “Proviso” it carves out an exception, whereby the said pre-condition is dispensed with and shall not apply where the industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of its business in the circumstances and within the period specified in Section 33B of the Act. To sum up, in case an industrial undertaking is formed as a result of the re-establishment, reconstruction, or revival by the assessee of its business in the circumstances referred to in Section 33B of the Act, then, notwithstanding the pre-condition contemplated in Section 80IA(2)((i) of the Act its claim for deduction under the said statutory provision on the said count will not be jeopardized. 19. On a conjoint reading of section 80IA r.w.s 33B of the Act, it transpires that if the business of the industrial undertaking of the assessee company before us was discontinued due to the extensive damage to or destruction of any building, machinery, plant or furniture 14 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 owned by it and used for purpose of its business because of the cyclone which had struck Yanam on 06/11/1996, then the subsequent reconstruction or revival of its industrial undertaking would not be hit by the pre-condition contemplated in Section 80IA(2)(i) of the Act and will be saved by the “Proviso” appended thereto. 20. On a perusal of the order of the CIT(A), dated 23/10/2024, as has been assailed by the revenue before us, we find that he had based on a reasoned order, concluded, that as the cyclone that had hit Yanam on 06.11.1996 and continued till the early hours of 07/11/1996, had caused extensive damage to the buildings, plant and machinery of the Industrial undertaking of the assessee company, resulting to stopping of its production, and thus, complete discontinuance of its business during the period 07/11/1996 to 21/12/1996, therefore, it was eligible for deduction under Section 80IA r.w.s 33B of the Act. For the sake of clarity, the observations of the CIT(A) are culled out as under: 4. Decision:- I have carefully examined the assessment order passed by the AO, order passed by the CIT(Appeals) & ITAT and other facts of the case available on record. All the issues in this case are therefore adjudicated on merit as under:- 5. Appellant is a company engaged in manufacture and sale of ceramic tiles and commenced its production initially on 01-05- 1986 and was continuing the same. While the said business was going on, on 6th November 1996 Appellant's factory was hit by a massive cyclone which devastated the entire coastal area of 15 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 Andhra Pradesh and Yanam. In Yanam, the buildings and plant and machinery in the Appellant's factory were damaged extensively. The devastating cyclone which struck Yanam on 6-11-1996 evening and continued till the early hours of 07-11-1996 caused extensive damage to buildings, plant and machinery of the Appellant's factory. The entire asbestos roof sheets of the main factory building admeasuring 8640 square mtrs. and the asbestos roof sheets of all the non-factory buildings admeasuring 13325 square mtrs. in all were blown off/broken to pieces. The machinery installed in the main factory and auxiliary buildings were open to sky on the onset of cyclone. The entire plant and machinery of the factory were exposed to the Fury of the heavy and incessant rain that followed the cyclone. All electrical motors and electrical equipments were submerged in flood waters. The factory was working at the time of the occurrence with all the three kilns in operation and hot condition. The heavy downpour suddenly quenched the hot furnace resulting in cracking up of refractory, breakage of ceramic rollers and damaging insulation. As could be seen from the above that the entire buildings, plant and machinery, electrical equipment, motors etc., in Appellant's factory were damaged extensively and there was complete stoppage of production from the date of cyclone i.e., 06.11.1996 to 20.12.1996 when production was recommenced in Kiln II. Kiln I recommenced production on 22.12.1996. There is no production in Kilns III till the end of the year and recommenced production only on 15.04.1997 in the next financial year. Therefore the assessee submitted that here was complete stoppage of production from evening of 6.11.1996 to 20.12.1996 i.e., 45 days. Appellant submitted that the quantitative details of production for the month of November 1997 at 50,834 Sq. meters is only for the period of six days i.e., from 1.11.1996 till evening of 6.11.1996 in all the three kilns. Further the quantity of production of 53,669 Sq. Meters for the month of December 1996 is the production achieved from Kiln I and Kiln II from 20.12.1996 & 22.12.1996 to 31.12.1996 and there is no production in Kiln III since it was restarted only on 15.4.1997. 