DCIT, CHENNAI V. Caress Beauty Care Products Pvt. Ltd., CHENNAI

ITA 2226/CHNY/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 7556 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 07-12-2015
• Court: TRIBUNAL
• Department Lawyers: SHIVA SRINIVAS JT
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Earning of tax free income; Question of law
• Section: 143(3); 14A; 80IB; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A, CHENNAI , ! ' . ' $ %, & ! %' BEFORE SHRI SANJAY ARORA, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NOS.2223, 2224 & 2226/MDS/2015 & ) '*) / ASSESSMENT YEARS : 2006-07, 2007-08 & 20008-09 DY. COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1(2), CHENNAI 600 034. (,-/ APPELLANT ) VS. CARESS BEAUTY CARE PRODUCTS PVT. LTD., NO.3, 4 TH FLOOR, GOKUL ARCADE, NO.2, SARDAR PATEL ROAD, ADYAR, CHENNAI 600 020. [PAN: AABCC 2016N ] (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SHRI SHIVA SRINIVAS, JT. CIT ./,- 0 1 /RESPONDENT BY : SHRI T.BANUSEKAR, CA ' 0 2 /DATE OF HEARING : 05.12.2016 3* 0 2 /DATE OF PRONOUNCEMENT : 03.03.2017 / O R D E R PER SANJAY ARORA, AM : THIS IS A SET OF THREE APPEALS BY THE REVENUE ARIS ING OUT OF SEPARATE ORDERS BY THE COMMISSIONER OF INCOME TAX (APPEALS)- 1, CHENNAI (CIT(A) FOR SHORT) DATED 27.08.2015, PARTLY ALLOWING THE ASSESS EES APPEALS CONTESTING ITS ASSESSMENTS FOR THREE CONSECUTIVE YEARS, BEING ASSE SSMENT YEARS (AYS) 2006-07 TO 2008-09. WHILE THE ASSESSMENT FOR THE LATER TWO YEARS IS U/S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER), THAT FOR THE FIRST YEAR IS U/S. 2 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. 143(3) R/W S. 263 OF THE ACT. THE APPEALS RAISING C OMMON ISSUES, WERE HEARD TOGETHER AND ARE BEING DISPOSED OF PER A COMMON ORD ER FOR THE SAKE OF CONVENIENCE. 2. THE PRINCIPAL ISSUE ARISING IN THESE APPEALS IS THE VALIDITY IN LAW OF THE ASSESSEES CLAIM FOR DEDUCTION U/S. 80-IB OF THE AC T IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. THE ASSESSING OFFICER (A O) HAS DISALLOWED THE ASSESSEES CLAIM ON THE GROUND THAT IT IS NO LONGER A SMALL SCALE INDUSTRIAL UNDERTAKING (SSI) IN TERMS OF S. 11-B OF THE INDUST RIES (DEVELOPMENT & REGULATION) ACT, 1951, WHICH DEFINES THE SAME, IN-A S-MUCH AS THE INVESTMENT BY IT IN PLANT AND MACHINERY EXCEEDS THE THRESHOLD LIM IT OBTAINING AS ON THE LAST DATE OF THE RELEVANT PREVIOUS YEAR (S), SO THAT IT CAN NO LONGER BE REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING FOR THOSE YEARS. RELIANCE FOR THE PURPOSE IS PLACED ON S. 80-IB(14)(G) OF THE ACT, WHICH DEFINES THE TERM SMALL SCALE INDUSTRIAL UNDERTAKING FOR THE PURPOSE OF S. 80-IB OF THE ACT, I.E., WITH REFERENCE TO S. 11-B (SUPRA). THE ASSESSEES CASE, ON THE OTH ER HAND, BASED ON THE DECISIONS BY THE TRIBUNAL AS WELL AS BY THE HIGHER COURTS OF LAW, IS THAT ONCE AN ASSESSEE SATISFIES THE QUALIFYING CONDITIONS FOR DEDUCTION, IT IS NOT NECESSARY THAT THE SAME SHOULD CONTINUE TO BE SO FOR ALL THE YEARS FOR WHIC H THE DEDUCTION IS AVAILABLE, I.E., BEGINNING WITH THE YEAR OF COMMENCEMENT OF PR ODUCTION. THIS, IT WAS ARGUED, WAS THE PRECISE QUESTION OF LAW POSED BEFOR E THE HON'BLE HIGH COURTS OF KARNATAKA (IN ACE MULTI AXES SYSTEMS LTD. VS. DY. CIT [2014] 367 ITR 266 (KAR)) AND PUNJAB & HARYANA (IN CIT V. SUNDER FORGING IN ITA NOS. 92 & 242 OF 2012 DATED 30/7/2015/COPY ON RECORD), ADVERTING OUR ATTENTION THERETO, AND WHICH WE REPRODUCE IN SERIATIM AS UNDER: (A) THE SUBSTANTIAL QUESTION OF LAW THAT ARISES FOR OUR CONSIDERATION IN THIS APPEAL IS AS UNDER: WHEN ONCE THE ELIGIBLE BUSINESS OF AN ASSESSEE IS GIVEN THE BENEFIT OF DEDUCTION UNDER SEC.80IB ON THE ASSESSEE SATISFYING THE CONDITIONS MENTIONED IN SUB-SEC.(2) OF SEC.80IB, CAN THE ASSES SEE BE DENIED THE BENEFIT 3 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. OF THE SAID DEDUCTION ON THE GROUND THAT DURING THE SAID 10 CONSECUTIVE YEARS, IT CEASES TO BE A SMALL SCALE INDUSTRY? (B) THE APPELLANT CONTENDS THAT THE FOLLOWING SUBST ANTIAL QUESTIONS OF LAW ARISE IN THIS CASE:- (I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE HON'BLE ITAT WAS RIGHT IN ALLOWING THE DEDUCTION U/S. 80IB DURIN G THE YEAR UNDER CONSIDERATION, I.E. 2007-08 WHEN THE ASSESSEE LOST THE STATUS OF SMALL SCALE INDUSTRIAL UNIT IN THE PREVIOUS YEAR AND EVEN DID N OT CLAIM DEDUCTION U/S. 80IB IN THE A.Y. 2006-07? (QUESTIONS (II) & (III) BEING NOT RELEVANT FOR OUR PURPOSES) 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, INCLUDING THE DECISIONS SUPRA RELIED UPON. 3.1 CLEARLY, THE ANSWER WOULD LIE IN THE LANGUAGE O F THE PROVISION, INCLUDING, WHERE NECESSARY, ITS INTERPRETATION