Appeal Details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 9993 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 2 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-05-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
B
Next Hearing Date
13-04-2016
Assessment Year
2007-2008
Appeal Filed On
17-03-2015
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 288/CHD/2015 ASSESSMENT YEAR: 2011-12 J.K. INTERNATIONAL VS. CIT PLOT NO. 18, INDUSTRIAL AREA SHIMLA BAI ATTARIAN, PO KANORORI, TEHSIL INDORA KANGRA PAN NO. AAEFJ9527D (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SH. SUSHIL KUMAR DATE OF HEARING : 12/05/2016 DATE OF PRONOUNCEMENT :23/05/2016 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY THE ASSESSEE HAS BEEN DIRECTED AGAIN ST THE ORDER OF LD. CIT, SHIMLA DT. 30/01/2015 FOR ASSESSMENT YEAR 201 1-12 UNDER SECTION 263 OF THE INCOME TAX ACT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE FILED RETURN OF INCOME DECLARING NIL INCOME AFTER CLAIMING DEDUCTION UNDER SECTION 80IC OF RS. 60,32,504/- AND SAME WAS PROCESSED UNDER SECTION 14 3(1), SUBSEQUENTLY THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT WAS C OMPLETED UNDER SECTION 143(3) ON 15/03/2013 AT THE TOTAL INCOME OF RS. 1,0 2,430/-. ASSESSEE FIRM IS ENGAGED IN MANUFACTURING OF TOUGHENED GLASS. 3. THE LD. CIT ON PERUSAL OF THE ASSESSMENT RECORDS FOUND THAT ASSESSEE HAD COMMENCED ITS MANUFACTURING ACTIVITIES W.E.F 10/10/ 2005 AND DECLARED INITIAL ASSESSMENT YEAR FOR CLAIMING DEDUCTION UNDER SECTI ON 80ICAS ASSESSMENT YEAR 2 2006-07 IN THE AUDITED ACCOUNT. THE ASSESSEE ALSO R EPORTED TO HAVE UNDERTAKEN SUBSTANTIAL EXPANSION DURING THE FINANCIAL YEAR 200 7-08. IN TERMS OF SECTION 80IC(3)(II) OF THE ACT 100% DEDUCTION WAS ADMISSIBL E UPTO FIVE YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR I.E; FROM ASSESSMENT YEAR 2006-07 TO ASSESSMENT YEAR 2010-11. BUT THE ASSESSEE HAD CLAI MED 100% DEDUCTION UNDER SECTION 80IC FOR THE SEVENTH YEAR ALSO I.E; ASSESSM ENT YEAR UNDER APPEAL 2011- 12. THE ASSESSEE HAD ALREADY CLAIMED DEDUCTION UNDE R SECTION 80IC FROM ASSESSMENT YEAR 2006-07 TO 2010-11. IT WAS THEREFO RE NOTED THAT ASSESSEE ENTITLED FOR DEDUCTION UNDER SECTION 80IC @ 25% ONL Y BEING 6 TH YEAR OF CLAIM OF DEDUCTION. 3.1 IT WAS FURTHER NOTED THAT ASSESSEE FIRM HAD PAI D INTEREST TO THE PARTNERS BUT HAVE NOT PROVIDED ANY CLAUSE IN THE PARTNERSHIP DEE D FOR PROVIDING INTEREST THEREFORE IT WAS CONTRAVENTION OF SECTION 40(B)(II) OF THE ACT. IT WAS ALSO FOUND THAT AS PER FORM NO. 3CD THERE IS NIL EXPENDITURE O N ADVERTISEMENT, WHEREAS IN THE P&L ACCOUNT THE ASSESSEE HAD DEBITED THE SUM O F RS. 1,56,733/- UNDER THIS HEAD WHICH IS ALLOWED BY THE AO WITHOUT MAKING ANY ENQUIRY AND VERIFICATION. 3.2 IN VIEW OF THE ABOVE THE LD. CIT FOUND THE ASSE SSMENT ORDER TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E IN TERMS OF SECTION 263 OF THE ACT. SHOW CAUSE NOTICE WAS ISSUED TO THE ASSESS EE WHICH WAS REPLIED BY THE ASSESSEE. THE ASSESSEE CONTESTED ALL THE ABOVE OBJE CTION OF THE LD. CIT AND ALSO SUBMITTED THAT THE ISSUE OF SECTION 80IC DEDUCTION HAVE BEEN EXAMINED BY THE AO AT ASSESSMENT STAGE. HOWEVER THE LD. CIT FOUND T HAT THE ASSESSEE HAS NEVER CLAIMED AND EXPLAINED THAT BECAUSE OF SUBSTANTIAL E XPANSION ON 20/04/2007, IT IS ELIGIBLE FOR 100% DEDUCTION FOR THE SIXTH ASSESS MENT YEAR AS WELL, NEITHER THE AO HAS RAISED FURTHER QUERY ON THIS ISSUE. THE AUDITOR ALSO REPORTED DEDUCTION UNDER SECTION 80IC HAS BEEN CLAIMED FROM THE INITIAL ASSE SSMENT YEAR 2006-07. ASSESSEE HAS NOWHERE REPORTED AND CLAIMED THAT FOR THE ASSESSMENT YEAR 3 UNDER CONSIDERATION ALSO ASSESSEE WAS ELIGIBLE FOR 100% DEDUCTION WHO CARRYING OUT SUBSTANTIAL EXPANSION DURING FY 2007-08. THE LD CIT ALSO FOUND THAT EXCEPT FOR THE CHANGE OF ASSESSMENT YEAR , DATE AND FIGURE S ALMOST EVERY PARA IS IDENTICAL TO THE ASSESSMENT ORDER COMPLETED IN THE EARLIER YEARS IT WOULD THEREFORE PROVIDED THAT AO HAS NOT APPLIED HIS MIND AND PASS THE ASSESSMENT ORDER IN ROUTINE MANNER WITHOUT VERIFYING THE FACTS OR INFORMATION AS TO HOW ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IC IN THE SIXTH YEAR. LD. CIT THEREFORE FIND THAT AO HAS FAILED TO EXAMINE THIS I SSUE WITH REGARD TO DEDUCTION UNDER SECTION 80IC THEREFORE FAILURE TO MAKE ENQUIR Y IS CLEARLY CAME WITHIN THE PURVIEW OF ERRONEOUS ORDER WHICH IS PREJUDICIAL TO THE INTEREST OF THE REVENUE. THE ASSESSMENT ORDER WAS THEREFORE CANCELLED AND AO WAS DIRECTED TO PASS THE ORDER A FRESH ON THIS ISSUE AFTER AFFORDING REASONA BLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. AS REGARDS INTEREST PAID TO THE PA RTNERS IT WAS EXPLAINED THAT SUPPLEMENTARY DEED PROVIDED FOR PAYMENT OF INTEREST TO THE PARTNERS. LD. CIT HOWEVER FIND THAT IN THE ASSESSMENT RECORD NO SUPPL EMENTARY DEED DT. 01/09/2009 HAS PLACED ON RECORD. SINCE IT WAS PROVI DED FOR FIRST TIME THEREFORE CONTENTION OF THE ASSESSEE WAS FOUND HAVING MERIT, HOWEVER AO WAS DIRECTED TO EXAMINE THIS FACT FROM ORIGINAL SUPPLEMENTARY PA RTNERSHIP DEED AND TAKE THE COGNIZANCE ACCORDINGLY. 3.3 REGARDING ADVERTISEMENT EXPENSES IT WAS SUBMITT ED THAT ASSESSEE HAD NOT PAID FOR ADVERTISEMENT ON POLITICAL PARTY. BUT THIS FACT IS NOT VERIFIED BY THE AO THEREFORE AO WAS ASKED TO VERIFY THIS FACT FROM THE RECORD. 3.4 THE ASSESSMENT ORDER WAS THEREFORE HELD TO BE E RRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THE SAME WA S THEREFORE CANCELED AND AO WAS ASKED TO MAKE THE ASSESSMENT ORDER AFRESH IN AC CORDANCE WITH LAW AFTER MAKING PROPER ENQUIRY. 3.5 NONE APPEARED ON THE DATE OF HEARING ON BEHALF OF THE ASSESSEE THEREFORE APPEAL IS HEARD IN THE ABSENCE OF ASSESSE E. 4 4. WE HAVE HEARD LD. DR AND PERUSED THE MATERIAL ON RECORD. 5. THE LD. DR CONTENDED THAT THE ISSUE INVOLVED IN THE APPEAL IS COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF HYCRO N ELECTRONICS VS ITO DATED 27.05.2015 REPORTED IN 41 ITR (TRIB) 486 IN WHICH G ROUP OF APPEALS HAVE BEEN DECIDED AND REFERRED TO THE FINDINGS GIVEN IN ITA 7 98/2012 WHICH READS AS UNDER: 3. FIRST WE SHALL TAKE THE APPEAL OF THE ASSESSEE IN ITA NO. 798/CHD/2012 IN THE CASE OF HYCRON ELECTRONICS VS. ITO. 4. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER DATED 11.06.2012 PASSED BY THE LD. CIT(APPEALS), SH IMLA U/S 250(6) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW, ILLEGAL, WITHOUT JURISDICTION AND VOID. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(APPEALS), SHIMLA HAS ERRED IN: AFFIRMING THE ORDER OF LD. ITO, WARD-2, SOLAN IN RE STRICTING THE CLAIM OF APPELLANT OF DEDUCTION U/S 80-IC OF THE IN COME TAX ACT, 1961 AT 25%I INSTEAD OF 100% CLAIMED BY THE AP PELLANT IN THE SIXTH YEAR OF OPERATION OF NEW INDUSTRIAL UNDER TAKING OF THE APPELLANT WHEREIN SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH NEW INDUSTRIAL UNDERTAKING BY THE APPELLANT. MISINTERPRETING THE PROVISIONS OF SECTION 80-IC OF THE ACT WHICH PROVIDES FOR SUBSTANTIAL EXPANSION TO BE UNDERTAKEN DURING THE PERIOD BEGINNING ON 7 TH JANUARY 2003 AND ENDING BEFORE 1 ST APRIL 2012 AND ERRONEOUSLY UPHOLDING THAT THE BENE FIT OF 100% DEDUCTION U/S 80-IC OF THE ACT FOR FIRST FIVE YEARS IN CASE OF SUBSTANTIAL EXPANSION IS AVAILABLE ONLY TO THE U NITS THAT EXISTED AND WERE OPERATIONAL AS ON 07.01.2003 AND S UCH BENEFIT IS NOT AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTER THE INTRODUCTION OF THE SCHEME OF SUCH DEDUCTION. UPHOLDING THAT ONCE AN INITIAL ASSESSMENT YEAR IS DETERMINED IN CASE OF AN UNDERTAKING CLAIMING BENEFIT U/S 80-I C OF THE ACT IT CANNOT BE CHANGED EVEN IF SUCH UNDERTAKING COMPLETES SUBSTANTIAL EXPANSION AND AGAIN QUALIFIES FOR DEDUCTION UNDER THE SAID SECTION ON THE BASIS OF Q UALIFYING EXPANSION. 5 MAKING A NARROW INTERPRETATION OF THE PROVISION OF SECTION 80- IC OF THE INCOME TAX ACT, 1961 WHICH WAS INTRODUCED AS A WELFARE LEGISLATION FOR PROVIDING STIMULUS TO THE E CONOMY OF INDUSTRIALLY BACKWARD STATES SUCH AS HIMACHAL PRADE SH. 5. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI RM WAS ENGAGED IN THE BUSINESS OF MANUFACTURING ASSEMBLY AND SUB-ASSEMBLY OF ELECTRONIC ENERGY METERS AND ALLIED PRODUCTS. THE UNIT STARTED COMMER CIAL PRODUCTION FROM 17.1.2004. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IC ON THE PRODUCTS OF THIS UNIT @ 100% FROM ASSESSMENT YEARS 2004-05 TO 2008-0 9. SUBSEQUENTLY, DURING FINANCIAL YEAR 2008-09, THE ASSESSEE FIRM UNDERTOOK SUBSTANTIAL EXPANSION BY WAY OF ADDITION TO PLANT AND MACHINERY BY MORE THAN THE PRESCRIBED LIMIT, THEREFORE, ASSESSEE AGAIN STARTED CLAIMING DEDUCTION U/S 80IC FROM ASSESSMENT YEAR 2009- 10 (I.E; THE YEAR BEFORE US) @ 100%. 6. THE ASSESSING OFFICER AFTER EXAMINING THE FACTS OBSERVED THAT ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR CLAIMING DEDUCTION . HOWEVER, HE NOTED THAT SINCE ASSESSEE HAS ALREADY CLAIMED 100% DEDUCTION FOR FIR ST FIVE YEARS UPTO ASSESSMENT YEAR 2008-09 FROM THE DATE OF SETTING UP OF THE UNI T, THEREFORE, ASSESSEE WAS ENTITLED ONLY TO 25% DEDUCTION FROM THE ELIGIBLE BU SINESS PROFITS FROM ASSESSMENT YEARS 2009-10 TO 2013-14. THEREFORE, ASSESSEE WAS REQUESTED TO JUSTIFY THE CLAIM OF 100% DEDUCTION EVEN FROM ASSESSMENT YEAR 2009-10 . 7. IN RESPONSE THE DETAILED WRITTEN REPLY WAS FURNI SHED WHICH HAS BEEN EXTRACTED BY ASSESSING OFFICER AND READS AS UNDER:- REFERENCE MY APPEARANCE IN THE ABOVE SAID CASE WH EREIN A QUERY WAS RAISED REGARDING CLAIM OF ASSESSEE U/S 80 IC. IT WAS POINTED OUT THAT SUBSTANTIAL EXPANSION IS APPLICABLE TO UNI TS WHICH WERE IN EXISTENCE AT THE TIME OF ANNOUNCEMENT OF SCHEME I.E . IN THE ASSESSMENT YEAR 2004-05 AND ASSESSES WHO INSTALLED THE NEW UNITS DURING THIS PERIOD AND ARE NOW GOING FOR SUBSTANTIA L EXPANSION ARE NOT ELIGIBLE TO CLAIM DEDUCTION U/S 80IC. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE UN IT I.E. M/S HYCRON ELECTRONICS, BADDI FIRST CAME INTO EXISTENCE IN THE FINANCIAL YEAR 2003- 04 I.E. RELEVANT TO THE ASSESSMENT YEAR 2004-05. TH US IT FIRST CLAIMED 100% DEDUCTION U/S 80IA/80IB OF THE I.T. ACT IN THE ASSESSMENT YEAR 2004-05. THE NECESSARY DEDUCTION WAS ALSO CLAIMED I N THE SUBSEQUENT ASSESSMENT YEAS I.E. 2005-06, 2006-07, 2 007-08 AND 2008- 09. THE ASSESSMENT FOR THESE YEARS WERE DECIDED UND ER SCRUTINY AND ORDERS WERE PASSED U/S 143(3) OF THE INCOME TAX ACT 1961. IN THE FINANCIAL YEAR 2008-09, THE ASSESSEE UNIT CA ME FOR SUBSTANTIAL EXPANSION AS PER THE PROVISION OF SECTION 80IC OF T HE I.T. ACT. IN THIS REGARD, IT MAY BE SUBMITTED THAT THE SECTION 80IC W AS INSERTED BY THE FINANCE ACT 2003 W.E.F. 01.04.2004 I.E. RELEVAN T TO THE ASSESSMENT YEAR 2005-06 AND ONWARDS THIS SECTION APPLIES TO AN Y UNDERTAKING OR 6 ENTERPRISE WHICH HAS BEGUN OR BEINGS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING NOT BEING ANY ARTICLE OR THING , NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE 13 TH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING 7 TH DAY OF JANUARY 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL 2012 IN THE STATE OF HIMACHAL PRADESH. THE DEDUCTION SHALL BE 100% OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS CONNECTING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE TH E ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. AS PER SUB-SECTION (6) OF SECTION 80IC, NO DEDUCTIO N SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION I.E. 80-IC, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF TH E PERIOD OF DEDUCTION UNDER THIS SECTION OF UNDER THE SECOND PROVISO TO SUB- SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10-C, AS THE CASE MAY BE EXCEEDS 10 ASSESSMENT YEARS. FURTHER INITIAL ASSESSMENT YEAR HAS BEEN DEFINED IN THE ACT AS INITIAL ASSESMENT YEAR MEANS THE ASSESSMENT YEAR RE LEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR ENTERPRIS E BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMMEN CES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION. AS ALREADY STATED, THE ASSESSEE UNIT AFTER CLAIMING 100% DEDUCTION U/S 80IA/80IB OF THE I.T. ACT FOR 5 ASSESSMENT YEAR S CAME FOR SUBSTANTIAL EXPANSION IN THE ASSESSMENT YEAR 2009-1 0 WHICH IS THE YEAR UNDER ASSESSMENT. THUS THIS THE FIRST YEAR OF CLAIMING 100% DEDUCTION FOR SUBSTANTIAL EXPANSION AS PER PROVISIO NS OF SECTION 80 IC. THE UNDERTAKING IS THUS ENTITLED TO CLAIM 100% DEDUCTION U/S 80IC OF THE I.T. ACT FOR THE NEXT 5 ASSESSMENT YEARS PRO VIDED THAT THE OVERALL PERIOD OF CLAIM OF DEDUCTION DOES NOT EXCEE D 10 ASSESSMENT YEARS. AS PER PROVISIONS OF SECTION 80IC, 100% DEDU CTION IS AVAILABLE FOR 5 ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER 25% IN THE NEXT 5 ASSESSMENT YE ARS .THE INITIAL ASSESSMENT YEAR HAS BEEN DEFINED IN THE ACT:- I) MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIO US YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS. OR II) MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVI OUS YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE COMPLETES SUBSTANTIAL EXPANSION. THUS IT MAKES IT CLEAR THAT 100% DEDUCTION IS AVAIL ABLE TO AN UNDERTAKING OR ENTERPRISE IN THE CASE OF ITS STARTI NG MANUFACTURING BETWEEN THE PERIOD 07.01.2003 AND ENDING BEFORE 01. 04.2012 AND IN THIS CASE THE INITIAL ASSESSMENT YEAR WOULD BE THE YEAR WHEN IT STARTS ITS PRODUCTION. SIMILARLY IN THE CASE OF SUBSTANTIA L EXPANSION, THE INITIAL ASSESSMENT YEAR WOULD START FROM THE YEAR WHEN SUBS TANTIAL EXPANSION IS COMPLETED. IN SUCH CASES, THE ASSESEE WOULD NOT BE ENTITLED FOR THE CLAIM OF ANY DEDUCTION BEYOND A PE RIOD OF 10 7 ASSESSMENT YEARS AS IT HAD ALREADY AVAILED 100% DED UCTION FOR 10 ASSESSMENT YEARS AS PER THE PROVISIONS OF SECTION 8 0-IC(6) OF THE ACT. IN THE PRESENT CASE, THE ASSESSEE MADE INVESTMENT I N PLANT AND MACHINERY AS UNDER: 8. THE ASSESSING OFFICER EXAMINED THIS REPLY AND TH EN REFERRED TO PROVISIONS OF SECTION 80IC. ACCORDING TO HIM, THE MOST IMPORTANT QUESTION WAS WHO COULD CARRY OUT THE SUBSTANTIAL EXPANSION. FOR THIS HE R EFERRED TO CIRCULAR NO. 7 OF 2003 ISSUED BY CENTRAL BOARD OF DIRECT TAXES (FOR SHORT CBDT) AS WELL AS CIRCULAR NO 49 OF 2003 ISSUED BY CENTRAL EXCISE AUTHORITIES. HE CO NCLUDED THAT ON THE BASIS OF THESE TWO CIRCULARS IT IS VERY CLEAR THAT SUBSTANTI AL EXPANSION COULD BE CARRIED ONLY BY THE EXISTING UNITS. HE ALSO REFERRED TO THE PROVISIONS OF CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC WHICH DEFINES INITIAL A SSESSMENT YEAR. ACCORDING TO HIM, THIS SECTION MAKES IT CLEAR THAT THERE COULD B E ONLY ONE INITIAL ASSESSMENT YEAR FOR CLAIMING OF BENEFIT U/S 80IC. HE ALSO REFE RRED TO SUB-SECTION (6) OF SECTION 80IC WHICH PRESCRIBED THE OVERALL LIMIT FOR DEDUCTI ON WHICH WAS 10 YEARS. ON THE BASIS OF THE ABOVE ANALYSIS THE ASSESSING OFFICER C ONCLUDED IN PARA 3.5 AS UNDER:- 3.5 FROM THE ABOVE DISCUSSION, IT CAN BE SAFELY CO NCLUDED THAT THE BENEFIT OF SUBSTANTIAL EXPANSION IS AVAILABLE O NLY TO THE EXISTING UNITS I.E. THE UNITS THAT EXISTED AND WERE OPERATIO NAL AS ON 07.01.2003 IN ORDER TO MAKE THEM ELIGIBLE FOR 100% DEDUCTION UNDER SECTION 80IC FOR FIRST FIVE YEARS AND IS NOT AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTER THE INTRODUCTION O F THE SCHEME I.E. 07.01.200. KEEPING THE ABOVE DISCUSSION IN MIND, TH E ASSESSEES CLAIM OF SUBSTANTIAL EXPANSION AND ON THAT BASIS, R ECKONING THE ASST. YEAR 2009-10 TO BE THE INITIAL ASST. YEAR IS DENIED. IN VIEW OF THIS ASST. YEAR 2004-05, RELATING TO THE PREVIOUS YEAR I N WHICH THE ASSESSEE FIRM HAD COMMENCED ITS BUSINESS OPERATION / ACTIVITY ON THE BASIS OF SETTING UP OF ITS NEW INDUSTRIAL UNDER TAKING IS HELD TO BE THE INITIAL ASST. YEAR AND THAT OF ASST. YEAR 2009- 10 TO BE THE SIXTH ASST. YEAR FOR CLAIM OF DEDUCTION U/S 80-IC OF THE ACT AT THE RATE OF 25% OF ITS BUSINESS PROFITS. THE ASSESSEE FIRM SHAL L NOT BE ALLOWED THE BENEFIT OF 100% DEDUCTION ON ITS PROFITS FOR SIXTH YEAR IN SUCCESSION I.E. FOR THE ASST. YEAR 2009-2010. IN THE ABOVE BACKGROUND, FOR THE PRESENT ASSESSMENT YEAR I .E. ASSESSMENT YEAR 2009-10, DEDUCTION U/S 80IC WAS ALLOWED @ 25%. 9. ON APPEAL BEFORE LD. CIT(A) IT WAS MAINLY SUBMIT TED THAT COMBINED READING OF SECTION (3)(II) AND DEFINITION OF INITIA L ASSESSMENT YEAR, IT BECOMES AMPLY CLEAR THAT ASSESSEE WAS ELIGIBLE FOR 100% DED UCTION FROM ASSESSMENT YEAR 2009-10. IN ANY CASE THERE WAS NO PROVISION RESTRI CTING THE DEDUCTION OF 100% 8 ONLY TO 5 YEARS EXCEPT SUB-SECTION (6) OF SECTION 8 0IC WHICH ONLY PROVIDES THAT TOTAL PERIOD OF DEDUCTION SHOULD NOT EXCEED 10 YEAR S. IT WAS FURTHER CONTENDED THAT BENEFIT OF DEDUCTION U/S 80IC WAS AVAILABLE NO T ONLY TO PRE-EXISTING UNIT ON THE DAY OF INTRODUCTION OF THIS SECTION WHICH UNDER TOOK SUBSTANTIAL EXPANSION BUT THE SAME WAS AVAILABLE TO ANY UNIT WHICH WAS ENGAGE D IN MANUFACTURING ACTIVITY AND UNDERTOOK SUBSTANTIAL EXPANSION DURING THE PIEORD BEGINNING OF 7TH DAY OF JANUARY 2003 AND ENDING BEFORE IST APRIL 201 2. THE SECTION NOWHERE PROVIDES THAT BENEFIT OF 100% DEDUCTION IN THE CASE OF SUBSTANTIAL EXPANSION SHALL BE AVAILABLE TO THE UNITS WHICH WERE ALREADY IN EXI STENCE AT THE TIME OF THIS SECTION. EVEN THE CIRCULAR NO. 7 OF 2003 ISSUED ON 5.9.2003 CLARIFIES THAT BENEFIT OF DEDUCTION SHALL BE AVAILABLE TO ALL ENTERPRISES WH ICH UNDERTAKE SUBSTANTIAL EXPANSION. 10. IT WAS FURTHER POINTED OUT THAT CLAUSE (25)(II) (D) OF FORM NO. 10CCB WHICH STATES IF THE EXISTING BUSINESS HAD UNDERTAKEN SUB STANTIAL EXPANSION, PLEASE SPECIFY CLEARLY SHOWS THAT FORM PRESCRIBED BY TH E LEGISLATURE REQUIRES INFORMATION ON WHETHER THE EXISTING UNDERTAKING HAS UNDERTAKEN SUBSTANTIAL EXPANSION. IN ANY CASE WHEN THE PROVISION WAS VERY CLEAR THE PROCESS OF INTERPRETATION COULD NOT BE ADOPTED TO DENY DEDUCTI ON AND IN THIS REGARD VARIOUS CASE LAWS WAS CITED. 11. IT WAS ALSO CONTENDED THAT IF VIEW OF THE ASSES SING OFFICER WAS TAKEN AS CORRECT THAT THERE CAN BE ONLY BE ONE INITIAL ASSES SMENT YEAR, THEN SUB-SECTION (6) OF SECTION 80IC WOULD BECOME REDUNDANT BECAUSE THEN DEDUCTION WOULD ALWAYS BE 100% FOR FIRST FIVE YEARS AND 25% FOR THE NEXT 5 YEARS. THEREFORE, THE PROVISION OF SECTION 80IC SHOULD BE CONSTRUCTED HAR MONIOUSLY. IN ANY CASE IF THERE WAS SOME AMBIGUITY THE PROVISION SHOULD BE LI BERALLY CONSTRUED SO AS TO ADVANCE THE EXEMPTION PROVISION. IN THIS REGARD RE LIANCE WAS PLACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BA JAJ TEMPO LTD 196 ITR 188 (SC), CIT V KULLU VALLEY TRANSPORT CO. P. LTD. 77 I TR 518 (SC) AND MYSORE MINERALS LTD V CIT 239 ITR 775 (SC). 12. IT WAS ALSO CONTENDED THAT REFERENCE COULD NOT BE MADE TO THE CIRCULAR ISSUED BY CENTRAL EXCISE AUTHORITIES BECAUSE THE LA NGUAGE USED IN THE CENTRAL EXCISE ACT WAS DIFFERENT FROM THE LANGUAGE USED IN SECTION 80IC. 13. THE LD. CIT(A) CONSIDERED THESE SUBMISSIONS AND OBSERVED THAT SECTION 80IC WAS ENACTED BY THE FINANCE ACT, 2003 TO GIVE E FFECT TO A NEW AND REVAMPED INDUSTRIAL POLICY NOTIFIED BY THE UNION CA BINET FOR THE STATE OF SIKKIM, HIMACHAL PRADESH, UTTARANCHAL AND NORTH-EASTERN STA TES. THIS INCENTIVE SCHEME PROVIDE FOR BENEFITS UNDER INCOME TAX ACT AND CENTR AL EXCISE, CAPITAL INVESTMENT SUBSIDY AND TRANSPORT SUBSIDY ETC. THE B ENEFIT UNDER INCOME TAX WERE PROVIDED IN SECTION 80IC TO NEW UNITS COMMENCI NG MANUFACTURING ON OR 9 AFTER 7 JANUARY OF 2003 OR TO THE EXISTING UNITS IN VOLVING SUBSTANTIAL EXPANSION AFTER THAT DATE ELIGIBLE FOR SUCH INCENTIVE. THE L D. CIT(A) THEREAFTER REFERRED TO PARA NO. 49 OF CIRCULAR NO. 7/2003 ISSUED BY THE BO ARD ON 5.9.2003. ACCORDING TO HER THE PLAIN READING OF SECTION 80IC ALONG WITH CI RCULAR MADE IT ABUNDANTLY CLEAR THAT SPECIAL PROVISION OF SECTION 80IC WERE A PPLICABLE TO TWO KINDS OF UNDERTAKING OR ENTERPRISES WHICH ARE AS UNDER:- I) ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OF PRODUCE ANY ARTICLE OR THING, SPECIF IED IN THE THIRTEENTH SCHEDULE /OR HAS BEGUN OR BEGINS TO MANU FACTURE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDU LE, WHICH MEANS A NEW UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY SPECIFIED ARTICLES OR TH ING ON THE 7 TH DAY OF JAY., 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADESH. II) ANY UNDERTAKING OR ENTERPRISE WHICH MANUFACTURE S OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN THE THIRTEENTH SCHEDULE OR WHICH MANUFACTURES OR PRODUC ES ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE, WHIC H MEANS AN ALREADY EXISTING (PRIOR TO 7 TH DAY OF JAN., 2003) UNDERTAKING OR ENTERPRISE WHICH WAS MANUFACTURING OR PRODUCING ANY ARTICLES OR THING PRIOR TO THE 7 TH DAY OF JAY., 2003 AND WHICH UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING O N THE 7DAY OF JAN., 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADESH. 14. ON THE BASIS OF ABOVE, SHE MADE THE FOLLOWING C ONCLUSION IN PARAS 4.3 AND 4.4., WHICH ARE AS UNDER:- 4.3 THUS IT IS CLEAR FROM ABOVE THAT DEDUCTION U/S 80IC IS AVAILABLE TO THE PRE-EXISTING UNDERTAKING OR ENTERP RISES (WHICH EXISTED PRIOR TO THE ENACTMENT OF SECTION 80IC) ON THE CONDITION THAT THEY UNDERTAKE SUBSTANTIAL EXPANSION DURING TH E PERIOD BEGINNING ON THE 7 TH DAY OF JAN., 2003 AND ENDING BEFORE THE 1SRT DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADESH AS PER THE CONDITIONS STIPULATED IN SECTION 80IC. HOWEVER, DED UCTION U/S 80IC IS ALSO AVAILABLE TO THE NEW UNDERTAKINGS OR ENTERP RISES WHICH UNDERTAKE THE MANUFACTURE OR PRODUCTION OF THE SPEC IFIED ARTICLES OR THING DURING THE PERIOD BEGINNING ON THE 7 TH DAY OF JAN., 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADESH. THUS THE LAW HAS BEEN ENACTED IN SUCH A FASHION THAT THE PRE-EXISTING UNDERTAKING OR ENTERP RISES DO NOT SUFFER 10 FROM ANY HANDICAP MERELY ON ACCOUNT OF THE FACT TH AT THEY WERE EXISTING PRIOR TO THE INTRODUCTION OF SECTION 80IC. BUT TO MEET THE OBVIOUS GOAL OF ENCOURAGING INVESTMENT IN THE S TATE OF HIMACHAL PRADESH, THE CONDITION OF SUBSTANTIAL EXPA NSION HAS BEEN MADE A PRE-REQUISITE FOR ALLOWING DEDUCTION U/S 80I C IN THE CASE OF OLD UNDERTAKINGS OR ENTERPRISES. IT IS, HOWEVER, CL EAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UNDERTAKINGS OR ENT ERPRISES MADE ELIGIBLE FOR DEDUCTION U/S 80IC. THESE ARE TWO DIST INCT CATEGORIES WITH DISTINCT CONDITIONS OF ELIGIBILITY LAID DOWN F OR DEDUCTION UNDER U/S 80IC. SINCE THE PRE-EXISTING UNITS CANNOT POSSI BLY CROSSOVER INTO THE ZONE OF NEW UNDERTAKINGS OR ENTERPRISES, THE NE W UNDERTAKINGS ALSO OBVIOUSLY CANNOT BE ALLOWED TO CROSS OVER INTO THE ZONE MEANT FOR THE OLD, PRE-EXISTING UNDERTAKINGS. THE RULES O F THE GAME HAVE TO BE THE SAME FOR ALL THE PARTICIPANTS OR STAKEHOLDER S. THE USE OF THE WORD OR IN CLAUSE (A) AND CLAUSE (B) OF SUB-SECTION (2) TO SE CTION 80IC ALSO LEAVES NO DOUBT ABOUT THE FACT THAT THE PROVI SIONS OF SECTION 80IC APPLY TO TWO DISTINCT TYPES OF UNDERTA KINGS OR ENTERPRISES AND THEY CANNOT REPLACE EACH OTHER. 