16 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 Appellant submitted that Surveyors of Insurance Company assessed the damages to the Buildings, Plant & Machinery and quantified the total cost of repairs for restructuring at Rs.4,39,75,689/-. Similarly, the Statutory Auditors also certified that an amount of Rs.254.87 lakhs and Rs.184.89 lakhs was incurred by the company for reconstruction of the plant and machinery and buildings in Schedule 19 attached to the Balance sheet for the year 1996-97 and Schedule 18 attached to the Balance sheet for the year 1997-98 respectively against the W.D.V of Fixed Assets of Rs.3608.38 lakhs as per books as on 01.04.1996 which works out to 12.18% of W.D.V of assets. It is evident from the above that the buildings, Plant and Machinery of Appellant’s factory were extensively damaged due to cyclone on 06.11.1996 and resulted in discontinuance of business. The Appellant enclosed the certificate No. 235/2014 dt. 11/07/2014 issued by Office of Superintendent of Customs and Central Excise, Yanam Range wherein it is categorically stated that the Company had stopped production during the period 7th November, 1996 to 21st December, 1996. Therefore, Appellant submitted that the Company’s working units were completely discontinued during the period 07-11-1996 to 21-12-1996 and therefore provisions of Sec.80IA/80IB r.w.s.33B were applicable to it. 5.1. Section 80IA of the Income Tax Act provides tax benefits to businesses that operate in infrastructure, power, telecommunication, and other specified sectors. This provision offers tax deductions and exemptions to encourage businesses to invest in the mentioned sectors. Section 80IA of the Act as it stood applicable for the AY 1998- 99 is reproduced here for ready reference as under: ‘80-IA. Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases.— (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange 17 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 services or construction and development of housing projects or operating an industrial park or commercial production or refining of mineral oil in the North Eastern Region or in any part of India on or after the 1st day of April, 1997 (such business being hereinafter referred to as the eligible business), to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6). (2). This section applies to any industrial undertaking which fulfils all the following conditions, namely:— (i). it is not formed by splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of an industrial 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, in the circumstances and within the period specified in that section; ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; iii) it manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India : Provided that the condition in this clause shall, in relation to a small scale industrial undertaking or an industrial undertaking referred to in sub-clause (b) of clause (iv) which begins to manufacture or produce an article or thing during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2000, apply as if the words \"not being any article or thing specified in the list in the Eleventh Schedule\" had been omitted; 18 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 *** ** *** 5.2. Section 33B of the Income Tax Act as it stood applicable for the AY 1998-99 is reproduced here as under:- \"33B. Where the business of any industrial undertaking carried on in India is discontinued in any previous year by reason of extensive damage to, or destruction of, any building, machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of – (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature: or (ii) riot or civil disturbance: or (in) accidental fire or explosion: or 1. action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty percent of the amount of the deduction allowable to him under clause (iii) of sub- section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged destroyed:” 5.3. As could be seen from sub-section (2) of section 80IA, for the purpose of claiming deduction under this section, the first condition to be satisfied is that the industrial undertaking shall not be formed by splitting up, or the reconstruction, of a business already in existence except the industrial undertakings formed by splitting up or on reconstruction or revival in the circumstances explained in section 33B of the Act. Appellant submitted that its industrial undertaking, which