AND, IN ANY CA SE, CANNOT BE ANSWERED DE HORS OR WITHOUT REFERENCE THERETO. WE SHALL, THEREFORE, SET OUT THE RELEVANT PROVISIONS OF S. 80-IB WHICH BEAR MENTION OF OR REFERENCE TO SMALL SCALE INDUSTRIAL UNDERTAKING. THE CONTROVERSY BETWEEN THE ASSESSEE AND THE REVENUE THUS IS IF THE CONDITION OF THE ASSESSEES UNIT CONTINUING TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING IS OF ANY RELEVANCE DURING THE PERIOD O F THE TAX HOLIDAY OR ITS RELEVANCE IS LIMITED ONLY FOR THE FIRST YEAR. AS A SEQUEL, WHERE THE ANSWER TO THE FIRST PART IS IN THE AFFIRMATIVE, IS THE EXTENT OF THE SAID RELEVANCE. THE QUESTION THAT ASSUMES RELEVANCE IS THE IMPORT OR THE SIGNIFI CANCE OF THE WORDS SMALL SCALE INDUSTRIAL UNDERTAKING, OR THE CONDITION A S TO IT, OCCURRING IN S. 80-IB. THE ANSWER, AS AFORE-STATED, WOULD LIE IN THE LANGU AGE OF THE PROVISION, WHICH IN ITS RELEVANT PART READS AS UNDER (WHICH ARE THE ONL Y SUB SECTIONS BEARING MENTION OF OR REFERENCE TO THE WORDS SMALL SCALE INDUSTRIE S UNDERTAKING THEREIN): DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM CER TAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS. 80-IB. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE IN CLUDES ANY PROFITS AND GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB-SECTIONS (3) TO (11), (11A) AND (11B) (SUCH BUSINESS BEING HEREINAFTER RE FERRED TO AS THE ELIGIBLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION , BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH 4 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION. (2) THIS SECTION APPLIES TO ANY INDUSTRIAL UNDERTAKING WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: ( I ) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTR UCTION, OF A BUSINESS ALREADY INEXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF AN INDUSTRIAL UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH INDUSTRIAL UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN TH AT SECTION; ( II ) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINES S OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE; ( III ) IT MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHE DULE, OR OPERATES ONE OR MORE COLD STORAGE PLANT OR PLANTS, IN ANY PART O F INDIA : PROVIDED THAT THE CONDITION IN THIS CLAUSE SHALL, IN RELATI ON TO A SMALL SCALE INDUSTRIAL UNDERTAKING OR AN INDUSTRIAL UNDERTAKING REFERRED TO IN SUB-SECTION (4) SHALL APPLY AS IF THE WORDS NOT BE ING ANY ARTICLE OR THING SPECIFIED IN THE LIST IN THE ELEVENTH SCHEDUL E HAD BEEN OMITTED. EXPLANATION 1. FOR THE PURPOSES OF CLAUSE ( II ), ANY MACHINERY OR PLANT WHICH WAS USED OUTSIDE INDIA BY ANY PERSON OT HER THAN THE ASSESSEE SHALL NOT BE REGARDED AS MACHINERY OR PLAN T PREVIOUSLY USED FOR ANY PURPOSE, IF THE FOLLOWING CONDITIONS ARE FU LFILLED, NAMELY : ( A ) SUCH MACHINERY OR PLANT WAS NOT, AT ANY TIME PR EVIOUS TO THE DATE OF THE INSTALLATION BY THE ASSESSEE, USED IN INDIA; ( B ) SUCH MACHINERY OR PLANT IS IMPORTED INTO INDIA FROM ANY COUNTRY OUTSIDE INDIA; AND ( C ) NO DEDUCTION ON ACCOUNT OF DEPRECIATION IN RESP ECT OF SUCH MACHINERY OR PLANT HAS BEEN ALLOWED OR IS ALLOWABLE UNDER THE PROVISIONS OF THIS ACT IN COMPUTING THE TOTAL INCOME OF ANY PERSON FOR ANY PERIOD PRIOR TO THE DATE OF THE INSTALLATION OF THE MACHINERY OR PLANT BY THE ASSESSEE. EXPLANATION 2. WHERE IN THE CASE OF AN INDUSTRIAL UNDERTAKING, ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL VALU E OF THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PERCENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINES S, THEN, FOR THE PURPOSES OF CLAUSE ( II ) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH; ( IV ) IN A CASE WHERE THE INDUSTRIAL UNDERTAKING MANUFACTURES OR PRODUCES ARTICLES OR THINGS, THE UNDERTAKING EMPLOYS TEN OR MORE WORKERS IN A MANUFACTURING PROCESS CARRIED ON WITH THE AID OF PO WER, OR EMPLOYS TWENTY OR MORE WORKERS IN A MANUFACTURING PROCESS C ARRIED ON WITHOUT THE AID OF POWER. (3) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDUSTRIAL UNDERTAKING SHALL BE 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 FOR A PERIOD OF TEN 5 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE ASSESSMENT YEARS WHERE THE ASSESSEE IS A CO-OPERATIVE SOCIETY) BEGINNING WITH THE INITIAL ASSESSMENT YEAR SUBJECT TO THE FULFILMENT OF THE FOLLOWING CONDITIO NS, NAMELY : ( I ) IT BEGINS TO MANUFACTURE OR PRODUCE, ARTICLES OR THINGS OR TO OPERATE SUCH PLANT OR PLANTS AT ANY TIME DURING THE PERIOD BEGINNING FROM THE 1ST DAY OF APRIL, 1991 AND ENDING ON THE 31ST DAY O F MARCH, 1995 OR SUCH FURTHER PERIOD AS THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY WITH REFERENCE TO ANY PARTICULAR UNDERTAKING; ( II ) WHERE IT IS AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE INDUSTRIAL UNDERTAKING , IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR T HINGS OR TO OPERATE ITS COLD STORAGE PLANT NOT SPECIFIED IN SUB-SECTION (4) OR SUBSECTION (5) AT ANY TIME DURING THE PERIOD BEGINN ING ON THE 1ST DAY OF APRIL, 1995 AND ENDING ON THE 31ST DAY OF MARCH, 2002 . (4) TO (13) --------- (14) FOR THE PURPOSES OF THIS SECTION, (A) TO (F) . (G) SMALL-SCALE INDUSTRIAL UNDERTAKING MEANS AN INDUST RIAL UNDERTAKING WHICH IS, AS ON THE LAST DAY OF THE PREVIOUS YEAR, REGARDED AS A SMALL- SCALE INDUSTRIAL UNDERTAKING UNDER SECTION 11B OF T HE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 (65 OF 1951) (EMPHASIS, BY ITALICS, OURS) SEC. 80-IB(1) PROVIDES FOR A DEDUCTION THERE-UNDER TO AN ASSESSEE ON THE PROFITS DERIVED FROM AN ELIGIBLE BUSINESS, DEFINED IN SPECI FIED SUB-SECTIONS, IN ACCORDANCE WITH AND THE SUBJECT TO THE PROVISIONS O F S. 80-IB. SEC. 80-IB (2) ENLISTS THE QUALIFYING CONDITIONS, UPON FULFILLMENT OF WHICH, THE DEDUCTION U/S. 80-IB(1) SHALL BE AVAILABLE TO AN INDUSTRIAL UNDERT AKING. THE SAME NOTABLY DOES NOT REFER TO AN INDUSTRIAL UNDERTAKING BEING A SMAL L SCALE INDUSTRIAL UNDERTAKING . SEC. 80-IB(3) PROVIDES THE PERIOD FOR WHICH, AND THE EXTENT TO WHICH, THE SAID DEDUCTION, I.E., ON THE PROFITS OF THE ELIGIBLE UNDERTAKING, SHALL BE AVAILABLE. FOR A SMALL SCALE INDUSTRIAL UNDERTAKING THE PERIOD OF COMMENCEMENT OF PRODUCTION SHOULD BE AT ANY TIME FROM APRIL 01, 1995 TO MARCH 31, 2002. SEC. 80-IB(14)(G) IMPORTS THE CONDITION OF S. 11-B OF THE INDUSTRIES (DEVELOPMENT AND REGULATION) ACT, 1951 FOR REGARDIN G, FOR THE PURPOSE OF S. 80- IB, AN INDUSTRIAL UNDERTAKING AS A SMALL SCALE INDU STRIAL UNDERTAKING, AS APPLIED 6 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. ON THE LAST DAY OF THE RELEVANT PREVIOUS YEAR. THE ASSESSEES UNDERTAKING, AS IS THE ADMITTED POSITION BETWEEN THE PARTIES, COMMENCE D PRODUCTION ON SEPTEMBER 09, 1999. IF, THEREFORE, AND AS IS UNDENIABLY THE C ASE, THE SAID UNDERTAKING WAS A SMALL SCALE INDUSTRIAL UNDERTAKING U/S. 11-B OF THE INDUSTRIES (D & R) ACT AS ON 31.3.2000, IT WOULD SATISFY THE CONDITION OF S. 80- IB(3). THIS, IT MAY BE NOTED, IS THE ONLY CONDITION STIPULATED BY S. 80-IB(3) FOR BE ING ENTITLED TO DEDUCTION U/S. 80-IB(1) AT TWENTY FIVE (THIRTY) PER CENT OF ITS PR OFITS FOR A PERIOD OF TEN (TWELVE) YEARS, BEGINNING WITH THE INITIAL ASSESSMENT YEAR, DEFINED AS THE YEAR OF THE COMMENCEMENT OF THE OPERATIONS (S. 80-IB(14)(C)). S EC. 80-IB(3) LAYS DOWN THE ELIGIBILITY TEST NOT IN TERMS OF AN UNDERTAKING BEI NG (OR NOT BEING) A SMALL SCALE INDUSTRIAL UNDERTAKING, BUT WITH REFERENCE TO THE P ERIOD OF THE COMMENCEMENT OF ITS OPERATIONS, ALLOWING AN EXTENDED PERIOD OF TIM E FOR A SMALL SCALE INDUSTRIAL UNDERTAKING. THAT IS, PROVIDES A FURTHER CONDITION WITH REFERENCE TO THE DATE OF COMMENCEMENT OF ITS OPERATIONS FOR AN OTHERWISE ELI GIBLE UNDERTAKING. TO CONTEND THEREFORE THAT THE CONDITION OF SEC. 80-IB( 3), WHICH ONLY CONCERNS ITSELF WITH THE PERIOD DURING WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR OPERATE PLANTS, ETC., WHICH THOUGH IS EXTENDED FOR A SMALL SCALE INDUSTRIAL UNDERTAKING, OUGHT TO BE MET OR AP PLIES ON A YEAR TO YEAR BASIS, IS MIS-DIRECTED. THE REVENUE REGARDING THE CONDITION OF S. 80-IB(3) TO BE FULFILLED EVERY YEAR IS THEREFORE MISPLACED . WE ARE IN THIS REGARD IN RESPECTFUL AGREEMENT WITH THE HON'BLE HIGH COURT IN ACE MULTI AXES SYSTEMS LTD. (SUPRA), WHICH DECISION STANDS ENDORSED IN SUNDER FORGING (SUPRA), THAT THERE IS NOTHING TO INDICATE THAT THIS CONDITION IS TO BE FULFILLED YEAR AFTER YEAR, I.E., FOR ALL THE TEN (TWELVE) YEARS FOR WHICH THE DEDUCTION UNDER THE SE CTION IS AVAILABLE. EVEN AS THE HON'BLE HIGH COURT IN ACE MULTI AXES SYSTEMS LTD. (SUPRA), THE OPERATIVE PART OF WHICH DECISION STANDS REPRODUCED IN SUNDER FORGING (SUPRA), SPEAKS OF AN AMBIGUITY IN THE LANGUAGE, REQUIRING INTERPRETAT ION, AND WHICH IT ADOPTS, IN VIEW OF THE PROVISION BEING AN INCENTIVE PROVISION, WITH THE AVOWED OBJECT OF 7 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. PROVIDING INCENTIVE FOR A DEFINED PERIOD, LIBERALLY , IN PREFERENCE TO A LITERAL INTERPRETATION, WHICH IT STATES WOULD KILL THE INDU STRY, IN OUR HUMBLE VIEW, REFERENCE TO SUCH CONSIDERATIONS MAY NOT, WITH RESP ECT, IN VIEW OF THE LANGUAGE OF THE PROVISION, BE NECESSARY. APART FROM THE GENE RAL PRINCIPLE OF THE TAXING STATUTES BEING REQUIRED TO BE INTERPRETED STRICTLY, ON WHICH CASE LAW IS LEGION (VIZ. CIT V. NATIONAL TAJ TRADERS [1980] 121 ITR 535 (SC)), IT IS EVEN OTHERWISE TRITE LAW THAT A BENEFICIAL PROVISION IS TO STRICTLY INTERPRETED (VIZ. ORISSA STATE WAREHOUSING CORPORATION V. CIT [1999] 237 ITR 589 (SC); NOVAPAN INDIA LTD. V. CCE , 73 ELT 769 (SC)), CREATE AS IT DOES A DEPARTURE FROM THE NORM, CARVING OUT A CLASSIFICATION, SO THA T ITS TERMS ARE TO BE STRICTLY CONSTRUED AND ADHERED TO. AGAIN, AS EXPLAINED IN IPCA LABORATORY LTD. V. DY. CIT [2004] 266 ITR 521 (SC), A BENEFICIAL PROVISION IS YET TO BE INTERPRETED ON ITS TERMS. WE HAVE, HOWEVER, EXPLAINED OF AN ABSENC E OF AMBIGUITY IN THE LANGUAGE OF S. 80-IB(3), PRECLUDING BRINGING INTO P LAY THE PRINCIPLES OF OR AIDS TO INTERPRETATION. 