4.4 THE APPELLANTS INTERPRETATION THAT DEDUCTION U /S 80IC SHALL BE AVAILABLE @ 100% TO THE NEW UNDERTAKING OR ENTER PRISES FOR THE INITIAL FIVE YEARS AND THEN SHALL AGAIN BE AVAILABL E @ 100% FOR ANOTHER FIVE YEARS IF THE SAID UNDERTAKINGS OR ENTE RPRISES CARRY OUT SUBSTANTIAL EXPANSION HAS THE EFFECT OF CREATING A GREAT ANOMALY, BECAUSE THIS INTERPRETATION WILL RESULT IN A DISADV ANTAGEOUS SITUATION FOR THE PRE-EXISTING UNDERTAKINGS. WHILE THE NEWLY ESTABLISHED UNDERTAKINGS SHALL BE IN A POSITION TO AVAIL TO 100 % DEDUCTION FOR A CONTINUOUS PERIOD OF 10 YEARS IF THEY CARRY OUT SUB STANTIAL EXPANSION AFTER FIVE YEARS OF THE COMMENCEMENT OF MANUFACTURE OR PRODUCTION; THE PRE-EXISTING UNDERTAKINGS SHALL BE ABLE TO AVAIL OF 100% DEDUCTION ONLY FOR A PERIOD OF FIVE YEARS AFTE R CARRYING OUT THE SUBSTANTIAL EXPANSION, AND AFTER FIVE YEARS THEY SH ALL BE ENTITLED TO ONLY 25% / 30% DEDUCTION. THIS CERTAINLY CANNOT BE THE INTENTION OF THE LEGISLATURE TO DOLE OUT UNEVEN BENEFITS TO THE TWO TYPES OF INDUSTRIES MEANT TO BE EQUALLY POISED IN THE GIVEN LEGAL FRAME WORK ENACTED BY SECTION 80IC. 15. SHE ALSO REFERRED TO THE CONTENTS OF CIRCULAR N O. 49/2003 OF CENTRAL EXCISE AND OBSERVED THAT THERE WAS NO FORCE IN THE ASSESSE ES CONTENTION THAT EXCISE AND INCOME TAX ARE TWO DIFFERENT STREAMS OF TAXATIO N WITH THEIR OWN INDEPENDENT LAWS, AND THEREFORE, CIRCULAR NO. 49 OF 2003 ISSUED BY THE EXCISE AUTHORITIES COULD NOT BE RELIED. IN THIS REGARD SHE OBSERVED THAT EX PLANATION TO FINANCE ACT 2003 11 MAKES IT ABSOLUTELY CLEAR THAT THESE PROVISIONS WER E BEING INSERTED ON THE BASIS OF A PACKAGE ANNOUNCED BY UNION CABINET WHICH CONSISTE D OF FISCAL AND NON- FISCAL COVERAGE FOR SPECIAL CATEGORY OF STATES OF S IKKAM, HIMACHAL PRADESH, UTTRANCHAL AND NORTH-EASTERN STATES IN ORDER TO BOO ST ECONOMY OF THESE STATES. SINCE NEW PROJECT INCLUDES CENTRAL EXCISE BENEFITS ALSO AS WELL AS BENEFITS IN INCOME TAX WHICH WERE OF THE SAME NATURE AND EMANAT ING FROM THE SAME PACKAGE, IT WAS NATURAL TO REFER TO CIRCULAR ISSUED BY EXCISE AUTHORITIES. 16. SHE ALSO REFERRED TO PROVISIONS OF SUB SECTION (6) OF SECTION 80IC AND POINTED OUT THAT SUB SECTION NOWHERE LAID DOWN THAT 100% DEDUCTION COULD BE ALLOWED TO ANY UNDERTAKING FOR A CONTINUES PERIOD O F 10 YEARS. 17. SHE ALSO REFERRED TO CLAUSE 25 (II)(D) OF FORM NO. 10CCB AND POINTED OUT THAT EVEN THE FORM DOES NOT HELP THE ASSESSEES CAS E. SHE OBSERVED THAT IN FACT CLAUSE 25 OF FORM 10CCB HELPS THE REVENUES POINT O F VIEW THAT PROVISIONS OF SECTION 80IC WERE SEPARATELY APPLICABLE TO TWO TYPE S OF BUSINESSES I.E. NEW BUSINESS AND EXISTING BUSINESS WHICH HAS UNDERGONE SUBSTANTIAL EXPANSION. FINALLY, IT WAS CONCLUDED VIDE PARA 4.11 AS UNDER: - 4.11 IN VIEW OF DISCUSSION ABOVE IT IS EVIDENT THA T THE PROVISIONS OF SECTION 80IC ARE AMPLY CLEAR AS THERE EXISTS NO AMB IGUITY OF ANY KIND AS REGARDS THE IMPORT OF THE PROVISIONS OR AS REGARDS THE INTENTION OF THE LEGISLATURE. THE LANGUAGE OF THE P ROVISIONS DOES NOT GIVE RISE TO MORE MEANING THAN ONE AND THE LEGISLAT IVE INTENT IS CLEARLY REFLECTED FROM THE BARE READING OF THE SECT ION. THE GIVEN EXPRESSION OF THE STATUTE IS SO CLEAR THAT THERE IS NO NEED TO ADD ANY WORD THERETO SO AS TO MAKE OUT THE OBJECT OF TH E LEGISLATURE. THEREFORE ALL THE PLEAS TAKEN BY THE APPELLANT REGA RDING THE RULE OF LIBERAL INTERPRETATION OR REGARDING THE HARMONIOUS CONSTRUCTION OF PROVISIONS ARE INTENDED TO GIVE RISE TO UNNECESSARY CONTROVERSY. 18. ON THE BASIS OF ABOVE ANALYSIS, THE ACTION OF T HE ASSESSING OFFICER WAS UPHELD. 19. BEFORE US LD. COUNSEL FOR THE ASSESSEE SHRI PA VAN VED LED THE ARGUMENTS BECAUSE MANY OTHER COUNSELS WERE ALSO PRESENT WHO W ERE REPRESENTING OTHER GROUP CASES. SHRI RAKESH GUPTA WHO WAS REPRESENTIN G MANY APPEALS PARTICULARLY IN ITA NO. 866 TO 869/CHD/2014, 895 TO 897/CHD/2014, 185/CHD/2014 ETC. ALSO MADE SOME SUBMISSIONS. ALL OTHER COUNSEL S PRESENT IN THE COURT REPRESENTING VARIOUS CASES ADOPTED THE ARGUMENTS RA ISED BY SHRI PAVAN VED AND SHRI RAKESH GUPTA. SHRI PAVAN VED HAD ALSO FIL ED WRITTEN SYNOPSIS. VARIOUS CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE CAN BE SUMMARIZED AS UNDER:- 12 THE ASSESSING OFFICER HAS CLEARLY ADMITTED IN PARA 2.1 OF THE ASSESSMENT ORDER THAT ALL THE CONDITIONS AND GENUINENESS OF DE DUCTION CLAIMED UNDER THE SECTION HAVE BEEN FULFILLED. THERE IS NO RESTRICTION OR LIMITATION U/S 80IC THAT ONLY INDUSTRIAL UNIT WHICH HAD COME INTO BEING BEFORE THE COMMENCEMENT OF THIS SECTION WOULD BE ELIGIBLE FOR THE BENEFIT OF SUBSTANTIAL EXPANSIO N. THEREFORE, THE ASSESSING OFFICER SHOULD HAVE ADOPTED A RULE OF INT ERPRETATION WHICH WAS BENEFICIAL TO THE ASSESSEE WHILE INTERPRETING THESE INCENTIVE PROVISIONS. ACCORDING TO HIM ASSESSEE COULD MAKE ANY NUMBER OF EXPANSIONS AND CLAIM DEDUCTION FOR MORE THAN 10 YEARS. HOWEVER, I T WAS POINTED OUT THAT ASSESSEE (HYCRON ELECTRONICS) HAS CLAIMED DEDU CTION ONLY FOR 10 YEARS. THE REFERENCE MADE TO CIRCULAR NO. 7 OF 2003 BY ASS ESSING OFFICER AND CIT(A) IS NOT PROPER BECAUSE CIRCULAR ITSELF PROVI DES FOR BENEFIT TO EXISTING UNDERTAKINGS AND THEIR SUBSTANTIAL EXPANSION AND TH E WORD EXISTING HAS NOT BEEN QUALIFIED WITH REFERENCE TO ANY PARTICULAR DATE. IT SIMPLY QUALIFIES UNDERTAKING. THE REFERENCE TO CIRCULAR NO. 49 OF 2003 ISSUED UND ER CENTRAL EXCISE ACT BY THE EXCISE AUTHORITIES IS ALSO NOT PROPER BECAU SE THIS CIRCULAR IS NOT ISSUED U/S 119 OF THE INCOME TAX ACT. FURTHER THI S CIRCULAR REFERS TO THE EXPANSION OF CAPACITY BY 25% WHEREAS UNDER THE INCO ME TAX ACT WHAT IS REQUIRED IS 50% INCREASE IN INVESTMENT UNDER THE HE AD PLANT AND MACHINERY IN ANY CASE, CIRCULARS ARE NOT BINDING ON THE COURT S AND CIRCULAR AND SAME SHOULD NOT BE CONSIDERED IN INTERPRETATION OF PROVISIONS. IN THIS REGARD RELIANCE WAS PLACED ON THE DECISION OF HON'B LE KARNATAKA HIGH COURT IN CASE OF DINAKAR ULLAL VS. CIT 323 ITR 452 (KARNATAKA), COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTI NG & WIRE (2008) (13 (SC) 1). LD. COUNSEL VEHEMENTLY OBJECTED TO THE RELIANCE PLA CED BY THE DEPARTMENT ON THE NOTIFICATION ISSUED BY THE MINIST RY OF COMMERCE, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION GOVT. OF INDIA VIDE NOTIFICATION DATED 8.1.2003. IT WAS SUBMITTED THAT FIRSTLY THE NOTIFICATION DID NOT HAVE ANY BEARING ON THE PRESENT CASE ON INTERPR ETATION OF THE PROVISIONS OF THE ACT. SECONDLY, THERE WAS CERTAIN INCONSISTENCY IN THE NOTIFICATION BECAUSE WHILE DEFINING THE EXISTING IN DUSTRIAL UNIT, IT WAS STATED THAT SAME WOULD MEAN AS UNIT EXISTING ON 7. 1.2003 BUT WHEN THE WORD SUBSTANTIAL EXPANSION WAS DEFINED, THE WORDS USED WAS OF AN INDUSTRIAL UNIT AND NOT AN EXISTING INDUSTRIAL U NIT. THIRDLY, NOTIFICATION CANNOT OVERRIDE THE SECTION WHICH PROVIDES THE LEGI SLATURE INTENT. 13 FOURTHLY, THE NOTIFICATION WAS NOT ISSUED U/S 119 O F THE INCOME TAX ACT AND, THEREFORE, HAS NOT BINDING FORCE. FIFTHLY, AS PER THIS NOTIFICATION THE SUBSTANTIAL EXPANSION WAS RELATED TO INCREASE IN CA PACITY BY 25% WHICH WAS CONTRARY TO THE CRITERIA LAID DOWN IN SECTION 8 0IC I.E. 50% INCREASE IN INVESTMENT. FORM NO. 10CCB CLAUSE (25)(II)(C) IS MEANT FOR NEW BUSINESS AND CLAUSE (D) IS FOR EXISTING BUSINESS. THERE IS NO WORD IN B ETWEEN CLAUSE (C) AND (D) LIKE OR/AND WHICH MEANS EVEN ACCORDING TO CBDT, B OTH SITUATIONS MAY EXIST IN A PARTICULAR CASE. A REFERENCE WAS MADE TO CLAUSE (V) OF SUB-SECTION ( 8) OF SECTION 80IC WHICH DEFINES INITIAL ASSESSMENT YEAR AND IT WAS POINTED OUT THAT INITIAL ASSESSMENT YEAR WAS WITH REFERENCE TO BOTH MANUFACT URER AND SUBSTANTIAL EXPANSION BECAUSE THE WORD OR HAS BEE N USED BETWEEN THE TWO EXPRESSION WHICH CLEARLY SHOWS THAT IT IS A DIS JOINTED SENTENCE AND REFERS TO BOTH SITUATIONS. RELIANCE WAS ALSO PLACED ON THE DECISION OF DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCI T IN ITA NO.991/DEC/2013 (COPY OF ORDER FILED). IT WAS SUBMITTED THAT IN THI S CASE IN SIMILAR SITUATION 100% DEDUCTION WAS HELD TO BE AVAILABLE AFTER SUBST ANTIAL EXPANSION OF THE NEW UNIT. HOWEVER, ON THE QUERY BY THE BENCH, I T WAS CLEARLY ADMITTED BY ALL THE COUNSELS PRESENT IN THE COURT T HAT THIS DECISION DOES NOT DEAL WITH ANY ASPECTS OF THE PROVISIONS OF SECT ION 80IC. FURTHER RELIANCE WAS ALSO PLACED ON DECISION OF AHMEDABAD B ENCH OF THE TRIBUNAL IN THE CASE OF SINTEX INDUSTRIES LTD IN IT A NO. 310/AHD/2014. A REFERENCE WAS ALSO MADE TO SUB SECTION (6) TO SEC TION 80-IC WHICH PRESCRIBES OVER ALL LIMITS OF DEDUCTION FOR 10 YEAR S. IT WAS CONTENDED THAT THIS LIMIT WAS WITH REFERENCE TO THE TIME PERIOD AN D NOT TO THE RATE OF DEDUCTION. RELIANCE WAS ALSO PLACED ON THE DECISION OF CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF DCIT CHANDIGARH VS. S.K. PA RYAVARAN ENGINEERS (P) LTD., IN ITA NO. 340/CHD/2010. IT WAS CONTENDED T HAT IN THIS CASE IT WAS HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80 IC ON SUBSTANTIAL EXPANSION. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN CASE OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE WA S REQUESTED TO EITHER GIVE CITATION OF THE DECISION OR FILE CERTIFIED COP Y OF THE ORDER. THIS HAS NOT BEEN DONE. HOWEVER, WE HAVE CONSIDERED THIS DECISI ON ALSO.) LASTLY, IT WAS CONTENDED THAT INCENTIVE PROVISION S HOULD BE CONSTRUED LIBERALLY IN VIEW OF THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF BAJAJ TEMPO LTD V CIT 196 ITR 188 (SC). 