was damaged extensively, stopped production resulting in discontinuance of business due to cyclone on 06.11.1996 as already explained in preceding paragraphs, was reconstructed within a period of about 1.5 months and satisfies the condition laid down in clause (i) of sub-section (2) of section 80IA r.w.s.33B of I.T Act. 19 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 Appellant further submitted that as could be seen from section 33B there should be extensive damage to any building, machinery or furniture. As could be seen from the whole phraseology of the section, the word 'or' is used and therefore the building may be damaged or plant and machinery could be damaged or furniture could be damaged. It is not necessary that the section requires that all these assets to be simultaneously damaged. The consequence should be the stoppage of business. In the present case, as a result of cyclone, the buildings, plant and machinery, electrical equipment, etc., were extensively damaged and business came to a standstill. The word \"extensive\" means 'large in amount or scale'. The total amount of compensation paid by the insurance company during the years 1996-97 and 1997-98 is Rs.311 lakhs. The assessee further submitted that in the absence of statute specifying any minimum percentage of value of the machinery damaged in comparison with the written down value of the machinery, the word 'extensive' which does not have any legal import, should be given its normal meaning which merely means as said earlier 'large in amount'. 5.4. The sole issue raised in assessee’s grounds pertains to disallowance of Section 80-IA deduction. The assessee’s case all along appears to be that the alleged eligible unit(s) at Yanam had stopped production during the period from 7 th November, 1996 to 21st December, 1996. The assessee revived or reconstructed this business units thereby falling under the meaning of industrial undertakings as specified in section 33B of the Act. Such specified industrial undertakings are eligible for deduction claimed u/s 80IA of the Act read with section 33B of the Act. In support of its contention, the assessee company furnished certificate issued from the office of the Superintendent of Customs and Central Excise, Yanam Range dt. 11-07-2014 regarding its above stated unit(s) having stopped production. The same was perused and found to be in order. In this case it is proved that the assessee company was damaged due to cyclone and its production was stopped. Subsequently, the same business units were reconstructed or revived as per provisions of section 33B of the Act and hence it is 20 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 held that the assessee company was eligible to claim deduction us/ 80IA read with section 33B of the Act. In view of the facts discussed above & documentary evidences furnished by the assessee, the contention of the assessee company is accepted and hence the AO is directed to allow the deduction claimed u/s 80IA read with section 33B of the Act. Accordingly, all the grounds of appeal are allowed. 5.5. For the other assessment years 1999-2000, 2000-01, 2001- 02 & 2002-03, the issue of disallowance of deduction u/s 80IA of the Act are identical and hence the AO is directed to give effect to other assessment years 1999-2000, 2000-01, 2001-02 & 2002-03 in a similar way as for the AY 1998-99 as discussed in above paragraphs. 6. In the result, the appeal is allowed”. 21. Although the revenue vide its “Written submissions” placed on our record has, inter alia, claimed that as the temporary stoppage or disruption of the production of the assessee company will not tantamount to discontinuance of business of the assessee company, which is a pre-condition for bringing it within the meaning of Section 33B of the Act, therefore, the CIT(A) losing sight of the said material aspect had wrongly allowed the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act, but we are unable to persuade ourselves to concur with the same. As observed by us hereinabove, the CIT(A) had based on his exhaustive deliberations observed that due to the devastating cyclone that had struck Yanam on 06/11/1996 evening and continued till the early hours of 07/11/1996, 21 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 that was followed by incessant rains, the entire buildings, plant and machinery, electrical equipment, motors etc., in the factory of the assessee company were damaged extensively and there was a complete stoppage of its production from the date of cyclone i.e., 06/11/1996 to 20/12/1996. Rather, we find that the CIT(A) had in his order culled out the multi-facet damage