3.2 THE SECOND AND THE ONLY OTHER PROVISION IN S. 8 0-IB WHICH BEARS MENTION OF OR REFERENCE TO THE WORDS SMALL SCALE INDUSTRIA L UNDERTAKING IS 80-IB(2)(III), WHICH AGAIN HAS TO BE READ ALONG WITH S.80-IB(14)(G ). THE SAME, AS SHALL BE READILY SEEN, STIPULATES A CONDITION OF MANUFACTURE OR PRODUCTION OF A SPECIFIED ARTICLE OR THING BY THE INDUSTRIAL UNDERTAKING SO A S TO QUALIFY AS AN ELIGIBLE UNDERTAKING. THE SAME IS DEFINED NEGATIVELY AS NOT BEING AN ARTICLE OR THING SPECIFIED IN THE ELEVENTH SCHEDULE. THAT IS, THE IN DUSTRIAL UNDERTAKING MAY MANUFACTURE OR PRODUCE ANY ARTICLE OR THING OTHER T HAN THAT SPECIFIED IN THE ELEVENTH SCHEDULE TO THE ACT, A NEGATIVE LIST. THIS CONDITION HOWEVER IS NOT APPLICABLE TO A SMALL SCALE INDUSTRIAL UNDERTAKING - EVEN AS NOTED BY THE HONBLE COURTS IN THE DECISIONS CITED SUPRA, OR AN INDUSTRIAL UNDERTAKING REFERRED TO IN SUB-SECTION (4) OF S.80-IB. IN OTHER WORDS, T HE ONLY CONDITION FOR A SMALL SCALE INDUSTRIAL UNDERTAKING IS TO PRODUCE AN ARTIC LE OR THING IN ANY PART OF INDIA. 8 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. SURELY, THIS BENEFIT IS AVAILABLE ONLY TO A SMALL S CALE INDUSTRIAL UNDERTAKING (AS DEFINED IN S. 80-IB(14)(G)). AS SUCH, ONCE AN INDUS TRIAL UNDERTAKING CEASES TO BE, OR IS NOT, A SMALL SCALE INDUSTRIAL UNDERTAKING, TH E CONDITION OF S. 80-IB(2)(III) WOULD REQUIRE THE UNDERTAKING TO PRODUCE AN ARTICLE OR THING OTHER THAN THAT SPECIFIED IN THE ELEVENTH SCHEDULE. THE DEDUCTION U /S. 80-IB(1), WHICH IS SUBJECT TO THE OTHER PROVISIONS OF S. 80-IB, IS ON THE POSITIVE FULFILMENT OF THE CONDITIONS SPECIFIED IN S. 80-IB(2), INCLUDING S. 8 0-IB(2)(III), WHICH REQUIRES FOR AN INDUSTRIAL UNDERTAKING TO MANUFACTURE OR PRODUCE IN INDIA ARTICLES OR THINGS OTHER THAN THAT SPECIFIED IN THE ELEVENTH SCHEDULE. AGAIN, AS IS THE ADMITTED POSITION, THE ASSESSEES INDUSTRIAL UNDERTAKING IS NOT A SMALL SCALE INDUSTRIAL UNDERTAKING IN TERMS OF SECTION 11-B OF THE INDUSTR IES (D&R) ACT AS ON THE LAST DAY OF THE RELEVANT PREVIOUS YEARS; ITS INVESTMENT IN PLANT & MACHINERY HAVING CROSSED THE THRESHOLD LIMIT AS IN FORCE (WHICH SPEC IFICATION MAY VARY FROM TIME TO TIME) PER THE SAID ENACTMENT FOR AN INDUSTRIAL U NDERTAKING TO BE REGARDED AS A SSI UNDERTAKING. SURELY, THEN, PRODUCTION OF AN ARTICLE OR THING SPE CIFIED IN THE ELEVENTH SCHEDULE, WHERE SO, WOULD DISQUALIFY THE A SSESSEES UNDERTAKING FOR BEING ELIGIBLE FOR DEDUCTION U/S. 80-IB(1) IN VIEW OF NON-SATISFACTION OF THE CONDITION OF S. 80-IB(2)(III) R/W S. 80-IB(14)(G) . THERE IS NO FINDING BY EITHER AUTHORITY ON THIS ASPECT OF THE MATTER. THIS BEING A GERMANE; NAY, A PRIMARY CONDITION; BEING IN FACT ONLY WITH REFERENCE TO THE ASSESSEES INDUSTRIAL UNDERTAKING NOT CONTINUING TO BE A SMALL SCALE INDU STRIAL UNDERTAKING, WE CONSIDER IT PROPER THAT THE MATTER IS RESTORED FOR DETERMINATION OF THE SATISFACTION OR OTHERWISE OF THE S. 80-IB(2)(III) FOR THE RELEVA NT YEARS BACK TO THE FILE OF THE AO INASMUCH AS IT IS NO LONGER A SMALL SCALE INDUST RIAL UNDERTAKING, TO BE DECIDED AFTER AFFORDING A REASONABLE OPPORTUNITY TO THE ASSESSEE TO STATE ITS CASE IN THE MATTER BEFORE HIM. HOW CAN THEREFORE IT BE SAID THAT THE FACT OF INDUS TRIAL UNDERTAKING BEING A SMALL SCALE INDUSTRY LOSES SIGNIFICANCE OR IS NO LO NGER RELEVANT, I.E., SUBSEQUENT 9 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. TO THE INITIAL ASSESSMENT YEAR? WE FIND NOTHING IN THE TWO DECISIONS AFORE- REFERRED FOR THE SUCH A BLANKET STATEMENT OR INFERE NCE, WHICH IS BEING CANVASSED BEFORE US WITH REFERENCE THERETO. THE ISSUE IN BOTH THE CITED DECISIONS, AS THEIR READING WOULD BEAR OUT, WAS OF THE INVESTMENT IN PL ANT AND MACHINERY CROSSING THE THRESHOLD LIMIT FOR THE INDUSTRIAL UNDERTAKING BEING REGARDED AS A SMALL SCALE INDUSTRIAL UNDERTAKING, AND IT WAS IN THAT CONTEXT THAT THE HON'BLE COURTS, WITH REFERENCE TO THE LANGUAGE OF S. 80IB(3), NOTING AMB IGUITY THEREIN, HELD THAT CROSSING THE SAID LIMIT