14 20. ON THE OTHER HAND LD. CITDR, DR. AMARVEER SINGH MADE DETAILED SUBMISSIONS AND HAS ALSO FILED WRITTEN SUBMISSIONS. THE CONTENTIONS OF THE REVENUE CAN BE SUMMARIZED AS UNDER:- I) THE NEW INCENTIVES SCHEME FOR VARIOUS HILLY STAT ES WAS CLEARED BY THE UNION CABINET AND COMPRISED OF VARIOUS INCENTIV ES IN THE FORM OF INCOME TAX CONCESSIONS, EXCISE CONCESSIONS, SUBSIDI ES IN THE FORM OF CAPITAL INVESTMENT SUBSIDY, TRANSPORT SUBSIDY ETC. IN VIEW OF THIS SCHEME, IN THE INCOME TAX ACT, SECTION 80IC WAS INTRODUCED W.E .F. 1.4.2004 AND THIS PROVISION WAS LATER ON CLARIFIED BY CIRCULAR NO. 7 OF 2003 BY THE CENTRAL BOARD OF DIRECT TAXES ISSUED ON 5.9.2003. SINCE THE SOURCE OF THIS SECTION AND OTHER BENEFITS AVAILABLE TO THE HILLY STATES OF HIMACHAL PRADESH, UTTRANCHAL, NORTH-EASTERN STATES AND STATE OF SIKKI M WAS THE SCHEME CLEARED BY THE UNION CABINET, THEREFORE, IT IS IMPO RTANT TO CONSIDER ALL THE MATERIAL EMANATING FROM THIS SCHEME I.E. CIRCULARS ISSUED BY CBDT, CIRCULARS ISSUED BY THE CENTRAL EXCISE AUTHORITIES AS WELL AS THE SUBSIDY SCHEME ISSUED BY MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, GOVT. OF INDIA. T HE WORD EXISTING UNIT IS NOT MENTIONED IN SECTION 80IC BUT THIS CAN BE ASCER TAINED EASILY IF THE SECTION IS PROPERLY CONSTRUED. IN ANY CASE, THE CIR CULAR NO. 49/2003 ISSUED BY CENTRAL EXCISE DEPARTMENT AS WELL AS NOTIFICATIO N ISSUED BY MINISTRY OF COMMERCE VERY CLEARLY MENTION THAT EXISTING UNIT WO ULD MEAN AN INDUSTRIAL UNIT EXISTING BEFORE 7.1.2003. BY CONSI DERING THE VARIOUS MATERIALS, THE NOTIFICATION OF THE GOVERNMENT BECOM ES ABSOLUTELY CLEAR. II) SUBSECTION (2) OF SECTION 80IC WHICH IS AN ENA BLING PROVISION FOR GRANT OF DEDUCTION VERY CLEARLY PROVIDES THAT DEDUC TION IS AVAILABLE TO THE UNDERTAKING WHICH EITHER BEGUN OR BEGINS TO MANUFAC TURE OR PRODUCE AN ARTICLE OR THING OR UNDERTAKE SUBSTANTIAL EXPANSION WITH REFERENCE TO THE STATE OF HIMACHAL PRADESH BETWEEN 7 TH DAY OF JANUARY 2003 AND ENDING ON 31 ST DAY OF MARCH, 2012. THIS ITSELF SHOWS THAT SUBSTA NTIAL EXPANSION COULD HAVE BEEN CARRIED OUT ONLY ON OR AFTER 7.1.20 03 BY AN INDUSTRIAL UNDERTAKING OR ENTERPRISE WHICH EXISTED PRIOR TO 7. 1.2003. III) IT WAS SUBMITTED THAT DEDUCTION PROVIDED U/S 80IC IN FACT WAS EXTENSION OF THE PROVISION ALREADY EXISTING U/S 80I B(4). IT WAS POINTED OUT THAT DEDUCTION U/S 80IB(4) IS AVAILABLE TO AN INDU STRIAL UNDERTAKING WHICH WAS LOCATED IN THE INDUSTRIAL BACKWARD STATE SPECIF IED IN THE 8 TH SCHEDULE WHICH BASICALLY CONSISTED OF THE SAME AREAS AS MENT IONED IN SECTION 80IC . UNDER SECTION 80IB(4) ALSO, THE DEDUCTION WAS TO BE ALLOWED TO THE INDUSTRIAL UNDERTAKING @ 100% OF PROFITS AND GAINS FOR THE FIVE ASSESSMENT 15 YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AN D THEREAFTER 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) AND ALL THE PR OFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. IT WAS P OINTED OUT THAT IN THE CASE OF DEDUCTION U/S 80IB(4), THERE WAS A SECOND P ROVISO IN THE SECTION BY WHICH IT IS CLARIFIED THAT THE 100% DEDUCTION WA S AVAILABLE FOR 10 ASSESSMENT YEARS IN CASE SUCH UNDERTAKINGS WHICH WE RE LOCATED IN NORTH- EASTERN REGION. SIMILAR PROVISION IS MADE U/S 80IC( 3)(II). THUS, IT IS CLEAR THAT PROVISIONS OF SECTION 80IC(3) IS ONLY AN EXTENSION OF SECTION 80IB(4) AND THROUGH SECTION 80IC, ONLY DIFFERENCE IS THAT THIS WAS EXTENDED TO INDUSTRIAL UNDERTAKING WHICH WERE ALREADY EXISTING ON THE COMM ENCEMENT OF THE WINDOW PERIOD I.E. 7.1.2003 TO THE IST DAY OF APRIL 2012. IV) IT WAS EMPATHETICALLY ARGUED THAT EXPRESSION AND UNDERTAKES SUBSTANTIAL EXPANSION HAS BEEN USED IN BOTH SECTIO NS 80IC(2(A) AND 80IC(2)(B). HOWEVER, IT IS TO BE NOTED THAT SECTIO N 80IC(2)(A)(II) IS APPLICABLE TO THE STATE OF HIMACHAL PRADESH OR UTTA RANCHAL AND SIMILARLY SECTION 80IC(2)(B)(II) IS APPLICABLE TO THE STATE O F HIMACHAL PRADESH AND STATE OF UTTARANCHAL WHEREAS SECTION 80IC(A)(III) AND (B)(III) ARE APPLICABLE TO THE NORTH-EASTERN STATES AND WHEN THI S IS COMPARED WITH THE RATE OF DEDUCTION PROVIDED UNDER SUB SECTION (3) O F SECTION 80IC, IT WOULD BE NOTED THAT UNDER SUB SECTION 3(II) THE RATE HAS BEEN GIVEN @ 100% FOR FIVE YEARS FOR THE STATES OF HIMACHAL PRADESH AND U TTARANCHAL AND THEREAFTER 25% FOR NEXT 5 YEARS WHEREAS UNDER SUB S ECTION 3(I) THE RATE HAS BEEN GIVEN AT 100% IN THE NORTH EASTERN STATES AND STATE OF SIKKIM FOR WHOLE OF TEN YEARS. IF THE INTERPRETATION ADOPTED BY THE ASSESSEE IS CORRECT THEN THE MEANING OF SUBSTANTIAL EXPANSION W OULD BECOME REDUNDANT FOR THE NORTH-EASTERN STATES AND STATE OF SIKKIM BECAUSE IN THOSE CASES DEDUCTION HAD BEEN STRAIGHT AWAY PROVID ED @ 100% FOR ALL THE 10 YEARS. IT WAS SUBMITTED THAT ANY INTERPRETAT ION OF A PROVISION WHICH WOULD RENDER SOME PART OF THE SECTION OTIOSE IS NOT PERMISSIBLE UNDER ANY RULE OF INTERPRETATION. EVEN THE EXPRESSION USED I N SECTION 80IC(3)(II) THEREAFTER WOULD BECOME REDUNDANT IN THE CASE OF ST ATE OF HIMACHAL PRADESH. V) A REFERENCE WAS MADE TO THE DEFINITION OF THE I NITIAL ASSESSMENT YEAR U/S 80IC(8)(V). IT WAS POINTED OUT THAT AS P ER THIS SECTION THERE COULD BE ONLY ONE INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF SECTION 80IC. THIS BECOME VERY CLEAR BECAUSE THE LEGISLATURE HAS USED EXCLUSIONARY WORD OR BEFORE THE WORDS COMPLETE SUBSTANTIAL EXPANSI ON THEREFORE, INITIAL ASSESSMENT YEAR WOULD BE THE YEAR IN SEPARATE SITUA TION AS UNDER:- 16 THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OF THINGS [RELEVANT FOR PURPOSE OF SECTION 80IC(2)(A) OR : THE UNDERTAKING OR ENTERPRISE COMMENCES OPERATION [ RELEVANT FOR THE PURPOSE OF SECTION 80IC(2)(B) ] OR THE UNDERTAKING OR ENTERPRISE WHICH COMPLETES SUBST ANTIAL EXPANSION THUS THERE CAN BE ONLY ONE INITIAL ASSESSMENT YEAR AND ONCE AN INITIAL ASSESSMENT YEAR HAD BEEN DETERMINED FOR A CLAIM OF DEDUCTION THEN THERE CANNOT BE SECOND INITIAL ASSESSMENT YEAR FOR CLAIM UNDER THE SAME SECTION BY THE SAME UNDERTAKING. IT WAS CONTENDED THAT IF THE DECISION BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF T RIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) IS ACCEPTED; THE FACT THA T THERE WAS NO BAR ON CARRYING OUT THE NUMBER OF SUBSTANTIAL EXPANSIONS A ND EVERY YEAR OF SUBSTANTIAL EXPANSION WOULD BECOME INITIAL ASSESSME NT YEAR. IF, THIS THEORY IS ACCEPTED AND GOING BY THE SAME ANALOGY EVERY ASS ESSMENT YEAR WOULD BECOME INITIAL ASSESSMENT YEAR SINCE THE UNDE RTAKING COMMENCES PRODUCTION ON THE FIRST DAY OF EACH ACCOUNTING YEAR . SUCH AN INTERPRETATION WOULD NOT ONLY RESULT INTO ABSURDITY BUT ABSOLUTELY AN IMPROBABLE AND UNWORKABLE SITUATION. VI) IF THE BENEFIT OF DEDUCTION OF SUBSTANTIAL EXP ANSION WAS TO BE ALLOWED TO THE NEW UNDERTAKING WHICH COMMENCED PRODUCTION O N OR AFTER 7.1.2003, THEN SUCH UNDERTAKING WOULD AUTOMATICALLY BE DISQUALIFIED FOR THE DEDUCTION BECAUSE OF THE RESTRICTION PROVIDED I N SUB SECTION (4) OF SECTION 80IC BECAUSE SUCH SUBSTANTIAL EXPANSION WOU LD AMOUNT TO RECONSTRUCTION OF THE BUSINESS. VII) IF THE INTERPRETATION ADOPTED BY THE ASSESSEE WAS TO BE FOLLOWED, THE SAME WOULD RESULT IN DISCRIMINATION BETWEEN THE NEW UNITS AND THE EXISTING UNITS. THE NEW UNITS WOULD BECOME ELIGIBLE FOR 100% DEDUCTION FOR THE FIRST FIVE YEARS THEN AGAIN FOR 100% DEDUCTION FOR ANOTHE R SET OF FIVE YEARS ON CARRYING OUT THE SUBSTANTIAL EXPANSION WHEREAS THE EXISTING UNIT WOULD GET BENEFIT ONLY OF 100% DEDUCTION FOR INITIAL FIVE YEA RS AND LATER ON THE DEDUCTION WOULD BE RESTRICTED TO 25% IN SUCH CASE. SUCH A DISCRIMINATORY INTENTION CANNOT BE ATTRIBUTED TO THE PARLIAMENT. VIII) IT WAS ALSO CONTENDED THAT FORM NO. 10CCB UND ER CLAUSE 25( C) AND (D) MAKES IT ABSOLUTELY CLEAR THAT DEDUCTION U/S 8 0IC IS PERMITTED TO TWO DISTINCT KIND OF UNDERTAKING I.E NEW ELIGIBLE BUSIN ESS WHICH COMMENCES 17 PRODUCTION DURING THE WINDOW PERIOD I.E. 7.1.2003 T O 31.3.2012 WHICH IS NEW UNDERTAKING AND SECONDLY IN THE CASE OF AN EXIS TING BUSINESS WHICH UNDERTAKES SUBSTANTIAL EXPANSION. IX) IT WAS CONTENDED THAT ASSESSEE HAS RAISED THE CONTENTION T HAT CONDITION ON CARRYING OUT SUBSTANTIAL EXPANSION WAS DURING THE WIDOW PERIOD. HOWEVER IF THIS INTERPRETATION IS ACCEPTED THEN THE CONSEQUENCES WOULD BE THAT IN THE GUISE OF EXPANSION BY INVESTIN G A VERY SMALL SUM, THE ASSESSEE WOULD CLAIM DEDUCTION OF 100% FOR WHOLE OF THE PROFITS OF SUCH EXPANDED UNDERTAKING WHICH WOULD MEAN THAT PROFIT O F OLDER UNIT ALSO GETS BENEFIT OF 100% DEDUCTION WHICH CANNOT BE THE INTENTION OF THE LEGISLATURE. X) WHILE CONCLUDING HIS ARGUMENT IT HAS BEEN SUBMIT TED THAT THERE IS NO AMBIGUITY IN THE PROVISIONS AND THE DECISION OF DEL HI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) WAS PER INQUERIM BECAUSE IT HAS NOT CONSIDERED ALL THE PROV ISIONS OF THE ACT AND HAS MERELY RELIED ON THE DECISION OF HON'BLE SUPREM E COURT IN THE CASE OF BAJAJ TEMPO LTD (SUPRA). IT WAS POINTED OUT THAT S UPREME COURT IN ANOTHER CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR O F CENTRAL EXCISE AND CUSTOMS, APPEAL (CIVIL) 3356 OF 1984 HAS CLEARLY H ELD THAT IT IS NOT POSSIBLE TO AGREE WITH THE SUBMISSIONS THAT IF THERE WAS CO NFLICT OF DECISION, THEN BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE . IT WAS ALSO VEHEMENTLY CONTENDED THAT ALL THE DECISIONS OF VARI OUS HIGH COURTS AND SUPREME COURT ARE UNANIMOUS IN HOLDING THAT BOARD H AS POWER TO ISSUE OF CIRCULAR U/S 119 OF THE INCOME TAX ACT AND SUCH CIR CULARS ARE BINDING ON THE AUTHORITIES. THE ONLY QUESTION IS WHETHER SUCH CIRCULARS CAN BE CONSIDERED FOR INTERPRETATION OF A PROVISION OR NOT . IT WAS POINTED OUT THAT HON'BLE SUPREME COURT IN THE CASE OF K.P. VARGHESE VS INCOME TAX OFFICER 131 ITR 597 (SC) HAS CLEARLY OBSERVED THAT IF A PA RTICULAR PROVISION IS REQUIRED TO BE INTERPRETED THEN NOT ONLY CIRCULAR B UT ANYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE CONSIDERED. A SIMIL AR VIEW WAS TAKEN BY THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M.S. VA IDYA 224 ITR 186 (KARNATAKA). XI) A REFERENCE WAS ALSO MADE TO THE DECISION RELIE D ON BEHALF OF THE ASSESSEE OF THE CHANDIGARH BENCH OF THE TRIBUNAL IN THE CASE OF DCIT CHANDIGARH VS. S.K. PARYAVARAN ENGINEERS (P) LTD. ( SUPRA). IT WAS POINTED OUT THAT DECISION IS TOTALLY DISTINGUISHABLE BECAUS E IN THAT CASE ASSESSEE CLAIMED DEDUCTION U/S 80IB IN 1999-2000 FOR THE FIR ST TIME. LATER ON, AFTER FIVE YEARS THE ASSESSEE CLAIMED BENEFIT @ 30%. THE ASSESSEE ALSO 18 UNDERTOOK SUBSTANTIAL EXPANSION IN FINANCIAL YEARS 2004-05 AND 2005-06 AND AGAIN CLAIMED DEDUCTION OF 100% OF PROFITS ON T HE STRENGTH OF SUBSTANTIAL EXPANSION BUT WRONGLY MENTIONED THE SEC TION AS 80IB INSTEAD OF SECTION 80IC. THEREFORE, IT IS CLEAR THAT THIS I S A CLEAR CASE OF EXPANSION OF EXISTING UNIT WHICH EXISTED BEFORE 7.1.2003 AND THE REFORE, IT IS CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE A SSESSEE. IT WAS FURTHER POINTED OUT THAT DECISIONS RELIED ON BEHALF OF THE ASSESSEE ARE TOTALLY DISTINGUISHABLE ON THEIR OWN FACTS. 