that was caused to the buildings, plant and machinery etc., of the assessee company. Elaborating on the damage caused, the CIT(A) had observed that the devastating cyclone which struck Yanam on 06/11/1996 evening and continued till the early hours of 07/11/1996 had caused extensive damage to the buildings, plant and machinery of the factory of the assessee company. Explaining further the nature of damage, it was observed by him that the asbestos roof sheets of the main factory building ad measuring 8640 square meters and the asbestos roof sheets of all the non-factory buildings ad measuring 13325 square meters in all were blown off/broken to pieces. Also, it was observed by him that the machinery installed in the main factory and auxiliary buildings were open to the sky at the onset of the cyclone. Further, it was observed by him that the plant and machinery of the factory were exposed to the fury of heavy and incessant rain that followed the cyclone, and all electrical motors and electrical equipment were submerged in flood waters. Also, he had taken note of the fact that 22 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 as the factory was working at the time when the cyclone had hit with all the three kilns in operation and in hot condition, the heavy downpour had suddenly quenched the hot furnace resulting in the cracking up of refractory, breakage of ceramic rollers and damaging the insulation. It was further observed by him that the entire buildings, plant and machinery, electrical equipment, motors etc. in the factory of the assessee company were extensively damaged and there was a complete stoppage of production from the date of the cyclone i.e., 06.11.1996 to 20.12.1996 when production was recommenced in Kiln II. The production in Kiln I recommenced on 22.12.1996. On the other hand, there was no production in Kiln III till the end of the year and the same had recommenced only on 15/04/1997. Considering the aforesaid facts, the CIT(A) observed that there was a complete stoppage of the production from the evening of 06.11.1996 to 20.12.199 i.e. for a period of 15 days. 22. Apart from that, the CIT(A) to dispel all doubts about his observation regarding the stoppage of production and discontinuance of the business of the assessee company, had drawn support from the quantitative details of production during the relevant period. It was observed by him that the production of ceramic tiles in the month of 23 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 November 1996 of 50,834 Sq. Mtrs. was only for the pre-cyclone period of six days i.e., from 01.11.1996 till the evening of 06.11.1996 in all three kilns. Further, it was observed by him that the production by the assessee company of 53,669 Sq. Mtrs. of ceramic tiles for the month of December 1996 was the production that was achieved from Kiln 1 and Kiln II from 20.12.1996 & 22.12.1996 (i.e the dates of their respective recommencement of production) till 31.12.1996, while for there was no production in Kiln III since it was restarted only on 15.04.1997. Also, we find that the CIT(A) had referred to the report of the surveyor of the Insurance company who had assessed the damages to the building, plant & machinery and quantified the total cost of repairs for restructuring at Rs. 4.39 crores (approx.). Also, it was observed by him that the Statutory Auditors of the assessee company had certified that an amount of Rs. 254.87 lacs and 184.89 lacs were incurred by the assessee company for the reconstruction of the plant & machinery and buildings in the “Schedule 19” attached to the balance sheet for the year 1996-97 and “Schedule 18” attached to the balance sheet for the year 1997-98, respectively, as against the W.D.V of the “Fixed assets” of Rs. 3608.38 lacs (as per the books of account on 01.04.1996) which worked out to 12.18% of the W.D.V of the assets. Also, we find that the CIT(A) had referred to the Certificate no. 235/2014, dated 11.07.2014 issued 24 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 by the Office of Superintendent of Customs and Central Excise, Yanam Range that was filed by the assessee company as “additional evidence” before the Tribunal, wherein it was categorically stated that the assessee company had stopped its production during the period 07th November 1996 to 21st November 1996. The CIT(A) after deliberating at length on the facts involved in the case before him, had observed that as the buildings, plant & machinery of the factory of the assessee company were extensively damaged due to the cyclone on 06.11.1996 and its production was stopped, therefore, the reconstruction or revival of its