WOULD NOT ADVERSELY IMPACT THE ASSESSEES CASE. WE HAVE, RATHER, WITH RESPECT, OBSERVED AN ABSENCE OF AMBIGU ITY (IN THE LANGUAGE OF THE SAID PROVISION), SO THAT THE QUESTION OF THE INDUST RIAL UNDERTAKING CONTINUING TO BE A SMALL SCALE INDUSTRY DOES NOT ARISE ONCE THE U NIT IS FOUND ELIGIBLE IN TERMS THEREOF. IT IS IN THIS CONTEXT, I.E., OF S. 80-IB(3 ), THAT THE HON'BLE COURTS IN THE SAID DECISIONS ANSWERED THE QUESTION/S OF LAW POSED FOR BEING ANSWERED BY THEM. A DECISION IS NECESSARILY TO BE READ IN CONTE XT OF ITS BACKGROUND FACTS AND THE QUESTION STATED AS ARISING THERE-FROM, I.E., TH ERE IS NO SCOPE FOR READING A JUDGMENT OUT OF CONTEXT. CONTINUING FURTHER, WHAT N EEDS TO BE EMPHASIZED IS THAT AN UNDERTAKING BEING A SMALL SCALE INDUSTRY IS A CONDITION OF S. 80IB(3) - WHERE-UNDER THE DECISIONS STAND RENDERED, I.E., WHE RE IT BEGINS TO MANUFACTURE OR PRODUCE WITHIN THE EXTENDED PERIOD OF TIME, AND NOT OF S. 80IB(2) . THE QUESTION ARISING IN THE PRESENT CASE IS ONLY U/S. 80IB(2)(III). THIS ALSO EXPLAINS THE REFERENCE TO THE SATISFACTION OF THE C ONDITION OF SUB-SECTION (2) OF S. 80-IB IN THE QUESTION REFERRED IN ACE MULTI AXES SYSTEMS LTD. (SUPRA), WHICH STANDS IN FACT FOLLOWED IN SUNDER FORGING (SUPRA). UNDERSTANDABLY, THEREFORE, THERE IS NO MENTION OR WHISPER OF THE ARTICLES OR T HINGS BEING MANUFACTURED OR PRODUCED, OR AS TO THEIR NATURE, THEREIN . THE SAID DECISIONS THEREFORE CANNOT BE REGARDED AS LAYING DOWN A PROPOSITION WHICH WOULD BE, AS OPPOSED TO U/S. 80- IB(3), IN THE CONTEXT OF S. 80-IB(2)(III) R/W S. 80 -IB(14)(G), AS ARISING FOR CONSIDERATION IN THE PRESENT CASE. EVEN OTHERWISE, IT IS TRITE LAW THAT A DECISION IS 10 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. AN AUTHORITY FOR WHAT IT ACTUALLY DECIDES AND NOT W HAT MAY REMOTELY OR EVEN LOGICALLY FOLLOW FROM IT ( GOODYEAR INDIA LTD. VS. STATE OF HARYANA AND ANOTHE R [1991] 188 ITR 402 (SC) ALSO REFER, RAJPUR RUDA MEHA VS. STATE OF GUJARAT [1980] 2 SCR 353; LACHMAN DASS BHATIA HINGWALA (P.) LTD. VS. ASSTT. CIT (2011) 330 ITR 243 (DEL.) (FB); AND BLUE STAR LTD. V. CIT (1996) 217 ITR 514 (BOM.)) . THE RELIANCE BY THE ASSESSEE THEREON TO SUGGEST T HAT AN INDUSTRIAL UNDERTAKING, BEING A SMALL SCALE INDUSTRIAL UNDERTA KING SHALL CONTINUE TO BE REGARDED AS SO EVEN IF IT IS NO LONGER A SMALL SCAL E INDUSTRIAL UNIT AS THE TERM PREVIOUS YEAR IN S. 80-IB(14)(G) REFERS TO THE IN ITIAL ASSESSMENT YEAR, ONLY NEEDS TO BE STATED TO BE REJECTED. THE DECISIONS NO WHERE STATE SO. IN FACT, IF THE INDUSTRIAL UNDERTAKING WERE TO CONTINUE TO BE A SSI DESPITE THE INVESTMENT IN ITS PLANT AND MACHINERY EXCEEDING THE PRESCRIBED LIMIT FOR A SSI UNIT, THE QUESTIONS ARISING FOR ANSWERING IN THE CITED DECISIONS WOULD NOT HAVE ARISEN IN THE FIRST PLACE. RATHER, IT IS ONLY AS THE INDUSTRIAL UNDERTA KING IS NO LONGER A SSI IN TERMS OF ITS DEFINING PROVISION UNDER THE RELEVANT ACT, WHICH DEFINITION STANDS SPECIFICALLY ADOPTED IN S. 80-IB AND, FURTHER, MADE APPLICABLE SEPARATELY FOR EACH YEAR, TO BE RECKONED AT ITS END, WHICH LEADS TO TH E FURTHER QUESTION OF THE RELEVANCE OF THIS CHANGE OF STATUS (AS AN SSI UNIT) INSOFAR AS THE DEDUCTIBILITY OF ITS PROFITS U/S. 80-IB (FOR THE YEAR/S SUBSEQUENT T O THE CHANGE) IS CONCERNED. THE FURTHER QUESTION OF THE BINDING NATURE OF THE SAID DECISIONS, SOUGHT TO BE RAISED BEFORE US BY THE LD. A.R WITH REFERENCE TO THE DECI SION IN CIT V . THANE ELECTRICITY SUPPLY LTD. [1994] 206 ITR 797 (BOM), ALSO THEREFORE DOES NOT A RISE. THE RELIANCE THEREON IS IN FACT MISPLACED, AND THE SAID DECISION, ON THE CONTRARY, SPEAKS OTHERWISE, SO THAT THE IS ONLY THE DECISION BY THE JURISDICTIONAL HIGH COURT THAT IS BINDING, IN CONFORMITY WITH THE WELL ACCEPTED LAW ON JUDICIAL PRECEDENTS (ALSO REFER SURESH DESAI & ASS. V. CIT [1998] 230 ITR 912 (DEL), EXPRESSING THAT THERE IS UNANIMITY IN THE VIEW OF T HE DIFFERENT HIGH COURTS IN THE MATTER). WE HAVE IN FACT ALREADY CLARIFIED THAT WE ARE IN AGREEMENT WITH THE TWO 11 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. DECISIONS RELIED UPON IN-SO-FAR AS WHAT STANDS HELD THEREIN, ASSUMING, IN FACT, A MORE LIBERAL STANCE IN THAT UNAMBIGUOUSLY, AN INDUS TRIAL UNDERTAKING CONTINUING TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING FOR THE PERIOD OF THE TAX HOLIDAY IS NOT A CONDITION MANDATED BY S. 80-IB(3), SO THAT IT DIS CONTINUING TO BE SO SHALL BE IRRELEVANT FOR THE PURPOSE OF SAID PROVISION AND NO T IMPACT ITS ELIGIBILITY FOR DEDUCTION ON THAT SCORE. 