21. IN THE REJOINDER, THE SUBMISSIONS MADE BY LD. S HRI PAVAN VED CAN BE SUMMARIZED AS UNDER:- A) IT WAS SUBMITTED THAT THE EXPRESSION INITIAL AS SESSMENT YEAR HAS BEEN DEFINED IN SECTION 80IC(8)(V) WHICH CLEARLY PR OVIDES THAT INITIAL ASSESSMENT YEAR FOR A UNIT GOING FOR THE SUBSTANTIA L EXPANSION IS THE YEAR IN WHICH SUCH EXPANSION IS COMPLETED AND, THEREFORE , IN THE CASE OF THE ASSESSEE, ASSESSMENT YEAR 2009-10 WOULD BE THE INIT IAL ASSESSMENT YEAR. B) ON PROPER INTERPRETATION OF SECTION 80IC(6), THE ASSESSEE WOULD BE ENTITLED FOR A FRESH DE NOVO COMMENCING PERIOD OF 1 0 YEARS FROM THE INITIAL ASSESSMENT YEAR. THOUGH IT WAS CLARIFIED THAT ASSES SEE HAD NOT CLAIMED DEDUCTION AFTER PERIOD OF 10 YEARS. IF SUBSTANTIAL EXPANSION WAS CARRIED OUT FOR THE FIRST TIME THEN ASSESSEE WAS ENTITLED T O BENEFIT OF 100% DEDUCTION EXCLUDING PROFITS OF EXISTING UNITS, THER EFORE, THE ONLY INFERENCE SHOULD BE THAT IN CASE OF SUBSEQUENT EXPANSION ALSO 100% PROFIT WOULD BE ELIGIBLE. THERE CANNOT BE A THEORY OF SEGREGATION O F PROFITS INTO PROFITS RELATABLE TO EXISTING UNITS AND PROFITS RELATED OF EXPANDED UNITS. FURTHER, SINCE SUBSTANTIAL EXPANSION HAS NO RELATIONSHIP WIT H CAPACITY AND IT IS RELATED TO INVESTMENT, THEREFORE, IT WAS NOT PRACTI CALLY POSSIBLE TO WORK OUT SEPARATELY PROFITS RELATED TO SUBSTANTIAL EXPANSION BECAUSE THOUGH INVESTMENT MAY BE 50% BUT THE SAME MAY LEAD TO INCR EASE OF CAPACITY TO SAY 10% OR OTHER PERCENTAGE. C) THOUGH THERE IS NO DOUBT THAT AN EXISTING UNIT C LAIMING BENEFIT US 80IB(4) WOULD NECESSARILY SWITCH OVER THE SECTION 8 0IC W.E.F. 1.4.2004 BY OPERATION OF LAW BUT THE SAME WOULD STILL BE ELIGIB LE FOR SUBSTANTIAL EXPANSION IN THE 5 TH YEAR ON THE GROUND OF BEING EXISTING UNIT AS ON 1.4.2004. D) EVEN IF THERE IS NO SEPARATE PROVISION U/S 80IC TO GIVE DEDUCTION OF SUBSTANTIAL EXPANSION STILL THE ELIGIBLE UNIT IS EL IGIBLE FOR DEDUCTION U/S 80IC 19 IF THE ASSESSEE MAKES INVESTMENT IN THE SAME UNITS AND THEREFORE, SECTION 80IC SHOULD BE INTERPRETED TO GIVE BENEFIT TO THE A SSESSEE ON THE BASIS OF SUBSTANTIAL EXPANSION. E) THE DECISION IN THE CASE OF M/S NOVAPAN INDIA LT D V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) WAS RELATED TO A N EXEMPTION AND THEREFORE, CANNOT BE USED WHILE INTERPRETING AN INC ENTIVE PROVISION. IN CASE OF INCENTIVE PROVISION, IT IS BASICALLY A PROM ISE BY THE LEGISLATURE THAT YOU MAKE THIS INVESTMENT WE WELL GIVE YOU THIS BENE FIT AND THEREFORE, CAN BE IN THE FORM OF A CONTRACT BETWEEN THE STATE AND THE ASSESSEE. FURTHER THE DECISION IN THE CASE OF M/S NOVAPAN IND IA LTD VS COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) RELATED TO INDIR ECT TAX AND, THEREFORE, CANNOT BE RELIED UPON WHILE INTERPRETING THE PROVIS IONS UNDER DIRECT TAX. F) IN RESPECT OF THE 100% DEDUCTION U/S 80IC (2)(I) TO THE STATE OF SIKKIM AND NORTH-EASTERN STATES AS CONTENDED BY THE REVENUE, IT WAS POINTED OUT THAT LEGISLATURE CAN CHOOSE TO GIVE MOR E BENEFIT TO ANY PARTICULAR AREA. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS INCLUD ING WRITTEN SUBMISSIONS IN THE LIGHT OF MATERIAL ON RECORD, AS WELL AS JUDG MENTS CITED BY THE PARTIES. BEFORE WE CONSIDER THE RELEVANT PROVISIONS WHICH AR E REQUIRED TO BE INTERPRETED, IT WILL BE USEFUL TO DEAL WITH THE VAR IOUS PRINCIPLES OF INTERPRETATION AS ENUNCIATED BY VARIOUS 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 LANGUAGE AS LONG THE SAME DOES NOT RESULT IN ABSURDITY OR UNINTENDED CONSEQUENCES. TH EREFORE, IF THE LANGUAGE OF A PARTICULAR STATUTE IS CLEAR THEN THE SAME CANNOT BE CHANGED BY APPLYING DIFFERENT PRINCIPLES OF INTERPRETATIONS. THIS IS CL EAR FROM THE OBSERVATIONS MADE BY HON'BLE APEX COURT IN THE CASE OF ORISSA STATE WA REHOUSING CORPORATION VS. CIT 237 ITR 607 WHEREIN 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 EARLY AS 1901, IN COOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) ST ATED 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 S AID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANIN G, THE LEGISLATURE MUST BE TAKEN TO HAVE MEANT AND INTENDED WHAT IT HA S PLAINLY 20 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 T O BE NOTICED AT THIS JUNCTURE. THE LEARNED JUDGE OBSERVED (PAGE 71) : . . . IN A TAXING STATUTE ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. THE OBSERVATIONS OF ROWLATT J. AS ABOVE STAND ACCEP TED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECISION, IN THE 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 ALS O IN A MANNER SIMILAR IN IRC V. ROSS AND COULTER (BLADNOCH DISTIL LERY CO. LTD. [1984] 1 ALL ER 616 AT PAGE 625 OBSERVE: IF THE MEANING OF THE PROVISION IS REASONABLY CLEA R, THE COURTS HAVE NO JURISDICTION TO MITIGATE SUCH HARSHNESS. THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND C O. V. CIT[1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VIEWS EXPRESSED ABOVE. THIS COURT OBSERVED (PAGE 9): AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIV E INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISL ATURE CANNOT THEN BE APPEALED TO TO WHITTLE DOWN THE STATUTORY L ANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED. IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATI ON ARISES WHEN THE WORDS USED IN THE STATUTE 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 BR EAKS, 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 NATUR AL CONSTRUCTION BY ATTRIBUTING NORMAL MEANING TO THE WORDS USED SIN CE 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 21 BE CONSIDERED TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE. IN THIS REGARD, THE OBSERVATION OF THE HON'BLE SUPREME COURT IN THE CEL EBRATED JUDGEMENT OF K.P. VERGESE 131 ITR 598 (SUPRA) ARE RELEVANT. WE EXTRA CT THE HEAD NOTE WHICH READS AS UNDER:- A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POS SIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE THE 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 T O ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AND PRODUCE A RATIONAL CONSTRUCTION. LUKE V. IRC [1963] HON'BLE APEX COURT 557; [1964] 5 4 ITR 692 (HL) FOLLOWED. SPEECHES MADE BY THE MEMBERS OF THE LEGISLATURE ON THE FLOOR OF THE HOUSE WHEN THE BILL IS BEING DEBATED A RE INADMISSIBLE FOR THE PURPOSE OF INTERPRETING THE STATUTORY PROVI SION BUT THE SPEECH MADE BY THE MOVER OF THE BILL EXPLAINING THE REASON FOR ITS INTRODUCTION CAN CERTAINLY BE REFERRED TO FOR THE P URPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OBJECT AND PURPOSE FOR WHICH THE LEGISLATIO N IS ENACTED. THIS IS AN ACCORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTERN COUNTRIES BUT ALSO IN INDIA, THAT THE INTER PRETATION OF A STATUTE BEING AN EXERCISE IN THE ASCERTAINMENT OF M EANING, EVERYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE AD MISSIBLE. 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 S HOW WHAT THE SECTION IS DEALING WITH. IT CANNOT CONTROL THE INTE RPRETATION OF THE WORDS OF A SECTION, PARTICULARLY WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS BUT, BEING PART OF THE STATUT E, IT PRIMA FACIE FURNISHES SOME CLUE AS TO THE MEANING AND PUR POSE OF THE SECTION. 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 ASUNDER:- 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 TH IS PURPOSE, EVEN THE SPEECH OF THE FINANCE MINISTER, WHILE INTRODUCI NG THE PARTICULAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCUL ARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ARE NOT ONLY BINDING ON THE INCOME- TAX DEPARTMENT BUT ARE ALSO IN THE NATURE OF CONTEM PORANEA 22 EXPOSITION FURNISHING LEGITIMATE AID IN THE CONSTRU CTION 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 V S. CIT (SUPRA) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTING & WIRE (SUPRA) FOR THE PROPOSITION T HAT SINCE CIRCULARS ARE NOT BINDING ON THE COURTS, THEREFORE, THE SAME SHOULD N OT BE CONSIDERED FOR INTERPRETATION OF A PARTICULAR PROVISION. AS FAR A S THE DECISION IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTI NG & WIRE (SUPRA) IS CONCERNED, THIS DOES NOT SUPPORT THE PROPOSITION MA DE BY THE LD. COUNSEL FOR THE ASSESSEE. IN THAT CASE THE QUESTION WAS WHETHE R A CIRCULAR ISSUED BY THE DEPARTMENT WHICH IS GENERALLY BINDING ON THE AUTHOR ITIES WOULD TAKE PRECEDENCE OVER THE INTERPRETATION MADE BY THE SUPR EME COURT OR HIGH COURT IN RESPECT OF PARTICULAR PROVISION. THE PARA 6 OF THI S JUDGMENT MAKE THIS POINT ABSOLUTELY CLEAR AND READS AS UNDER:- 6. CIRCULARS AND INSTRUCTIONS ISSUED BY THE BOARD ARE NO DOUBT BINDING IN LAW ON THE AUTHORITIES UNDER THE RESPECT IVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH COURT DECLARES T HE LAW ON THE QUESTION ARISING FOR CONSIDERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT THAT THE CIRCULAR SHOULD BE GIV EN EFFECT TO AND NOT THE VIEW EXPRESSED IN A DECISION OF THIS COURT OR THE HIGH COURT. SO FAR AS THE CLARIFICATIONS/CIRCULARS ISSUED BY TH E CENTRAL GOVERNMENT AND OF THE STATE GOVERNMENT ARE CONCERNE D THEY REPRESENT MERELY THEIR UNDERSTANDING OF THE STATUTO RY PROVISIONS. THEY ARE NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DECLARE WHAT THE PARTICULAR PROVISION OF STATUTE SAYS AND I T IS NOT FOR THE EXECUTIVE. LOOKED AT FORM ANOTHER ANGEL, A CIRCULA R WHICH IS CONTRARY TO THE STATUTORY PROVISIONS HAS REALLY NO EXISTENCE IN LAW. THE ABOVE SHOWS THAT CIRCULARS ARE NOT BINDING ON T HE COURT BUT THE COURT HAS RIGHT TO LOOK AT THE CIRCULAR AND ULTIMATELY MEANIN G OF A PROVISION AS INTERPRETED BY THE COURT WOULD PREVAIL IN COMPARISON TO THE INT ERPRETATION GIVEN IN THE CIRCULAR. THEREFORE, IF CIRCULAR IS CONTRARY TO A PROVISION AS INTERPRETED BY THE COURT THEN THE OPINION OF THE COURT WOULD PREVAIL. THIS DECISION NOWHERE LAYS DOWN THAT CIRCULARS CANNOT BE CONSIDERED FOR INTERP RETATION OF A PARTICULAR PROVISION. 25. IN THE CASE OF DINAKAR ULLAL VS CIT 323 ITR 45 2(KARNATAKA), THE ASSESSEE WAS A CIVIL CONTRACTOR AND HAD FILED BELATED RETURN DECLARING INCOME OF RS. 50,240/- AND WAS CLAIMING REFUND OF RS. 2,14,505/- ON ACCOUNT OF TAX DEDUCTED AT SOURCE. THE LAST DATE OF FILING THE RETURN WAS 3 1.3.1997 BUT THE RETURN WAS FILED 23 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 AC T WHICH WAS INITIALLY REJECTED. HOWEVER, ON A WRIT PETITI ON THE ORDER FOR REJECTION WAS QUASHED BY A SINGLE JUDGE AND REMITTED THE MATTER B ACK FOR FRESH CONSIDERATION. ON REMAND, THE COMMISSIONER WHO WAS VESTED WITH THE JURISDICTION UNDER INSTRUCTION NO.13 OF 2006 IN RESPECT OF CLAIM UPTO RS. 10 LAKHS ACCEPTED THE CAUSE SHOWN FOR DELAY IN FILING THE RETURN BUT DENI ED INTEREST ON REFUND AMOUNT IN VIEW OF THE CONDITION SET OUT IN CIRCULAR NO. 670 D ATED 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 PROVID ED FOR PAYMENT OF INTEREST ON REFUNDS. THIS BECOMES ABSOLUTELY CLEAR FROM THE QU ESTION FRAMED BY HON'BLE COURT WHICH IS CONTAINED AT PLACITUM 6 AND READS AS UNDER:- (I) WHETHER THE CONDITION TO DENY INTEREST ON REFU ND AMOUNT DUE TO AN ASSESSEE UNDER THE ACT, WHILE ADMI TTING AN APPLICATION TO CONDONE THE DELAY IN MAKING A CLA IM FOR BELATED REFUND UNDER SECTION 237 OF THE ACT, AS CON TAINED IN 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 IMPUG NED. 26. THE HON'BLE COURT DISCUSSED THE MATTER AND ULTI MATELY HELD THAT ASSESSEE WAS ENTITLED TO INTEREST U/S 244A AND CIRCULAR NO. 670 WAS CONTRARY TO THE PROVISIONS OF SECTION 244A. THE COURT ALSO OBSERVED THAT CIRCULAR COULD BE ISSUED TO CLARIFY THE PROVISIONS FOR REMOVING THE DIFFICUL TIES. THEREFORE, IT IS CLEAR THAT QUESTION WHETHER A CIRCULAR CAN BE CONSIDERED IN IN TERPRETATION OF A PARTICULAR PROVISION WAS NEVER BEFORE THE COURT AND THEREFORE, IN OUR OPINION, THIS JUDGEMENT DOES NOT SUPPORT THE PROPOSITION THAT CIR CULAR CANNOT BE CONSIDERED FOR THE PURPOSE OF INTERPRETING THE PARTICULAR PROV ISION. 27. IT WILL BE USEFUL TO STATE ANOTHER VERY WELL S ETTLED PRINCIPLE OF INTERPRETATION I.E. WHENEVER THE PARTICULAR PROVISION IS REQUIRED TO BE INTERPRETED, IT SHOULD BE INTERPRETED AFTER READING THE WHOLE PROVISION AND N OT THE PARTS OF A PARTICULAR SECTION. HOWEVER, A PROVISION HAS TO BE READ IN CON TEXT OF THE OVERALL SCHEME OF THE ACT. IT IS ALSO WELL SETTLED THAT NO PROVISION CAN BE INTERPRETED IN SUCH A WAY WHICH WOULD RENDER PARTS OF THE SECTION OTIOSE OR M EANINGLESS. 28. HAVING CONSIDERED THE PRINCIPLES OF INTERPRETAT ION ABOVE, LET US CONSIDER THE PROVISION OF SECTION 80IC IN THE LIGHT OF THE A BOVE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT. SECTION 80IC READS AS UNDER: - SECTION 80IC 24 80-IC (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN E NTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHAL L, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFI TS 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 TH ING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDU LE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING. (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TE CHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEG RATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TE CHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE 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 O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TE CHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH-EAST ERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMM ENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES O R PRODUCES ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR C OMMENCES ANY OPERATIONS SPECIFIED IN THAT SCHEDULE AND UNDERTAKE S SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING- ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM; OR 25 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 ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN ST ATES. (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAU SES (I) AND (III) OF CLAUSE (B), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR TEN ASSESSMENT YEARS COM MENCING WITH THE INITIAL ASSESSMENT YEAR; 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 THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUC TION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THERE- ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASS ESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PE RIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION.- THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CLAUS E (II) OF 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 D EDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTE R VIA OR IN SECTION 10A OR SECTION 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD O F DEDUCTION UNDER THIS 26 SECTION, OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS THE ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTIONS(7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE UNDERTAKING OR ENTERPRISE UNDER THIS SECTION. (8) FOR THE PURPOSES OF THIS SECTION,- INDUSTRIAL AREA MEANS SUCH AREAS, WHICH THE BOARD , MAY, BE NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT; INDUSTRIAL ESTATE MEANS SUCH ESTATES, WHICH THE B OARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT. INDUSTRIAL GROWTH CENTRE MEANS SUCH CENTRES, WHIC H THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE , SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT; INDUSTRIAL PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR TH E ENTERPRISE BEGINS TO MANUFACTURES OR PRODUCE ARTICL ES OR THINGS, OR COMMENCES OPERATION OR COMPLETES SUBSTAN TIAL EXPANSION; INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE MEAN S SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN T HE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAM ED AND NOTIFIED BY THE CENTRAL GOVERNMENT NORTH-EASTERN STATES MEANS THE STATES OF ARUNACH AL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALA ND AND TRIPURA; SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP I N ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; SUBSTANTIAL EXPANSION MEANS INCREASE IN THE INVES TMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF T HE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAK EN; (X) THEME PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE 27 WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTION [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TYPES OF UNDERTAKINGS AND CIRCUMST ANCES WHERE DEDUCTION UNDER SECTION 80IC WOULD BE ALLOWED. IT ALLOWS DEDU CTION TO VARIOUS UNDERTAKINGS WHICH HAVE EITHER BEGUN OR BEGINS MANUFACTURING OF ANY ARTICLE OR THINGS NOT BEING ANY ARTICLE OR THING SPECIFIED IN SCHEDULE XI II AND ALSO UNDERTAKES SUBSTANTIAL EXPANSION. THESE DEDUCTIONS WERE AVAILA BLE IN DIFFERENT STATES DURING DIFFERENT WINDOW PERIODS WHICH HAVE BEEN REFERRED T O IN CLAUSE (I), (II) & (III) OF THIS SUB SECTION. THE CONTENTION ON BEHALF OF THE A SSESSEE IS THAT SINCE DEDUCTION IS AVAILABLE TO THE UNDERTAKING WHICH UNDERTAKES SU BSTANTIAL EXPANSION AND SINCE THERE IS NO RESTRICTION IN THIS SUB SECTION ITSELF, THEREFORE, THE DEDUCTION WAS AVAILABLE ON SUBSTANTIAL EXPANSION BY OLD UNDERTAKI NGS AS WELL AS NEW UNDERTAKINGS DURING THE WINDOW PERIOD. HOWEVER, THE RE IS NO FORCE IN THIS INTERPRETATION. SUB SECTION (2) BEGINS WITH THE EX PRESSION THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BE GINS THIS ITSELF SHOWS THAT PROVISION MADE EVEN THE EXISTING UNDERTAKINGS ENTIT LED FOR THE DEDUCTION BECAUSE THE EXPRESSION BEGUN WOULD REFER TO THE U NDERTAKING WHICH WERE ALREADY EXISTING AND BEGAN THE MANUFACTURE BEFORE T HE WINDOW PERIOD MENTIONED IN THE SUB SECTION. THE LAST LINE OF THE SUB SECTION READS 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 T O READ THEN THE PROVISION WOULD BECOME UNWORKABLE BECAUSE IF THERE IS AN UNDE RTAKING WHICH IS ESTABLISHED DURING THE WINDOW PERIOD THEN THE SAME CANNOT POSSIBLY UNDERTAKES SUBSTANTIAL EXPANSION ALSO SIMULTANEOUSLY. THE EXP RESSION AND WOULD REFER TO THE CUMULATIVE CONDITION THAT IS BOTH PARTS OF THE CONDITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JOINED ONLY W ITH THE EXPRESSION BEGUN. THIS IS BECAUSE BEGUN REFERS TO SOMETHING WHICH H AS ALREADY STARTED IN THE PAST WHEREAS BEGINS CONNOTES SOMETHING WHICH WOULD COM MENCE IN THE PRESENT. THEREFORE, THE EXPRESSION AND CAN BE CORRELATED O NLY WITH EXISTING UNIT BECAUSE AS WE HAVE ALREADY SEEN A NEW UNIT WHICH HAS BEEN S ET UP AND BEGINS PRODUCTION CANNOT SIMULTANEOUSLY UNDERGO SUBSTANTIA L 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 28 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 NOT ONLY IN COME TAX CONCESSION BUT EXCISE CONCESSIONS AND SOME SUBSIDIES LIKE TRANSPOR T SUBSIDY AND CAPITAL SUBSIDY WERE ALSO PROVIDED TO VARIOUS INDUSTRIES IN THE HIL LY STATED COMPRISING STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EAS TERN STATES TO BOOST THE ECONOMIES OF THESE HILLY STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9.2003 IN THIS RESPECT AND THE CIRCULAR READS AS UNDER:- CIRCULAR NO. 7/2003 DATED 05.09.2003 49. NEW PROVISIONS ALLOWING A TEN YEARS TAX HOLIDAY IN RESPECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRAD ESH, SIKKIM, 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 STA TES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STAT ES, IN ORDER TO GIVE BOOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80-IC HA S BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FROM TH E PROFITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HI MACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES . 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 UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN THE THIRTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, OR INTEGRATED INFRASTRUCTUR E DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ES TATE, OR INDUSTRIAL PARK, OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL ARE A OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH R ULES PRESCRIBED IN THIS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABL E TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH SCHEDULE . 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH- EASTERN STATES SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT YEARS. THE AMOUNT OF DEDUCTION IN CA SE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTARA NCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFIT S OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND THEREAFT ER TWENTY-FIVE PER CENT (THIRTY PER CENT FOR COMPANIES ) FOR THE N EXT FIVE ASSESSMENT YEARS. 29 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 O F DEDUCTION UNDER THIS SECTION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURT HER, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDU CTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHA PTER VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PROFITS A ND 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. F URTHER, A NEW FOURTEENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH S PECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST SECTOR IN DUSTRIES, WHICH ARE ELIGIBLE FOR THE PURPOSES OF AVAILING DEDUCTION UND ER THIS SECTION. CONSEQUENT TO THESES AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION(4) OF SECTION 80-IB HAVE BEEN MADE INOPERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN TH E STATE OF HIMACHAL PRADESH OR IN NORTH-EASTERN REGION INCLUDI NG 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 ASSESSM ENT YEAR 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 CABINET. THE CIRCULAR FURTHER CLARIFIES THAT THIS SECTION PROVIDES FOR DEDUCTION FOR A PERI OD OF 10 YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKI NG OR ENTERPRISE ON THEIR SUBSTANTIAL EXPANSION (SEE HIGHLIGHTED PORTION OF T HE CIRCULAR). THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT WORD EXIS TING QUALIFIES ONLY THE UNDERTAKING OR ENTERPRISES AND DOES NOT MENTION ANY PARTICULAR DATE FOR CARRYING OUT SUBSTANTIAL EXPANSION. WE FIND NO MERIT IN THIS CONTENTION. THE WORD EXISTING 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 30 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 STI LL EXIST IN THE WILD. ON HIS RETIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUPPORT VICTIMS OF CRIME. 