ACIT, New Delhi V. M/s. Sobhagia Clothing Co., New Delhi

ITA 1908/DEL/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8439 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-07-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 08-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: SURESH ANATHRAMAN
• Section: 143(3); 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI VIMAL GANDHI, PRESIDENT AND SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER I.T.A.NO.1908/DEL/2009 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME-TAX, M/S. SOBHAGIA C LOTHING CO., CIRCLE 33(1), NEW DELHI. VS. 5/69, 1 ST FLOOR, GURU MANSION, PADAM SINGH ROAD, KAROL BAGH, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANIS H GUPTA, DR. RESPONDENT BY : SHRI SURESH ANATHRAMAN, CA. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-XXVI, NEW DELH I, DATED 27.02.2009 IN AN APPEAL AGAINST ASSESSMENT FRAMED U NDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (THE ACT). 2. THE REVENUE CHALLENGES THE ORDER OF THE LEARNED CIT(A) WHO HAS HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IC OF THE ACT. 3. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF MANUFACTURING OF COTTON/SYNTHETIC YARN (TWISTED/FAN CY YARN) WHICH IS PRODUCED FROM THE BASIC YARN PROCURED FROM THE MARK ET. THE PRODUCT 2 MANUFACTURED BY THE ASSESSEE FIRM IS USED FOR THE M ANUFACTURE OF WOVEN FABRIC, FANCY KNITTED FABRICS AND GARMENTS. DURING THE YEAR UNDER REVIEW, THE ASSESSEE FIRM HAD SET UP A MANUFACTURING UNIT I N THE NOTIFIED EXPORT PROMOTION INDUSTRIAL PARK OF VILLAGE JHARMAJRI, BAD DI, TEHSIL NALAGARH, DISTT. SOLAN IN THE STATE OF HIMACHAL PRADESH. THI S IS THE FIRST YEAR OF THE OPERATION OF THE ASSESSEE FIRM. FOR THE YEAR ENDED 31.03.2006, THE ASSESSEE FIRM HAD EARNED A NET PROFIT OF RS.52,07,070/-. AS THE UNIT OF THE ASSESSEE FIRM IS ENGAGED IN THE MANUFACTURING OF AN ARTICLE OR THING WHICH IS NOT SPECIFIED IN 13 TH SCHEDULE OF INCOME TAX ACT, 1961 AND THE UNIT IS S ITUATED IN THE EXPORT PROMOTION INDUSTRIAL PARK IN THE STAT E OF HIMACHAL PRADESH WHICH IS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD A S PER PROVISIONS UNDER SECTION 80IC(2)(A)(II) OF INCOME-TAX ACT, 1961, THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80IC(2)(A)(II) @ 100% FOR F IRST FIVE YEARS OF OPERATION AS PER PROVISIONS OF SECTION 80IC(3)(II) OF THE ACT. THE ASSESSING OFFICER HELD THAT FOR CLAIMING DEDUCT ION UNDER SECTION 80IC, SUB-SECTION (2) THEREOF HAS TO BE FULFILLED. AS PER SUB-SECTION (2)(A), SECTION APPLIES PROVIDED THE ASSESSEE BEGINS TO MAN UFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THIRTEENTH SCHEDULE AND AS PER CLAUSE (B) OF SUB-SECTION (2) O F SECTION 80IC, THE 3 UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ANY AR TICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE ALSO. SINCE THE ASSESSE E IS NOT MANUFACTURING OR PRODUCING ANY ARTICLE OR THING MENTIONED IN SCHEDUL E FOURTEEN AS APPLICABLE FOR THE STATE OF HIMACHAL PRADESH, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IC OF THE ACT. THE LEARNED CIT(A) AFTER CONSIDERING THE REPLY OF THE ASSESSEE, HELD THAT DEDUCTION UNDER SE CTION 80IC CAN BE CLAIMED IN EITHER OF THE SITUATION NAMELY, EITHER THE ASSES SEE IS MANUFACTURING ANY ARTICLE OR THING NOT MENTIONED IN SCHEDULE THIRTEEN OR MANUFACTURES AN ARTICLE OR THING MENTIONED IN SCHEDULE FOURTEEN OF THE ACT. SINCE THE ASSESSEE IS MANUFACTURING AN ARTICLE NOT MENTIONED IN SCHEDULE THIRTEEN OF THE ACT, THE ASSESSEE IS ENTITLED TO DEDUCTION UNDE R SECTION 80IC. THE REVENUE IS IN FURTHER APPEAL BEFORE US. 4. WHEREAS THE LEARNED DR SHRI MANISH GUPTA SOUGHT TO RELY UPON THE OBSERVATIONS OF THE ASSESSING OFFICER, THE LEARNED COUNSEL FOR THE ASSESSEE SHRI SURESH ANANTHRAMAN REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) AND HIS FINDING THEREON. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. SECTI ON 80IC IS EXTRACTED HEREUNDER:- 80-IC. SPECIAL PROVISIONS IN RESPECT OF CERTAIN UN DERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES. 4 (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISES FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), T HERE SHALL, IN ACCORDANCE WITH THE SUBJECT TO THE PROVISIONS OF TH IS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB- SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISES, - (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE, OR WHIC H MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEE NTH 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, 2012], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE 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 INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR 5 (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OF INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE 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 PRODUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES O R PRODUCES ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTI AL EXPANSION DURING THE PERIOD BEGINNING (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE [1 ST DAY OF APRIL, 2012] 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 UTTRANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, 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 REFERRED 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; 6 (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (B), OF SU B- SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. IN OUR OPINION THE INTERPRETATION TAKEN BY THE ASSE SSING OFFICER IN RESPECT OF THE PROVISION OF SECTION 80-IC IS WRONG AND INCORRE CT IN VIEW OF THE PROVISIONS OF SECTION AS CONTAINED IN SECTION 80IC OF THE ACT. FROM THE PERUSAL OF THE ABOVE SAID PROVISIONS OF LAW AS CONT AINED IN SECTION 80IC OF THE ACT, WE FIND THAT THE PROVISION OF SECTION 80IC (2)(A)(II) IS APPLICABLE IF THE UNDERTAKING OR ENTERPRISE IS ENGAGED IN THE MAN UFACTURING OF ANY ARTICLE OR THING NOT BEING ANY ARTICLE OR THING SPECIFIED I N THIRTEENTH SCHEDULE DURING THE PERIOD JANUARY 7, 2003 TO 31 ST MARCH 2012 AND THE UNDERTAKING OR ENTERPRISE IS SITUATED IN ANY EXPORT PROCESSING ZON E OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GR OWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PA RK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGA RD, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL. HOW EVER, THE DEDUCTION UNDER SECTION 80IC(2)(B)(II) IS ALLOWABLE IN RESPEC T OF THOSE UNDERTAKING OR ENTERPRISE WHICH IS ENGAGED IN THE MANUFACTURE OR P RODUCE OF ANY ARTICLE OR 7 THING WHICH IS SPECIFIED IN FOURTEENTH SCHEDULE DUR ING THE PERIOD 7 TH JANAURY 2003 TO 31 ST MARCH 2012 IN THE STATE OF HIMACHAL PRADESH OR UTT RANCHAL. FROM THE PERUSAL OF THE ABOVE SAID PROVISION, WE FI ND THAT THE BASIC CONDITION FOR ALLOWABILITY OF DEDUCTION UNDER SECTI ON 80IC(2)(A)(II) IS THAT THE UNDERTAKING OR ENTERPRISE SHOULD BE ENGAGED IN THE MANUFACTURE OR PRODUCE OF AN ARTICLE OR THING NOT BEING AN ARTICLE OR THING SPECIFIED IN THIRTEENTH SCHEDULE AND SUCH UNDERTAKING OR ENTERPR ISE SHOULD BE SITUATION IN THE SPECIFIED AREAS NOTIFIED BY THE BOARD AS PER TH E SCHEME FRAMED BY THE CENTRAL GOVERNMENT. HOWEVER, FOR ALLOWABILITY OF DEDUCTION UNDER SECTIO N 80IC(2)(B)(II), THE BASIC CONDITION IS THAT THE UNDERTAKING OR ENTE RPRISE SHOULD BE ENGAGED IN THE MANUFACTURE OR PRODUCE OF AN ARTICLE OR THING S PECIFIED IN FOURTEENTH SCHEDULE AND SUCH UNDERTAKING OR ENTERPRISE CAN BE SITUATED IN ANY PART OF THE STATE OF HIMACHAL PRADESH OR UTTRANCHAL. IN OUR OPINION, SECTION 80IC(A)(II) AND SECTION 80I C(B)(II) ARE TWO SEPARATE PROVISIONS APPLICABLE TO DIFFERENT CLASS O F ASSESSEES. HOWEVER, IF THE CONTENTION OF THE ASSESSING OFFICER THAT BOTH THE CONDITIONS MENTIONED IN CLAUSE (A) AND (B) ARE TO B E COMPLIED BY EACH AND EVERY ASSESSEE CLAIMING DEDUCTION UNDER SECTION 80I C IS TO BE ACCEPTED WHICH IN THE GIVEN CIRCUMSTANCES SEEMS TO BE TOTALL Y ILLOGICAL AND 8 UNJUSTIFIABLE AS THERE WAS NO LOGIC OF MENTIONING T HESE TWO CONDITIONS IN TWO DIFFERENT CLAUSES. IN OUR OPINION, IN SUCH A SITUA TION, THEN THE LAW SHOULD HAVE SIMPLY PROVIDED IN ONE CLAUSE ITSELF BOTH THE CONDITION THAT THE ARTICLE OR THING TO BE MANUFACTURE OR PRODUCE SHOULD NOT BE AN ARTICLE OR THING SPECIFIED IN THIRTEENTH SCHEDULE AND IT SHOULD BE A N ARTICLE OR THING SPECIFIED IN FOURTEENTH SCHEDULE OR EVEN MORE SIMPLY THAT THE ARTICLE OR THING TO BE MANUFACTURE OR PRODUCE SHOULD BE AN ARTICLE OR THIN G SPECIFIED IN FOURTEENTH SCHEDULE. HOWEVER, THIS IS NOT THE CASE. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE PROVISIONS AS CONTAINED IN SECTION 80IC, THERE IS NO SCOPE OF AMBIGUITY IN THE INTERPRETATION OF PROV ISIONS OF SECTION 80-IC AS DONE BY THE ASSESSING OFFICER. 6. IN THE RESULT, THE APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2009. SD/- SD/- (VIMAL GANDHI) (DEEPAK R. SHAH) PRESIDENT ACCOUNTANT MEMBER DATED: 31 ST JULY 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) BY ORDER 5. DR *MG DEPUTY REGISTRAR, ITAT.