M/s Mahabir Industries, Baddi V. ITO, Baddi

ITA 1217/CHANDI/2011

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9811 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 15-12-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Assessee Lawyers: HARRY RICKKY
• Keywords: Depreciation; Advance ruling; Condonation of delay
• Section: 244A; 80IB; 6; 263; 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO.1217/CHD/2011 ASSESSMENT YEAR:2008-09 & ITA NO. 791/CHD/2012 ASSESSMENT YEAR:2009-10 M/S MAHABIR INDUSTRIES VS. THE ITO PLOT NO. 117, BADDI HPSIDC, BADDI PAN NO. AACFM3117G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. HARRY RICKKY RESPONDENT BY : SH. AMARVEER SINGH DATE OF HEARING : 22/06/2015 DATE OF PRONOUNCEMENT : 03/07/2015 ORDER PER T.R.SOOD, A.M. 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 FOLLO WING GROUNDS : 1. THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS DEFECTIVE BOTH IN LAW AND FACT S 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 R S. 59,32,287/- CLAIMED BY THE APPELLANT U/S 80IC OF TH E INCOME TAX ACT 1961 ON THE GROUND THAT THE APPELLANT HAS D URING THE YEAR EXCEEDED THE TOTAL PERIOD OF DEDUCTION AS PER SECTION 80IC(6) OF THE I.T. ACT 1961 AS THEY HAVE WRONGLY I NTERPRETED THE PROVISIONS OF SECTION 80-IC(6). THIS ADDITION I S UNCALLED FOR AND DESERVES TO BE DELETED AS THE APPELLANT MADE 2 SUBSTANTIAL EXPANSION IN THE ASSESSMENT YEAR 2006-0 7 AND STARTED CLAIMING DEDUCTION U/S 80IC(2)(A)(II) FROM THE INITIAL ASSESSMENT YEAR 2006-07 ONWARDS U/S 80IC(3) (II) RE AD WITH 80IC(8)(V) OF THE I.T. ACT 1961. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEES UNDERTAKING STARTED OPERATION ON 18/05/1997 AND CLA IMED DEDUCTION UNDER SECTION 80IB(4) FOR ASSESSMENT YEAR 1998-99 TO 2005-06, THEREAFTER SUBSTANTIAL EXPANSION WAS CARRI ED OUT IN FY 2005-06 AND ASSESSEE AGAIN CLAIMED DEDUCTION UNDER SECTION 80IC FROM AY 2006-07. AO NOTICED THAT PRESENT YEAR IS THE 11 TH YEAR FOR OPERATION OF THE UNIT AND THEREFORE, NO DE DUCTION WAS ALLOWABLE UNDER SECTION 80IC IN VIEW OF THE SPECIFI C PROVISIONS OF 80IC(6) AND ACCORDINGLY DENIED THE CLAIM OF DEDU CTION 4. ON APPEAL THE ACTION OF AO WAS CONFIRMED BY THE LD. CIT(A). 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT SECTION 80IC SUB SECTION 6 CANNOT BE APPLIED TO THE UNDERTA KING IN STATE OF HIMACHAL PRADESH BECAUSE SUB SECTION 6 WAS APPLICABLE TO THE UNIT LOCKED IN NORTH EAST STATES. 6. ON THE OTHER HAND LD. DR SUBMITTED THAT THE ISSU E IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF TRIBUN AL IN CASE OF HYCRON ELECTRONICS & OTHERS IN ITA NO. 798/CHD/2 012 AND OTHERS. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY, SECTION 80IC SUB SECTION 6 READS AS UNDER: NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, N O 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 SEC TION, OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 1 0C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. IT IS TO BE NOTICED THAT THIS SUB SECTION STARTS W ITH NON OBSTANTE CLAUSE WHICH MEANS THAT THIS SECTION IS A PPLICABLE TO ALL KINDS OF STATES WHEREVER SECTION 80IC IS APPLICABLE . THE PERIOD OF DEDUCTION HAS BEEN CLEARLY RESTRICTED TO PERIOD OF TEN YEARS INCLUSIVE OF THE DEDUCTION CLAIMED UNDER SECTION 80 IB. SINCE ASSESSEE HAS ALREADY CLAIMED DEDUCTION UNDER SECTIO N 80IB FOR TEN YEARS THEREFORE ASSESSEE IS NOT ENTITLED FOR THE DE DUCTION IN THE PRESENT YEAR. IN ANY CASE THE ISSUE HAS BEEN ADJUDI CATED BY US IN 3 DETAIL IN CASE OF HYCRON ELECTRONICS & OTHERS IN IT A NO. 798/CHD/2012 AND OTHERS. THE RELEVANT PARAS ARE 22-49 WHICH ARE AS U NDER : 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS INCLU DING WRITTEN SUBMISSIONS IN THE LIGHT OF MATERIAL ON RECORD, AS WELL AS JUDGMENTS CITED BY THE PARTIES. BEFORE WE CONSIDER THE RELEVA NT PROVISIONS WHICH ARE REQUIRED TO BE INTERPRETED, IT WILL BE US EFUL TO DEAL WITH THE VARIOUS PRINCIPLES OF INTERPRETATION AS ENUNCIA TED 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 UNINT ENDED CONSEQUENCES. THEREFORE, IF THE LANGUAGE OF A PART ICULAR STATUTE IS CLEAR THEN THE SAME CANNOT BE CHANGED BY APPLYING D IFFERENT PRINCIPLES OF INTERPRETATIONS. THIS IS CLEAR FROM T HE OBSERVATIONS MADE BY HON'BLE APEX COURT IN THE CASE OF ORISSA STATE WAREHOUSING CORPORATION VS. CIT 237 ITR 607 WHER EIN IT HAS BEEN OBSERVED AT PAGE 604 & 605 OF THE REPORT AS UNDER:- LET US, HOWEVER, AT THIS JUNCTURE, CONSIDER SOME O F THE OFT CITED DECISIONS PERTAINING TO THE INTERPRETATION OF THE FISCAL STAT UTES BEING THE FOCAL POINT OF CONSIDERATION IN THESE APPEALS. LORD HALSBURY AS EA RLY AS 1901, IN COOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) STATE D THE LAW IN THE MANNER FOLLOWING: A COURT OF LAW, HAS NOTHING TO DO WITH THE REASONA BLENESS OR UNREASONABLENESS OF A PROVISION OF A STATUTE EXCEPT SO FAR AS IT MAY H OLD IT IN INTERPRETING WHAT THE LEGISLATURE HAS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, THE LEGISLATURE MUST BE TAKEN TO HAVE MEAN T AND INTENDED WHAT IT HAS PLAINLY EXPRESSED, AND WHATEVER IT HAS IN CLEAR TER MS ENACTED MUST BE ENFORCED THOUGH IT SHOULD NOT LEAD TO ABSURD OR MISCHIEVOUS RESULTS. IF THE LANGUAGE OF THIS SUB-SECTION BE NOT CONTROLLED BY SOME OF THE OTHER PROVISIONS OF THE STATUTE. IT MUST, SINCE, ITS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED AND YOUR LORDSHIPS HOUSE SITTING JUDICIALLY IS NOT CONCERNE D WITH THE QUESTION WHETHER THE POLICY IT EMBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OR UNJUST, BENEFICIAL OR MISCHIEVOUS. THE OFT-QUOTED OBSERVATIONS OF ROWLATTT J. IN THE C ASE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT ALSO TO BE NO TICED AT THIS JUNCTURE. THE LEARNED JUDGE OBSERVED (PAGE 71): . . . IN A TAXING STATUTE ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS T O BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. THE OBSERVATIONS OF ROWLATT J. AS ABOVE STAND ACCEP TED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECISION, IN THE C ASE OF CANADIAN EAGLE OIL ALSO IN A MANNER SIMILAR IN IRC V. ROS AND COULTER (BLADNOC H DISTILLERY CO. LTD. V. THE KING [1946] HON'BLE APEX COURT 119; [1945] 2 ALL ER 499. LORD THANKERTON ALSO IN A MANNER SIMILAR IN IRC V. ROSS AND COULTER (BLADNOCH DISTILLERY CO. LTD. [1984] 1 ALL ER 616 AT PAGE 625 OBSERVE: IF THE MEANING OF THE PROVISION IS REASONABLY CLEA R, THE COURTS HAVE NO JURISDICTION TO MITIGATE SUCH HARSHNESS. THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND C O. V. CIT[1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VIEWS EXPRESSED ABOVE. THIS COUR T OBSERVED (PAGE 9): AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIVE IN TENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT THEN B E APPEALED TO TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAM BIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED. IT IS NOWHERE ELSE. THE N EED FOR INTERPRETATION ARISES WHEN 4 THE WORDS USED IN THE STATUTE ARE, ON THEIR OWN TER MS, AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE ARTIFICIAL AND UNDULY LATIDUDINARIAN RULES OF CONST RUCTION, 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 I NJUSTICE DO NOT AND CANNOT HAVE ANY BEARING FOR REJECTING THE NATURAL CONSTRUC TION 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 REQ UIRED TO BE CONSTRUED SO AS TO FIND OUT THE REAL INTENTION OF T HE LEGISLATURE AND THEN EVERY POSSIBLE MATERIAL SHOULD BE CONSIDERED T O FIND OUT THE REAL INTENTION OF THE LEGISLATURE. IN THIS REGARD, THE OBSERVATION OF THE HON'BLE SUPREME COURT IN THE CELEBRATED JUDGEME NT OF K.P. VERGESE 131 ITR 598 (SUPRA) ARE RELEVANT. WE EXTRA CT THE HEAD NOTE WHICH READS AS UNDER:- A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POS SIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE THE PLAIN LITERAL IN TERPRETATION OF A STATUTORY PROVISION PRODUCES A MANIFESTLY ABSURD AND UNJUST R ESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MAY MOD IFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME VIOLENCE TO IT, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. L UKE V . IRC [1963] H ON ' BLE A PEX C OURT 557; [1964] 54 ITR 692 (HL) FOLLOWED. SPEECHES MADE BY THE MEMBERS OF THE LEGISLATURE ON THE FLOOR OF THE HOUSE WHEN THE BILL IS BEING DEBATED ARE INADMISSIB LE FOR THE PURPOSE OF INTERPRETING THE STATUTORY PROVISION BUT THE SPEECH MADE BY THE MOVER OF THE BILL EXPLAINING THE REASON FOR ITS INTRODUCTION CAN CERT AINLY BE REFERRED TO FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE R EMEDIED BY THE LEGISLATION AND THE OBJECT AND PURPOSE FOR WHICH THE LEGISLATIO N IS ENACTED. THIS IS AN ACCORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTERN COUNTRIES BUT ALSO IN INDIA, THAT THE INTERPRETATION OF A STATUTE BEING A N EXERCISE IN THE ASCERTAINMENT OF MEANING, EVERYTHING WHICH IS LOGICALLY RELEVANT SHO ULD BE ADMISSIBLE. THE MARGINAL NOTE TO A SECTION CANNOT BE REFERRED TO FOR THE PURPOSE OF CONSTRUING THE SECTION BUT IT CAN CERTAINLY BE RELI ED UPON AS INDICATING THE DRIFT OF THE SECTION OR TO SHOW WHAT THE SECTION IS DEALING WITH. IT CANNOT CONTROL THE INTERPRETATION OF THE WORDS OF A SECTION, PARTICULA RLY WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS BUT, BEING PART OF THE STATUTE, IT PRIMA FACIE FURNISHES SOME CLUE AS TO THE MEANING AND PURPOSE O F THE SECTION. THE HIGHLIGHTED PORTION CLEARLY SHOWS THAT EVERY MA TERIAL WHICH IS LOGICALLY RELEVANT SHOULD BE TAKEN INTO ACCOUNT FOR ASCERTAINING THE TRUE MEANING OF A PARTICULAR PROVISION. THE SAME V IEW WAS TAKEN BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V N .K. VAIDYA 224 ITR 186 (SUPRA) AND OBSERVATIONS CONTAINED IN THE H EAD NOTE READS ASUNDER:- THE LEGISLATIVE HISTORY OF A FISCAL STATUTE COULD BE TRACED AND CONSIDERED TO UNDERSTAND ITS SCOPE. THE COURTS ARE PERMITTED TO T RAVEL BEYOND THE WORDS USED IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHICH A PART ICULAR PROVISION IS ENACTED; FOR THIS PURPOSE, EVEN THE SPEECH OF THE FINANCE MINIST ER, WHILE INTRODUCING THE PARTICULAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ARE NOT ONLY BINDING ON THE INCOME-TAX DEPARTMENT BUT ARE ALSO IN THE NATURE OF CONTEMPORANEA EXPOSIT ION FURNISHING LEGITIMATE AID IN THE CONSTRUCTION OF A PROVISION. 24. THE LD. COUNSEL OF THE ASSESSEE HAD REFERRED TO THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF DINA KAR ULLAL VS. CIT (SUPRA) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE O F 5 COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTI NG & WIRE (SUPRA) FOR THE PROPOSITION THAT SINCE CIRCULARS AR E NOT BINDING ON THE COURTS, THEREFORE, THE SAME SHOULD NOT BE CONSI DERED FOR INTERPRETATION OF A PARTICULAR PROVISION. AS FAR A S THE DECISION IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S RATT AN MELTING & WIRE (SUPRA) IS CONCERNED, THIS DOES NOT SUPPORT TH E PROPOSITION MADE BY THE LD. COUNSEL FOR THE ASSESSEE. IN THAT CASE THE QUESTION WAS WHETHER A CIRCULAR ISSUED BY THE DEPAR TMENT WHICH IS GENERALLY BINDING ON THE AUTHORITIES WOULD TAKE PRE CEDENCE OVER THE INTERPRETATION MADE BY THE SUPREME COURT OR HIG H COURT IN RESPECT OF PARTICULAR PROVISION. THE PARA 6 OF THI S 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 RESPECT IVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH COURT DECLARES T HE LAW ON THE QUESTION ARISING FOR CONSIDERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT THAT THE CIRCULAR SHOULD BE GIV EN EFFECT TO AND NOT THE VIEW EXPRESSED IN A DECISION OF THIS COURT OR THE HIGH COURT. SO FAR AS THE CLARIFICATIONS/CIRCULARS ISSUED BY TH E CENTRAL GOVERNMENT AND OF THE STATE GOVERNMENT ARE CONCERNE D THEY REPRESENT MERELY THEIR UNDERSTANDING OF THE STATUTO RY PROVISIONS. THEY ARE NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DECLARE WHAT THE PARTICULAR PROVISION OF STATUTE SAYS AND I T IS NOT FOR THE EXECUTIVE. LOOKED AT FORM ANOTHER ANGEL, A CIRCULA R WHICH IS CONTRARY TO THE STATUTORY PROVISIONS HAS REALLY NO EXISTENCE IN LAW. THE ABOVE SHOWS THAT CIRCULARS ARE NOT BINDING ON T HE COURT BUT THE COURT HAS RIGHT TO LOOK AT THE CIRCULAR AND ULTIMAT ELY MEANING OF A PROVISION AS INTERPRETED BY THE COURT WOULD PREVAIL IN COMPARISON TO THE INTERPRETATION GIVEN IN THE CIRCULAR. THER EFORE, IF CIRCULAR IS CONTRARY TO A PROVISION AS INTERPRETED BY THE COURT THEN THE OPINION OF THE COURT WOULD PREVAIL. THIS DECISION NOWHERE LAYS DOWN THAT CIRCULARS CANNOT BE CONSIDERED FOR INTERP RETATION OF A PARTICULAR PROVISION. 25. IN THE CASE OF DINAKAR ULLAL VS CIT 323 ITR 45 2(KARNATAKA), THE ASSESSEE WAS A CIVIL CONTRACTOR AND HAD FILED BELAT ED RETURN DECLARING INCOME OF RS. 50,240/- AND WAS CLAIMING R EFUND OF RS. 2,14,505/- ON ACCOUNT OF TAX DEDUCTED AT SOURCE. TH E LAST DATE OF FILING THE RETURN WAS 31.3.1997 BUT THE RETURN WAS FILED LATE ON 8 TH SEPTEMBER 1997. THE ASSESSEE SOUGHT CONDONATION OF DELAY BY AN APPLICATION FILED ON 21 ST SEPT, 1998 BY INVOKING SECTION 119(2)(B) OF THE ACT WHICH WAS INITIALLY REJECTED. HOWEVER, ON A WRIT PETITION THE ORDER FOR REJECTION WAS QUASHED BY A SINGLE JUD GE AND REMITTED THE MATTER BACK FOR FRESH CONSIDERATION. ON REMAND , THE COMMISSIONER WHO WAS VESTED WITH THE JURISDICTION U NDER INSTRUCTION NO.13 OF 2006 IN RESPECT OF CLAIM UPTO RS. 10 LAKHS ACCEPTED THE CAUSE SHOWN FOR DELAY IN FILING THE RETURN BUT DENI ED INTEREST ON REFUND AMOUNT IN VIEW OF THE CONDITION SET OUT IN C IRCULAR NO. 670 DATED 26 TH OCT 1993. THEREFORE, QUESTION BEFORE THE COURT WA S WHETHER THESE INSTRUCTIONS WERE CONTRARY TO THE PRO VISION OF SECTION 244A OF THE ACT WHICH PROVIDED FOR PAYMENT OF INTEREST ON REFUNDS. THIS BECOMES ABSOLUTELY CLEAR FROM THE QU ESTION FRAMED BY HON'BLE COURT WHICH IS CONTAINED AT PLACITUM 6 A ND READS AS UNDER:- (I) WHETHER THE CONDITION TO DENY INTEREST ON REFU ND AMOUNT DUE TO AN ASSESSEE UNDER THE ACT, WHILE ADMITTING AN APPLICATION TO CO NDONE THE DELAY IN MAKING A CLAIM FOR BELATED REFUND UNDER SECTION 237 OF THE A CT, 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 RE SPONDENT 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 ULTI MATELY HELD THAT ASSESSEE WAS ENTITLED TO INTEREST U/S 244A AND CIRCULAR NO. 670 6 WAS CONTRARY TO THE PROVISIONS OF SECTION 244A. THE COURT ALSO OBSERVED THAT CIRCULAR COULD BE ISSUED TO CLARIFY T HE PROVISIONS FOR REMOVING THE DIFFICULTIES. THEREFORE, IT IS CLEAR THAT QUESTION WHETHER A CIRCULAR CAN BE CONSIDERED IN INTERPRETAT ION OF A PARTICULAR PROVISION WAS NEVER BEFORE THE COURT AND THEREFORE, IN OUR OPINION, THIS JUDGEMENT DOES NOT SUPPORT THE PR OPOSITION THAT CIRCULAR CANNOT BE CONSIDERED FOR THE PURPOSE OF IN TERPRETING THE PARTICULAR PROVISION. 27. IT WILL BE USEFUL TO STATE ANOTHER VERY WELL S ETTLED PRINCIPLE OF INTERPRETATION I.E. WHENEVER THE PARTICULAR PROVISI ON IS REQUIRED TO BE INTERPRETED, IT SHOULD BE INTERPRETED AFTER READ ING THE WHOLE PROVISION AND NOT THE PARTS OF A PARTICULAR SECTION . HOWEVER, A PROVISION HAS TO BE READ IN CONTEXT OF THE OVERALL SCHEME OF THE ACT. IT IS ALSO WELL SETTLED THAT NO PROVISION CAN BE INTERPRETED IN SUCH A WAY WHICH WOULD RENDER PARTS OF THE SECTION OTIOSE OR MEANINGLESS. 28. HAVING CONSIDERED THE PRINCIPLES OF INTERPRETAT ION ABOVE, LET US CONSIDER THE PROVISION OF SECTION 80IC IN THE LI GHT OF THE ABOVE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT. SECTION 80IC READS AS UNDER:- SECTION 80IC 80-IC (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRIS E FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE W ITH 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, AS SPECIFIED IN SUB-SECTION(3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENT ERPRISE,- (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THI RTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING. (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ES TATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUC TURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR IN DUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR TH E STATE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ES TATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH-EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES A NY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES AN Y ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATI ONS SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURIN G THE PERIOD BEGINNING- (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM; OR 7 (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN STATES. (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE (I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III ) OF CLAUSE (B), OF 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 REFERR ED 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 PROFIT AND GAINS FOR FIVE ASSESSME NT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWE NTY-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 ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUC TION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THERE-ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTA KING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PE RIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION.- THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CLAUSE (II) O F THIS SUB-SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB-SECTION. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDU CTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR SECTION 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UN DERTAKING OR ENTERPRISE. (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 DEDUCTION UNDE R THIS SECTION, OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS THE ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTIONS(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 B OARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T. (III) INDUSTRIAL GROWTH CENTRE MEANS SUCH CENTRES, WHIC H THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T; 8 (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 ENTER PRISE BEGINS TO MANUFACTURES OR PRODUCE ARTICLES OR THINGS, OR COMM ENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION; (VI) INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE MEAN S SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICI AL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT (VII) NORTH-EASTERN STATES MEANS THE STATES OF ARUNACH AL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TRIPURA; (VIII) SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP I N ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; (IX) SUBSTANTIAL EXPANSION MEANS INCREASE IN THE INVES TMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF THE BOOK VA LUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSIO N IS UNDERTAKEN; (X) THEME PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH TH E SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTIO N [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TYPES OF UNDERTAKINGS AND CIRCUMSTANCES WHERE DEDUCTION UNDER SECTION 80IC WO ULD BE ALLOWED. IT ALLOWS DEDUCTION TO VARIOUS UNDERTAKING S WHICH HAVE EITHER BEGUN OR BEGINS MANUFACTURING OF ANY ARTICLE OR THINGS NOT BEING ANY ARTICLE OR THING SPECIFIED IN SCHEDULE XI II AND ALSO UNDERTAKES SUBSTANTIAL EXPANSION. THESE DEDUCTIONS WERE AVAILABLE IN DIFFERENT STATES DURING DIFFERENT WINDOW PERIODS WHICH HAVE BEEN REFERRED TO IN CLAUSE (I), (II) & (III) OF THIS SUB SECTION. THE CONTENTION ON BEHALF OF THE ASSESSEE IS THAT SINCE DEDUCTION I S AVAILABLE TO THE UNDERTAKING WHICH UNDERTAKES SUBSTANTIAL EXPANSION AND SINCE THERE IS NO RESTRICTION IN THIS SUB SECTION ITSELF, THEREFORE, THE DEDUCTION WAS AVAILABLE ON SUBSTANTIAL EXPANSION BY OLD UNDERTAKINGS AS WELL AS NEW UNDERTAKINGS DURING THE WINDOW PERIOD. HOWEVER, THERE IS NO FORCE IN THIS INTERPRE TATION. SUB SECTION (2) BEGINS WITH THE EXPRESSION THIS SECTION APPLI ES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS THIS ITSELF SHOWS THAT PROVISION MADE EVEN THE EXISTING UNDERTA KINGS ENTITLED FOR THE DEDUCTION BECAUSE THE EXPRESSION BEGUN WO ULD REFER TO THE UNDERTAKING WHICH WERE ALREADY EXISTING AND BEG AN THE MANUFACTURE BEFORE THE WINDOW PERIOD MENTIONED IN T HE SUB SECTION. THE LAST LINE OF THE SUB SECTION READS AN D 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 UNW ORKABLE BECAUSE IF THERE IS AN UNDERTAKING WHICH IS ESTABLI SHED DURING THE WINDOW PERIOD THEN THE SAME CANNOT POSSIBLY UNDERTA KES SUBSTANTIAL EXPANSION ALSO SIMULTANEOUSLY. THE EXP RESSION AND WOULD REFER TO THE CUMULATIVE CONDITION THAT IS BOT H PARTS OF THE CONDITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JOINED ONLY WITH THE EXPRESSION BEGUN. THIS IS B ECAUSE BEGUN REFERS TO SOMETHING WHICH HAS ALREADY STARTED IN TH E PAST WHEREAS BEGINS CONNOTES SOMETHING WHICH WOULD COMMENCE IN THE PRESENT. THEREFORE, THE EXPRESSION AND CAN BE CO RRELATED ONLY WITH EXISTING UNIT BECAUSE AS WE HAVE ALREADY SEEN A NEW UNIT 9 WHICH HAS BEEN SET UP AND BEGINS PRODUCTION CANNOT SIMULTANEOUSLY UNDERGO SUBSTANTIAL EXPANSION ALSO S O AS TO BECOME ELIGIBLE FOR DEDUCTION UNDER THIS SECTION. 30. AT THIS STAGE, IT CAN BE SAID THAT SECTION HAS SOME CONFUSION AND SOME EFFORT IS REQUIRED TO UNDERSTAND THE CORRE CT INTENTION OF THE LEGISLATURE BY KEEPING VARIOUS PRINCIPLES OF IN TERPRETATION. THEREFORE, VARIOUS PRINCIPLES OF INTERPRETATION NEE DS TO BE LOOKED INTO. THIS PROVISION WAS BROUGHT INTO THE STATUTE I NDISPUTABLY IN THE LIGHT OF THE INCENTIVE PACKAGE ANNOUNCED BY THE U NION CABINET. THROUGH THIS INCENTIVE PACKAGE NOT ONLY INCOME TAX CONCESSION BUT EXCISE CONCESSIONS AND SOME SUBSIDIES LIKE TRANSPOR T SUBSIDY AND CAPITAL SUBSIDY WERE ALSO PROVIDED TO VARIOUS INDUS TRIES IN THE HILLY STATED COMPRISING STATES OF HIMACHAL PRADESH, UTTAR ANCHAL, SIKKIM AND NORTH-EASTERN STATES TO BOOST THE ECONOMIES OF THESE HILLY STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9 .2003 IN THIS RESPECT AND THE CIRCULAR READS AS UNDER:- CIRCULAR NO. 7/2003 DATED 05.09.2003 49. NEW PROVISIONS ALLOWING A TEN YEARS TAX HOLIDAY IN RESPECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, SIK KIM, UTTARANCHAL AND NORTH- EASTERN STATES. 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF F ISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN ORDER TO GIVE B OOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FR OM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HIMACHAL PR ADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES . FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINE D AS 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 ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL E XPANSION IS UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PR ODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THI RTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL ARE A OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH RULES PRESCRIBED IN TH IS 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 UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH-EASTERN STATES SHALL BE ON E HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT YEARS . THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES O F UTTARANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND THEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CENT FOR COMPANIES ) FOR THE NEXT FIVE ASSESSMENT YEARS. 49.4 THE SECTION ALSO PROVIDES THAT NO DEDUCTION SH ALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SEC TION 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 DEDU CTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKIN G OR ENTERPRISE. 49.5 A NEW THIRTEENTH SCHEDULE HAS BEEN INSERTED IN THE INCOME-TAX ACT TO SPECIFY THE LIST OF ARTICLES AND THINGS, WHICH ARE INELIGIBLE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IC. FURTHER, A NEW FOURT EENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH SPECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR THE PURPOSES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUENT TO THESES AMENDMENTS, THE PROVI SIONS OF SECTION 10C AND 10 SUB-SECTION(4) OF SECTION 80-IB HAVE BEEN MADE INOP ERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHA L PRADESH OR IN NORTH-EASTERN REGION INCLUDING SIKKIM, WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2004. 49.6 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2004 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2004-05 AN D SUBSEQUENT YEARS. 31. THE CIRCULAR MAKES IT CLEAR THAT SECTION 80IC W AS INSERTED TO GIVE EFFECT TO THE NEW PACKAGE ANNOUNCED BY THE UNI ON CABINET. THE CIRCULAR FURTHER CLARIFIES THAT THIS SECTION PR OVIDES FOR DEDUCTION FOR A PERIOD OF 10 YEARS FROM THE PROFITS OF NEW UN DERTAKING OR ENTERPRISE OR EXISTING UNDERTAKING OR ENTERPRISE ON THEIR SUBSTANTIAL EXPANSION (SEE HIGHLIGHTED PORTION OF THE CIRCULAR) . THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT WORD E XISTING QUALIFIES ONLY THE UNDERTAKING OR ENTERPRISES AND DOES NOT ME NTION ANY PARTICULAR DATE FOR CARRYING OUT SUBSTANTIAL EXPANS ION. WE FIND NO MERIT IN THIS CONTENTION. THE WORD EXISTING IS DE FINED IN THE DICTIONARIES ARE AS UNDER:- 32. BLACK LAW DICTIONARY 6 TH EDITION:- EXIST : TO LIVE, TO HAVE LIFE OR ANIMATION TO BE IN PRESENT FORCE , ACTIVITY, OR EFFECT AT A GIVEN TIME, AS IN SPEAKING OF EXISTING CONTRACTS, CREDITORS DEBTS, LAWS, RIGHTS OR LIENS. FOR US RELEVANT MEANING WOULD BE TO BE IN PRESENT FORCE AS PER OXFORD DICTIONARY EXIST IS DEFINED AS UNDER EXIST : 1 (NOT USED IN THE PROGRESSIVE TENSES) TO BE REAL; TO BE PRESENT IN A PLACE OR SITUATION : DOES LIFE EXIST ON OTHER PLANETS? THE PROBLEM ONL Y EXISTS IN YOUR HEAD, JANE. FEW OF THESE MONKEYS STILL EXIST IN THE WILD. ON HIS RETIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUPPORT VICTI MS OF CRIME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION OR WITH VERY LI TTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING THE ABOVE DEFINITION CLEARLY SHOWS THAT EXIST WOU LD REFER TO SOMETHING WHICH IS IN FORCE PRESENTLY. EXIST WOUL D GENERALLY AND IN COMMON SENSE REFERS TO SOMETHING WHICH IS ALREADY T HERE. 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, DEPARTMEN T OF INDUSTRIAL POLICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZE TTE OF INDIA REMOVED ALL THE DOUBTS. THIS NOTIFICATION IS RELEVA NT BECAUSE THIS WAS ISSUED WITH REFERENCE TO SAME PACKAGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEVELOPMENT OF THE H ILLY STATES. SECTION 5, READS AS UNDER;- DEFINITIONS: (A) .. (B) .. (C) EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 7 TH 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 CONTROVERSY IS IGNORED REGARD ING EXISTING UNIT, THE INTENTION OF THE LEGISLATURE BECOME ABSOL UTELY CLEAR WHEN SUB SECTION (2) IS READ ALONGWITH SUB-SECTION (3) O F SECTION 80IC. AS NOTED EARLIER, SUB SECTION (2) IS ENABLING PROVISIO N WHICH PROVIDES FOR DEDUCTION IN CERTAIN KIND OF UNDERTAKINGS, I.E. NEW UNIT SET UP OR 11 THE EXISTING UNITS WHICH CARRIES OUT SUBSTANTIAL EX PANSION DURING THE PARTICULAR WINDOW PERIOD WHICH ARE GIVEN IN CLAUSES (I), (II) & (III) OF SUB SECTION (2). THE SUB SECTION (3) PROVIDES FOR R ATES OF DEDUCTION. IT IS USEFUL TO NOTE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUSE (A) AND SUB CLAUSE (I) & (III) OF CLAUSE (B). NOW SUB CLAUSE (I ) AND (III) OF CLAUSE (A) OF SUB SECTION (2) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF SIKKIM, NORTH-EASTERN STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND STA TE OF UTTARANCHAL. SIMILARLY, SUB CLAUSE (I) & (III) OF CLAUSE (B) REFERS TO WINDOW PERIOD IN CASE OF STATE OF SIKKIM AND NORTH- EASTER STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL. NOW CLAUSE (I I) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION ON SUCH PRO FITS FOR FIVE ASSESSMENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE ASSESSEE IS A COM PANY) OF THE PROFITS AND GAINS. THEREFORE, IT IS ABSOLUTELY CLE AR THAT IN CASE OF STATE OF SIKKIM AND NORTH-EASTERN STATES, LEGISLATU RE WAS VERY CLEAR THAT IN CASE OF NEW UNDERTAKING OR IN CASE OF SUBST ANTIAL EXPANDED UNDERTAKING DEDUCTION IS TO BE ALLOWED @ 100% FOR W HOLE OF THE TEN YEARS WHEREAS IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL THE DEDUCTION WAS TO BE ALLOWED @ 100% ONLY FOR FIRST FIVE YEARS AND THEREAFTER IT WAS ONLY 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EX PANSION SEPARATELY THEN THE RATE OF DEDUCTION IN THE CLAUSE (I) & (II) OF SUB SECTION (3) WOULD NOT HAVE BEEN DIFFERENT I.E. 100% FOR WHOLE OF THE 10 YEARS IN CASE OF STATE OF SIKKIM & NORTH-EASTERN STATES UNDER SUB CLAUSE (I) AND FOR THE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FOR FIRST FIVE YEARS AND THEREAFTER 25% FOR NEXT FIVE YEARS. THE CONCEPT OF SUBSTANTIAL EXPAN SION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES OF STATES I.E STATE OF SIKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACH AL 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 E XPANSION AS GIVEN UNDER SUB SECTION (2) WHICH IS SAME FOR THE S TATE OF SIKKIM AND NORTH-EASTERN STATES BECOME REDUNDANT. AS NOTE D EARLIER, THE PROVISION CANNOT BE INTERPRETED IN SUCH A WAY THAT PART OF THE SECTION BECOMES REDUNDANT OR OTIOSE. THEREFORE, WH ATEVER DOUBTS MAY BE THERE IN SUB SECTION (2) WHEN IT IS READ WIT H SUB SECTION (3), THOSE DOUBTS ARE TOTALLY REMOVED AND IT BECOME ABSO LUTELY 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/D R 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 TH E 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 OF MACHIN ERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLAN ATION TO THIS SUB SECTION MAKES IT CLEAR THAT EXPLANATION 1 & 2 OF SU B SECTION (3) OF SECTION 80IA ARE APPLICABLE IN THIS RESPECT. EXPLAN ATION 2 OF SUB SECTION (3) OF SECTION 80 IA READS AS UNDER: EXPLANATION 2- WHERE IN THE CASE OF AN [UNDERTAKIN G], ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TO TAL VALUE OF THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLA NT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH. FROM THE ABOVE IT BECOMES CLEAR THAT IF 20% OF THE MACHINERY FROM THE OLD UNIT WAS USED IN THE NEW UNIT THEN SUCH UNI T WOULD NOT BE 12 ELIGIBLE FOR DEDUCTION UNDER THIS SECTION THAT IS S ECTION 80IC. NOW FOR CARRYING OUT SUBSTANTIAL EXPANSION THE INVESTME NT IN PLANT & MACHINERY IS REQUIRED TO BE MADE BY ATLEAST 50%. S O IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN IT WILL VIO LATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPRETATION CANV ASSED ON BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80I C(4) WOULD BECOME REDUNDANT AND SUCH AN INTERPRETATION IS NOT POSSIBLE. 35. FURTHER, SUB SECTION (6) PROVIDES THAT IN NO CA SE THE TOTAL PERIOD OF DEDUCTION COULD EXCEED THE PERIOD OF 10 Y EARS INCLUDING DEDUCTION AVAILED UNDER SUB SECTION (4) OF SECTION 80IB AND SECTION 10A AND 10B. IT WAS CONTENDED BEFORE US THAT SIN CE THERE IS NO RESTRICTION IN CARRYING OUT OF SUBSTANTIAL EXPANSIO N IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARRIED OU T ANY NUMBER OF TIMES. IF THIS INTERPRETATION IS ACCEPTED THEN SUB SECTION (6) WOULD BE RENDERED OTIOSE OR MEANINGLESS BECAUSE IF A UNIT WAS SET UP ON THE COMMENCEMENT OF THIS SECTION AND THE SAM E CLAIMS DEDUCTION @ 100% AND LATER ON EVERY FIVE YEARS A SU BSTANTIAL EXPANSION IS CARRIED OUT THEN ACCORDING TO THE INTE RPRETATION CANVASSED ON BEHALF OF THE ASSESSEE, SUCH UNIT WOUL D AGAIN BECOME ENTITLED TO 100% DEDUCTION FOR ANOTHER FIVE YEARS AND FURTHER BLOCK OF FIVE YEARS EVERY TIME SUBSTANTIAL EXPANSION IS CARRIED OUT. IF THIS INTERPRETATION IS ADOPTED THE N DEDUCTION WOULD BECOME ALMOST PERCEPTUAL AS LONG AS THE ASSESSEE HA S CARRIED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE 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 W OULD LIKE TO EMPHASIZE THAT NO PRINCIPLE OF INTERPRETATION CAN B E ADOPTED WHICH LEADS TO A SITUATION WHERE A PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDUNDANT. IN FACT THOUGH IT WAS C ONTENDED THAT IN THE PRESENT CASE (I.E. IN CASE OF HYCRON ELECTRO NICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE O F HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTIO N WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHICH HAS BEEN MADE BEFORE US. IN CASE OF M/S MAHAVIR INDUSTR IES (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 1 998-99 TO 2005- 06. LATER ON, SUBSTANTIAL EXPANSION WAS CARRIED OUT IN ASSESSMENT YEAR 2005-06 AND ON THE BASIS OF THE CONTENTION THA T ASSESSEE IS ALLOWED TO CARRY OUT ANY NUMBER OF EXPANSIONS, DED UCTION WAS CLAIMED FOR THE 12 TH YEAR FOR ASSESSMENT YEAR 2009-10 (WE MAY CLARIFY THAT REFERENCE TO THESE CASES IS MADE BECAU SE OF PARTICULAR CONTENTION AND WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THESE APPEALS HERE). THEREFORE, THE CONTENTION OF THE ASSESSEE THAT ANY NUMBER OF EXPANSIONS ARE ALLOWED IS NOT POSSIBL E IN VIEW OF THE RESTRICTION GIVEN IN SECTION 80IC(6). 36. THE ABOVE SITUATION AS POINTED BY THE REVENUE A LSO BECOMES CLEAR IF THE PROVISION OF SECTION 80IC IS COMPARED TO THE PROVISION OF SECTION 80IB(4). RELEVANT PROVISION OF SECTION 80IB (4) READS AS UNDER:- (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECIFIED IN THE EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH IND USTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSM ENT YEAR AND THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDE RTAKING: PROVIDED THAT THE TOTAL PERIOD OF DEDUCTION DOES NO T EXCEED TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE ASSESSMENT YEARS WHERE THE ASSESEE IS A COMPANY-OPERATIVE SOCIETY) SUBJECT TO FULFILLMENT O F THE CONDITION THAT IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPE RATE ITS COLD STORAGE PLANT OR PLANTS DURING THE PERIOD BEGINNING ON THE IST DAY O F APRIL, 1993 AND ENDING ON THE 31 ST DAY OF MARCH, [2004]: 13 PROVIDED FURTHER THAT IN THE CASE OF SUCH INDUSTRIE S IN THE NORTH-EASTERN REGION, AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT, THE AMOU NT OF DEDUCTION SHALL BE HUNDRED PER CENT OF PROFITS AND GAINS FOR A PERIOD OF TEN ASSESSMENT YEARS, AND THE TOTAL PERIOD OF DEDUCTION SHALL IN SUCH A CASE NOT EXCEED TEN ASSESSMENT YEARS: PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SUB-SECT ION SHALL BE ALLOWED FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2004 OR ANY SUBSEQUENT YEAR TO ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SE CTION (2) OF SECTION 80-IC. 37. THE CAREFUL PERUSAL OF THE ABOVE PROVISION WOUL D SHOW THAT BEFORE THE INTRODUCTION OF SECTION 80IC WHICH IS BE FORE US FOR CONSIDERATION, THE DEDUCTION TO THE BACKWARD STATES WAS AVAILABLE IN TERMS OF SECTION 80IB(4). THE THIRD PROVISO MAK ES IT CLEAR THAT AFTER 31.3.2004, THIS DEDUCTION WILL BE AVAILABLE O NLY U/S 80IC. THE SUB SECTION FURTHER MAKES IT CLEAR THAT DEDUCTION W OULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREAFTER @ 25%. FUR THER, THE FIRST PROVISO MAKES IT CLEAR THAT DEDUCTION WILL NOT EXCE ED 10 CONSECUTIVE ASSESSMENT YEARS. THE SECOND PROVISO F URTHER MAKES IT CLEAR THAT IN THE CASE OF STATES OF NORTH-EASTERN R EGIONS, THE DEDUCTION WOULD BE @ 100% FOR ALL THE 10 YEARS. TH US, EVEN IN THE EARLIER PROVISION ONLY IN CASE OF NORTH-EASTER STAT ES, THE DEDUCTION OF 100% WAS ALLOWABLE FOR 10 YEARS WHEREAS IN THE C ASE 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 DEDUC TION 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 & PITHISARIAS - SIXTH EDITION HAS EXP RESSED 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 SECTION 80-IC, - WHERE THE TOTAL PERIOD OF DE DUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION - UNDER SECTION 80-IC, OR - UNDER THE SECOND PROVISO TO SECTION 80-IB(4) OR - UNDER SECTION 10C AS THE CASE MAY BE, EXCEEDS 10 ASSESSMENT YEARS. 39. LASTLY, IT WAS CONTENDED THAT INITIAL ASSESSMEN T YEAR AS DEFINED IN CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC USES THE EXPRESSION OR THEREFORE, IT CAN BE CONSTRUED THAT IT RELATES TO BOTH SITUATIONS SEPARATELY I.E. FOR NEW UNIT AND SUBSTAN TIAL EXPANDED UNIT. WE FIND NO FORCE IN THIS CONTENTION. THE IN ITIAL ASSESSMENT YEAR HAS BEEN DEFINED AND THE EXPRESSION OR HAS B EEN USED IN RESPECT OF NEW UNITS BY STATING COMMENCES OPERATIO N OR COMPLETE SUBSTANTIAL EXPANSION. HERE THE EXPRESSI ON OR IS TO BE READ AS A MUTUALLY EXCLUSIVE EXPRESSION WHICH REFER S TO A PARTICULAR SITUATION BY EXCLUDING THE OTHER SITUATION. THEREF ORE, INITIAL ASSESSMENT YEAR WOULD CLEARLY COMMENCE EITHER ON COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBST ANTIAL EXPANSION OF EXISTING UNIT. IN ANY CASE THE WORD INITIAL CANNOT BE USED TWICE BY REFERRING TO SERIES OF EVENTS. THIS C AN BE UNDERSTOOD WITH A VERY SIMPLE EXAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GET EMPLOYED AS LEGAL OFFICE R IN AN ORGANIZATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROFESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE. THEN IN SUCH A SITUATION IT CANNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AND THEN INITIALLY HE WAS IN THE PROFE SSION AND THEN 14 ELEVATED AS A JUDGE. INITIALLY CAN BE USED ONLY ONC E AS A MATTER OF USAGE OF ENGLISH LANGUAGE. THEREFORE, READING OF TH E ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGIS LATURE WAS VERY CLEAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE STATE OF HIMACHAL PRADESH (SINCE ALL THE CASES BEFO RE US ARE SITUATED IN THE STATE OF HIMACHAL PRADESH) AND THER EAFTER 25% DEDUCTION FOR ANOTHER FIVE YEARS ON THE NEW UNITS O R THE EXISTING UNITS WHERE SUBSTANTIAL EXPANSION WAS CARRIED OUT. 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WITH REFERENCE TO THE DECISION OF M/S NOVAPAN INDIA LTD VS COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) BY THE REVENUE IS NOT CORRECT B ECAUSE THAT PROVISION WAS RENDERED UNDER INDIRECT TAX ACT. WE F IND NO FORCE IN THESE SUBMISSIONS. EVERY DECISION OF THE HON'BLE SU PREME COURT OR FOR THAT MATTER OF ANY HIGH COURT HAS TO BE SEEN FO R THE RATIO LAID DOWN IN A PARTICULAR DECISION AND IT DOES NOT MATTE R UNDER WHICH PARTICULAR ACT SUCH PRINCIPLES HAS BEEN DECIDED. N O DOUBT THE INCENTIVE PROVISIONS ARE REQUIRED TO BE INTERPRETED LIBERALLY BUT IN CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR OF CENTRA L EXCISE AND CUSTOMS (SUPRA), IT WAS OBSERVED AS UNDER:- THE LEARNED COUNSEL FOR THE APPELLANT THEN CONTEN DED THAT SINCE THERE IS AN AMBIGUITY ABOUT THE MEANING AND PURPORT OF ITEM-6 O F THE TABLE APPENDED TO THE EXEMPTION NOTIFICATION, THE BENEFIT OF SUCH AMB IGUITY SHOULD GO TO THE ASSESSEE MANUFACTURER AND THE ENTRY MUST BE CONSTRU ED 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 TH EN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE IN THE FOLLOWING WORD S: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERV ATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN SUPPORT OF STRICT CONS TRUCTION OF A PROVISION CONCERNING EXEMPTIONS. THERE IS SUPPORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION HAVE A TENDENCY TO INCREASE THE BURDEN ON THE OTHER UN-EXEMPTED CLASS OF TAX PAYERS AND SHOULD BE CONSTRUED AGAINST THE SUBJECT IN CASE OF AMBIGUITY. IT IS AN EQUALLY WELL KNOWN PRINCIPLE THAT A PERSON WHO CLAIMS AN EXEMPTION HAS TO ESTABLISH HIS CASE. INDEED, IN THE VERY CASE OF PARLE EXPORTS (P) LTD. RELIED UPON BY SHRI NARASIMHAMURTHY, IT WAS OB SERVED. WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VIOLENCE IS DO NE TO THE LANGUAGE EMPLOYED. IT MUST, HOWEVER, BE BORNE IN MIND THAT A BSURD RESULTS OF CONSTRUCTION SHOULD BE AVOIDED. THE CHOICE BETWEEN A STRICT AND A LIBERAL CONSTRUCT ION ARISES ONLY IN CASE OF DOUBT IN REGARD TO THE INTENTION OF THE LEGISLATURE MANIF EST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPRETATIVE PR OCESS ARISES ONLY WHERE THE MEANING IS NOT MANIFEST ON THE PLAIN WORDS OF THE S TATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY THE MEANING, THERE IS NOT NEED FOR ANY INTERPRETATION. WE ARE, HOWEVER, OF THE OPINION THAT, ON PRINCIPLE , THE DECISION OF THE COURT IN MANGALORE CHEMICALS AND IN UNION OF INDIA V. WOOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW OF LAW. THE PRINCIPLE THAT IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASSUMING THAT THE SAID PRINCIPLE IS GOOD AND SOUND- DOES NOT APPLY TO THE CONSTRUCTION OF AN EXCEPTION OR AN EXEMPTING PROVISION; THEY HAVE TO B E CONSTRUED STRICTLY. A PERSON INVOKING AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX LIABILITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SA ID PROVISION. IN CASE OF DOUBT OR AMBIGUITY, BENEFIT OF ITS MUST GO TO THE STATE. THE HONBLE SUPREME COURT IN ORISSA STATE WAREHOUSI NG CORPORATIONS CASE (SUPRA) HAS LAID DOWN THAT WHILE IT IS TRUE THAT I N THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL S TATUTE, THE SAME GOES IN FAVOUR OF THE ASSESSEE, BUT THE FACT REMAINS AND THE LAW IS W ELL-SETTLED ON THIS SCORE THAT IN 15 THE MATTER OF INTERPRETATION OF THE TAXING STATUTES THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCING SOME OTHER EXPRESSIONS WHI CH 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 S INCE THE SAME IS OPPOSED TO THE NATURAL TENOR OF THE STATUTE, THE ENTITLEMENT F OR EXEMPTION, THEREFORE, OUGHT NOT TO BE READ WITH ANY LATITUDE TO THE TAX-PAYER O R EVEN WITH A WIDER CONNOTATION. 41. THEREFORE, IT BECOMES CLEAR THAT LIBERAL INTERP RETATION OF AN INCENTIVE PROVISION IS POSSIBLE IF THERE IS ANY DOU BT. 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 FO R NEW UNITS OR IN CASE OF OLD UNITS IF SUBSTANTIAL EXPANSION WAS C ARRIED OUT IN SUCH OLD UNITS AND DEDUCTION WAS AVAILABLE ONLY FOR A PE RIOD OF 10 YEARS. THEREFORE, THERE IS NO QUESTION OF GIVING ANY INTER PRETATION MUCH LESS LIBERAL INTERPRETATION TO SECTION 80IC WHEN TH E READING OF WHOLE SECTION MAKES THE PROVISION VERY CLEAR. AS OBSERVE D IN CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) THE BURDEN WAS ON THE ASSESSEE TO SHOW UNDE R WHICH CLAUSE HE WAS ENTITLED TO THE DEDUCTION BUT ASSESSEE IS SI MPLY ASSERTING BEFORE US THAT THERE IS NO RESTRICTION FOR DEDUCTIO N IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION , THAT IS NOT ENOUGH BECAUSE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULAR DEDUCTION WAS ALLOWABLE. 42. WE ALSO FIND FORCE IN THE SUBMISSIONS OF LD. CI T-DR THAT IF INTERPRETATION GIVEN BY THE ASSESSEE IS TO BE ACCEP TED, THE PROVISION WOULD BECOME DISCRIMINATORY FOR TWO CLASS ES OF UNDERTAKINGS I.E. NEW UNITS AND OLD UNITS. BECAUSE THE OLD UNITS WOULD BE ENTITLED TO 100% DEDUCTION ON EXPANSION F OR FIRST FIVE YEARS AND 25% THEREAFTER WHEREAS THE NEW UNITS WOUL D BECOME ENTITLED TO DEDUCTION FOR 100% FOR FIRST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EXPANSION. SUCH DISCRIMINATORY INTEN TION CANNOT BE IMPUTED TO THE LEGISLATURE. 43. BEFORE US, RELIANCE WAS ALSO PLACED ON THE DECI SION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG IN DUSTRIES LIMITED VS. DCIT(SUPRA). IN THIS DECISION, THE BENCH HAS SIMPLY OBSERVED THAT MAIN DISPUTE IS ON THE DEFINITION OF INITIAL ASSES SMENT YEAR. THE PROVISIONS OF SUB SECTION (2) AND SUB SECTION (3) A S DISCUSSED IN DETAIL ABOVE HAVE BEEN TOTALLY IGNORED AND, THEREFO RE, THIS DECISION, IN OUR OPINION, IS PER INQUERIM AND CANNO T BE FOLLOWED. 44. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION IN THE CASE OF S.R. PARYAVARAN ENGINEERS PVT LTD (SUPRA) OF THE CH ANDIGARH BENCH. THE FACTS IN THAT CASE ARE THAT ASSESSEE HAS CLAIME D DEDUCTION U/S 80IB IN ASSESSMENT YEAR 1999-2000 @ 100% . THE DED UCTION WAS CLAIMED @ 100% FOR FIVE YEARS AND THEN DEDUCTION WA S CLAIMED @ 30% ON THE PROFITS IN THE NEXT YEAR. THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION IN FINANCIAL YEARS 2004-05 & 2005-06 AND CLAIMED DEDUCTION AT THE RATE OF 100% ON THE BASIS OF SUCH SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 2006-07. HOWEVER, THE DEDUCTION WAS WRONGLY CLAIMED U/S 80IB INSTEAD OF S ECTION 80IC. THE CIT(A) ALLOWED THE DEDUCTION BY OBSERVING THAT DEDUCTION COULD NOT BE DENIED SIMPLY BECAUSE ASSESSEE HAS QUO TED A WRONG SECTION. ON THE APPEAL FILED BY REVENUE, THE DEDUC TION WAS HELD TO BE ALLOWABLE BECAUSE SUBSTANTIAL EXPANSION WAS C ARRIED OUT IN A UNIT WHICH WAS ALREADY IN EXISTENCE AS ON 7.1.2003. THEREFORE, IN OUR OPINION, THIS DECISION DOES NOT PROVIDE ANY ASS ISTANCE 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 16 FORMED ON 23.05.2009. THE FIRM COMMENCED COMMERCIAL PRODUCTION IN MARCH, 2010. SHRI ABHISHEK BHARGAV WHILE PLANNIN G TO JOIN THE FIRM AS PARTNER BY ACQUIRING 20% SHARE OF PROFIT AND ENH ANCING ADDITIONAL MANUFACTURING FACILITY BY UNDERTAKING SU BSTANTIAL EXPANSION SOUGHT ADVANCE RULING ON THE ISSUE WHETHE R THE INTRODUCTION OF NEW PARTNER WOULD BE TREATED AS REC ONSTRUCTION OF THE EXISTING BUSINESS OR THE FIRM WILL BE ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION AS PER THE PROVISIONS OF SECT ION 80IC(2)(A)(II) IF IT STARTS COMMERCIAL PRODUCTION BEFORE 01.04.201 2. 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 S UBSTANTIALLY EXPANDED UNIT BEFORE 01.04.2012. IN THIS CASE THE A SSESSE SHALL BE ENTITLED TO DEDUCTION OF 100% OF ITS PROFITS UPTO A .Y. 2014-15 SINCE THE INITIAL ASSESSMENT YEAR WAS A.Y. 2010-11 AND CL AIM OF DEDUCTION CANNOT BE DENIED MERELY ON THE GROUND OF EXPANSION OF MANUFACTURING CAPACITY SO LONG IT IS NOT A CASE OF RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE. HOWEVER, THE QUESTIO N WHETHER THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION OF 100% OF ITS PROFIT EVEN AFTER A.Y. 2014-15 I.E. FOR 2 MORE YEARS BEYOND A.Y . 2014-15 IS LEFT OPEN AND NOT DECIDED BY THE AAR. THEREFORE THIS DEC ISION IS TOTALLY DISTINGUISHABLE AND DOES NOT HELP THE CASE OF THE A SSESSEE. 46. THE LAST DECISION RELIED ON WAS IN THE CASE OF SINTEX INDUSTRIES LTD V CIT (SUPRA). IN THIS CASE THE DED UCTION U/S 80IC WAS ALLOWED BY THE ASSESSING OFFICER BUT LATER ON A REV ISIONARY ORDER WAS PASSED U/S 263 OF THE ACT. THE BENCH MAINLY DEA LT WITH THE PROVISION OF SECTION 263 AND IN VIEW OF THE DECISIO N OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO LTD V CIT 243 ITR 83 (SC) HELD THAT SINCE VIEW TAKEN BY THE ASSE SSING OFFICER IS ALSO POSSIBLE VIEW, THEREFORE, ASSESSMENT ORDER WAS NOT ERRONEOUS. IN FACT THE BENCH REFERRED TO THE DECISION OF DELHI BENCH IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (S UPRA) WITHOUT CONSIDERING THE PROVISION OF SECTION 80IC IN DETAIL FOR REACHING THE CONCLUSION THAT IT IS ONE OF THE POSSIBLE VIEW. SI NCE WE HAVE ALREADY DISCUSSED THE DECISION OF TRIPUTI LPG INDU STRIES LIMITED VS. DCIT (SUPRA) AND FOUND THAT ALL THE PROVISIONS OF T HE SECTION WERE NOT DISCUSSED IN THAT SECTION AND THAT IS PER INQUE RIM, THEREFORE, IN OUR OPINION, THIS ORDER DOES NOT HELP THE CASE OF T HE ASSESSEE. 47. THE LAST ARGUMENT WAS IN RESPECT OF COLUMN IN FORM NO. 10CCB. THE COLUMN 25 OF FORM NO. 10CCB READS AS UND ER:- 25(I) WHETHER THE UNDERTAKING OR ENTERPRISE IS LOC ATED IN AN AREA NOTIFIED BY THE BOARD FOR THE PURPOSES OF SECT ION 80-IC :---YES ---NO (II) IF YES PLEASE INDICATE,- A. NAME OF THE EXPORT PROCESSING ZONE / INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE / INDUSTRIAL GROWTH CENTRE/INDUSTRIAL PARK/ESTATE/SOFTWARE TECHNOLOGY PARK/INDUSTRIAL AREA/THEME PARK AND THE DISTRICT/STATE IN WHICH LOCATED :------------ -------- (B) KHASRA NO. OF THE UNDERTAKING OR ENTERPRISE :- ------------------- (ALSO INDICATE THE BOARDS NOTIFICATION NO. ) (C) IF THE ELIGIBLE BUSINESS IS NEW, PLEASE GIVE T HE DATE OF COMMENCEMENT OF PRODUCTION OR MANUFACTURE OF ARTICLE OR THING. :-------------- ------ (D) IF THE EXISTING BUSINESS HAS UNDERTAKEN SUBSTA NTIAL EXPANSION, PLEASE SPECIFY,- :----------------- ----- (I) THE DATE OF SUBSTANTIAL EXPANSION (II) THE TOTAL BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR)AS ON FIRST DAY OF THE PREVIOUS YEAR IN WHICH SUB- STANTIAL EXPANSION TOOK PLACE. :--------------- ------- 17 (III) VALUE OF INCREASE IN THE PLANT AND MACHINER Y IN THE YEAR OF SUBSTANTIAL EXPANSION. :-------- -------------- (E) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING) :----------------------- (F) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING O R OPERATION):----------------------- 48. THE CAREFUL READING OF THE FORM IN A SERIAL ORD ER WOULD CLEARLY SHOW THAT THE ASSESSEE IS REQUIRED TO INFORM THE LO CATION OF THE INDUSTRY AND COLUMN (C) SPECIFICALLY ASK THE ASSESS EE TO STATE WHETHER BUSINESS IS A NEW BUSINESS? COLUMN (D) CL EARLY ASK THE ASSESSEE WHETHER EXISTING BUSINESS HAS UNDERTAKEN S UBSTANTIAL EXPANSION, THEREFORE, THERE ARE TWO CATEGORIES OF B USINESS AND SUBSTANTIAL EXPANSION IS POSSIBLE ONLY IN CASE OF E XISTING BUSINESS. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY ADJUDICA TED THIS ISSUE. 49. IN VIEW OF THE ABOVE DETAILED DISCUSSION WE HOL D THAT THE ASSESSEE BEFORE US I.E. M/S HYCRON ELECTRONICS IN I TA NO. 798/CHD/2012 IS ENTITLED TO ONLY 25% OF DEDUCTION D URING THE PRESENT YEAR BECAUSE THE ASSESSEE HAS ALREADY AVAI LED THE PERIOD OF FULL DEDUCTION @ 100% IN THE EARLIER FIVE YEARS I.E. FROM ASSESSMENT YEARS 2004-05 TO 2008-09. IN THIS BACKGR OUND, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE U PHOLD THE SAME. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 8. IN VIEW OF THE ABOVE DISCUSSIONS AND FOLLOWING T HE ORDER OF TRIBUNAL IN CASE OF HYCRON ELECTRONICS & OTHERS IN ITA NO. 798/CHD/2012 AND OTHERS, THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO. 791/CHD/2012 9. IN THIS CASE THE ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80IC IN THE FIRST YEAR THEREFORE ISSUE IS IDENTICAL TO THE ISSUE RAISED IN ASSESSMENT YEAR 2008-09 IN ITA NO. 1217/CHD/2011 WH ICH WE HAD ADJUDICATED IN ABOVE NOTED PARAS, FOLLOWING THE ABO VE ORDER WE DECIDE THE ISSUE RAISED IN THIS APPEAL AGAINST THE ASSESSEE. 10. IN THE RESULT BOTH APPEAL OF THE ASSESSEE ARE D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/07/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03/07/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR