M/s Aerowin International, Baddi V. ITO, Baddi

ITA 165/CHANDI/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90160 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-06-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 12-02-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AMARVEER SINGH
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Depreciation; Advance ruling; Condonation of delay
• Section: 244A; 80IB; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI. BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 165/CHD/2015 ASSESSMENT YEAR: 2011-12 M/S AEROWIN INTERNATIONAL, VS. THE ITO, BADDI BADDI PAN NO. AAIFA8458N APPELLANT BY : SHRI RAKESH GUPTA RESPONDENT BY : SHRI AMARVEER SINGH (APPELLANT) (RESPONDENT) & ITA NO. 195/CHD/2015 ASSESSMENT YEAR: 2011-12 M/S MAHESH T. PRASANA, VS. THE DCIT, CIRCLE, C/O M/S SWASTIK SCALE INDUSTRY, PARWANOO PARWANOO. H.P. PAN NO. AAIFPP3246R APPELLANT BY : SHRI RAKESH GUPTA RESPONDENT BY : SHRI MANJIT SINGH (APPELLANT) (RESPONDENT) DATE OF HEARING : 04.06.2015 DATE OF PRONOUNCEMENT : 05.06.2015 ORDER PER T.R.SOOD, A.M. BOTH THE APPEALS BY THE ASSESSEES ARE DIRECTED AGAI NST THE SEPARATE ORDERS DATED 29.12.2014 AND 08.01.2015 OF CIT(A), SHIMLA R ESPECTIVELY. 2. SINCE IDENTICAL ISSUE HAS BEEN RAISED IN THESE A PPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON A ND CONSOLIDATED ORDER. 2 3. FIRST WE SHALL DEAL WITH ITA NO. 165/CHD/2015 WHEREIN THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE ID. CIT(A) IS WRONG IN DISALLOWING THE BENE FIT OF SUBSTANTIAL EXPANSION U/S 80IC(2) AND CONFIRMING THE DEDUCTION U/S 801C ONLY TO THE EXTENT OF 25% AS AGAINST 100% BY HOLDING THAT B ENEFIT OF SUBSTANTIAL EXPANSION IS ALLOWABLE ONLY TO THE UNDE RTAKING WHICH WERE EXISTING PRIOR TO 07/01/2003 I. LD. CIT(A) IGNORED THE FINDINGS OF HON'BLE DELHI BENCH IN THE CASE OF TIRUPATI LPG INDUSTRIES LTD. VS DC1T BY STATING THAT THIS JUDGMENT IS NOT FROM JURISDICTIONAL 1TAT IN WHICH I T WAS HELD THAT EXISTING UNIT AVAILING 80IC CAN ALSO UNDERTAKE SUBS TANTIAL EXPANSION AND THAT YEAR OF SUBSTANTIAL EXPANSION WILL BE THE INITIAL YEAR. II. LD. CIT(A) IGNORED THE FINDINGS OF HON'BLE ADVA NCE RULING AUTHORITY IN THE CASE OF 'SH. ABHISHEK BHARGAVA' BY STATING THAT FACTS OF THE CASE ARE NOT IDENTICAL WITH THE ASSESSEE'S C ASE WHEREAS IN THE RULING IT WAS HELD THAT AN INDUSTRIAL UNIT WHICH HA S COMMENCED PRODUCTION IN THE F.Y. 2009-10 WILL BE ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION IF IT STARTS COMMERCIAL PRODU CTION IN THE SUBSTANTIALLY EXPANDED UNIT BEFORE 01.04.2012. 4. AFTER HEARING BOTH THE PARTIES WE FIND THAT ASSE SSEE HAS STARTED MANUFACTURING ACTIVITIES ON 2.2.2006 AND CLAIMED DE D U/S 80IC FOR THE FIRST TIME IN ASSESSMENT YEAR 2006-07. THE DEDUCTION WAS CLAIMED FOR ANOTHER TOTAL PERIOD OF 5 YEARS UPTO ASSESSMENT YEAR 2009-10 @ 100% THEREAFT ER ASSESSEE CARRIED OUT SUBSTANTIAL EXPANSION AND AGAIN CLAIMED DEDUCTION @ 100% IN ASSESSMENT YEAR 2010-11. THIS DEDUCTION WAS DENIED BY ASSESSING OFF ICER BY HOLDING THAT BENEFIT OF SUBSTANTIAL EXPANSION WAS AVAILABLE ONLY TO THE EXISTING UNITS. THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED BY LD. CIT(A). 5. BOTH THE PARTIES WERE HEARD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THIS ISSUE HAS BEEN ADJUDICATED RECENTLY IN DETAILED ORDER WHERE VARIOU S SUBMISSIONS WERE MADE BY VARIOUS COUNSELS. THE ISSUE WAS ADJUDICATED IN A GR OUP OF CASES CONSISTING OF 20 APPEALS INCLUDING THE CASE OF M/S HYRCRON ELECTRONI CS, BADDI VS. ITO IN ITA NO. 798/CHD/2012 VIDE PARA NOS. 22 TO 49 WHICH ARE AS U NDER:- 3 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 USEFUL T O DEAL WITH THE VARIOUS PRINCIPLES OF INTERPRETATION AS ENUNCIATED BY VARIO US COURTS. 23. IT IS SETTLED THAT IF THE LANGUAGE OF A PARTICULAR STATUTE IS CLE AR THEN ONLY LITERAL MEANING HAS TO BE GIVEN TO SUCH LANGUA GE AS LONG THE SAME DOES NOT RESULT IN ABSURDITY OR UNINTENDED CONSEQUENCES. THEREFORE, IF THE LANGUAGE OF A PARTICULAR STATUTE IS CLEAR THEN THE SAME CANNOT BE CHANGED BY APPLYING DIFFERENT PRINCIPLES OF INTERPRETATIONS. T HIS IS CLEAR FROM THE OBSERVATIONS MADE BY HON'BLE APEX COURT IN THE CA SE 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 SAI D. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, THE LEGISLATURE MUST BE TAKEN TO HAVE MEANT AND INTENDED WHAT IT HA S PLAINLY EXPRESSED, AND WHATEVER IT HAS IN CLEAR TERMS ENACT ED MUST BE ENFORCED THOUGH IT SHOULD NOT LEAD TO ABSURD OR MIS CHIEVOUS RESULTS. IF THE LANGUAGE OF THIS SUB-SECTION BE NOT CONTROLL ED BY SOME OF THE OTHER PROVISIONS OF THE STATUTE. IT MUST, SINCE, I TS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED AND YOUR LORDSHIPS HO USE SITTING JUDICIALLY IS NOT CONCERNED WITH THE QUESTION WHETH ER 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 EQ UITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE L ANGUAGE USED. THE OBSERVATIONS OF ROWLATT J. AS ABOVE STAND ACCEP TED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECISION, IN THE CASE OF CANADIAN EAGLE OIL ALSO IN A MANNER SIMILAR IN IRC V. ROS AND COULTER (BLADNOCH 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. 