business unit as per the provisions of section 33B of the Act rendered it eligible for claim of deduction under Section 80IA of the Act. The CIT(A) based on his aforesaid observations directed the A.O. to allow the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act. 23. Considering the aforesaid exhaustive deliberations of the CIT(A) in his impugned order, and also the observation of the Tribunal in its order passed while disposing off the appeals filed by the assessee company, viz. ITA Nos. 1304 to 1308/Hyd/16, dated 16.02.2021, wherein it had on a perusal of the certificate issued by the Superintendent of Customs and Central Excise, Yanam range dt.11-07-2014, had observed that a clinching fact regarding the stoppage of production by the assessee company has 25 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 surfaced, we find no infirmity in the view taken by the CIT(A) that as the buildings, plant & machinery of the factory of the assessee company were extensively damaged due to the cyclone on 06.11.1996 and its production was stopped, therefore, on the reconstruction or revival of its business unit it was eligible for deduction under Section 80IA r.w.s 33B of the Act. 24. We shall now deal with the Ld. DR’s contention, that though the fact that the production in the assessee’s unit due to the aforesaid natural calamity was temporarily stopped is not disputed, but, such temporary stoppage or disruption of production cannot suffice to bring the case of the assessee company with the meaning of “discontinuance of business”, i.e a pre-condition for availing deduction under Section 80IA r.w.s 33B of the Act. The Ld. D.R states that the CIT(A) in the course of the set-aside proceedings by losing sight of the difference between, viz., temporary stopping or disruption of production and discontinuance of business, had grossly erred in law and facts of the case in observing that the assessee company was entitled for deduction under Section 80IA r.w.s 33B of the Act. 25. We have perused the written submissions filed by the Ld. D.R. to support her aforesaid claim but are unable to concur with her. 26 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 Ostensibly, the CIT(A) had based on his exhaustive deliberations established beyond doubt that the entire buildings, plant and machinery, electrical equipment, motors etc. in the factory of the assessee company were extensively damaged and there was a complete stoppage of production from the date of the cyclone i.e., from 06.11.1996 till 20.12.1996. Also, the aforesaid fact can safely be gathered from the Certificate issued by the Superintendent of Customs and Central Excise, Yanam range, dated.11-07-2014, which as observed by the Tribunal (in the second round of litigation) while disposing off the appeals filed by the assessee company in ITA Nos. 1304 to 1308/Hyd/16, dated 16.02.2021 was a clinching fact regarding the stoppage of production by the assessee company. Be that as it may, the Ld. D.R (in her written submissions) had not disputed the fact that due to the cyclone that had hit Yanam on 06.11. 1996 evening and continued till the early hours of 07/11/1996, the production at the unit of the assessee company was stopped. Rather, it is the ld. D.R’s claim that the temporary stoppage of production or disruption of work at the unit of the assessee company cannot partake the meaning of discontinuance of its business, i.e. a pre-condition for triggering the provisions of Section 33B of the Act. The learned CIT- DR to buttress her aforesaid claim had pressed into service the CBDT Circular No. 5-P (LXXVI-63) of 1967, dated 09/10/1967, wherein it is 27 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 stated that in the context of section 33B of the Act discontinuance of business of an undertaking implies the complete cessation of the business and not merely a cessation of some of the activities or closing down of a few units or sub-units of the industrial undertaking. The Ld. CIT-DR further states that as the assessee company during the period when its production was temporarily stopped i.e. 06/11/1996 to 20/11/2016 was undertaking steps to revive its business, therefore, the question that its business was discontinued during the said period does not arise at all. 26. We have given thoughtful consideration to the aforesaid contentions of the ld. D.R. and are unable to persuade ourselves to subscribe to the same. As the term “discontinuance” of business had not been defined in the Act, therefore, we construe the same by borrowing its dictionary meaning. As per the dictionary meaning, the term “discontinue” means an interruption (temporary