3.3 WE, NEXT, CONSIDER THE QUESTION IF THE ALLIED I SSUE OF THE MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING FALLING UNDER ELE VENTH SCHEDULE COULD BE RAISED AT THIS STAGE, AND AT THE INSTANCE OF THE TRIBUNAL; THERE BEING ADMITTEDLY NO REFERENCE THERETO PRIOR TO THIS STAGE. WE CONSIDER IT A SO FOR MORE THAN ONE REASON. TO BEGIN WITH, IT IS NECESSARY TO ANSWER TH E ISSUE ARISING FOR OUR ADJUDICATION, I.E., THE MAINTAINABILITY OF THE ASSE SSEES CLAIM FOR DEDUCTION U/S. 80-IB(1) FOR THE RELEVANT YEARS (UNDER THE GIVEN FA CTS AND CIRCUMSTANCES), OR THE REAL CONTROVERSY STEMMING - IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, FROM THE DIFFERENT STANDS OF THE PARTIES BEFORE US, I.E., WHETHER THE INDUSTRIAL UNDERTAKING BEING A SMALL SCALE UNDERTAKING IS OF A NY RELEVANCE BEYOND THE INITIAL ASSESSMENT YEAR AND, IF SO, WHAT? THIS IS AS WHILE THE ASSESSEE CLAIMS IT AS OF NO RELEVANCE, THE REVENUE REGARDS IT AS OF CO NTINUING RELEVANCE. THE QUESTION THUS IS PURELY LEGAL. WE HAVE, ON A READIN G OF THE TERMS OF THE PROVISION, FOUND THAT IT MAY BE OF RELEVANCE ONLY I N-SO-FAR AS THE NATURE OF THE ARTICLE OR THING MANUFACTURED OR PRODUCED BY THE UN IT IS CONCERNED. THIS IS AS IT MAY NOT BE RELEVANT IF THE SSI UNIT IS NOT MANUFACT URING OR PRODUCING AN ARTICLE OR THING NOT SPECIFIED IN THE NEGATIVE LIST, WHILE WOULD BE OTHERWISE. IT NEEDS TO BE APPRECIATED THAT WHILE BEING A SMALL SCALE INDUS TRIAL UNDERTAKING IS NOT A CONDITION PER SE OF S. 80IB(2), SUBJECT TO THE POSITIVE SATISFACTIO N OF THE CONDITIONS ENLISTED WHEREIN ONLY IS THE DEDUCTION U /S. 80IB(1) ALLOWABLE, THE NATURE OF THE ARTICLE OR THING MANUFACTURED OR PROD UCED BY THE INDUSTRIAL UNDERTAKING IS (OF S. 80IB(2)(III)). THE EXACT ISSU E THEREFORE ARISING FOR 12 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. CONSIDERATION, OR DIFFERENTLY PUT, THE DERIVED ISSU E THAT REQUIRES TO BE ADDRESSED FOR ANSWERING THE ISSUE AS DELINEATED ABOVE IS: WHETHER THE NATURE OF ARTICLE OR THING MANUFACTURED OR PRODUCED BY AN INDUSTRIAL UND ERTAKING, SPECIFIED SEPARATELY FOR OTHER THAN A SSI UNIT, AND, BY IMPLI CATION FOR A SSI UNIT, RELEVANT ? SURELY, YES. THE QUESTION MAY INDEED BE REFINED STI LL FURTHER TO READ AS: WHETHER THE CONTINUING STATUS (I.E., AFTER THE INITIAL ASSE SSMENT YEAR) OF AN INDUSTRIAL UNDERTAKING AS A SMALL SCALE INDUSTRIAL UNDERTAKING OF RELEVANCE, I.E., FOR CLAIMING DEDUCTION U/S. 80-IB(1), CONSIDERING THAT THERE IS NO NEGATIVE LIST FOR AN INDUSTRIAL UNDERTAKING BEING A SMALL SCALE INDUS TRIAL UNDERTAKING U/S. 80- IB(2)(III) READ WITH PROVISO THERETO ? THIS IS AS FOR AN INDUSTRIAL UNDERTAKING OTHER THAN A SSI, ITS ELIGIBILITY U/S. 80IB(2)(III ) IS LINKED TO THE NATURE OF THE ARTICLE OR THING MANUFACTURED OR PRODUCED BY IT. NO W, SURELY, IF THE INDUSTRIAL UNDERTAKING IS MANUFACTURING/PRODUCING AN ARTICLE O R THING SPECIFIED IN THE NEGATIVE LIST, THE DEDUCTIBILITY OF ITS PROFITS U/S . 80-IB WILL BE ADVERSELY IMPACTED ON IT CEASING TO BE A SSI UNIT. AS SHALL BE APPAREN T, THE ISSUE ARISING OUT OF THE VARIEGATED STAND OF THE PARTIES, CANNOT BE ANSWERED WITHOUT ADDRESSING OR MEETING THE QUESTION ARISING IN VIEW OF THE CLEAR L ANGUAGE OF U/S. 80IB(2)(III). CONTINUING FURTHER, EVEN AS WE HAS TAKEN PAINS TO F ORMULATE THE SPECIFIC QUESTIONS CAPTURING THE CONTROVERSY ARISING IN THE PRESENT CASE AND, WHICH, THEREFORE, NEED TO BE ADDRESSED OR MET, THE PLAIN A ND SIMPLE FACT IS THAT THE QUESTION THAT IN ANY CASE ARISES FOR DETERMINATION IS THE VALIDITY OF THE ASSESSEES CLAIM U/S.80-IB IN THE FACTS AND CIRCUMSTANCES OF T HE CASE. EVEN IF, THEREFORE, THE SAID QUESTIONS WERE NOT TO ARISE OUT OF THE CONTROV ERSY ARISING OUT OF THE VARIEGATED STANDS OF THE PARTIES WHICH WE HAVE SHOWN IT TO , THE VERY FACT THAT THE TRIBUNAL FINDS IT RELEVANT TO ANSWER THE QUESTI ON AS TO THE VALIDITY OF THE ASSESSEES CLAIM IS ITSELF SUFFICIENT FOR THE PURPO SE. THE APPELLATE PROCEEDINGS UNDER THE ACT, WHICH ARE ONLY A CONTINUATION OF THE ASSESSMENT PROCEEDINGS, ARE NOT ADVERSARIAL IN NATURE, SO THAT THE PARTIES, IRR ESPECTIVE OF THEIR RESPECTIVE 13 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. STANDS, RAISING ISSUES AS DEEMED RELEVANT BY THEM, IS NOT CONCLUSIVE OF THE MATTER. THE TRIBUNAL AS AN APPELLATE AUTHORITY IS N OT BOUND BY THEIR VIEWS INASMUCH AS IT IS THE CORRECT LEGAL POSITION THAT I S RELEVANT, AND NOT THE VIEW THAT THE PARTIES MAY TAKE OF THEIR RIGHTS IN THE MATTER ( CIT V. C. PARAKH & CO. (INDIA ) LTD . (1956) 29 ITR 661 (SC); ALSO, KEDARNATH JUTE MFG. CO. LTD. V. CIT (1971) 82 ITR 363 (SC)). ITS MANDATE IS TO DECIDE IN ACCO RDANCE WITH LAW, AND ITS PURVIEW, AS IS OF A TAX APPEAL, IS TO DETERMINE THE CORRECT TAX LIABILITY OF THE ASSESSEE. IT IS IN FACT INCUMBENT ON THE HIGHER APP ELLATE AUTHORITY TO CORRECT