4 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 COURT 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 TH EN BE APPEALED TO TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERW ISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED. IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE ST ATUTE ARE, ON THEIR OWN TERMS, 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 REQUIRED TO BE CONSTRUED SO AS TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE AND THEN EVERY POSSIBLE MATERIAL SHOULD BE CONSIDERED TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE. IN THIS REGARD, THE OBSERVATION OF THE HON'BLE SUPREME COURT IN THE CELEBRATED JUDGEMENT OF K.P. VERGESE 131 ITR 5 98 (SUPRA) ARE RELEVANT. WE EXTRACT 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 PL AIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRODUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHICH COULD NEVER HAVE BEEN INTEN DED BY THE LEGISLATURE, THE COURT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME VIOLENCE TO IT, SO AS TO ACHIEVE TH E OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCT ION. 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 INA DMISSIBLE 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 CERTAINLY BE REFERRED TO FOR THE PURPOSE OF ASCERTA INING THE MISCHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OB JECT AND PURPOSE FOR WHICH THE LEGISLATION IS ENACTED. THIS IS AN ACCORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTERN COUNT RIES BUT ALSO IN INDIA, THAT THE INTERPRETATION OF A STATUTE BEING A N EXERCISE IN THE ASCERTAINMENT OF MEANING, EVERYTHING WHICH IS LOGIC ALLY RELEVANT SHOULD BE ADMISSIBLE. THE MARGINAL NOTE TO A SECTION CANNOT BE REFERRED TO FOR THE PURPOSE OF CONSTRUING THE SECTION BUT IT CAN CERTAI NLY BE RELIED UPON AS INDICATING THE DRIFT OF THE SECTION OR TO SHOW W HAT THE SECTION IS DEALING WITH. IT CANNOT CONTROL THE INTERPRETATION OF THE WORDS OF A SECTION, PARTICULARLY WHEN THE LANGUAGE OF THE SECT ION IS CLEAR AND 5 UNAMBIGUOUS BUT, BEING PART OF THE STATUTE, IT PRIM A FACIE FURNISHES SOME CLUE AS TO THE MEANING AND PURPOSE OF THE SECT ION. THE HIGHLIGHTED PORTION CLEARLY SHOWS THAT EVERY MA TERIAL WHICH IS LOGICALLY RELEVANT SHOULD BE TAKEN INTO ACCOUNT FOR ASCERTAIN ING THE TRUE MEANING OF A PARTICULAR PROVISION. THE SAME VIEW WAS TAKEN BY H ON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V N.K. VAIDYA 224 ITR 186 (SUPRA) AND OBSERVATIONS CONTAINED IN THE HEAD NOTE READS ASUND ER:- THE LEGISLATIVE HISTORY OF A FISCAL STATUTE COULD BE TRACED AND CONSIDERED TO UNDERSTAND ITS SCOPE. THE COURTS ARE PERMITTED TO TRAVEL BEYOND THE WORDS USED IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHICH A PARTICULAR PROVISION IS ENACTED; FOR THIS PURPOSE, EVEN THE SPEECH OF THE FINANCE MINISTER, WHILE INTRODUCING THE PARTICU LAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCULARS ISS UED BY THE CENTRAL BOARD OF DIRECT TAXES ARE NOT ONLY BINDING ON THE I NCOME-TAX DEPARTMENT BUT ARE ALSO IN THE NATURE OF CONTEMPORA NEA EXPOSITION 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 DINAKAR ULLAL VS. CIT (SUPRA) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE O F COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTING & WIRE (SUPRA ) FOR THE PROPOSITION THAT SINCE CIRCULARS ARE NOT BINDING ON THE COURTS, THEREFORE, THE SAME SHOULD NOT BE CONSIDERED FOR INTERPRETATION OF A PA RTICULAR PROVISION. AS FAR AS THE DECISION IN THE CASE OF COMMISSIONER OF CENT RAL EXCISE VS. M/S RATTAN MELTING & WIRE (SUPRA) IS CONCERNED, THIS DO ES NOT SUPPORT THE PROPOSITION MADE BY THE LD. COUNSEL FOR THE ASSESSE E. IN THAT CASE THE QUESTION WAS WHETHER A CIRCULAR ISSUED BY THE DEPAR TMENT WHICH IS GENERALLY BINDING ON THE AUTHORITIES WOULD TAKE PRECEDENCE OV ER THE INTERPRETATION MADE BY THE SUPREME COURT OR HIGH COURT IN RESPECT OF PARTICULAR PROVISION. THE PARA 6 OF THIS JUDGMENT MAKE THIS POINT ABSOLUT ELY CLEAR AND READS AS UNDER:- 6. CIRCULARS AND INSTRUCTIONS ISSUED BY THE BOARD ARE NO DOUBT BINDING IN LAW ON THE AUTHORITIES UNDER TH E RESPECTIVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH COURT DECLARES THE LAW ON THE QUESTION ARISING FOR CONSIDERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT THAT THE CIRCULAR SHOULD BE GIVEN 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 THE CENTRAL GOVERNMENT AND OF THE STATE GOVERNME NT ARE CONCERNED THEY REPRESENT MERELY THEIR UNDERSTAN DING OF THE STATUTORY PROVISIONS. THEY ARE NOT BINDING U PON THE COURT. IT IS FOR THE COURT TO DECLARE WHAT THE PART ICULAR PROVISION OF STATUTE SAYS AND IT IS NOT FOR THE EXE CUTIVE. LOOKED AT FORM ANOTHER ANGEL, A CIRCULAR 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 ULTIMATELY ME ANING OF A PROVISION AS INTERPRETED BY THE COURT WOULD PREVAIL IN COMPARISO N TO THE INTERPRETATION GIVEN IN THE CIRCULAR. THEREFORE, IF CIRCULAR IS CONTRARY TO A PROVISION AS INTERPRETED BY THE COURT THEN THE OPINION OF THE C OURT WOULD PREVAIL. THIS 6 DECISION NOWHERE LAYS DOWN THAT CIRCULARS CANNOT BE CONSIDERED FOR INTERPRETATION 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 REFUND OF R S. 2,14,505/- ON ACCOUNT OF TAX DEDUCTED AT SOURCE. THE 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 RE JECTED. HOWEVER, ON A WRIT PETITION THE ORDER FOR REJECTION WAS QUASHED B Y A SINGLE JUDGE 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 ACCEP TED THE CAUSE SHOWN FOR DELAY IN FILING THE RETURN BUT DENIED INTEREST