or permanent). The Ld. DR’s claim that “discontinuance of business” is to be construed in a manner that the said business was permanently disrupted with there being no intention to carry on the same in the coming tomes, we are afraid not only militates against the dictionary meaning which takes within its sweep also a “temporary interruption”, but the said 28 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 interpretation, if subscribed, will defeat the very purpose of the concession provided in Section 80IA r.w.s 33B of the Act. Although Section 80IA(2)(i) of the Act, for entitling an assessee to claim deduction under the said statutory provision, inter alia, contemplates a pre- condition that the industrial undertaking is not formed by splitting up, or the reconstruction, of a business already in existence, but by way of a “Proviso” an exception is therein carved out, whereby the applicability of the said pre-condition is dispensed with in respect of an industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in Section 33B, in the circumstances and within the period specified in that section. If the Ld. DR’s contention that the “discontinuance” of business is to be construed in a manner that at the relevant point of time there should be no intention to continue the same in the coming times, then, we are afraid that the concession carved out in the “Proviso” to Section 80IA(2)(i) r.w Section 33B of the Act would be rendered as meaningless and otiose. We are unable to persuade ourselves to subscribe to the aforesaid manner in which the “discontinuance of business” is sought to be construed by the revenue. We are of the firm conviction that all that the term “discontinuance of business” means is an interruption (temporary or 29 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 permanent), which if it had occasioned because of the circumstances envisaged in Section 33B of the Act, viz. (i). flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature; or (ii). riot or civil disturbance; (iii). accidental fire or explosion; or (iv). action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), would resultantly dispense with the pre-condition laid down in Section 80IA(2)(i) i.e. the industrial undertaking is not formed as a result of the re-establishment, reconstruction or revival of its business. Once again, we may herein observe, that if the Ld. DR’s contention that the “discontinuance” of business is to be construed in a manner that the assessee at the relevant point of time had no intention to continue the said business in the coming times, then, the concession provided in Section 80IA r.w Section 33B will be rendered as unworkable. 27. We thus, finding no infirmity in the view taken by the CIT(A), who had by a well-reasoned order held that the assessee company is entitled to the claim of deduction under Section 80IA r.w.s 33B of the Act, uphold the same. 28. The Grounds of appeal Nos. 1, 2, & 3 of the Revenue’s appeal are dismissed. 30 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 29. In the result, appeal filed by the Revenue being devoid and bereft of any substance is dismissed in terms of our aforesaid observations. 30. As the facts involved in the captioned appeal remain the same as were there in the appeal filed by the Revenue in A.Y 1998-99 in ITA No. 1350/Hyd/2024, therefore, our order therein passed shall apply mutatis mutandis for purpose of disposing of the present appeals. 31. Resultantly, the captioned appeals in ITA No. 1337/Hyd/2024 (A.Y 1999-2000); ITA No. 1338/Hyd/2024 (A.Y 2000-2001); ITA No. 1339/Hyd/2024 (A.Y 2001-2002); and ITA No. 1340/Hyd/2024 (A.Y 2002-2003) are dismissed in the same terms. 32. In the result, all the appeals filed by the Revenue are dismissed. Order pronounced in the Open Court on 2nd June, 2025. Sd/- Sd/- (मंजूनाथ जी) (MANJUNATHA G.) लेखध सदस्य/ACCOUNTANT MEMBER Sd/- (रवीश सूद) (RAVISH SOOD) न्यधनयक सदस्य/JUDICIAL MEMBER Sd/- Hyderabad, dated 02.06.2025. *OKK/SPS आदेशकी प्रतततिति अग्रेतषत/ Copy of the order forwarded to:- 1. तिर्ााररती/The Assessee : Regency Ceramics Limited, 6-3-1090/A/7/IMS House Rajbhavan, Somajiguda, Hyderabad, Telangana-500082. 31 ITO, Ward 3(1), Hyderabad Vs. Regency Ceramics Ltd. ITA Nos. 1350, 1337 to 1340/Hyd/2024 AY(s). 1998-99 to 2002-03 2. राजस्व/ The Revenue : Income Tax Officer, Ward-3(1), 7th Floor, Signature Towers, Kodapur, Hyderabad, Telangana-500084. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. तिभागीयप्रतततितर्, आयकर अिीिीय अतर्करण, हैदराबाद / DR, ITAT, Hyderabad 5. The Commissioner of Income Tax 6. गार्ाफ़ाईि / Guard file आदेशािुसार / BY ORDER Sr. Private Secretary ITAT, Hyderabad "