2- (ON STH) TO LIVE, ESP ECIALLY IN A DIFFICULT SITUATION OR WITH VERY LITTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING THE ABOVE DEFINITION CLEARLY SHOWS THAT EXIST WOU LD REFER TO SOMETHING WHICH IS IN FORCE PRESENTLY. EXIST WOULD GENERALLY AND IN COM MON SENSE REFERS TO SOMETHING WHICH IS ALREADY THERE. WITH REFERENCE TO THIS PROV ISION, THIS WOULD REFER TO AN UNDERTAKING WHICH WAS ALREADY PRESENT ON THE DATE W HEN THIS PROVISION WAS INTRODUCED. IN ANY CASE THE NOTIFICATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POL ICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZETTE OF INDIA REMOVED ALL THE D OUBTS. THIS NOTIFICATION IS RELEVANT BECAUSE THIS WAS ISSUED WITH REFERENCE TO SAME PACK AGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEVELOPMENT OF THE HILLY S TATES. SECTION 5, READS AS UNDER;- DEFINITIONS: .. .. EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 7 TH JANUARY 2003. . . 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 NOTE D EARLIER, SUB SECTION (2) IS ENABLING PROVISION WHICH PROVIDES FOR DEDUCTION IN CERTAIN KIND OF UNDERTAKINGS, I.E. NEW UNIT SET UP OR THE EXISTING UNITS WHICH CA RRIES OUT SUBSTANTIAL EXPANSION DURING THE PARTICULAR WINDOW 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 NOTE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FOR 100 % DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUSE (A) AND SUB 31 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 STATE OF SIKKIM AND NORTH-EASTER STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL. NOW CLAUSE (II) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION ON SUCH PROFITS FOR FIVE ASSESSM ENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. THEREFORE, IT I S ABSOLUTELY CLEAR THAT IN CASE OF STATE OF SIKKIM AND NORTH-EASTERN STATES, LEGISLATU RE WAS VERY CLEAR THAT IN CASE OF NEW UNDERTAKING OR IN CASE OF SUBSTANTIAL EXPANDED UNDERTAKING DEDUCTION IS TO BE ALLOWED @ 100% FOR WHOLE OF THE TEN YEARS WHEREA S 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 ONL Y 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EXPAN SION SEPARATELY THEN THE RATE OF DEDUCTION IN THE CLAUSE (I) & (II) OF SUB SECTIO N (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 THE STA TE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FOR FIRST FI VE YEARS AND THEREAFTER 25% FOR NEXT FIVE YEARS. THE CONCEPT OF SUBSTANTIAL EXPAN SION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES OF STATES I.E STATE OF S IKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACHAL PRADESH AND UTTRANCHAL. IF THE E XTENDED BENEFIT OF SUBSTANTIAL EXPANSION WAS TO BE SEPARATELY ALLOWED IN CASE OF S TATE OF HIMACHAL PRADESH AND STATE OF UTTARANCHAL, THEN MEANING OF SUBSTANTI AL EXPANSION AS GIVEN UNDER SUB SECTION (2) WHICH IS SAME FOR THE STATE OF SIKK IM AND 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 IT BECOME ABSOLUTELY CLEAR THAT RATE OF DEDUCTION HAS TO BE 100% FOR FIRST 5 YEARS AND 2 5% 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 ADOPT ED THEN SUB SECTION (4) OF SECTION 80IC WOULD ALSO BECOME REDUNDANT. SUB SECTI ON (4) CLEARLY PROVIDES THAT THE DEDUCTION IS AVAILABLE TO ANY UNDERTAKING OR ENTERPRISE WHICH IS NOT FORMED BY SPLITTING OR RECONSTRUCTION OF THE BUSINE SS ALREADY IN EXISTENCE OR IT IS NOT FORMED BY TRANSFER TO NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLANATION TO THIS SUB SE CTION MAKES IT CLEAR THAT 32 EXPLANATION 1 & 2 OF SUB SECTION (3) OF SECTION 80I A ARE APPLICABLE IN THIS RESPECT. EXPLANATION 2 OF SUB SECTION (3) OF SECTION 80 IA R EADS AS UNDER: EXPLANATION 2- WHERE IN THE CASE OF AN [UNDERTAKIN G], ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TO TAL VALUE OF THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLA NT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH. FROM THE ABOVE IT BECOMES CLEAR THAT IF 20% OF THE MACHINERY FROM THE OLD UNIT WAS USED IN THE NEW UNIT THEN SUCH UNIT WOULD NOT B E ELIGIBLE FOR DEDUCTION UNDER THIS SECTION THAT IS SECTION 80IC. NOW FOR CA RRYING OUT SUBSTANTIAL EXPANSION THE INVESTMENT IN PLANT & MACHINERY IS REQUIRED TO BE MADE BY ATLEAST 50%. SO IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN I T WILL VIOLATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPRETATION CANVASSE D ON BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80IC(4) WOULD BECOME R EDUNDANT AND SUCH AN INTERPRETATION IS NOT POSSIBLE. 35. FURTHER, SUB SECTION (6) PROVIDES THAT IN NO CA SE THE TOTAL PERIOD OF DEDUCTION COULD EXCEED THE PERIOD OF 10 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 RESTRICTION IN CAR RYING OUT OF SUBSTANTIAL EXPANSION IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARRIED OUT ANY NUMBER OF TIMES. IF THIS INTERPRETATION IS ACCEPTE D THEN SUB SECTION (6) WOULD BE RENDERED OTIOSE OR MEANINGLESS BECAUSE IF A UNIT WA S SET UP ON THE COMMENCEMENT OF THIS SECTION AND THE SAME CLAIMS D EDUCTION @ 100% AND LATER ON EVERY FIVE YEARS A SUBSTANTIAL EXPANSION I S CARRIED OUT THEN ACCORDING TO THE INTERPRETATION CANVASSED ON BEHALF OF THE ASSES SEE, SUCH UNIT WOULD AGAIN BECOME ENTITLED TO 100% DEDUCTION FOR ANOTHER FIVE YEARS AND FURTHER BLOCK OF FIVE YEARS EVERY TIME SUBSTANTIAL EXPANSION IS CAR RIED OUT. IF THIS INTERPRETATION IS ADOPTED THEN DEDUCTION WOULD BECOME ALMOST PERCEPTU AL AS LONG AS THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE SUB SECTION (6) WOULD LOOSE ITS MEANING. SUCH AN UNLIMITED PERIOD O F DEDUCTION WOULD NOT BE IN CONSONANCE OF LAW. AT THE COST OF REPETITION, WE W OULD LIKE TO EMPHASIZE THAT NO PRINCIPLE OF INTERPRETATION CAN BE ADOPTED WHICH LEADS 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 CASE OF HYCRON ELECTRONICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE O F HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTION WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHICH HAS BEEN M ADE BEFORE US. IN CASE OF M/S MAHAVIR INDUSTRIES (ITA NO. 127/CHD/2011 AND IT A NO. 791/CHD/2012) THOUGH 33 THOSE CASES WERE ADJOURNED BECAUSE SOME OTHER ISSUE S WERE ALSO THERE BUT IN THOSE TWO CASES ASSESSEE HAD COMMENCED THE OPERATIO N ON 8.5.1997 AND CLAIMED DEDUCTION U/S 80IB FROM ASSESSMENT YEARS 1 998-99 TO 2005-06. LATER ON, SUBSTANTIAL EXPANSION WAS CARRIED OUT IN ASSESSMENT YEAR 2005-06 AND ON THE BASIS OF THE CONTENTION 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 THAT REFERENCE TO THESE CASES IS MA DE BECAUSE OF PARTICULAR CONTENTION AND WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THESE APPEALS HERE). THEREFORE, THE CONTENTION OF THE AS SESSEE THAT ANY NUMBER OF EXPANSIONS ARE ALLOWED IS NOT POSSIBLE IN VIEW OF T HE RESTRICTION GIVEN IN SECTION 80IC(6). 36. THE ABOVE SITUATION AS POINTED BY THE REVENUE A LSO BECOMES CLEAR IF THE PROVISION OF SECTION 80IC IS COMPARED TO THE PROVIS ION OF SECTION 80IB(4). RELEVANT PROVISION OF SECTION 80IB (4) READS AS UNDER:- (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECIFIED IN THE EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED F ROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WIT H 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 DER IVED FROM SUCH INDUSTRIAL UNDERTAKING: 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) S UBJECT TO FULFILLMENT OF THE CONDITION THAT IT BEGINS TO MANUFACTURE OR PROD UCE 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 RE FERRED 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 34 TO THE BACKWARD STATES WAS AVAILABLE IN TERMS OF SE CTION 80IB(4). THE THIRD PROVISO MAKES IT CLEAR THAT AFTER 31.3.2004, THIS D EDUCTION WILL BE AVAILABLE ONLY U/S 80IC. THE SUB SECTION FURTHER MAKES IT CLEAR T HAT DEDUCTION WOULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREAFTER @ 25%. FUR THER, THE FIRST PROVISO MAKES IT CLEAR THAT DEDUCTION WILL NOT EXCEED 10 CONSECUTIVE ASSESSMENT YEARS. THE SECOND PROVISO FURTHER MAKES IT CLEAR THAT IN THE C ASE OF STATES OF NORTH-EASTERN REGIONS, THE DEDUCTION WOULD BE @ 100% FOR ALL THE 10 YEARS. THUS, EVEN IN THE EARLIER PROVISION ONLY IN CASE OF NORTH-EASTER STAT ES, THE DEDUCTION OF 100% WAS ALLOWABLE FOR 10 YEARS WHEREAS IN THE CASE OF STATE S OF HIMACHAL PRADESH, THE DEDUCTION WAS ALLOWABLE @ 100% FOR FIRST FIVE YEARS AND 25% FOR NEXT FIVE YEARS. 38. FURTHER, IT SHOULD BE NOTED THAT SUB SECTION (6 ) STARTS WITH NON OBSTANTE CLAUSE AND THEREFORE, IN NO CASE THE DEDUCTION COUL D BE FOR PERIOD EXCEEDING 10 YEARS AND IN THIS REGARD WE MAY NOTE THAT EVEN T HE LD. AUTHORS IN THEIR COMMENTARY OF INCOME TAX LAWS BY CHATURVEDI & PITHI SARIAS - 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 TH E PERIOD OF DEDUCTION - UNDER SECTION 80-IC, OR - UNDER THE SECOND PROVISO TO SECTION 80-IB(4) OR - UNDER SECTION 10C AS THE CASE MAY BE, EXCEEDS 10 ASSESSMENT YEARS. 39. LASTLY, IT WAS CONTENDED THAT INITIAL ASSESSMEN T YEAR AS DEFINED IN CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC USES THE EXP RESSION OR THEREFORE, IT CAN BE CONSTRUED THAT IT RELATES TO BOTH SITUATIONS SEPARA TELY I.E. FOR NEW UNIT AND SUBSTANTIAL EXPANDED UNIT. WE FIND NO FORCE IN THI S CONTENTION. THE INITIAL ASSESSMENT YEAR HAS BEEN DEFINED AND THE EXPRESSION OR HAS BEEN USED IN RESPECT OF NEW UNITS BY STATING COMMENCES OPERATIO N OR COMPLETE SUBSTANTIAL EXPANSION. HERE THE EXPRESSION OR IS TO BE READ AS A MUTUALLY EXCLUSIVE EXPRESSION WHICH REFERS TO A PARTICULAR SITUATION B Y EXCLUDING THE OTHER SITUATION. THEREFORE, INITIAL ASSESSMENT YEAR WOULD CLEARLY CO MMENCE EITHER ON COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBST ANTIAL EXPANSION OF EXISTING UNIT. IN ANY CASE THE WORD INITIAL CAN NOT BE USED TWICE BY REFERRING TO SERIES OF EVENTS. THIS CAN BE UNDERSTOOD WITH A VER Y SIMPLE EXAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GE T EMPLOYED AS LEGAL OFFICER 35 IN AN ORGANIZATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROFESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE . THEN IN SUCH A SITUATION IT CANNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AND THEN INITIALLY HE WAS IN THE PROFESSION AND THEN ELEVATED AS A JUDGE. INITIALLY CAN BE USED ONLY ONCE AS A MATTER OF USAGE OF ENGLISH LANGUAGE. THER EFORE, READING OF THE ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGIS LATURE WAS VERY CLEAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE STATE OF HIMACHAL PRADESH (SINCE ALL THE CASES 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 CARRIED OUT. 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WITH REFEREN CE TO THE DECISION OF M/S NOVAPAN INDIA LTD VS COLLECTOR OF CENTRAL EXCISE AN D CUSTOMS (SUPRA) BY THE REVENUE IS NOT CORRECT BECAUSE THAT PROVISION WAS R ENDERED UNDER INDIRECT TAX ACT. WE FIND NO FORCE IN THESE SUBMISSIONS. EVERY D ECISION OF THE HON'BLE SUPREME COURT OR FOR THAT MATTER OF ANY HIGH COURT HAS TO B E SEEN FOR THE RATIO LAID DOWN IN A PARTICULAR DECISION AND IT DOES NOT MATTER UND ER WHICH PARTICULAR ACT SUCH PRINCIPLES HAS BEEN DECIDED. NO DOUBT THE INCENTIV E PROVISIONS ARE REQUIRED TO BE INTERPRETED LIBERALLY BUT IN CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR 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, T HE BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE MANUFACTUR ER AND THE ENTRY MUST BE CONSTRUED AS TAKING IN THE MFPBS AS W ELL. 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 LE ARNED CHIEF JUSTICE THEN WAS) AND S.C AGRAWAL, J. STATED THE RE LEVANT PRINCIPLE IN 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 SUPP ORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION H AVE A TENDENCY TO INCREASE THE BURDEN ON THE OTHER UN-EXEMPTED CLA SS OF TAX PAYERS AND SHOULD BE CONSTRUED AGAINST THE SUBJECT IN CASE OF AMBIGUITY. IT IS AN EQUALLY WELL KNOWN PRINCIPLE THAT A PERSON WH O CLAIMS AN EXEMPTION HAS TO ESTABLISH HIS CASE. INDEED, IN THE VERY CASE OF PARLE EXPORTS (P) LTD. RELIED UPON BY SHRI NARASIMH AMURTHY, IT WAS OBSERVED. 36 WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VI OLENCE IS DONE TO THE LANGUAGE EMPLOYED. IT MUST, HOWEVER, BE BORN E IN MIND 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 LEG ISLATURE MANIFEST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPRETATIVE PROCESS ARISES ONLY WHERE THE MEANIN G IS NOT MANIFEST ON THE PLAIN WORDS OF THE STATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY THE MEANING, THERE IS NOT NEED FOR ANY INTERPRETATION. WE ARE, HOWEVER, OF THE OPINION THAT, ON PRINCIPLE , THE DECISION OF THE COURT IN MANGALORE CHEMICALS AND IN UNION OF INDIA V. WOOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW OF LAW. THE PRINCIPLE THAT IN CASE OF AMBIGUITY, A TAXING STATU TE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASSUMING THAT THE SAID PRINCIPLE IS GOOD AND SOUND- DOES NOT APPLY TO THE CONSTRUCTI ON OF AN EXCEPTION OR AN EXEMPTING PROVISION; THEY HAVE TO B E CONSTRUED STRICTLY. A PERSON INVOKING AN EXCEPTION OR AN EXEM PTION PROVISION TO RELIEVE HIM OF THE TAX LIABILITY MUST ESTABLISH CLE ARLY THAT HE IS COVERED BY THE SAID PROVISION. IN CASE OF DOUBT OR AMBIGUIT Y, BENEFIT OF ITS MUST GO TO THE STATE. THE HONBLE SUPREME COURT IN ORISSA STATE WAREHOUSI NG CORPORATIONS CASE (SUPRA) HAS LAID DOWN THAT WHIL E IT IS TRUE THAT IN THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL STATUTE, THE SAME GOES IN FAVOUR OF THE AS SESSEE, BUT THE FACT REMAINS AND THE LAW IS WELL-SETTLED ON THIS SCORE T HAT IN THE MATTER OF INTERPRETATION OF THE TAXING STATUTES THE LAW COURT S WOULD NOT BE JUSTIFIED IN INTRODUCING SOME OTHER EXPRESSIONS WHI CH THE LEGISLATURE THOUGHT FIT TO OMIT. IN THE PRESENT CONTEXT, THERE IS NO DOUBT AS TO THE MEANING OF THE WORDS USED IN THE SECTION BY REASON OF THE LANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN ASCERTAINI NG THE STATUTORY INTENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTI ON 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 O R EVEN WITH A WIDER CONNOTATION. 41. THEREFORE, IT BECOMES CLEAR THAT LIBERAL INTERP RETATION OF AN INCENTIVE PROVISION IS POSSIBLE IF THERE IS ANY DOUBT. AS WE HAVE SEEN ABOVE THAT IF VARIOUS SUB SECTIONS OF SECTION 80IC ARE READ CAREFULLY IT LEAVES NO DOUBT THAT DEDUCTION WAS MEANT ONLY FOR NEW UNITS OR IN CASE OF OLD UNIT S IF SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH OLD UNITS AND DEDUCTION WAS AVA ILABLE ONLY FOR A PERIOD OF 10 YEARS. THEREFORE, THERE IS NO QUESTION OF GIVING A NY INTERPRETATION MUCH LESS LIBERAL INTERPRETATION TO SECTION 80IC WHEN THE REA DING OF WHOLE SECTION MAKES THE PROVISION VERY CLEAR. AS OBSERVED IN CASE OF M /S NOVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) THE BURDEN WAS ON THE ASSESSEE TO SHOW UNDER WHICH CLAUSE HE WAS ENTITLED TO THE D EDUCTION BUT ASSESSEE IS 37 SIMPLY ASSERTING BEFORE US THAT THERE IS NO RESTRIC TION FOR DEDUCTION IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION , THAT IS NOT ENOUGH BECAUSE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULA R DEDUCTION WAS ALLOWABLE. 42. WE ALSO FIND FORCE IN THE SUBMISSIONS OF LD. CI T-DR THAT IF INTERPRETATION GIVEN BY THE ASSESSEE IS TO BE ACCEPTED, THE PROVIS ION WOULD BECOME DISCRIMINATORY FOR TWO CLASSES OF UNDERTAKINGS I.E. NEW UNITS AND OLD UNITS. BECAUSE THE OLD UNITS WOULD BE ENTITLED TO 100% DE DUCTION ON EXPANSION FOR FIRST FIVE YEARS AND 25% THEREAFTER WHEREAS THE NEW UNITS WOULD BECOME ENTITLED TO DEDUCTION FOR 100% FOR FIRST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EXPANSION. SUCH DISCRIMINATORY 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 LIMI TED VS. DCIT(SUPRA). IN THIS DECISION, THE BENCH HAS SIMPLY OBSERVED THAT MAIN D ISPUTE IS ON THE DEFINITION OF INITIAL ASSESSMENT YEAR. THE PROVISIONS OF SUB SE CTION (2) AND SUB SECTION (3) AS DISCUSSED IN DETAIL ABOVE HAVE BEEN TOTALLY IGNORED AND, THEREFORE, THIS DECISION, IN OUR OPINION, IS PER INQUERIM AND CANNOT BE FOLLO WED. 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 80 IB IN ASSESSMENT YEAR 1999- 2000 @ 100% . THE DEDUCTION WAS CLAIMED @ 100% FOR FIVE YEARS AND THEN DEDUCTION WAS CLAIMED @ 30% ON THE PROFITS IN THE N EXT YEAR. THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION IN FINANCIAL YEARS 2004-05 & 2005-06 AND CLAIMED DEDUCTION AT THE RATE OF 100% ON THE BASIS OF SUCH SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 2006-07. HOWEVER, THE DEDUCTION WAS WRONGLY CLAIMED U/S 80IB INSTEAD OF SECTION 80IC. THE CIT(A) ALLOWED T HE DEDUCTION BY OBSERVING THAT DEDUCTION COULD NOT BE DENIED SIMPLY BECAUSE ASSESS EE HAS QUOTED A WRONG SECTION. ON THE APPEAL FILED BY REVENUE, THE DEDUC TION WAS HELD TO BE ALLOWABLE BECAUSE SUBSTANTIAL EXPANSION WAS CARRIED OUT IN A UNIT WHICH WAS ALREADY IN EXISTENCE AS ON 7.1.2003. THEREFORE, IN OUR OPINION, THIS DECISION DOES NOT PROVIDE ANY ASSISTANCE TO THE CASE OF THE ASSES SEE. 45. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (SUPRA). THE FACTS IN THAT CASE ARE THAT A PARTNERSHIP FIRM NAMELY M/S. HIMACHAL POWER PRODUCTS WAS FORMED ON 23.05.20 09. 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 FACILITY BY UNDERTAKING SUBSTANTIAL E XPANSION SOUGHT ADVANCE RULING ON THE ISSUE WHETHER THE INTRODUCTION OF NEW PARTNER WOULD BE TREATED AS RECONSTRUCTION OF THE EXISTING BUSINESS OR THE FIRM WILL BE ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION AS PER THE PROVISIONS OF SECT ION 80IC(2)(A)(II) IF IT STARTS 38 COMMERCIAL PRODUCTION BEFORE 01.04.2012. THE AUTHOR ITY HELD THAT THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSIO N IN TERMS OF AND TO THE EXTENT PROVIDED BY SECTION 80IC OF THE ACT IF IT STARTS CO MMERCIAL PRODUCTION IN THE SUBSTANTIALLY EXPANDED UNIT BEFORE 01.04.2012. IN T HIS 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 DEDUC TION 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 EXISTE NCE. HOWEVER, THE QUESTION WHETHER THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION OF 100% OF ITS PROFIT EVEN AFTER A.Y. 2014-15 I.E. FOR 2 MORE YEARS BEYOND A.Y . 2014-15 IS LEFT OPEN AND NOT DECIDED BY THE AAR. THEREFORE THIS DECISION IS TOTA LLY 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 WAS A LLOWED 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 SECTION 263 AND IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF MALABAR INDUSTRIES CO LTD V CIT 243 ITR 83 (SC) HELD THAT SINCE VIEW TAKEN BY THE ASSESSING OFFICER IS ALSO POSSIBLE VIEW, THEREFORE, ASSESSMENT ORDER WAS NOT ERRONEOUS. IN F ACT THE BENCH REFERRED TO THE DECISION OF DELHI BENCH IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) WITHOUT CONSIDERING THE PROVISION OF SECTIO N 80IC IN DETAIL FOR REACHING THE CONCLUSION THAT IT IS ONE OF THE POSSIBLE VIEW. SI NCE WE HAVE ALREADY DISCUSSED THE DECISION OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) AND FOUND THAT ALL THE PROVISIONS OF THE SECTION WERE NOT DISCUSSED IN THAT 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,- 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 OF COMMENCEMENT OF PRODUCTION OR MANUFACTUR E OF ARTICLE OR THING. :--------------------- (D) IF THE EXISTING BUSINESS HAS UNDERTAKEN SUBST ANTIAL EXPANSION, PLEASE SPECIFY,- :------------ ---------- 39 (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 MANUFACTUR E 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 LOCATION OF THE INDUSTRY AND COLUMN (C) SPECIFICALLY ASK THE ASSESSEE TO STATE WHETHER BUS INESS IS A NEW BUSINESS? COLUMN (D) CLEARLY ASK THE ASSESSEE WHETHER EXISTING BUSINESS HAS UNDE RTAKEN 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 CORRECTLY 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. 798/CHD/2 012 IS ENTITLED TO ONLY 25% OF DEDUCTION DURING THE PRESENT YEAR BECAUSE THE ASSE SSEE 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 THIS BACKGROUND, WE FI ND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE UPHOLD THE SAME. ACCORD INGLY, ASSESSEES APPEAL IS DISMISSED. 50. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 6. CONSIDERING THE SUBMISSION OF THE LD. DR IN THE LIGHT OF THE FACTS OF THE CASE AND IN THE LIGHT OF DECISION OF THE TRIBUNAL IN THE CASE OF HYCRON ELECTRONICS (SUPRA) WE ARE OF THE VIEW THAT ISSUE IS COVERED AG AINST THE ASSESSEE FOR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT BY THE ORDE R IN THE CASE OF HYCRON ELECTRONICS (SUPRA). 40 7. FURTHER THE LD. CIT SPECIFICALLY NOTED IN THE IM PUGNED ORDER THAT AO HAS NOT EXAMINED THIS ISSUE IN THE LIGHT OF LIGHT OF TH E MATERIAL ON RECORD AND IN ACCORDANCE WITH LAW. THEREFORE LD. CIT WAS JUSTIFIE D IN HOLDING THE ASSESSMENT ORDER TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO T HE INTEREST OF REVENUE. AS REGARDS THE INTEREST PAID TO THE PARTNERS, THE SUPP LEMENTARY DEED WAS FOUND TO HAVE BEEN FILED FOR THE FIRST TIME BEFORE CIT AND N O SUPPLEMENTARY DEED WAS AVAILABLE ON THE RECORD OF THE AO. SIMILARLY AO DID NOT EXAMINE THE ISSUE OF ADVERTISEMENT EXPENSES THEREFORE LD. CIT WAS JUSTIF IED IN HOLDING THAT ASSESSMENT ORDER WAS ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. IT IS WELL SETTLED LAW WHEN THE AO HAS NOT EXAMINE ABOVE ISSUE S AT ASSESSMENT STAGE AND HAS NOT APPLIED HIS MIND TO FACTS THEREFORE LD. CIT WOULD BE JUSTIFIED IN INVOKING JURISDICTION UNDER SECTION 263 OF THE INCOME TAX AC T. THE CASE LAW RELIED UPON BY THE LD. CIT IN THE IMPUGNED ORDER CLEARLY SUPPOR T HIS FINDINGS. IN THIS VIEW OF THE MATTER, WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE ASSESSEE THE SAME IS THEREFORE DISMISSED. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (RANO JAIN) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :23/05/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR
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