ON R EFUND AMOUNT IN VIEW OF THE CONDITION SET OUT IN CIRCULAR NO. 670 DATED 26 TH OCT 1993. THEREFORE, QUESTION BEFORE THE COURT WAS WHETHER THESE INSTRUC TIONS WERE CONTRARY TO THE PROVISION OF SECTION 244A OF THE ACT WHICH PR OVIDED FOR PAYMENT OF INTEREST ON REFUNDS. THIS BECOMES ABSOLUTELY CLEAR FROM THE QUESTION 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 A N APPLICATION TO CONDONE THE DELAY IN MAKING A CLAIM FOR BELATED REFUND UNDER SECTION 237 OF THE ACT, AS CONTAINED I N INSTRUCTION NO. 12 OF 2003 DATED OCTOBER 30,2003 AN D 13 OF 2006 DATED JANUARY 22,2006, OF THE BOARD, IS INCONS ISTENT 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 CIRC ULAR NO. 670 WAS CONTRARY TO THE PROVISIONS OF SECTION 244A. THE COURT ALSO O BSERVED THAT CIRCULAR COULD BE ISSUED TO CLARIFY THE PROVISIONS FOR REMOV ING THE DIFFICULTIES. THEREFORE, IT IS CLEAR THAT QUESTION WHETHER A CIRC ULAR CAN BE CONSIDERED IN INTERPRETATION OF A PARTICULAR PROVISION WAS NEVER BEFORE THE COURT AND THEREFORE, IN OUR OPINION, THIS JUDGEMENT DOES NOT SUPPORT THE PROPOSITION THAT CIRCULAR CANNOT BE CONSIDERED FOR THE PURPOSE OF INTERPRETING THE PARTICULAR PROVISION. 27. IT WILL BE USEFUL TO STATE 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 READING THE WHOLE PROVISION AND NOT THE PARTS OF A PARTICULAR SECTION. HOWEVER, A P ROVISION HAS TO BE READ IN CONTEXT OF THE OVERALL SCHEME OF THE ACT. IT IS ALS O WELL SETTLED THAT NO PROVISION CAN BE INTERPRETED IN SUCH A WAY WHICH WO ULD 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 LIGHT OF THE ABOVE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT. SECTION 80I C READS AS UNDER:- 7 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 ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AN D 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 THIRTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING , NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDE RTAKES 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 I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE 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 I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, 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 EXPORT PROCESSING ZONE OR INTEGRATED I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH- EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR 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 ANY ART ICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATIONS SPE CIFIED IN THAT 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 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 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 8 (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 PROFI TS AND GAINS FOR TEN ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT 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 ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THE REAFTER TWENTY- FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSE E 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-ES TABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN TH E CIRCUMSTANCES AND WITHIN THE PERIOD 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 SECTIO N 10A OR SECTION 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTE RPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, W HERE 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 SECTIO N 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 ELIGIBL E 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 AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T; (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, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; 9 (IV) INDUSTRIAL PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T; (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 B Y THE CENTRAL GOVERNMENT (VII) NORTH-EASTERN STATES MEANS THE STATES OF ARUNACH AL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TR IPURA; (VIII) SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP I N ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED B Y 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 BOO K VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPAN SION IS UNDERTAKEN; (X) THEME PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTION [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TYPES OF UNDERTAKINGS AND CI RCUMSTANCES WHERE DEDUCTION UNDER SECTION 80IC WOULD BE ALLOWED. IT A LLOWS DEDUCTION TO VARIOUS UNDERTAKINGS WHICH HAVE EITHER BEGUN OR BEG INS MANUFACTURING OF ANY ARTICLE OR THINGS NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN SCHEDULE XIII AND ALSO UNDERTAKES SUBSTANTIAL EXPANSION. THESE DE DUCTIONS 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 IS AVAILABLE T O THE UNDERTAKING WHICH UNDERTAKES SUBSTANTIAL EXPANSION AND SINCE THERE IS NO RESTRICTION IN THIS SUB SECTION ITSELF, THEREFORE, THE DEDUCTION WAS AVAILA BLE ON SUBSTANTIAL EXPANSION BY OLD UNDERTAKINGS AS WELL AS NEW UNDERT AKINGS DURING THE WINDOW PERIOD. HOWEVER, THERE IS NO FORCE IN THIS I NTERPRETATION. SUB SECTION (2) BEGINS WITH THE EXPRESSION THIS SECTION APPLI ES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS THIS ITSELF S HOWS THAT PROVISION MADE EVEN THE EXISTING UNDERTAKINGS ENTITLED FOR THE DED UCTION BECAUSE THE