A MISTAKE OR ABERRATION OR OMISSION, ETC., BY THE LOW ER AUTHORITY THAT COMES TO ITS NOTICE. THOUGH THE FOREGOING REPRESENTS THE WELL SE TTLED LAW IN THE MATTER, REFERENCE MAY BE, AGAIN, ONLY FOR THE SAKE OF COMPL ETENESS OF THIS ORDER, IS MADE TO THE DECISIONS IN KAPURCHAND SHRIMAL V. CIT [1981] 131 ITR 451, (460, 461) (SC); CIT V. ASSAM TRAVELS SHIPPING SERVICE [1993] 199 ITR 1 (SC); CIT V. C.C.C. HOLDINGS [2003] 260 ITR 433 (MAD); THANTHI TRUST V. ASST. CIT [1999] 238 ITR 117 (MAD); CIT V. INDIAN EXPRESS (MADURAI) PVT. LTD. [1983] 140 ITR 705 (MAD), AHMEDABAD ELECTRICITY CO. LTD. V. CIT [1993] 199 ITR 351 (BOM-FB); CONTROLLER OF ESTATE DUTY V. R.BRAHADEESWARAN [1987] 163 ITR 680 (MAD); CIT V. CELLULOSE PRODUCTS OF INDIA LTD . [1985] 151 ITR 499 (GUJ-FB), TO CITE SOME. IN SUM 4. THE ASSESSEES INDUSTRIAL UNDERTAKING BEING NO L ONGER A SSI UNIT AS AT THE END OF THE RELEVANT PREVIOUS YEARS, THE QUESTION TH AT ARISES IS AS TO THE RELEVANCE THEREOF, I.E., OF THE CHANGE OF STATUS AS AN SSI UN DERTAKING IN-SO-FAR AS ITS CLAIM U/S. 80-IB IS AS CONCERNED. WHILE THE ASSESSEE PLEA DS OF IT AS TO NO CONSEQUENCE, I.E., NOT IMPACTING ITS ELIGIBILITY, THE REVENUE H OLDS OTHERWISE. THE TRIBUNAL, ON AN EXAMINATION OF THE PROVISION, FINDS THAT THE QUE STION ASSUMES RELEVANCE IN THE CONTEXT OF THE NATURE OF THE ARTICLE/S OR THING/S B EING MANUFACTURED OR PRODUCED BY THE ASSESSEES INDUSTRIAL UNDERTAKING, INASMUCH AS THERE IS NO NEGATIVE LIST 14 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. (ELEVENTH SCHEDULE TO THE ACT) FOR A SMALL SCALE IN DUSTRIAL UNDERTAKING (OR FOR AN INDUSTRIAL UNDERTAKING REFERRED TO IN SUB-SECTION ( 4) OF SEC.80-IB), WHILE IS SO FOR OTHER THAN SUCH UNDERTAKINGS, SO THAT THE CONDITION AS TO THE NATURE OF THE ARTICLE OR THING MAY BE A DETERMINING FACTOR WHERE THE ASSE SSEES INDUSTRIAL UNDERTAKING CEASES TO BE A SMALL SCALE INDUSTRIAL UNDERTAKING, IN VIEW OF S.80-IB(2)(III). EVEN AS A TAXING STATUTE IS TO BE STRICTLY CONSTRUE D, WHAT WE HAVE DONE IS ONLY TO GIVE A FAIR LOOK TO THE CLEAR LANGUAGE OF THE PROVI SION, WHICH PRINCIPLE, ENUNCIATED BY J. ROWLATT J. IN CAPE BRANDY SYNDICATE V. INLAND REVENUE COMMISSIONER , ALSO CALLED THE RULE OF LITERAL INTERPRETATION, S TANDS EXPLAINED RECENTLY BY THE APEX COURT IN CIT V. YOKOGAWA INDIA LTD. & OTHRS . (IN CIVIL APPEAL NO. 8498 OF 2013 DATED 16/12/2016) AS THE MO THER PRINCIPLE, TO WHICH ALL THE PRINCIPLES OWE THEIR ORIGIN (ALSO REFER: CIT V. CALCUTTA KNITWEARS [2014] 362 ITR 673 (SC)). THERE IS NO ASTOPPLE AGAINST LAW ( CIT V. DURGA PRASAD MORE [1971] 82 ITR 540 (SC)) THERE IS THUS AND, RATHER, IN LAW, NO SCOPE FOR TAKING A DIFFERENT VIEW IN THE MATTER, IN-AS-MUCH A S DOING SO WOULD BE TO DO VIOLENCE TO THE CLEAR LANGUAGE OF THE PROVISION, DE FEATING ITS VERY PURPOSE - WHICH NO COURT OR TRIBUNAL IS AUTHORIZED TO, RATHER THAN UPHOLDING IT. THE QUESTION ARISING IN THE CITED DECISION, CITING A SI MILAR QUESTION, IS IN A DIFFERENT CONTEXT ALTOGETHER, I.E., UNDER SECTION 80-IB(3) AN D, THEREFORE, NOT RELEVANT. AN APPELLATE AUTHORITY IS NOT BOUND BY THE VIEW OF EIT HER PARTY BEFORE IT, WHO DO NOT STAND IN AN ADVERSARIAL POSITION TO EACH OTHER TAX PROCEEDINGS; THE PURVIEW OF A TAX APPEAL BEING TO ASCERTAIN AND DETERMINE THE COR RECT TAX LIABILITY OF THE ASSESSEE. THERE BEING NO FINDING, THE MATTER, FOR F ACTUAL DETERMINATION, IS RESTORED TO THE FILE OF THE ASSESSING AUTHORITY, WH O SHALL DECIDE PER A SPEAKING ORDER, IN ACCORDANCE WITH LAW, AFTER ALLOWING THE A SSESSEE A REASONABLE OPPORTUNITY TO STATE ITS CASE BEFORE HIM. WE DECIDE ACCORDINGLY. 5. THE SECOND, AND THE ONLY OTHER ISSUE RAISED BY T HE REVENUE, WHICH IS FOR THE LAST TWO YEARS IN APPEAL, IS IN RESPECT OF DISA LLOWANCE U/S.14 A, DISALLOWED 15 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. APPLYING RULE 8D. THE LD. CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE ON THE BASIS OF THE REVISED FIGURES BY THE ASSESSEE, RECASTING T HE AOS WORKING, WHICH HE CLAIMS TO HAVE VERIFIED. BEFORE US, THE REVENUE, WO ULD INSIST ON APPLICATION OF R. 8D, EVEN FOR AY 2007-08 INASMUCH AS, THOUGH NOT MAN DATORY FOR THAT YEAR, REPRESENTS A REASONABLE BASIS FOR ESTIMATING THE CO ST/EXPENDITURE ATTRIBUTABLE TO INCOME NOT FORMING PART OF THE TOTAL INCOME AND, TH US, LIABLE FOR DISALLOWANCE. THE ASSESSEE WOULD, ON THE OTHER HAND, CLAIM THAT 2 % OF THE TAX-EXEMPT INCOME BE REGARDED AS A REASONABLE ESTIMATION, EVEN AS ASS ESSED IN THE ASSESSEES OWN CASE FOR AY 2006-07, BESIDES BEING SUPPORTED BY JUD ICIAL PRECEDENTS. 6. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES PLEADING FOR ADOPTION OF EXPENDITURE AT A PRESUMED RATE (1/50) WITH REFERENCE TO THE EXEMPT INCOME IS INCONSISTENT WITH ITS OWN STAND, BASED ON FACTS, OF HAVING INCURRED EXPENDITURE ONLY IN THE I MPUGNED SUM TOWARD THE INCOME NOT FORMING PART OF THE TOTAL INCOME. THAT I S, BY SHOWING THAT INTEREST EXPENDITURE, WHICH COMPRISES THE DISALLOWANCE IN TH E MAIN, CANNOT TO THE STATED EXTENT, BE ATTRIBUTABLE TO THE INVESTMENT IN SHARES AS THE SAME WAS ONLY FOR BUSINESS PURPOSES, I.E., TOWARD WORKING CAPITAL OF ITS BUSINESS. SURELY, WHERE THE SAME IS, WITH REFERENCE TO THE ACCOUNTS, AS IS INCUMBENT S. 14A BEING A STATUTORY DISALLOWANCE, SHOWN TO BE ON DEDICATED BO RROWED FUNDS, VIZ. CASH CREDIT, TERM LOAN, ETC., APPLIED FOR THE RELEVANT B USINESS PURPOSE, NO DISALLOWANCE IN ITS RESPECT COULD BE MADE. THE RECA STED WORKING IS NOT BEFORE US, NOR HAS THE LD. CIT(A) ISSUED ANY DEFINITE FIND INGS IN THE MATTER; IN FACT, EVEN WITH REFERENCE TO THE PORTFOLIO MANAGEMENT CHA RGES, DISALLOWED U/S.14A R/W R. 8D(2)(I). HE HAS IN FACT NOT EVEN STATED W HICH HE OUGHT TO HAVE AT THE MINIMUM, OF THE ASSESSEES REVISED WORKING BEING CO NSISTENT WITH ITS ACCOUNTS FOR THE RELEVANT YEARS. RATHER, HE OUGHT TO HAVE, I N FAIRNESS, CAUSED AN EXAMINATION OF THE SAID WORKING BY THE AO BEFORE AD JUDICATING THE MATTER BY ISSUING DEFINITE FINDINGS, AND WHICH WOULD HAVE, UN LESS THOSE FINDINGS WERE DE 16 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. HORS , OR NOT BORNE BY, THE ASSESSEES ACCOUNTS, WOULD H AVE BEEN CONCLUSIVE OF THE MATTER. THE INCURRING OF THE EXPENDITURE, IF AN Y, IN RESPECT OF INCOME NOT FORMING PART OF THE INCOME IS ESSENTIALLY A FACTUAL MATTERS, EVEN AS CLARIFIED BY THE HONBLE JURISDICTIONAL HIGH COURT IN BEACH MINERALS CO. P. LTD . (IN T.C. APPEAL NO. 681 OF 2013 DATED 02/12/2013). THE SAME WOULD ACCORDINGLY VARY FROM ASSESSEE TO ASSESSEE AND, IN FACT, FROM YEAR T O YEAR. FURTHER, THE ONUS TOWARD THE SAME, TO BE DISCHARGED WITH REFERENCE TO ITS ACCOUNTS, IS ON THE ASSESSEE, AS CLARIFIED IN HARYANA LAND RECLAMATION & DEVELOPMENT CORPORATION V. CIT [2008] 302 ITR 218 (P&H). BOTH THESE DECISIONS FIN D REFERENCE IN THE DECISIONS CITED BY THE ASSESSEE. W HAT VALUE THEN, WE WONDER, THE RELIANCE ON THE CITED CASE LAW, THROUGH WHICH W E WERE NOT TAKEN THROUGH DURING HEARING. THE PRINCIPLE OF RES JUDICATA BEING NOT APPLICABLE, ALLUDING TO BE THE ASSESSMENT FOR AY 2006-07 WOULD BE TO NO CONSEQ UENCE. IN FACT, STATING THE EXPENDITURE TO BE WITH REFERENCE TO INCOME IS ITSEL F PRESUMPTUOUS. THE TWO, I.E., THE EXPENDITURE AND INCOME, ARE INDEPENDENT VARIABL ES, SO THAT ONE CANNOT BE ESTIMATED WITH REFERENCE TO THE OTHER. ALL, THAT TH EREFORE, I.E., WHERE THE TWO BEAR A DIRECT, LINEAR RELATIONSHIP, AS SUGGESTED BY THE PROPOSED PERCENTAGE RATE OF EXPENDITURE, WOULD BE REQUIRED TO EARN AN INCOME IS TO INCUR EXPENDITURE, AND AT 50 TIMES IN CASE OF DIVIDEND INCOME, I.E., GOING BY THE STATED RATE OF 2%! THE SAME ONLY NEEDS TO BE STATED TO BE REJECTED. THE MATTER, IN VIEW OF THE FOREGOING, IS RESTORED T O THE FILE OF THE AO, TO ALLOW THE ASSESSEE AN OPPORTUNITY TO STATE ITS CASE IN THE MATTER. THE AO SHALL DECIDE ON MERITS, PER A SPEAKING ORDER, MEETING THE ASSESSEES CASE WHERE IN DISAGREEMENT WITH ITS CLAIM/S. BEFORE PARTING, WE M AY CLARIFY THAT RULE 8D, THOUGH STRICTLY SPEAKING NOT APPLICABLE FOR YEARS P RIOR TO AY 2008-09, I.E., AS PER THE JUDICIAL PRECEDENTS, INASMUCH AS IT IS ONLY A RULE FOR ESTIMATING EXPENDITURE, COULD BE, BEING ADMITTEDLY REASONABLE, APPLIED FOR ANOTHER YEAR AS WELL, I.E., IN THE ABSENCE OF A MORE REASONABLE BAS IS FOR ESTIMATING THE 17 ITA NOS.2223, 2224 & 2226/MDS /2016 (AYS 2006-07 TO 2008-09) DY. CIT V. CARESS BEAUTY CARE PRODUCTS PVT. LTD. EXPENDITURE - BASED ON THE ASSESSEES ACCOUNTS, LIA BLE FOR DISALLOWANCE U/S. 14A. REFERENCE TOWARD THE FOREGOING BE MADE, APART FROM THE DECISION IN GODREJ & BOYCE MFG. CO. LTD. V. DY. CIT [2010] 328 ITR 81 (BOM), DECISIONS BY THE TRIBUNAL, AS IN ITO V. DAGA CAPITAL MANAGEMENT (P.) LTD . [2009] 312 ITR (AT) 1 (MUM)(SB); DH SECURITIES (P.) LTD. V. DY. CIT [2014] 146 ITD 1(MUM)(TM) (31 ITR (TRIB) 381); AFL (P.) LTD. V. ASST. CIT [2013] 28 ITR (TRIB) 263 (MUM); AND KUNAL CORP. V. ASST. CIT [2013] 28 ITR (TRIB) 277 (MUM), TO CITE SOME. WE DECIDE ACCORDINGLY. 7. IN THE RESULT, THE REVENUES APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON MARCH 03, 2017 AT CHENNAI . SD/- SD/- ( . ' $ % ) ( ) (G. PAVAN KUMAR) (SANJAY ARORA) & ! /JUDICIAL MEMBER ! /ACCOUNTANT MEMBER /CHENNAI, 4 /DATED, MARCH 3 RD , 2017 EDN 5 0 .&267 87*2 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. $ 92 ( )/CIT(A) 4. $ 92 /CIT 5. 7':; .&2& /DR 6. ;<) = /GF