EXPRESSION BEGUN WOULD REFER TO THE UNDERTAKING W HICH WERE ALREADY EXISTING AND BEGAN THE MANUFACTURE BEFORE THE WINDO W PERIOD MENTIONED IN THE SUB SECTION. THE LAST LINE OF THE SUB SECTION R EADS AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING ... THIS WOULD NATURALLY REFER TO THE UNDERTAKING WHICH WERE ALREA DY EXISTING. IF IT IS READ THE WAY THE LD. COUNSEL OF THE ASSESSEE WOULD LIKE US TO READ THEN THE PROVISION WOULD BECOME UNWORKABLE BECAUSE IF THERE IS AN UNDERTAKING WHICH IS ESTABLISHED DURING THE WINDOW PERIOD THEN THE SAME CANNOT POSSIBLY UNDERTAKES SUBSTANTIAL EXPANSION ALSO SIMULTANEOUSL Y. THE EXPRESSION AND 10 WOULD REFER TO THE CUMULATIVE CONDITION THAT IS BOT H PARTS OF THE CONDITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JO INED ONLY WITH THE EXPRESSION BEGUN. THIS IS BECAUSE BEGUN REFERS TO SOMETHING WHICH HAS ALREADY STARTED IN THE PAST WHEREAS BEGINS CONNOT ES SOMETHING WHICH WOULD COMMENCE IN THE PRESENT. THEREFORE, THE EXPR ESSION AND CAN BE CORRELATED ONLY WITH EXISTING UNIT BECAUSE AS WE HA VE ALREADY SEEN A NEW UNIT WHICH HAS BEEN SET UP AND BEGINS PRODUCTION CA NNOT SIMULTANEOUSLY UNDERGO SUBSTANTIAL EXPANSION ALSO SO 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 CORRECT INTENT ION OF THE LEGISLATURE BY KEEPING VARIOUS PRINCIPLES OF INTERPRETATION. THERE FORE, VARIOUS PRINCIPLES OF INTERPRETATION NEEDS TO BE LOOKED INTO. THIS PROVIS ION WAS BROUGHT INTO THE STATUTE INDISPUTABLY IN THE LIGHT OF THE INCENTIVE PACKAGE ANNOUNCED BY THE UNION CABINET. THROUGH THIS INCENTIVE PACKAGE N OT ONLY INCOME TAX CONCESSION BUT EXCISE CONCESSIONS AND SOME SUBSIDIE S LIKE TRANSPORT SUBSIDY AND CAPITAL SUBSIDY WERE ALSO PROVIDED TO VARIOUS I NDUSTRIES IN THE HILLY STATED COMPRISING STATES OF HIMACHAL PRADESH, UTTAR ANCHAL, SIKKIM AND NORTH-EASTERN STATES TO BOOST THE ECONOMIES OF THES E HILLY STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9.2003 IN THIS RES PECT 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 OR DER TO GIVE BOOST 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 DEDU CTION FOR TEN YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE O R EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN T HE STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STAT ES . FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED 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 EXPANSION IS UNDERTAK EN. 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 THIRTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSI NG ZONE, OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR IND USTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWA RE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH RULES PRESCRIBED IN THIS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURT EENTH SCHEDULE. 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH-EASTERN STATES SHAL L BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSE SSMENT YEARS. THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTARANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS 11 OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND T HEREAFTER 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 UNDE R THIS SECTION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURTHER, IN COMPUTING THE TOTAL I NCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PR OFITS AND GAINS OF THE UNDERTAKING 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 ART ICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR TH E PURPOSES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUENT TO THESES AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION(4) OF SEC TION 80-IB HAVE BEEN MADE INOPERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHAL PRADESH OR IN NORTH-EASTERN REGION INCL UDING 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 YE AR 2004-05 AND SUBSEQUENT YEARS. 31. THE CIRCULAR MAKES IT CLEAR THAT SECTION 80IC W AS INSERTED TO GIVE EFFECT TO THE NEW PACKAGE ANNOUNCED BY THE UNION CA BINET. THE CIRCULAR FURTHER CLARIFIES THAT THIS SECTION PROVIDES FOR DE DUCTION FOR A PERIOD OF 10 YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERP RISE OR EXISTING UNDERTAKING OR ENTERPRISE ON THEIR SUBSTANTIAL EXPA NSION (SEE HIGHLIGHTED PORTION OF THE CIRCULAR). THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT WORD EXISTING QUALIFIES ONLY THE UNDERTA KING OR ENTERPRISES AND DOES NOT MENTION ANY PARTICULAR DATE FOR CARRYING O UT SUBSTANTIAL EXPANSION. WE FIND NO MERIT IN THIS CONTENTION. THE WORD EXI STING IS DEFINED 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 SUP PORT VICTIMS OF CRIME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION O R WITH VERY LITTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING 12 THE ABOVE DEFINITION CLEARLY SHOWS THAT EXIST WOU LD REFER TO SOMETHING WHICH IS IN FORCE PRESENTLY. EXIST WOULD GENERALLY AND IN COMMON SENSE REFERS TO SOMETHING WHICH IS ALREADY THERE. WITH REFERENCE TO THIS PROVISION, THIS WOULD REFER TO AN UNDERTAKING WHICH WAS ALREADY PRESENT O N THE DATE WHEN THIS PROVISION WAS INTRODUCED. IN ANY CASE THE NOTIFICAT ION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMEN T OF INDUSTRIAL POLICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZETTE OF INDI A REMOVED ALL THE DOUBTS. THIS NOTIFICATION IS RELEVANT BECAUSE THIS WAS ISSU ED WITH REFERENCE TO SAME PACKAGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEVELOPMENT OF THE HILLY STATES. SECTION 5, READS AS UNDER;- DEFINITIONS: (A) .. (B) .. (C) EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 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 ABSOLUTELY CLEA R WHEN SUB SECTION (2) IS READ ALONGWITH SUB-SECTION (3) OF SECTION 80IC. AS NOTED EARLIER, SUB SECTION (2) IS ENABLING PROVISION WHICH PROVIDES FO R DEDUCTION IN CERTAIN KIND OF UNDERTAKINGS, I.E. NEW UNIT SET UP OR THE E XISTING UNITS WHICH CARRIES OUT SUBSTANTIAL EXPANSION DURING THE PARTICULAR WIN DOW PERIOD WHICH ARE GIVEN IN CLAUSES (I), (II) & (III) OF SUB SECTION ( 2). THE SUB SECTION (3) PROVIDES FOR RATES OF DEDUCTION. IT IS USEFUL TO NO TE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION FOR A PERIO D OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUS E (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 STATE OF UTTARANCHAL. SIMILAR LY, SUB CLAUSE (I) & (III) OF CLAUSE (B) REFERS TO WINDOW PERIOD IN CASE OF ST ATE 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 CLA USE (II) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION ON SUCH PROFITS FOR FIVE ASSESSMENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAF TER 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS . THEREFORE, IT IS ABSOLUTELY CLEAR THAT IN CASE OF STATE OF SIKKIM AN D NORTH-EASTERN STATES, LEGISLATURE WAS VERY CLEAR THAT IN CASE OF NEW UNDE RTAKING OR IN CASE OF SUBSTANTIAL EXPANDED UNDERTAKING DEDUCTION IS TO BE ALLOWED @ 100% FOR WHOLE 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 LEGIS LATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EXPANSION SE PARATELY 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 CA SE OF STATE OF SIKKIM & NORTH-EASTERN STATES UNDER SUB CLAUSE (I) AND FOR T HE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FO R FIRST FIVE YEARS AND THEREAFTER 25% FOR NEXT FIVE YEARS. THE CONCEPT O F SUBSTANTIAL EXPANSION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES O F STATES I.E STATE OF SIKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACH AL PRADESH AND 13 UTTRANCHAL. IF THE EXTENDED BENEFIT OF SUBSTANTIAL EXPANSION WAS TO BE SEPARATELY ALLOWED IN CASE OF STATE OF HIMACHAL PRA DESH AND STATE OF UTTARANCHAL, THEN MEANING OF SUBSTANTIAL EXPANSION AS GIVEN UNDER SUB SECTION (2) WHICH IS SAME FOR THE STATE OF SIKKIM A ND NORTH-EASTERN STATES BECOME REDUNDANT. AS NOTED EARLIER, THE PROVISION CANNOT BE INTERPRETED IN SUCH A WAY THAT PART OF THE SECTION BECOMES REDUNDA NT OR OTIOSE. THEREFORE, WHATEVER DOUBTS MAY BE THERE IN SUB SECTION (2) WHE N IT IS READ WITH SUB SECTION (3), THOSE DOUBTS ARE TOTALLY REMOVED AND I T BECOME ABSOLUTELY CLEAR THAT RATE OF DEDUCTION HAS TO BE 100% FOR FIRST 5 YEARS AND 25% THEREAFTER. 34. THERE IS A FORCE IN THE CONTENTION OF LD. CIT/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 R EDUNDANT. SUB SECTION (4) CLEARLY PROVIDES THAT THE DEDUCTION IS AVAILABL E TO ANY UNDERTAKING OR ENTERPRISE WHICH IS NOT FORMED BY SPLITTING OR RECO NSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE OR IT IS NOT FORMED BY TRANSFE R TO NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLANATION TO THIS SUB SECTION MAKES IT CLEAR THAT EXPLANATION 1 & 2 OF SUB SECTION (3) OF SECTION 80IA ARE APPLICABLE IN THIS RESPECT. EXP LANATION 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 PREVIOUS LY USED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINE SS AND THE TOTAL VALUE OF THE MACHINERY OR PLANT OR PA RT SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINES S, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-S ECTION, 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 UNIT WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER THIS SECTION THAT IS SECTION 80IC. NOW FOR CARRYING OUT SUBSTANTIAL EXPANSION THE INVESTMENT IN PLANT & MAC HINERY IS REQUIRED TO BE MADE BY ATLEAST 50%. SO IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN IT WILL VIOLATE SUB SECTION (4) OF SECTION 80I C, THEREFORE, INTERPRETATION CANVASSED ON BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80IC(4) WOULD BECOME REDUNDANT AND SUCH AN INTERPRETATION I S NOT POSSIBLE. 35. FURTHER, SUB SECTION (6) PROVIDES THAT IN NO CA SE THE TOTAL PERIOD OF DEDUCTION COULD EXCEED THE PERIOD OF 10 YEARS INCLU DING DEDUCTION AVAILED UNDER SUB SECTION (4) OF SECTION 80IB AND SECTION 1 0A AND 10B. IT WAS CONTENDED BEFORE US THAT SINCE THERE IS NO RESTRI CTION IN CARRYING OUT OF SUBSTANTIAL EXPANSION IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARRIED OUT ANY NUMBER OF TIMES. IF THIS INTERP RETATION IS ACCEPTED THEN SUB SECTION (6) WOULD BE RENDERED OTIOSE OR MEANING LESS BECAUSE IF A UNIT WAS SET UP ON THE COMMENCEMENT OF THIS SECTION AND THE SAME CLAIMS DEDUCTION @ 100% AND LATER ON EVERY FIVE YEARS A SU BSTANTIAL EXPANSION IS CARRIED OUT THEN ACCORDING TO THE INTERPRETATION CA NVASSED ON BEHALF OF THE ASSESSEE, SUCH UNIT WOULD 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 THEN DEDUCTION WOULD BECOME ALMOST PERCEPTUAL AS LONG AS THE ASSES SEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE SUB SECTION (6) WOULD LOOSE ITS MEANING. SUCH AN UNLIMITED PERIOD OF DEDUCTION WOUL D NOT BE IN CONSONANCE OF LAW. AT THE COST OF REPETITION, WE WOULD LIKE T O EMPHASIZE THAT NO 14 PRINCIPLE OF INTERPRETATION CAN BE ADOPTED WHICH LE ADS TO A SITUATION WHERE A PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDU NDANT. IN FACT THOUGH IT WAS CONTENDED THAT IN THE PRESENT CASE (I.E. IN CAS E OF HYCRON ELECTRONICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE OF HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTIO N WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHICH HA S BEEN MADE BEFORE US. IN CASE OF M/S MAHAVIR INDUSTRIES (ITA NO. 127/CHD/ 2011 AND ITA NO. 791/CHD/2012) THOUGH THOSE CASES WERE ADJOURNED BEC AUSE SOME OTHER ISSUES WERE ALSO THERE BUT IN THOSE TWO CASES ASSES SEE HAD COMMENCED THE OPERATION ON 8.5.1997 AND CLAIMED DEDUCTION U/S 80I B FROM ASSESSMENT YEARS 1998-99 TO 2005-06. LATER ON, SUBSTANTIAL EXP ANSION WAS CARRIED OUT IN ASSESSMENT YEAR 2005-06 AND ON THE BASIS OF THE CONTENTION THAT ASSESSEE IS ALLOWED TO CARRY OUT ANY NUMBER OF EXPANSIONS, DEDUCTION WAS CLAIMED FOR THE 12 TH YEAR FOR ASSESSMENT YEAR 2009-10 (WE MAY CLARIFY T HAT REFERENCE TO THESE CASES IS MADE BECAUSE OF PARTICULAR CONTEN TION AND WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THESE APPEA LS HERE). THEREFORE, THE CONTENTION OF THE ASSESSEE THAT ANY NUMBER OF EXPAN SIONS ARE ALLOWED IS NOT POSSIBLE IN VIEW OF THE RESTRICTION GIVEN IN SECTIO N 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 PR OVISION OF SECTION 80IB(4). RELEVANT PROVISION OF SECTION 80IB (4) REA DS 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 INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL AS SESSMENT 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 OF THE CONDITION THAT IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT OR PLANTS DURING THE PERIOD BEGINNING ON THE IST DAY OF APRIL, 1993 AND ENDING ON THE 31 ST DAY OF MARCH, [2004]: PROVIDED FURTHER THAT IN THE CASE OF SUCH INDUSTRIE S IN THE NORTH-EASTERN REGION, AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMEN T, THE AMOUNT 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 -SECTION (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 BEFORE US FOR CONSIDERATION, THE DEDUCTION TO THE BACKWARD STATES WAS AVAILABLE IN T ERMS OF SECTION 80IB(4). THE THIRD PROVISO MAKES IT CLEAR THAT AFTER 31.3.20 04, THIS DEDUCTION WILL BE AVAILABLE ONLY U/S 80IC. THE SUB SECTION FURTHER M AKES IT CLEAR THAT DEDUCTION WOULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREAFTER @ 25%. FURTHER, THE FIRST PROVISO MAKES IT CLEAR THAT DEDU CTION WILL NOT EXCEED 10 CONSECUTIVE ASSESSMENT YEARS. THE SECOND PROVISO F URTHER MAKES IT CLEAR 15 THAT IN THE CASE OF STATES OF NORTH-EASTERN REGIONS , THE DEDUCTION WOULD BE @ 100% FOR ALL THE 10 YEARS. THUS, EVEN IN THE EAR LIER PROVISION ONLY IN CASE OF NORTH-EASTER STATES, THE DEDUCTION OF 100% WAS ALLOWABLE FOR 10 YEARS WHEREAS IN THE CASE OF STATES OF HIMACHAL PRA DESH, THE DEDUCTION WAS ALLOWABLE @ 100% FOR FIRST FIVE YEARS AND 25% FOR N EXT 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 T HAT EVEN THE LD. AUTHORS IN THEIR COMMENTARY OF INCOME TAX LAWS BY CHATURVED I & PITHISARIAS - SIXTH EDITION HAS EXPRESSED THE SAME OPINION. THE RELEVANT EXTRACT AT PAGES 6351 OF THE COMMENTARY READS AS UNDER;- NO DEDUCTION POSSIBLE FOR MORE THAN 10 ASSESSMENT YEARS.- SECTION 80-IC(6) ALSO OPENS WITH A NON OBSTANTE CLAUSE NO TWITHSTANDING ANYTHING CONTAINED IN,AND PROVIDES THAT NO DEDUCTI ON SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER SECT ION 80-IC, - WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERI OD 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 B OTH SITUATIONS SEPARATELY I.E. FOR NEW UNIT AND SUBSTANTIAL EXPANDED UNIT. W E FIND NO FORCE IN THIS CONTENTION. THE INITIAL ASSESSMENT YEAR HAS BEEN D EFINED AND THE EXPRESSION OR HAS BEEN USED IN RESPECT OF NEW UNITS BY STATI NG COMMENCES OPERATION OR COMPLETE SUBSTANTIAL EXPANSION. HERE THE EXPRE SSION OR IS TO BE READ AS A MUTUALLY EXCLUSIVE EXPRESSION WHICH REFERS TO A PARTICULAR SITUATION BY EXCLUDING THE OTHER SITUATION. THEREFORE, INITIAL ASSESSMENT YEAR WOULD CLEARLY COMMENCE EITHER ON COMMENCEMENT OF OPERATIO N OR AT COMPLETION OF SUBSTANTIAL EXPANSION OF EXISTING UNIT. IN ANY CASE THE WORD INITIAL CANNOT BE USED TWICE BY REFERRING TO SERIES OF EVENTS. THI S CAN BE UNDERSTOOD WITH A VERY SIMPLE EXAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GET EMPLOYED AS LEGAL OFFICER IN AN ORGANIZ ATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROF ESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE. THEN IN SUCH A SITUATION IT CA NNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AND THEN INITIALL Y HE WAS IN THE PROFESSION AND THEN ELEVATED AS A JUDGE. INITIALLY CAN BE USED ONLY ONCE AS A MATTER OF USAGE OF ENGLISH LANGUAGE. THEREFORE, READING OF TH E ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGISLATURE WAS VERY CLEAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN T HE STATE OF HIMACHAL PRADESH (SINCE ALL THE CASES BEFORE US ARE SITUATED IN THE STATE OF HIMACHAL PRADESH) AND THEREAFTER 25% DEDUCTION FOR ANOTHER FIVE YEARS ON THE NEW UNITS OR THE EXISTING UNITS WHERE SUBSTANTIAL EXPANSION WAS CARR IED OUT. 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WI TH REFERENCE TO THE DECISION OF M/S NOVAPAN INDIA LTD VS COLLECTOR OF C ENTRAL EXCISE AND CUSTOMS (SUPRA) BY THE REVENUE IS NOT CORRECT BECAU SE THAT PROVISION WAS RENDERED UNDER INDIRECT TAX ACT. WE FIND NO FORCE I N THESE SUBMISSIONS. EVERY DECISION OF THE HON'BLE SUPREME COURT OR FOR THAT MATTER OF ANY HIGH COURT HAS TO BE SEEN FOR THE RATIO LAID DOWN IN A P ARTICULAR DECISION AND IT 16 DOES NOT MATTER UNDER WHICH PARTICULAR ACT SUCH PRI NCIPLES HAS BEEN DECIDED. NO DOUBT THE INCENTIVE PROVISIONS ARE REQ UIRED TO BE INTERPRETED LIBERALLY BUT IN CASE OF M/S NOVAPAN INDIA LTD V CO LLECTOR OF CENTRAL 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 OF THE TABLE APPENDED TO THE EXEMPTION NOTIFICATION, THE BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE MANUFACTURER AND THE ENTR Y MUST BE CONSTRUED AS TAKING IN THE MFPBS AS WELL. IT IS NOT POSSIBLE TO AGREE WITH THIS SUBMISSION. IN MANGALORE CHEMICALS& FERTILIZERS LTD.. V. DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ORS., [1992) SUPPL. 1 S.C.C, 21, A BENCH OF THIS COURT COMPRISING M.N. VENKATACHALIAH, J. (AS THE LEARNED CHIEF JUSTICE THEN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE I N THE FOLLOWING WORDS: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERV ATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN SUPPORT OF STRICT CONSTRUCTION OF A PROVISION CONCERNING EXEMPTIONS. THERE IS SUPPORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION HAVE A TENDE NCY 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 EXEMPTI ON HAS TO ESTABLISH HIS CASE. INDEED, IN THE VERY CASE OF PARLE EXPORTS (P) LTD. RELIED UPON BY SHRI NARASIMHAMURTHY, IT WAS OBSERVED. WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VIOLE NCE IS DONE TO THE LANGUAGE EMPLOYED. IT MUST, HOWEVER, BE BORNE IN MI ND THAT ABSURD 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 MANIFEST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPR ETATIVE PROCESS ARISES ONLY WHERE THE MEANING IS NOT MANIFEST ON THE PLAIN WORDS OF THE STATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY T HE 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 INDI A V. WOOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW O F LAW. THE PRINCIPLE THAT IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CO NSTRUED 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 EXE MPTING PROVISION; THEY HAVE TO BE CONSTRUED STRICTLY. A PERSON INVOKING AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX LIABI LITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SAID PROVISION. IN CASE O F 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 T HAT IN THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL STATUTE, THE SAME GOES IN FAVOUR OF THE ASSESSEE, BUT THE FACT REMAIN S AND THE LAW IS WELL- SETTLED ON THIS SCORE THAT IN THE MATTER OF INTERPR ETATION OF THE TAXING STATUTES THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCIN G SOME OTHER EXPRESSIONS WHICH THE LEGISLATURE THOUGHT FIT TO OMIT. IN THE P RESENT CONTEXT, THERE IS NO 17 DOUBT AS TO THE MEANING OF THE WORDS USED IN THE SE CTION BY REASON OF THE LANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN A SCERTAINING THE STATUTORY INTENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTION IS AN EXCEPTION TO THE GENERAL RULE AND SINCE THE SAME IS OPPOSED T O THE NATURAL TENOR OF THE STATUTE, THE ENTITLEMENT FOR EXEMPTION, THEREFORE, OUGHT NOT TO BE READ WITH ANY LATITUDE TO THE TAX-PAYER OR EVEN WITH A WIDER CONNOTATION. 41. THEREFORE, IT BECOMES CLEAR THAT LIBERAL INTERP RETATION OF AN INCENTIVE PROVISION IS POSSIBLE IF THERE IS ANY DOUBT. AS WE HAVE SEEN ABOVE THAT IF VARIOUS SUB SECTIONS OF SECTION 80IC ARE READ CAREF ULLY IT LEAVES NO DOUBT THAT DEDUCTION WAS MEANT ONLY FOR NEW UNITS OR IN C ASE OF OLD UNITS IF SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH OLD U NITS AND DEDUCTION WAS AVAILABLE ONLY FOR A PERIOD OF 10 YEARS. THEREFORE , THERE IS NO QUESTION OF GIVING ANY INTERPRETATION MUCH LESS LIBERAL INTERPR ETATION TO SECTION 80IC WHEN THE READING OF WHOLE SECTION MAKES THE PROVISI ON VERY CLEAR. AS OBSERVED IN CASE OF M/S NOVAPAN INDIA LTD V COLLECT OR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) THE BURDEN WAS ON THE ASSESSEE TO S HOW UNDER WHICH CLAUSE HE WAS ENTITLED TO THE DEDUCTION BUT ASSESSEE IS SI MPLY ASSERTING BEFORE US THAT THERE IS NO RESTRICTION FOR DEDUCTION IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION, THAT IS NOT ENOUGH BECA USE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULAR DEDUCTION WAS ALLOWAB LE. 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 CLASSES OF UNDERTAKIN GS I.E. NEW UNITS AND OLD UNITS. BECAUSE THE OLD UNITS WOULD BE ENTITLED TO 1 00% DEDUCTION ON EXPANSION FOR FIRST FIVE YEARS AND 25% THEREAFTER W HEREAS THE NEW UNITS WOULD BECOME ENTITLED TO DEDUCTION FOR 100% FOR FIR ST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EXPANSION. SUCH DISCRIMINATOR Y INTENTION 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 INDUSTRIES LIMITED VS. DCIT(SUPRA). IN THIS DECISION, THE BENCH HAS SIMPLY OBSERVED THA T MAIN DISPUTE IS ON THE DEFINITION OF INITIAL ASSESSMENT YEAR. THE PROVIS IONS OF SUB SECTION (2) AND SUB SECTION (3) AS DISCUSSED IN DETAIL ABOVE HAVE B EEN TOTALLY IGNORED AND, THEREFORE, THIS DECISION, IN OUR OPINION, IS PER IN QUERIM AND CANNOT 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 CHANDIG ARH BENCH. THE FACTS IN THAT CASE ARE THAT ASSESSEE HAS CLAIMED DEDUCTION U /S 80IB IN ASSESSMENT YEAR 1999-2000 @ 100% . THE DEDUCTION WAS CLAIMED @ 100% FOR FIVE YEARS AND THEN DEDUCTION WAS CLAIMED @ 30% ON THE P ROFITS IN THE NEXT YEAR. THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION IN FIN ANCIAL YEARS 2004-05 & 2005-06 AND CLAIMED DEDUCTION AT THE RATE OF 100% O N THE BASIS OF SUCH SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 2006-07. HOWEVER, THE DEDUCTION WAS WRONGLY CLAIMED U/S 80IB INSTEAD OF SECTION 80I C. THE CIT(A) ALLOWED THE DEDUCTION BY OBSERVING THAT DEDUCTION COULD NOT BE DENIED SIMPLY BECAUSE ASSESSEE HAS QUOTED A WRONG SECTION. ON TH E APPEAL FILED BY REVENUE, THE DEDUCTION WAS HELD TO BE ALLOWABLE BEC AUSE SUBSTANTIAL EXPANSION WAS CARRIED OUT IN A UNIT WHICH WAS ALREA DY IN EXISTENCE AS ON 7.1.2003. THEREFORE, IN OUR OPINION, THIS DECISION DOES NOT PROVIDE ANY ASSISTANCE TO THE CASE OF THE ASSESSEE. 18 45. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (SUPRA). THE FACTS IN THAT CAS E ARE THAT A PARTNERSHIP FIRM NAMELY M/S. HIMACHAL POWER PRODUCTS WAS FORMED ON 23.05.2009. THE FIRM COMMENCED COMMERCIAL PRODUCTION IN MARCH, 2010 . SHRI ABHISHEK BHARGAV WHILE PLANNING TO JOIN THE FIRM AS PARTNER BY ACQUIRING 20% SHARE OF PROFIT AND ENHANCING ADDITIONAL MANUFACTURING FA CILITY BY UNDERTAKING SUBSTANTIAL EXPANSION SOUGHT ADVANCE RULING ON THE ISSUE WHETHER THE INTRODUCTION OF NEW PARTNER WOULD BE TREATED AS REC ONSTRUCTION OF THE EXISTING BUSINESS OR THE FIRM WILL BE ENTITLED TO T HE BENEFIT OF SUBSTANTIAL EXPANSION AS PER THE PROVISIONS OF SECTION 80IC(2)( A)(II) IF IT STARTS COMMERCIAL PRODUCTION BEFORE 01.04.2012. THE AUTHOR ITY 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 I F IT STARTS COMMERCIAL PRODUCTION IN THE SUBSTANTIALLY EXPANDED UNIT BEFOR E 01.04.2012. IN THIS CASE THE ASSESSE 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 CLAIM 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 QUESTION WHETHER THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION OF 100% OF ITS PROFIT EVEN AF TER 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 DECISION IS TOTALLY DISTINGUISHABLE AND DOES NOT HELP THE CASE OF THE ASSESSEE. 46. THE LAST DECISION RELIED ON WAS IN THE CASE OF SINTEX INDUSTRIES LTD V CIT (SUPRA). IN THIS CASE THE DEDUCTION U/S 80IC W AS ALLOWED BY THE ASSESSING OFFICER BUT LATER ON A REVISIONARY ORDER WAS PASSED U/S 263 OF THE ACT. THE BENCH MAINLY DEALT WITH THE PROVISION OF S ECTION 263 AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE O F MALABAR INDUSTRIES CO LTD V CIT 243 ITR 83 (SC) HELD THAT SINCE VIEW TA KEN BY THE ASSESSING OFFICER IS ALSO POSSIBLE VIEW, THEREFORE, ASSESSMEN T 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 (SUPRA) WI THOUT CONSIDERING THE PROVISION OF SECTION 80IC IN DETAIL FOR REACHING TH E CONCLUSION THAT IT IS ONE OF THE POSSIBLE VIEW. SINCE WE HAVE ALREADY DISCUS SED THE DECISION OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) AN D FOUND THAT ALL THE PROVISIONS OF THE SECTION WERE NOT DISCUSSED IN THA T SECTION AND THAT IS PER INQUERIM, THEREFORE, IN OUR OPINION, THIS ORDER DOE S NOT HELP THE CASE OF THE ASSESSEE. 47. THE LAST ARGUMENT WAS IN RESPECT OF COLUMN IN FORM NO. 10CCB. THE COLUMN 25 OF FORM NO. 10CCB READS AS UNDER:- 25 (I) WHETHER THE UNDERTAKING OR ENTERPRISE IS LO CATED IN AN AREA NOTIFIED BY THE BOARD FOR THE PURPOSES OF SEC TION 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 THE DATE 19 OF COMMENCEMENT OF PRODUCTION OR MANUFACTUR E OF ARTICLE OR THING. :--------------------- (D) IF THE EXISTING BUSINESS HAS UNDERTAKEN SUBST ANTIAL 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 SU B- STANTIAL EXPANSION TOOK PLACE. :-------- -------------- (III) VALUE OF INCREASE IN THE PLANT AND MACHINE RY 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 LOCATIO N OF THE INDUSTRY AND COLUMN (C) SPECIFICALLY ASK THE ASSESSEE TO STATE W HETHER BUSINESS IS A NEW BUSINESS? COLUMN (D) CLEARLY ASK THE ASSESSEE WHET HER EXISTING BUSINESS HAS UNDERTAKEN SUBSTANTIAL EXPANSION, THEREFORE, THERE ARE TWO CATEGORIES OF BUSINESS AND SUBSTANTIAL EXPANSION IS POSSIBLE ONLY IN CASE OF EXISTING BUSINESS. IN OUR OPINION, THE LD. CIT(A) HAS CORR ECTLY ADJUDICATED 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 ITA NO. 79 8/CHD/2012 IS ENTITLED TO ONLY 25% OF DEDUCTION DURING THE PRESENT YEAR BECAU SE THE ASSESSEE HAS ALREADY AVAILED THE PERIOD OF FULL DEDUCTION @ 100% IN THE EARLIER FIVE YEARS I.E. FROM ASSESSMENT YEARS 2004-05 TO 2008-09. IN T HIS BACKGROUND, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE U PHOLD THE SAME. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 7. FOLLOWING THE ABOVE, WE DECIDE THIS ISSUE AGAIN ST THE ASSESSEE. 8. IN THE RESULT, APPEAL IS DISMISSED. ITA NO. 195/CHD/2015 : 9. IN THIS CASE ALSO IDENTICAL ISSUE HAS BEEN RAISE D AND FACTS AND ALSO IDENTICAL AS DECIDED IN ABOVE NOTED CASE I.E. M/S AEROWIN INT ERNATIONAL, BADDI IN ITA NO. 20 165/CHD/2015. THEREFORE, FOLLOWING THAT ORDER WE D ECIDE THE ISSUE AGAINST THE ASSESSEE. THUS, APPEAL IS STANDS DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/06/2015. SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 5TH JUNE, 2015 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR