Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 90183 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 1 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-05-2015
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
06-04-2015
Assessment Year
2010-2011
Appeal Filed On
09-04-2014
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A & B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 798/CHD/2012 (B BENCH) ASSESSMENT YEAR: 2009-10 HYCRON ELECTRONICS, VS. THE ITO BADDI, SOLAN WARD 2 BADDI PAN NO. AADFH1249K (APPELLANT) (RESPONDENT) ITA NO. 374/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2010-11 HYCRON ELECTRONICS, VS. THE ITO BADDI, SOLAN BADDI PAN NO. AADFH1246K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PAVAN VED RESPONDENT BY : SMT. JYOTI KUMARI ITA NO. 866/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2010-11 M/S STOVE KRAFT INDIA, VS. THE DCIT VILL- BURANWALA CIRCLE SOLAN, HP PARWANOO, HP PAN NO. AAZFS6497G (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 867/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2011-12 M/S STOVE KRAFT INDIA, VS. THE JCIT VILL- BURANWALA SOLAN,HP SOLAN, HP PAN NO. AAZFS6497G (APPELLANT) (RESPONDENT) 2 APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 868 & 869/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2010-11& 2011-12 M/S VANSER METALLICS, VS. THE ITO BADDI BADDI SOLAN, HP PAN NO. AAEF7622H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 895/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2007-08 M/S SANSUI ELECTRONICS, VS. THE DCIT PARWANOO CIRCLE PARWANOO PAN NO. AACFS7773F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 896/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2010-11 M/S SANSUI ELECTRONICS, VS. THE ITO PARWANOO PARWANOO PAN NO. AACFS7773F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 897/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2011-12 M/S SANSUI ELECTRONICS, VS. THE ITO PARWANOO PARWANOO PAN NO. AACFS7773F (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA 3 RESPONDENT BY : SMT.JYOTI KUMARI ITA NO. 782/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2010-11 LYON DC, VS. THE ITO PARWANOO PARWANOO PAN NO. AABFL8891P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER BABBAR RESPONDENT BY : SH. MANJIT SINGH ITA NO. 783/CHD/2014 (A BENCH) ASSESSMENT YEAR: 2011-12 LYON DC, VS. THE DCIT PARWANOO CIRCLE PARWANOO PAN NO. AABFL8891P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER BABBAR RESPONDENT BY : SH. MANJIT SINGH APPELLANT BY : SH. PAVAN VED RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 175 & 176/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2010-11& 2011-12 CUTTING EDGE TECHNOLOGIES, VS. THE ACIT BADDI, SOLAN SOLAN RANGE HP SOLAN (HP) SHIMLA PAN NO. AADFC9018P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PAVAN VED RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 185/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2010-11 M/S UPS INVERTOR. COM, VS. THE ITO PARWANOO PARWANOO SOLAN 4 PAN NO. AABFU7064R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 195/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2010-11 SH. RAKESH VERMA, VS. THE ITO PARWANOO PARWANOO SOLAN PAN NO. AADPV5591N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 776 & 777/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2010-11& 2011-12 USAKA ELECTRICALS, VS. THE ITO PARWANOO PARWANOO PAN NO. AABFU7064R (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SURINDER BABBAR RESPONDENT BY : SH. MANJIT SINGH ITA NO. 780/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2011-12 M/S DIGITAL SYSTEMS INC., VS. THE ITO BADDI, SOLAN BADDI PAN NO. AAEFD8241L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. VISHAL MOHAN RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 1007/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2011-12 ADMAC FORMULATIONS, VS. THE ITO PANCHKULA WARD 1 5 PANCHKULA PAN NO. AAAAA5219Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TEJ MOHAN SINGH RESPONDENT BY : DR. AMARVEER SINGH ITA NO. 1051/CHD/2014 (B BENCH) ASSESSMENT YEAR: 2010-11 SH. VIPAN GUPTA, VS. THE ITO BADDI, SOLAN BADDI PAN NO. ABXPG0206E (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 06/04/2015 DATE OF PRONOUNCEMENT : 27/05/2015 ORDER PER BENCH THIS IS GROUP OF 20 APPEALS ALL FILED BY THE DIFFER ENT ASSESSEES AGAINST THE SEPARATE ORDERS OF CIT(A). 2. SINCE IDENTICAL ISSUES HAVE BEEN RAISED IN ALL T HE APPEALS AND THESE WERE HEARD TOGETHER, THE SAME ARE BEING DISPOSED OF BY T HIS COMMON AND CONSOLIDATED ORDER. ITA NO. 798/CHD/2012 3. FIRST WE SHALL TAKE THE APPEAL OF THE ASSESSEE I N 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:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER DATED 11.06.2012 PASSED BY THE LD. CIT(APPEALS), SHIMLA U /S 250(6) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW, ILLEGAL, WITHOUT JURIS DICTION AND VOID. 6 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(APPEALS), SHIMLA HAS ERRED IN: I. AFFIRMING THE ORDER OF LD. ITO, WARD-2, SOLAN IN RE STRICTING THE CLAIM OF APPELLANT OF DEDUCTION U/S 80-IC OF THE INCOME T AX ACT, 1961 AT 25%I INSTEAD OF 100% CLAIMED BY THE APPELLANT IN TH E SIXTH YEAR OF OPERATION OF NEW INDUSTRIAL UNDERTAKING OF THE APPE LLANT WHEREIN SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH NEW I NDUSTRIAL UNDERTAKING BY THE APPELLANT. II. 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 BENEFIT OF 100% DEDU CTION U/S 80-IC OF THE ACT FOR FIRST FIVE YEARS IN CASE OF SUBSTANTIAL EXPANSION IS AVAILABLE ONLY TO THE UNITS THAT EXISTED AND WERE OPERATIONAL AS ON 07.01.2003 AND SUCH BENEFIT IS NOT AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTER THE INTRODUCTION OF THE SCHEME OF SUCH DEDUCTION. III. UPHOLDING THAT ONCE AN INITIAL ASSESSMENT YEAR IS DETERMINED IN CASE OF AN UNDERTAKING CLAIMING BENEFIT U/S 80-IC OF THE ACT IT CANNOT BE CHANGED EVEN IF SUCH UNDERTAKING COMPLETES SUBSTANT IAL EXPANSION AND AGAIN QUALIFIES FOR DEDUCTION UNDER THE SAID SECTIO N ON THE BASIS OF QUALIFYING EXPANSION. IV. MAKING A NARROW INTERPRETATION OF THE PROVISION OF SECTION 80-IC OF THE INCOME TAX ACT, 1961 WHICH WAS INTRODUCED AS A WELF ARE LEGISLATION FOR PROVIDING STIMULUS TO THE ECONOMY OF INDUSTRIAL LY BACKWARD STATES SUCH AS HIMACHAL PRADESH. 5. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FI RM WAS ENGAGED IN THE BUSINESS OF MANUFACTURING ASSEMBLY AND SUB-ASSEMBLY OF ELECT RONIC ENERGY METERS AND ALLIED PRODUCTS. THE UNIT STARTED COMMERCIAL PRODUC TION FROM 17.1.2004. THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IC ON THE PROD UCTS OF THIS UNIT @ 100% FROM ASSESSMENT YEARS 2004-05 TO 2008-09. SUBSEQUENTLY, DURING FINANCIAL YEAR 2008- 09, THE ASSESSEE FIRM UNDERTOOK SUBSTANTIAL EXPANSI ON BY WAY OF ADDITION TO PLANT AND MACHINERY BY MORE THAN THE PRESCRIBED LIMIT, TH EREFORE, ASSESSEE AGAIN STARTED CLAIMING DEDUCTION U/S 80IC FROM ASSESSMENT YEAR 20 09-10 (I.E; THE YEAR BEFORE US) @ 100%. 7 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 80IC. IT WAS POINTE D OUT THAT SUBSTANTIAL EXPANSION IS APPLICABLE TO UNITS WHICH WERE IN EXIS TENCE 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 SUBSTANTIAL EXPANSION ARE NOT ELIGIBLE TO CLAIM DEDUCTION U/S 8 0IC. 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 YE AR 2003-04 I.E. RELEVANT TO THE ASSESSMENT YEAR 2004-05. THUS 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 IN THE SUBSEQUENT ASSESSMENT YEAS I.E. 2005-06, 2006-07, 2007-08 AND 2008-09. THE ASSESSMENT FOR THESE YEARS WERE DE CIDED UNDER 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 THE I.T. AC T. IN THIS REGARD, IT MAY BE SUBMITTED THAT THE SECTION 80IC WAS INSERTED BY THE FINANCE ACT 2003 W.E.F. 01.04.2004 I.E. RELEVANT TO THE ASSESSMENT YEAR 200 5-06 AND ONWARDS THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WH ICH HAS BEGUN OR BEINGS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING NOT BEI NG 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 SU CH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS CONNECTING WITH THE INITIAL A SSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE 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. 8 0-IC, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDU CTION UNDER THIS SECTION OF UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF 8 SECTION 80-IB OR UNDER SECTION 10-C, AS THE CASE MA Y BE EXCEEDS 10 ASSESSMENT YEARS. FURTHER INITIAL ASSESSMENT YEAR HAS BEEN DEFINED IN THE ACT AS INITIAL ASSESMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT T O THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUF ACTURE OR PRODUCE ARTICLES OR THINGS OR COMMENCES OPERATION OR COMPLE TES SUBSTANTIAL EXPANSION. AS ALREADY STATED, THE ASSESSEE UNIT AFTER CLAIMING 100% DEDUCTION U/S 80IA/80IB OF THE I.T. ACT FOR 5 ASSESSMENT YEARS CA ME FOR SUBSTANTIAL EXPANSION IN THE ASSESSMENT YEAR 2009-10 WHICH IS T HE YEAR UNDER ASSESSMENT. THUS THIS THE FIRST YEAR OF CLAIMING 100% DEDUCTION FOR SUBSTANTIAL EXPANSION AS PER PROVISIONS OF SECTION 80 IC. THE UNDERTAKING IS THUS ENTITLED TO CLAIM 100% DEDUCTION U/S 80IC OF THE I.T. ACT FOR THE NEX T 5 ASSESSMENT YEARS PROVIDED THAT THE OVERALL PERIOD OF CLAIM OF DEDUCT ION DOES NOT EXCEED 10 ASSESSMENT YEARS. AS PER PROVISIONS OF SECTION 80IC , 100% DEDUCTION IS AVAILABLE FOR 5 ASSESSMENT YEARS COMMENCING WITH TH E INITIAL ASSESSMENT YEAR AND THEREAFTER 25% IN THE NEXT 5 AS SESSMENT YEARS .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 EXP ANSION. THUS IT MAKES IT CLEAR THAT 100% DEDUCTION IS AVAIL ABLE TO AN UNDERTAKING OR ENTERPRISE IN THE CASE OF ITS STARTING MANUFACTURIN G 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 IT S PRODUCTION. SIMILARLY IN THE CASE OF SUBSTANTIAL EXPANSION, THE INITIAL ASSE SSMENT YEAR WOULD START FROM THE YEAR WHEN SUBSTANTIAL EXPANSION IS COMPLETED. I N SUCH CASES, THE ASSESEE WOULD NOT BE ENTITLED FOR THE CLAIM OF ANY DEDUCTIO N BEYOND A PERIOD OF 10 ASSESSMENT YEARS AS IT HAD ALREADY AVAILED 100% DED UCTION FOR 10 ASSESSMENT YEARS AS PER THE PROVISIONS OF SECTION 80-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 REFERRE D 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 CONCLUDED THAT ON THE BASIS OF THESE TWO CIRCULARS IT IS VERY CLEAR THAT SUBSTANTI AL EXPANSION COULD BE CARRIED ONLY 9 BY THE EXISTING UNITS. HE ALSO REFERRED TO THE PROV ISIONS OF CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC WHICH DEFINES INITIAL ASSESSMEN T YEAR. ACCORDING TO HIM, THIS SECTION MAKES IT CLEAR THAT THERE COULD BE ONLY ONE INITIAL ASSESSMENT YEAR FOR CLAIMING OF BENEFIT U/S 80IC. HE ALSO REFERRED TO S UB-SECTION (6) OF SECTION 80IC WHICH PRESCRIBED THE OVERALL LIMIT FOR DEDUCTION WH ICH WAS 10 YEARS. ON THE BASIS OF THE ABOVE ANALYSIS THE ASSESSING OFFICER CONCLUD ED 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 ONLY TO THE E XISTING UNITS I.E. THE UNITS THAT EXISTED AND WERE OPERATIONAL 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 OF THE SCHEME I.E. 07.01.200. KEEPING THE ABOVE DISCUS SION IN MIND, THE ASSESSEES CLAIM OF SUBSTANTIAL EXPANSION AND ON TH AT BASIS, RECKONING 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 IN WHIC H THE ASSESSEE FIRM HAD COMMENCED ITS BUSINESS OPERATION / ACTIVITY ON THE BASIS OF SETTING UP OF ITS NEW INDUSTRIAL UNDERTAKING IS HELD TO BE THE INITIA L ASST. YEAR AND THAT OF ASST. YEAR 2009-10 TO BE THE SIXTH ASST. YEAR FOR CLAIM O F DEDUCTION U/S 80-IC OF THE ACT AT THE RATE OF 25% OF ITS BUSINESS PROFITS. THE ASSESSEE FIRM SHALL NOT BE ALLOWED THE BENEFIT OF 100% DEDUCTION ON ITS PRO FITS 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 INITIAL ASSESS MENT YEAR, IT BECOMES AMPLY CLEAR THAT ASSESSEE WAS ELIGIBLE FOR 100% DEDUCTION FROM ASSESSMENT YEAR 2009-10. IN ANY CASE THERE WAS NO PROVISION RESTRICTING THE DED UCTION OF 100% ONLY TO 5 YEARS EXCEPT SUB-SECTION (6) OF SECTION 80IC WHICH ONLY P ROVIDES THAT TOTAL PERIOD OF DEDUCTION SHOULD NOT EXCEED 10 YEARS. IT WAS FURT HER CONTENDED THAT BENEFIT OF DEDUCTION U/S 80IC WAS AVAILABLE NOT ONLY TO PRE-EX ISTING UNIT ON THE DAY OF INTRODUCTION OF THIS SECTION WHICH UNDERTOOK SUBSTA NTIAL EXPANSION BUT THE SAME WAS AVAILABLE TO ANY UNIT WHICH WAS ENGAGED IN MANU FACTURING ACTIVITY AND UNDERTOOK SUBSTANTIAL EXPANSION DURING THE PIEORD B EGINNING OF 7TH DAY OF JANUARY 10 2003 AND ENDING BEFORE IST APRIL 2012. THE SECTION NOWHERE PROVIDES THAT BENEFIT OF 100% DEDUCTION IN THE CASE OF SUBSTANTIAL EXPANS ION SHALL BE AVAILABLE TO THE UNITS WHICH WERE ALREADY IN EXISTENCE AT THE TIME O F 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 WHICH UNDERTAKE SUB STANTIAL 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 Y EARS. THEREFORE, THE PROVISION OF SECTION 80IC SHOULD BE CONSTRUCTED HARMONIOUSLY. IN ANY CASE IF THERE WAS SOME AMBIGUITY THE PROVISION SHOULD BE LIBERALLY CO NSTRUED SO AS TO ADVANCE THE EXEMPTION PROVISION. IN THIS REGARD RELIANCE WAS P LACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD 196 IT R 188 (SC), CIT V KULLU VALLEY TRANSPORT CO. P. LTD. 77 ITR 518 (SC) AND M YSORE 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 LANGUAGE USED IN THE CENTRAL EXCISE ACT WAS DIFFERENT FROM THE LANGUAGE USED IN SECTION 80I C. 11 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 CABINET FOR THE STATE OF SIKKIM, HIMACHAL PRADESH, UTTARANCHAL AND NORTH-EASTERN STATES. THIS INCENTIVE SCHEME PROVIDE FOR BENEFITS UNDER INCOME TAX ACT AND CENTRAL EXCISE, C APITAL INVESTMENT SUBSIDY AND TRANSPORT SUBSIDY ETC. THE BENEFIT UNDER INCOME TAX WERE PROVIDED IN SECTION 80IC TO NEW UNITS COMMENCING MANUFACTURING ON OR AF TER 7 JANUARY OF 2003 OR TO THE EXISTING UNITS INVOLVING SUBSTANTIAL EXPANSION AFTER THAT DATE ELIGIBLE FOR SUCH INCENTIVE. THE LD. CIT(A) THEREAFTER REFERRED TO PARA NO. 49 OF CIRCULAR NO. 7/2003 ISSUED BY THE BOARD ON 5.9.2003. ACCORDING TO HER THE PLAIN READING OF SECTION 80IC ALONG WITH CIRCULAR MADE IT ABUNDANTLY CLEAR THAT SPECIAL PROVISION OF SECTION 80IC WERE APPLICABLE TO TWO KINDS OF UNDER TAKING OR ENTERPRISES WHICH ARE AS UNDER:- I) ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OF PRODUCE ANY ARTICLE OR THING, SPECIFIED IN THE T HIRTEENTH SCHEDULE /OR HAS BEGUN OR BEGINS TO MANUFACTURE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE, WHICH MEANS A NEW UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY S PECIFIED ARTICLES OR THING 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 THING SPECIFIED IN THE THIRTEENTH SCHEDULE OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE, WHICH MEANS AN ALREADY EXISTIN G (PRIOR TO 7 TH DAY OF JAN., 2003) UNDERTAKING OR ENTERPRISE WHICH WAS MAN UFACTURING 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 ENTERPRISES (WHICH EXIS TED PRIOR TO THE ENACTMENT 12 OF SECTION 80IC) ON THE CONDITION THAT THEY UNDERTA KE SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING ON THE 7 TH DAY OF JAN., 2003 AND ENDING BEFORE THE 1SRT DAY OF APRIL, 2012 IN THE STATE OF HIMACHA L PRADESH AS PER THE CONDITIONS STIPULATED IN SECTION 80IC. HOWEVER, DED UCTION U/S 80IC IS ALSO AVAILABLE TO THE NEW UNDERTAKINGS OR ENTERPRISES WH ICH UNDERTAKE THE MANUFACTURE OR PRODUCTION OF THE SPECIFIED 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 ENTERPRISES DO NOT SUFFER FROM ANY HANDICAP MERELY ON ACCOUNT OF THE FACT TH AT THEY WERE EXISTING PRIOR TO THE INTRODUCTION OF SECTION 80IC. BUT TO M EET THE OBVIOUS GOAL OF ENCOURAGING INVESTMENT IN THE STATE OF HIMACHAL PRA DESH, THE CONDITION OF SUBSTANTIAL EXPANSION HAS BEEN MADE A PRE-REQUISITE FOR ALLOWING DEDUCTION U/S 80IC IN THE CASE OF OLD UNDERTAKINGS OR ENTERPR ISES. IT IS, HOWEVER, CLEAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UN DERTAKINGS OR ENTERPRISES MADE ELIGIBLE FOR DEDUCTION U/S 80IC. THESE ARE TWO DISTINCT CATEGORIES WITH DISTINCT CONDITIONS OF ELIGIBILITY LAID DOWN FOR DE DUCTION UNDER U/S 80IC. SINCE THE PRE-EXISTING UNITS CANNOT POSSIBLY CROSSO VER INTO THE ZONE OF NEW UNDERTAKINGS OR ENTERPRISES, THE NEW UNDERTAKINGS A LSO OBVIOUSLY CANNOT BE ALLOWED TO CROSS OVER INTO THE ZONE MEANT FOR THE O LD, PRE-EXISTING UNDERTAKINGS. THE RULES OF THE GAME HAVE TO BE THE SAME FOR ALL THE PARTICIPANTS OR STAKEHOLDERS. THE USE OF THE WORD OR IN CLAUSE (A) AND CLAUSE (B) OF SUB-SECTION (2) TO SECTION 80IC ALSO LEAVES NO DOUBT ABOUT THE FACT THAT THE PROVISIONS OF SECTION 80IC APPLY TO T WO DISTINCT TYPES OF UNDERTAKINGS 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 ENTERPRI SES FOR THE INITIAL FIVE YEARS AND THEN SHALL AGAIN BE AVAILABLE @ 100% FOR ANOTHER FIVE YEARS IF THE SAID UNDERTAKINGS OR ENTERPRISES CARRY OUT SUBSTANT IAL EXPANSION HAS THE EFFECT OF CREATING A GREAT ANOMALY, BECAUSE THIS IN TERPRETATION WILL RESULT IN A DISADVANTAGEOUS SITUATION FOR THE PRE-EXISTING UNDE RTAKINGS. 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 S UBSTANTIAL EXPANSION AFTER FIVE YEARS OF THE COMMENCEMENT OF MANUFACTURE OR PR ODUCTION; THE PRE- EXISTING UNDERTAKINGS SHALL BE ABLE TO AVAIL OF 100 % DEDUCTION ONLY FOR A PERIOD OF FIVE YEARS AFTER CARRYING OUT THE SUBSTAN TIAL EXPANSION, AND AFTER FIVE YEARS THEY SHALL BE ENTITLED TO ONLY 25% / 30% DEDUCTION. THIS CERTAINLY CANNOT BE THE INTENTION OF THE LEGISLATURE TO DOLE OUT UNEVEN BENEFITS TO THE 13 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 TAXATION WI TH THEIR OWN INDEPENDENT LAWS, AND THEREFORE, CIRCULAR NO. 49 OF 2003 ISSUED BY TH E EXCISE AUTHORITIES COULD NOT BE RELIED. IN THIS REGARD SHE OBSERVED THAT EXPLAN ATION TO FINANCE ACT 2003 MAKES IT ABSOLUTELY CLEAR THAT THESE PROVISIONS WERE BEIN G INSERTED ON THE BASIS OF A PACKAGE ANNOUNCED BY UNION CABINET WHICH CONSISTED OF FISCAL AND NON-FISCAL COVERAGE FOR SPECIAL CATEGORY OF STATES OF SIKKAM, HIMACHAL PRADESH, UTTRANCHAL AND NORTH-EASTERN STATES IN ORDER TO BOOST ECONOMY OF THESE STATES. SINCE NEW PROJECT INCLUDES CENTRAL EXCISE BENEFITS ALSO AS WE LL AS BENEFITS IN INCOME TAX WHICH WERE OF THE SAME NATURE AND EMANATING FROM TH E SAME PACKAGE, IT WAS NATURAL TO REFER TO CIRCULAR ISSUED BY EXCISE AUTHO RITIES. 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 AMBIGUITY O F ANY KIND AS REGARDS THE IMPORT OF THE PROVISIONS OR AS REGARDS THE INTENTIO N OF THE LEGISLATURE. THE LANGUAGE OF THE PROVISIONS DOES NOT GIVE RISE TO MO RE MEANING THAN ONE AND THE LEGISLATIVE INTENT IS CLEARLY REFLECTED FROM TH E BARE READING OF THE SECTION. THE GIVEN EXPRESSION OF THE STATUTE IS SO CLEAR THA T THERE IS NO NEED TO ADD ANY 14 WORD THERETO SO AS TO MAKE OUT THE OBJECT OF THE LE GISLATURE. THEREFORE ALL THE PLEAS TAKEN BY THE APPELLANT REGARDING 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 REPRESENTING MANY APPEALS PARTICULARLY IN ITA NO. 866 TO 869/CHD/2014, 895 TO 897/CHD/2014, 185/C HD/2014 ETC. ALSO MADE SOME SUBMISSIONS. ALL OTHER COUNSELS PRESENT IN TH E COURT REPRESENTING VARIOUS CASES ADOPTED THE ARGUMENTS RAISED BY SHRI PAVAN VE D AND SHRI RAKESH GUPTA. SHRI PAVAN VED HAD ALSO FILED WRITTEN SYNOPSIS. VAR IOUS CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE CAN BE SUMMARIZED AS UNDER:- (A) THE ASSESSING OFFICER HAS CLEARLY ADMITTED IN PARA 2.1 OF THE ASSESSMENT ORDER THAT ALL THE CONDITIONS AND GENUIN ENESS OF DEDUCTION CLAIMED UNDER THE SECTION HAVE BEEN FULFILLED. (B) THERE IS NO RESTRICTION OR LIMITATION U/S 80IC THAT ONLY INDUSTRIAL UNIT WHICH HAD COME INTO BEING BEFORE THE COMMENCEMENT O F THIS SECTION WOULD BE ELIGIBLE FOR THE BENEFIT OF SUBSTANTIAL EX PANSION. THEREFORE, THE ASSESSING OFFICER SHOULD HAVE ADOPTED A RULE OF INTERPRETATION WHICH WAS BENEFICIAL TO THE ASSESSEE WHILE INTERPRE TING THESE INCENTIVE PROVISIONS. ACCORDING TO HIM ASSESSEE CO ULD MAKE ANY NUMBER OF EXPANSIONS AND CLAIM DEDUCTION FOR MORE T HAN 10 YEARS. HOWEVER, IT WAS POINTED OUT THAT ASSESSEE (HYCRON E LECTRONICS) HAS CLAIMED DEDUCTION ONLY FOR 10 YEARS. (C) THE REFERENCE MADE TO CIRCULAR NO. 7 OF 2003 BY ASS ESSING OFFICER AND CIT(A) IS NOT PROPER BECAUSE CIRCULAR ITSELF P ROVIDES FOR BENEFIT 15 TO EXISTING UNDERTAKINGS AND THEIR SUBSTANTIAL EXPA NSION AND THE WORD EXISTING HAS NOT BEEN QUALIFIED WITH REFERENCE TO ANY PARTICULAR DATE. IT SIMPLY QUALIFIES UNDERTAKING. (D) THE REFERENCE TO CIRCULAR NO. 49 OF 2003 ISSUED UND ER CENTRAL EXCISE ACT BY THE EXCISE AUTHORITIES IS ALSO NOT PROPER B ECAUSE THIS CIRCULAR IS NOT ISSUED U/S 119 OF THE INCOME TAX ACT. FURT HER THIS CIRCULAR REFERS TO THE EXPANSION OF CAPACITY BY 25% WHEREAS UNDER THE INCOME TAX ACT WHAT IS REQUIRED IS 50% INCREASE IN INVESTM ENT UNDER THE HEAD PLANT AND MACHINERY (E) 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). (F) 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 PRESEN T CASE ON INTERPRETATION OF THE PROVISIONS OF THE ACT. SECON DLY, THERE WAS CERTAIN INCONSISTENCY IN THE NOTIFICATION BECAUSE W HILE DEFINING THE EXISTING INDUSTRIAL 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 UNIT. THIRDLY, NOTIFICATION C ANNOT OVERRIDE THE SECTION WHICH PROVIDES THE LEGISLATURE INTENT. FOU RTHLY, THE NOTIFICATION WAS NOT ISSUED U/S 119 OF THE INCOME T AX ACT AND, THEREFORE, HAS NOT BINDING FORCE. FIFTHLY, AS PER THIS NOTIFICATION THE 16 SUBSTANTIAL EXPANSION WAS RELATED TO INCREASE IN CA PACITY BY 25% WHICH WAS CONTRARY TO THE CRITERIA LAID DOWN IN SEC TION 80IC I.E. 50% INCREASE IN INVESTMENT. (G) FORM NO. 10CCB CLAUSE (25)(II)(C) IS MEANT FOR NEW BUSINESS AND CLAUSE (D) IS FOR EXISTING BUSINESS. THERE IS NO WO RD IN BETWEEN CLAUSE (C) AND (D) LIKE OR/AND WHICH MEANS EVEN ACCORDIN G TO CBDT, BOTH SITUATIONS MAY EXIST IN A PARTICULAR CASE. (H) 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 MANUFACTURER AND SUBSTANTIAL EXPANSION BECAUSE THE WORD OR HAS BEE N USED BETWEEN THE TWO EXPRESSION WHICH CLEARLY SHOWS THAT IT IS A DISJOINTED SENTENCE AND REFERS TO BOTH SITUATIONS. (I) RELIANCE WAS ALSO PLACED ON THE DECISION OF DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMI TED VS. DCIT IN ITA NO.991/DEC/2013 (COPY OF ORDER FILED). IT WAS S UBMITTED THAT IN THIS CASE IN SIMILAR SITUATION 100% DEDUCTION WAS H ELD TO BE AVAILABLE AFTER SUBSTANTIAL EXPANSION OF THE NEW UNIT. HOWEVE R, ON THE QUERY BY THE BENCH, IT WAS CLEARLY ADMITTED BY ALL THE COUNS ELS PRESENT IN THE COURT THAT THIS DECISION DOES NOT DEAL WITH ANY ASP ECTS OF THE PROVISIONS OF SECTION 80IC. FURTHER RELIANCE WAS A LSO PLACED ON DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SINTEX INDUSTRIES LTD IN ITA NO. 310/AHD/2014. (J) 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 PERI OD AND NOT TO THE RATE OF DEDUCTION. 17 (K) 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 W AS CONTENDED THAT IN THIS CASE IT WAS HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80IC ON SUBSTANTIAL EXPANSION. FURTHER RELIANCE WAS ALSO PLACED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN CA SE OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (DURING THE HEARING, L D. COUNSEL OF THE ASSESSEE WAS REQUESTED TO EITHER GIVE CITATION OF THE DECISION OR FILE CERTIFIED COPY OF THE ORDER. THIS HAS NOT BEEN DONE. HOWEVER, WE HAVE CONSIDERED THIS DECISION ALSO.) (L) 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). 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 INCEN TIVES IN THE FORM OF INCOME TAX CONCESSIONS, EXCISE CONCESSIONS, SUBS IDIES IN THE FORM OF CAPITAL INVESTMENT SUBSIDY, TRANSPORT SUBSIDY ET C. IN VIEW OF THIS SCHEME, IN THE INCOME TAX ACT, SECTION 80IC WAS INT RODUCED 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 AVAIL ABLE TO THE HILLY STATES OF HIMACHAL PRADESH, UTTRANCHAL, NORTH-EASTE RN STATES AND STATE OF SIKKIM WAS THE SCHEME CLEARED BY THE UNION CABIN ET, THEREFORE, IT IS IMPORTANT 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 18 COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POL ICY AND PROMOTION, GOVT. OF INDIA. THE WORD EXISTING UNIT IS NOT MENTIONED IN SECTION 80IC BUT THIS CAN BE ASCERTAINED EASILY IF THE SECTION IS PROPERLY CONSTRUED. IN ANY CASE, THE CIRCULAR NO. 4 9/2003 ISSUED BY CENTRAL EXCISE DEPARTMENT AS WELL AS NOTIFICATION I SSUED BY MINISTRY OF COMMERCE VERY CLEARLY MENTION THAT EXISTING UNIT WOULD 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 D EDUCTION IS AVAILABLE TO THE UNDERTAKING WHICH EITHER BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE AN ARTICLE OR THING OR UNDERTAKE SUBSTANTIA L 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 SUBSTANTIAL EXPANSION COULD HAVE BEEN CARRIED OUT O NLY ON OR AFTER 7.1.2003 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 AVAILABL E TO AN INDUSTRIAL UNDERTAKING WHICH WAS LOCATED IN THE INDUSTRIAL BAC KWARD STATE SPECIFIED IN THE 8 TH SCHEDULE WHICH BASICALLY CONSISTED OF THE SAME AREAS AS MENTIONED IN SECTION 80IC . UNDER SECTION 80IB(4) ALSO, THE DEDUCTION WAS TO BE ALLOWED TO THE INDUSTRIAL UNDER TAKING @ 100% OF PROFITS AND GAINS FOR THE FIVE ASSESSMENT YEARS BEG INNING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) AND ALL THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING. IT WAS POINTED OUT THAT IN THE CASE OF 19 DEDUCTION U/S 80IB(4), THERE WAS A SECOND PROVISO I N THE SECTION BY WHICH IT IS CLARIFIED THAT THE 100% DEDUCTION WAS A VAILABLE 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 80 IC, ONLY DIFFERENCE IS THAT THIS WAS EXTENDED TO INDUSTRIAL UNDERTAKING WHICH WERE ALREADY EXISTING ON THE COMMENCEMENT OF THE WI NDOW 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 T HE STATE OF HIMACHAL PRADESH AND STATE OF UTTARANCHAL WHEREAS SECTION 8 0IC(A)(III) AND (B)(III) ARE APPLICABLE TO THE NORTH-EASTERN STATES AND WHEN THIS IS COMPARED WITH THE RATE OF DEDUCTION PROVIDED UNDER SUB SECTION (3) OF SECTION 80IC, IT WOULD BE NOTED THAT UNDER SUB SECT ION 3(II) THE RATE HAS BEEN GIVEN @ 100% FOR FIVE YEARS FOR THE STATES OF HIMACHAL PRADESH AND UTTARANCHAL AND THEREAFTER 25% FOR NEXT 5 YEARS WHEREAS UNDER SUB SECTION 3(I) THE RATE HAS BEEN GIVEN AT 1 00% IN THE NORTH EASTERN STATES AND STATE OF SIKKIM FOR WHOLE OF TEN YEARS. IF THE INTERPRETATION ADOPTED BY THE ASSESSEE IS CORRECT T HEN THE MEANING OF SUBSTANTIAL EXPANSION WOULD BECOME REDUNDANT FOR TH E NORTH-EASTERN STATES AND STATE OF SIKKIM BECAUSE IN THOSE CASES D EDUCTION HAD BEEN STRAIGHT AWAY PROVIDED @ 100% FOR ALL THE 10 YEARS. IT WAS SUBMITTED THAT ANY INTERPRETATION OF A PROVISION WHICH WOULD RENDER SOME PART OF THE SECTION OTIOSE IS NOT PERMISSIBLE UNDER ANY RUL E OF INTERPRETATION. 20 EVEN THE EXPRESSION USED IN SECTION 80IC(3)(II) THE REAFTER WOULD BECOME REDUNDANT IN THE CASE OF STATE OF HIMACHAL P RADESH. 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 P URPOSE OF SECTION 80IC. THIS BECOME VERY CLEAR BECAUSE THE LEGISLATU RE HAS USED EXCLUSIONARY WORD OR BEFORE THE WORDS COMPLETE S UBSTANTIAL EXPANSION THEREFORE, INITIAL ASSESSMENT YEAR WOULD BE THE YEAR IN SEPARATE SITUATION AS UNDER:- (A) THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OF THINGS [RELEVANT FOR PURPOSE OF SECTION 80IC(2)(A) OR : (B) THE UNDERTAKING OR ENTERPRISE COMMENCES OPERATION [ RELEVANT FOR THE PURPOSE OF SECTION 80IC(2)(B) ] OR (C) THE UNDERTAKING OR ENTERPRISE WHICH COMPLETES SUBSTANTIAL 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 CONTE NDED THAT IF THE DECISION BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) IS ACCEPTED; T HE FACT THAT THERE WAS NO BAR ON CARRYING OUT THE NUMBER OF SUBSTANTIA L EXPANSIONS AND EVERY YEAR OF SUBSTANTIAL EXPANSION WOULD BECOME IN ITIAL ASSESSMENT YEAR. IF, THIS THEORY IS ACCEPTED AND GOING BY THE SAME ANALOGY EVERY ASSESSMENT YEAR WOULD BECOME INITIAL ASSESSMENT YEA R SINCE THE UNDERTAKING COMMENCES PRODUCTION ON THE FIRST DAY O F EACH ACCOUNTING YEAR. SUCH AN INTERPRETATION WOULD NOT ONLY RESULT INTO ABSURDITY BUT ABSOLUTELY AN IMPROBABLE AND UNWORKABLE SITUATION. 21 VI) IF THE BENEFIT OF DEDUCTION OF SUBSTANTIAL EXP ANSION WAS TO BE ALLOWED TO THE NEW UNDERTAKING WHICH COMMENCED PROD UCTION ON OR AFTER 7.1.2003, THEN SUCH UNDERTAKING WOULD AUTOMAT ICALLY BE DISQUALIFIED FOR THE DEDUCTION BECAUSE OF THE RESTR ICTION PROVIDED IN SUB SECTION (4) OF SECTION 80IC BECAUSE SUCH SUBSTA NTIAL EXPANSION WOULD 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 1 00% DEDUCTION FOR ANOTHER SET OF FIVE YEARS ON CARRYING OUT THE SUBST ANTIAL EXPANSION WHEREAS THE EXISTING UNIT WOULD GET BENEFIT ONLY OF 100% DEDUCTION FOR INITIAL FIVE YEARS AND LATER ON THE DEDUCTION W OULD 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 80IC IS PERMITTED TO TWO DISTINCT KIND OF UNDERTAKING I.E NEW ELIGIBL E BUSINESS WHICH COMMENCES PRODUCTION DURING THE WINDOW PERIOD I.E. 7.1.2003 TO 31.3.2012 WHICH IS NEW UNDERTAKING AND SECONDLY IN THE CASE OF AN EXISTING BUSINESS WHICH UNDERTAKES SUBSTANTIAL EXPA NSION. 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 EXPANSIO N BY INVESTING A VERY SMALL SUM, THE ASSESSEE WOULD CLAIM DEDUCTION OF 100% FOR WHOLE OF THE PROFITS OF SUCH EXPANDED UNDERTAKING W HICH WOULD MEAN 22 THAT PROFIT OF 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 DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMI TED VS. DCIT (SUPRA) WAS PER INQUERIM BECAUSE IT HAS NOT CONSIDE RED ALL THE PROVISIONS OF THE ACT AND HAS MERELY RELIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD (SUPRA ). IT WAS POINTED OUT THAT SUPREME COURT IN ANOTHER CASE OF M/S NOVAP AN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS, APPEAL (CI VIL) 3356 OF 1984 HAS CLEARLY HELD THAT IT IS NOT POSSIBLE TO AG REE WITH THE SUBMISSIONS THAT IF THERE WAS CONFLICT OF DECISION , THEN BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE. IT WAS AL SO VEHEMENTLY CONTENDED THAT ALL THE DECISIONS OF VARIOUS HIGH CO URTS AND SUPREME COURT ARE UNANIMOUS IN HOLDING THAT BOARD HAS 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 SU CH 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. VAR GHESE VS INCOME TAX OFFICER 131 ITR 597 (SC) HAS CLEARLY OBSERVED THAT IF A PARTICULAR PROVISION IS REQUIRED TO BE INTERPRETED THEN NOT ON LY CIRCULAR BUT ANYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE C ONSIDERED. A SIMILAR VIEW WAS TAKEN BY THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. M.S. VAIDYA 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 TRIBUNA L IN THE CASE OF DCIT CHANDIGARH VS. S.K. PARYAVARAN ENGINEERS (P) L TD. (SUPRA). IT WAS POINTED OUT THAT DECISION IS TOTALLY DISTINGUIS HABLE BECAUSE IN THAT CASE ASSESSEE CLAIMED DEDUCTION U/S 80IB IN 1999-20 00 FOR THE FIRST 23 TIME. LATER ON, AFTER FIVE YEARS THE ASSESSEE CLAIM ED BENEFIT @ 30%. THE ASSESSEE ALSO UNDERTOOK SUBSTANTIAL EXPANSION I N FINANCIAL YEARS 2004-05 AND 2005-06 AND AGAIN CLAIMED DEDUCTION OF 100% OF PROFITS ON THE STRENGTH OF SUBSTANTIAL EXPANSION BUT WRONGL Y MENTIONED THE SECTION AS 80IB INSTEAD OF SECTION 80IC. THEREFORE, IT IS CLEAR THAT THIS IS A CLEAR CASE OF EXPANSION OF EXISTING UNIT WHICH EXISTED BEFORE 7.1.2003 AND THEREFORE, IT IS CLEARLY DISTINGUISHAB LE FROM THE FACTS OF THE CASE OF THE ASSESSEE. IT WAS FURTHER POINTED O UT THAT DECISIONS RELIED ON BEHALF OF THE ASSESSEE ARE TOTALLY DISTIN GUISHABLE 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 CLEARL Y PROVIDES THAT INITIAL ASSESSMENT YEAR FOR A UNIT GOING FOR THE SU BSTANTIAL EXPANSION IS THE YEAR IN WHICH SUCH EXPANSION IS COMPLETED AN D, THEREFORE, IN THE CASE OF THE ASSESSEE, ASSESSMENT YEAR 2009-10 WOULD BE THE INITIAL ASSESSMENT YEAR. B) ON PROPER INTERPRETATION OF SECTION 80IC(6), THE ASSESSEE WOULD BE ENTITLED FOR A FRESH DE NOVO COMMENCING PERIOD O F 10 YEARS FROM THE INITIAL ASSESSMENT YEAR. THOUGH IT WAS CLARIFIE D THAT ASSESSEE HAD NOT CLAIMED DEDUCTION AFTER PERIOD OF 10 YEARS. IF SUBSTANTIAL EXPANSION WAS CARRIED OUT FOR THE FIRST TIME THEN A SSESSEE WAS ENTITLED TO BENEFIT OF 100% DEDUCTION EXCLUDING PROFITS OF E XISTING UNITS, THEREFORE, THE ONLY INFERENCE SHOULD BE THAT IN CAS E OF SUBSEQUENT EXPANSION ALSO 100% PROFIT WOULD BE ELIGIBLE. THERE CANNOT BE A THEORY OF SEGREGATION OF PROFITS INTO PROFITS RELAT ABLE TO EXISTING UNITS AND PROFITS RELATED OF EXPANDED UNITS. FURTHER, SIN CE SUBSTANTIAL 24 EXPANSION HAS NO RELATIONSHIP WITH CAPACITY AND IT IS RELATED TO INVESTMENT, THEREFORE, IT WAS NOT PRACTICALLY POSSI BLE 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 SECTIO N 80IC W.E.F. 1.4.2004 BY OPERATION OF LAW BUT THE SAME WOULD STI LL BE ELIGIBLE 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 ELIGIBLE FOR DEDUCTION U/S 80IC IF THE ASSESSEE MAKES INVESTMENT IN THE SA ME UNITS AND THEREFORE, SECTION 80IC SHOULD BE INTERPRETED TO GI VE BENEFIT TO THE ASSESSEE 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 T O AN EXEMPTION AND THEREFORE, CANNOT BE USED WHILE INTERPRETING AN INCENTIVE PROVISION. IN CASE OF INCENTIVE PROVISION, IT IS B ASICALLY A PROMISE BY THE LEGISLATURE THAT YOU MAKE THIS INVESTMENT WE WE LL GIVE YOU THIS BENEFIT AND THEREFORE, CAN BE IN THE FORM OF A CON TRACT BETWEEN THE STATE AND THE ASSESSEE. FURTHER THE DECISION IN TH E CASE OF M/S NOVAPAN INDIA LTD VS COLLECTOR OF CENTRAL EXCISE AN D CUSTOMS (SUPRA) RELATED TO INDIRECT TAX AND, THEREFORE, CANNOT BE R ELIED UPON WHILE INTERPRETING THE PROVISIONS 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 25 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. THEREFORE , IF THE LANGUAGE OF A PARTICULAR STATUTE IS CLEAR THEN THE SAME CANNOT BE CHANGED BY APPLYING DIFFERENT PRINCIPLES OF INTERPRETATIONS. THIS IS CLEAR FROM T HE OBSERVATIONS MADE BY HON'BLE APEX COURT IN THE CASE OF ORISSA STATE WAREHOUSING CORPORATION VS. CIT 237 ITR 607 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 STATUTES BEING THE FOCAL POINT OF CONSIDERATION IN THESE APPEALS. LORD HALSBURY AS EARLY AS 1901, IN C OOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) STATED THE LAW IN THE MA NNER FOLLOWING: A COURT OF LAW, HAS NOTHING TO DO WITH THE REASONA BLENESS OR UNREASONABLENESS OF A PROVISION OF A STATUTE EXCEPT SO FAR AS IT MAY H OLD IT IN INTERPRETING WHAT THE LEGISLATURE HAS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, THE LEGISLATU RE MUST BE TAKEN TO HAVE MEANT AND INTENDED WHAT IT HAS PLAINLY EXPRESSED, A ND WHATEVER IT HAS IN CLEAR TERMS ENACTED MUST BE ENFORCED THOUGH IT SHOU LD NOT LEAD TO ABSURD OR MISCHIEVOUS RESULTS. IF THE LANGUAGE OF THIS SUB-SECTION BE NOT CONTROL LED BY SOME OF THE OTHER PROVISIONS OF THE STATUTE. IT MU ST, SINCE, ITS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED AND YOUR LORDSHI PS HOUSE SITTING JUDICIALLY IS NOT CONCERNED WITH THE QUESTION WHETH ER THE POLICY IT EMBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OR UNJUST, BENEFICIAL OR MISCHIEVOUS. THE OFT-QUOTED OBSERVATIONS OF ROWLATTT J. IN THE C ASE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT ALSO TO BE NO TICED AT THIS JUNCTURE. THE LEARNED JUDGE OBSERVED (PAGE 71): . . . IN A TAXING STATUTE ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY A BOUT A TAX. THERE IS NO 26 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 ALSO IN A MANNER SIMILAR IN IRC V. ROSS AND COULTER (BLADNOCH DISTILLERY CO. LTD. [1984] 1 ALL ER 616 AT PAGE 625 OBSERVE: IF THE MEANING OF THE PROVISION IS REASONABLY CLEA R, THE COURTS HAVE NO JURISDICTION TO MITIGATE SUCH HARSHNESS. THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND C O. V. CIT[1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VIEWS EXPRESSED ABOVE . THIS COURT OBSERVED (PAGE 9): AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO UNFOLD THE LEGISLATIVE IN TENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT TH EN BE APPEALED TO TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERW ISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED. IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE ST ATUTE ARE, ON THEIR OWN TERMS, AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE ARTIFICIAL AND UNDULY LATIDUDINARIAN RULES OF CONST RUCTION, WHICH WITH THEIR GENERAL TENDENCY TO GIVE THE TAXPAYER THE BREAKS, ARE OUT OF PLACE WHERE THE LEGISLATION HAS A FISCAL MISSION. BE IT NOTED THAT INDIVIDUAL CASES OF HARDSHIP AND I NJUSTICE DO NOT AND CANNOT HAVE ANY BEARING FOR REJECTING THE NATURAL CONSTRUC TION BY ATTRIBUTING NORMAL MEANING TO THE WORDS USED SINCE HARD CASES DO NOT MAKE BAD LAWS. HOWEVER, IF SOME AMBIGUITY IS THERE IN THE LANGUAGE OF A PARTICULAR STATUTE BECAUSE OF VARIOUS REASONS, THE SAME IS REQUIRED TO BE CONS TRUED SO AS TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE AND THEN EVERY POSSIBL E MATERIAL SHOULD BE CONSIDERED TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE. IN THIS REGARD, THE OBSERVATION OF THE HON'BLE SUPREME COURT IN THE CELEBRATED JUDGEME NT OF K.P. VERGESE 131 ITR 598 (SUPRA) ARE RELEVANT. WE EXTRACT THE HEAD NOTE WHICH READS AS UNDER:- A STATUTORY PROVISION MUST BE SO CONSTRUED, IF POS SIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE THE PL AIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRODUCES A MANIFESTLY ABSU RD AND UNJUST RESULT WHICH COULD NEVER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MAY MODIFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME VI OLENCE TO IT, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AN D PRODUCE A RATIONAL CONSTRUCTION. 27 L UKE V . IRC [1963] H ON ' BLE A PEX C OURT 557; [1964] 54 ITR 692 (HL) FOLLOWED. SPEECHES MADE BY THE MEMBERS OF THE LEGISLATURE ON THE FLOOR OF THE HOUSE WHEN THE BILL IS BEING DEBATED ARE INADMISSIB LE FOR THE PURPOSE OF INTERPRETING THE STATUTORY PROVISION BUT THE SPEECH MADE BY THE MOVER OF THE BILL EXPLAINING THE REASON FOR ITS INTRODUCTION CAN CERTAINLY BE REFERRED TO FOR THE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OBJECT AND PURPOSE FOR WHICH TH E LEGISLATION 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 MEANING, EVERYT HING WHICH IS LOGICALLY RELEVANT SHOULD BE ADMISSIBLE. THE MARGINAL NOTE TO A SECTION CANNOT BE REFERRED TO FOR THE PURPOSE OF CONSTRUING THE SECTION BUT IT CAN CERTAINLY BE R ELIED UPON AS INDICATING THE DRIFT OF THE SECTION OR TO SHOW WHAT THE SECTION IS DEALING WITH. IT CANNOT CONTROL THE INTERPRETATION OF THE WORDS OF A SECTIO N, PARTICULARLY WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS BU T, BEING PART OF THE STATUTE, IT PRIMA FACIE FURNISHES SOME CLUE AS TO T HE MEANING AND PURPOSE 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 T RAVEL BEYOND THE WORDS USED IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHIC H A PARTICULAR PROVISION IS ENACTED; FOR THIS PURPOSE, EVEN THE SPEECH OF THE F INANCE MINISTER, WHILE INTRODUCING THE PARTICULAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAX ES ARE NOT ONLY BINDING ON THE INCOME-TAX DEPARTMENT BUT ARE ALSO IN THE NA TURE OF CONTEMPORANEA 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 28 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 WHETHER A CIRCULAR ISSUED BY THE DEPARTMENT WHICH IS GENERALLY BINDING ON THE AUTHOR ITIES WOULD TAKE PRECEDENCE OVER THE INTERPRETATION MADE BY THE SUPREME COURT O R HIGH COURT IN RESPECT OF PARTICULAR PROVISION. THE PARA 6 OF THIS 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 R ESPECTIVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH CO URT DECLARES THE LAW ON THE QUESTION ARISING FOR CONSID ERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT TH AT THE CIRCULAR SHOULD BE GIVEN EFFECT TO AND NOT THE VIEW EXPRESSED IN A DECISION OF THIS COURT OR THE HIGH COURT. SO FAR AS THE CLARIFICATIONS/CIRCULARS ISSUED BY THE CENTRAL GOVE RNMENT AND OF THE STATE GOVERNMENT ARE CONCERNED THEY REPRESEN T MERELY THEIR UNDERSTANDING OF THE STATUTORY PROVISIONS. TH EY ARE NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DECL ARE WHAT THE PARTICULAR PROVISION OF STATUTE SAYS AND IT 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 MEANING OF A PROVISION AS INTERPRETED BY THE COURT WOULD PREVAIL IN COMPARISON TO THE INTERPRETA TION GIVEN IN THE CIRCULAR. THEREFORE, IF CIRCULAR IS CONTRARY TO A PROVISION A S INTERPRETED BY THE COURT THEN THE OPINION OF THE COURT WOULD PREVAIL. THIS DECIS ION NOWHERE LAYS DOWN THAT CIRCULARS CANNOT BE CONSIDERED FOR INTERPRETATION O F 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 29 SOURCE. THE LAST DATE OF FILING THE RETURN WAS 31.3 .1997 BUT THE RETURN WAS FILED LATE ON 8 TH SEPTEMBER 1997. THE ASSESSEE SOUGHT CONDONATION OF DELAY BY AN APPLICATION FILED ON 21 ST SEPT, 1998 BY INVOKING SECTION 119(2)(B) OF THE 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 DENIED INT EREST ON REFUND AMOUNT IN VIEW OF THE CONDITION SET OUT IN CIRCULAR NO. 670 DATED 26 TH OCT 1993. THEREFORE, QUESTION BEFORE THE COURT WAS WHETHER THESE INSTRUC TIONS WERE CONTRARY TO THE PROVISION OF SECTION 244A OF THE ACT WHICH 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 ADMITTING AN APPLI CATION TO CONDONE THE DELAY IN MAKING A CLAIM FOR BELATED REFUND UNDE R SECTION 237 OF THE ACT, AS CONTAINED IN INSTRUCTION NO. 12 OF 2003 DATED OCTOBER 30,2003 AND 13 OF 2006 DATED JANUARY 22,2006, OF TH E BOARD, IS INCONSISTENT WITH SUB-SECTION (2) OF SECTION 244A O F THE ACT? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES, THE RE SPONDENT WAS JUSTIFIED IN DENYING INTEREST ON BELATED REFUND CLA IMED FOR THE ASSESSMENT YEAR 1995-96, BY THE ORDER IMPUGNED. 26. THE HON'BLE COURT DISCUSSED THE MATTER AND ULTI MATELY HELD THAT ASSESSEE WAS ENTITLED TO INTEREST U/S 244A AND CIRCULAR NO. 670 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 CIRCULAR CANN OT BE CONSIDERED FOR THE PURPOSE OF INTERPRETING THE PARTICULAR PROVISION. 27. IT WILL BE USEFUL TO STATE ANOTHER VERY WELL S ETTLED PRINCIPLE OF INTERPRETATION I.E. WHENEVER THE PARTICULAR PROVISION IS REQUIRED TO BE INTERPRETED, IT SHOULD BE 30 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 ABOVE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME COURT. SECTION 80IC READS AS UNDER: - SECTION 80IC 80-IC (1) WHERE THE GROSS TOTAL INCOME OF AN ASSES SEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FR OM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AN D SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENT ERPRISE,- (A) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THI RTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING. (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED I NFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDU STRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH T HE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF THE NORTH- EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES A NY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ART ICLE OR THING, SPECIFIED IN THE 31 FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATIONS SPE CIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING- (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN STATES. (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE (I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III) OF CLAUSE (B), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFI TS AND GAINS FOR TEN ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT YEAR; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE (II) OF CLAUSE (B) , OF SUB-SECTION (2),ONE HUNDRED PER CENT OF SUCH PROFIT AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THE REAFTER TWENTY- FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSE E IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUC TION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THERE-ES TABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN TH E CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION.- THE PROVISIONS OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CLAUSE (II) O F THIS SUB-SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF THAT SUB-SECTION. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDU CTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTIO N 10A OR SECTION 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTE RPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, W HERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SEC TION, OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 1 0C, AS THE CASE MAY BE, EXCEEDS THE ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTIONS(7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBL E UNDERTAKING OR ENTERPRISE UNDER THIS SECTION. (8) FOR THE PURPOSES OF THIS SECTION,- 32 (I) INDUSTRIAL AREA MEANS SUCH AREAS, WHICH THE BOARD , MAY, BE NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T; (II) INDUSTRIAL ESTATE MEANS SUCH ESTATES, WHICH THE B OARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T. (III) INDUSTRIAL GROWTH CENTRE MEANS SUCH CENTRES, WHIC H THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; (IV) INDUSTRIAL PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T; (V) INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR THE ENTER PRISE BEGINS TO MANUFACTURES OR PRODUCE ARTICLES OR THINGS, OR COMM ENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION; (VI) INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE MEAN S SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICI AL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED B Y THE CENTRAL GOVERNMENT (VII) NORTH-EASTERN STATES MEANS THE STATES OF ARUNACH AL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TR IPURA; (VIII) SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP I N ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED B Y THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; (IX) SUBSTANTIAL EXPANSION MEANS INCREASE IN THE INVES TMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF THE BOO K VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPAN SION IS UNDERTAKEN; (X) THEME PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN AC CORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTION [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TYPES OF UNDERTAKINGS AND CIRCUMST ANCES WHERE DEDUCTION UNDER SECTION 80IC WOULD BE ALLOWED. IT ALLOWS DEDUCTION TO VARIOUS UNDERTAKINGS WHICH HAVE EITHER BEGUN OR BEGINS MANUFACTURING OF ANY AR TICLE OR THINGS NOT BEING ANY ARTICLE OR THING SPECIFIED IN SCHEDULE XIII AND ALS O UNDERTAKES SUBSTANTIAL EXPANSION. THESE DEDUCTIONS WERE AVAILABLE IN DIFFE RENT STATES DURING DIFFERENT WINDOW PERIODS WHICH HAVE BEEN REFERRED TO IN CLAUS E (I), (II) & (III) OF THIS SUB SECTION. THE CONTENTION ON BEHALF OF THE ASSESSEE I S THAT SINCE DEDUCTION IS 33 AVAILABLE TO THE UNDERTAKING WHICH UNDERTAKES SUBST ANTIAL 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, THERE IS NO FORC E IN THIS INTERPRETATION. SUB SECTION (2) BEGINS WITH THE EXPRESSION THIS SECTI ON APPLIES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS THIS ITSELF S HOWS THAT PROVISION MADE EVEN THE EXISTING UNDERTAKINGS ENTITLED FOR THE DEDUCTIO N BECAUSE THE EXPRESSION BEGUN WOULD REFER TO THE UNDERTAKING WHICH WERE ALREADY E XISTING AND BEGAN THE MANUFACTURE BEFORE THE WINDOW PERIOD MENTIONED IN T HE SUB SECTION. THE LAST LINE OF THE SUB SECTION READS AND UNDERTAKES SUBSTANTIA L EXPANSION DURING THE PERIOD BEGINNING... THIS WOULD NATURALLY REFER TO THE UNDERTAKING WHICH WERE ALREADY EXISTING. IF IT IS READ THE WAY THE LD. CO UNSEL OF THE ASSESSEE WOULD LIKE US TO READ THEN THE PROVISION WOULD BECOME UNWORKABLE BECAUSE IF THERE IS AN UNDERTAKING WHICH IS ESTABLISHED DURING THE WINDOW PERIOD THEN THE SAME CANNOT POSSIBLY UNDERTAKES SUBSTANTIAL EXPANSION ALSO SIMU LTANEOUSLY. THE EXPRESSION AND WOULD REFER TO THE CUMULATIVE CONDITION THAT IS BOTH PARTS OF THE CONDITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JO INED ONLY WITH THE EXPRESSION BEGUN. THIS IS BECAUSE BEGUN REFERS TO SOMETHI NG WHICH HAS ALREADY STARTED IN THE PAST WHEREAS BEGINS CONNOTES SOMETHING WHICH WOULD COMMENCE IN THE PRESENT. THEREFORE, THE EXPRESSION AND CAN BE CO RRELATED ONLY WITH EXISTING UNIT BECAUSE AS WE HAVE ALREADY SEEN A NEW UNIT WHICH HA S BEEN SET 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 INTENTION OF THE LEGISLATURE BY KEEPING VARIOUS PRINCIPLES OF INTERPRETATION. THEREFORE, VA RIOUS PRINCIPLES OF INTERPRETATION NEEDS TO BE LOOKED INTO. THIS PROVISION WAS BROUGHT INTO THE STATUTE INDISPUTABLY IN THE LIGHT OF THE INCENTIVE PACKAGE ANNOUNCED BY T HE UNION CABINET. THROUGH THIS INCENTIVE PACKAGE NOT ONLY INCOME TAX CONCESSION BU T EXCISE CONCESSIONS AND SOME 34 SUBSIDIES LIKE TRANSPORT SUBSIDY AND CAPITAL SUBSID Y WERE ALSO PROVIDED TO VARIOUS INDUSTRIES IN THE HILLY STATED COMPRISING STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES TO BOOST THE ECONOM IES OF THESE HILLY STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9.2003 IN THIS RESPECT AND THE CIRCULAR READS AS UNDER:- CIRCULAR NO. 7/2003 DATED 05.09.2003 49. NEW PROVISIONS ALLOWING A TEN YEARS TAX HOLIDAY IN RESPECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, SIK KIM, UTTARANCHAL AND NORTH-EASTERN STATES. 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF F ISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN OR DER TO GIVE BOOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDU CTION FOR TEN YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE O R EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN T HE STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STAT ES . FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAK EN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PR ODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSI NG ZONE, OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR IND USTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWA RE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH RULES PRESCRIBED IN THIS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURT EENTH SCHEDULE. 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH-EASTERN STATES SHAL L BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSE SSMENT YEARS. THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTARANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND T HEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CENT FOR COMPANIES ) FOR THE NEXT FIVE ASSESSMENT YEARS. 49.4 THE SECTION ALSO PROVIDES THAT NO DEDUCTION SH ALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDE R THIS SECTION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURTHER, IN COMPUTING THE TOTAL I NCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER 35 VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PR OFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. 49.5 A NEW THIRTEENTH SCHEDULE HAS BEEN INSERTED IN THE INCOME-TAX ACT TO SPECIFY THE LIST OF ARTICLES AND THINGS, WHICH ARE INELIGIBLE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IC. FURTHER, A NEW FOURT EENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH SPECIFIES THE LIST OF ART ICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR TH E PURPOSES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUENT TO THESES AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION(4) OF SEC TION 80-IB HAVE BEEN MADE INOPERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHAL PRADESH OR IN NORTH-EASTERN REGION INCL UDING SIKKIM, WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2004. 49.6 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2004 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YE AR 2004-05 AND SUBSEQUENT YEARS. 31. THE CIRCULAR MAKES IT CLEAR THAT SECTION 80IC W AS INSERTED TO GIVE EFFECT TO THE NEW PACKAGE ANNOUNCED BY THE UNION 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 AS PER OXFORD DICTIONARY EXIST IS DEFINED AS UNDER EXIST : 36 1 (NOT USED IN THE PROGRESSIVE TENSES) TO BE REAL; TO BE PRESENT IN A PLACE OR SITUATION : DOES LIFE EXIST ON OTHER PLANETS? THE PROBLEM ONL Y EXISTS IN YOUR HEAD, JANE. FEW OF THESE MONKEYS STILL EXIST IN THE WILD. ON HIS RETIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUP PORT VICTIMS OF CRIME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION O R WITH VERY LITTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING THE ABOVE DEFINITION CLEARLY SHOWS THAT EXIST WOU LD REFER TO SOMETHING WHICH IS IN FORCE PRESENTLY. EXIST WOULD GENERALLY AND IN COMMON SENSE REFERS TO SOMETHING WHICH IS ALREADY THERE. WITH REFERENCE TO THIS PROVISION, THIS WOULD REFER TO AN UNDERTAKING WHICH WAS ALREADY PRESENT O N THE DATE WHEN THIS PROVISION WAS INTRODUCED. IN ANY CASE THE NOTIFICATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZETTE OF INDIA REMOVED ALL TH E DOUBTS. THIS NOTIFICATION IS RELEVANT BECAUSE THIS WAS ISSUED WITH REFERENCE TO SAME PACKAGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEVELOPMENT OF THE H ILLY STATES. SECTION 5, READS AS UNDER;- DEFINITIONS: (A) .. (B) .. (C) EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 7 TH JANUARY 2003. (D) . (E) . (F) THUS THE DEFINITION GIVEN ABOVE MAKES IT CLEAR THAT EXISTING INDUSTRIAL UNIT WOULD MEAN AN UNIT WHICH EXISTED ON 7.1.2003. 33. EVEN IF THE ABOVE CONTROVERSY IS IGNORED REGARD ING EXISTING UNIT, THE INTENTION OF THE LEGISLATURE BECOME 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 37 DURING THE PARTICULAR WINDOW PERIOD WHICH ARE GIVEN IN CLAUSES (I), (II) & (III) OF SUB SECTION (2). THE SUB SECTION (3) PROVIDES FOR R ATES OF DEDUCTION. IT IS USEFUL TO NOTE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FO R 100% DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUSE (A) AND SUB CLAUSE (I) & (III) OF CLAUSE (B). NOW SUB CLAUSE ( I ) AND (III) OF CLAUSE (A) OF SUB SECTION (2) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF SIKKIM, NORTH-EASTERN STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND 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 ASSESSMENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE T HE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. THEREFORE, IT IS ABSOLUTELY CLEAR THAT IN CASE OF STATE OF SIKKIM AND NORTH-EASTERN STATES, LEGISLATURE WAS VE RY CLEAR THAT IN CASE OF NEW UNDERTAKING OR IN CASE OF SUBSTANTIAL EXPANDED UNDE RTAKING DEDUCTION IS TO BE ALLOWED @ 100% FOR WHOLE OF THE TEN YEARS WHEREAS I N CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL THE DEDUCTION WAS TO BE ALL OWED @ 100% ONLY FOR FIRST FIVE YEARS AND THEREAFTER IT WAS ONLY 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EXPANSION SEPARA TELY THEN THE RATE OF DEDUCTION IN THE CLAUSE (I) & (II) OF SUB SECTION (3) WOULD NOT HAVE BEEN DIFFERENT I.E. 100% FOR WHOLE OF THE 10 YEARS IN CASE OF STATE OF SIKKIM & NORTH-EASTERN STATES UNDER SUB CLAUSE (I) AND FOR THE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FOR FIRST FIVE YEARS AND THEREAFTER 25% F OR NEXT FIVE YEARS. THE CONCEPT OF SUBSTANTIAL EXPANSION REMAINS SAME UNDER SUB SEC TION (2) FOR BOTH TYPES OF STATES I.E STATE OF SIKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACHAL PRADESH AND UTTRANCHAL. IF THE EXTENDED BENEFIT OF SUBSTAN TIAL EXPANSION WAS TO BE SEPARATELY ALLOWED IN CASE OF STATE OF HIMACHAL PRA DESH AND STATE OF UTTARANCHAL, THEN MEANING OF SUBSTANTIAL EXPANSION AS GIVEN UNDE R SUB SECTION (2) WHICH IS SAME FOR THE STATE OF SIKKIM AND NORTH-EASTERN STAT ES BECOME REDUNDANT. AS NOTED 38 EARLIER, THE PROVISION CANNOT BE INTERPRETED IN SUC H A WAY THAT PART OF THE SECTION BECOMES REDUNDANT OR OTIOSE. THEREFORE, WHATEVER D OUBTS MAY BE THERE IN SUB SECTION (2) WHEN IT IS READ WITH SUB SECTION (3), T HOSE DOUBTS ARE TOTALLY REMOVED AND IT BECOME ABSOLUTELY CLEAR THAT RATE OF DEDUCT ION HAS TO BE 100% FOR FIRST 5 YEARS AND 25% THEREAFTER. 34. THERE IS A FORCE IN THE CONTENTION OF LD. CIT/D R THAT IF THE INTERPRETATION CONTENDED ON BEHALF OF THE ASSESSEE WAS TO BE 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 EN TERPRISE WHICH IS NOT FORMED BY SPLITTING OR RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE OR IT IS NOT FORMED BY TRANSFER TO NEW BUSINESS OF MACHINERY OR PLANT P REVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLANATION TO THIS SUB SECTION MAKES I T CLEAR THAT EXPLANATION 1 & 2 OF SUB SECTION (3) OF SECTION 80IA ARE APPLICABLE I N THIS RESPECT. EXPLANATION 2 OF SUB SECTION (3) OF SECTION 80 IA READS AS UNDER: EXPLANATION 2- WHERE IN THE CASE OF AN [UNDERTAKIN G], ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TO TAL VALUE OF THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLA USE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN S HALL 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 CARRYING OUT SUBSTANTIAL EXPANSION THE INVESTMENT IN PLANT & MACHINERY IS REQUIRED TO BE M ADE BY ATLEAST 50%. SO IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN IT WI LL VIOLATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPRETATION CANVASSED O N BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80IC(4) WOULD BECOME REDUN DANT 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 INCLUDING DEDUC TION AVAILED UNDER SUB SECTION 39 (4) OF SECTION 80IB AND SECTION 10A AND 10B. IT WA S CONTENDED BEFORE US THAT SINCE THERE IS NO RESTRICTION IN CARRYING OUT OF SU BSTANTIAL EXPANSION IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARR IED OUT ANY NUMBER OF TIMES. IF THIS INTERPRETATION IS ACCEPTED THEN SUB SECTION (6 ) WOULD BE RENDERED OTIOSE OR MEANINGLESS BECAUSE IF A UNIT WAS SET UP ON THE COM MENCEMENT OF THIS SECTION AND THE SAME CLAIMS DEDUCTION @ 100% AND LATER ON EVERY FIVE YEARS A SUBSTANTIAL EXPANSION IS CARRIED OUT THEN ACCORDING TO THE INTE RPRETATION CANVASSED ON BEHALF OF THE ASSESSEE, SUCH UNIT WOULD AGAIN BECOME ENTIT LED TO 100% DEDUCTION FOR ANOTHER FIVE YEARS AND FURTHER BLOCK OF FIVE YEARS EVERY TIME SUBSTANTIAL EXPANSION IS CARRIED OUT. IF THIS INTERPRETATION IS ADOPTED THEN DEDUCTION WOULD BECOME ALMOST PERCEPTUAL AS LONG AS THE ASSESSEE HAS CARRI ED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE SUB SECTION (6) WOULD LOOSE ITS MEANIN G. SUCH AN UNLIMITED PERIOD OF DEDUCTION WOULD NOT BE IN CONSONANCE OF LAW. AT TH E COST OF REPETITION, WE WOULD LIKE TO EMPHASIZE THAT NO PRINCIPLE OF INTERPRETATI ON CAN BE ADOPTED WHICH LEADS TO A SITUATION WHERE A PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDUNDANT. IN FACT THOUGH IT WAS CONTENDED THAT IN THE PRESENT CA SE (I.E. IN CASE OF HYCRON ELECTRONICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE OF HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTION WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHI CH HAS BEEN MADE BEFORE US. IN CASE OF M/S MAHAVIR INDUSTRIES (ITA NO. 127/CHD/ 2011 AND ITA NO. 791/CHD/2012) THOUGH THOSE CASES WERE ADJOURNED BEC AUSE SOME OTHER ISSUES WERE ALSO THERE BUT IN THOSE TWO CASES ASSESSEE HAD COMM ENCED THE OPERATION ON 8.5.1997 AND CLAIMED DEDUCTION U/S 80IB FROM ASSES SMENT YEARS 1998-99 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 ALL OWED 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 ASSESSEE T HAT ANY NUMBER OF EXPANSIONS ARE ALLOWED IS NOT POSSIBLE IN VIEW OF THE RESTRICTION GIVEN IN SECTION 80IC(6). 40 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 UND ER:- (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECIFIED IN THE EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRI AL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSMENT YEAR AN D THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS DERIVED 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) SUBJECT TO FULFILLMENT OF THE CO NDITION THAT IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPERATE ITS COL D 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 GOVERNMENT, THE AMOU NT OF DEDUCTION SHALL BE HUNDRED PER CENT OF PROFITS AND GAINS FOR A PERIOD OF TEN A SSESSMENT YEARS, AND THE TOTAL PERIOD OF DEDUCTION SHALL IN SUCH A CASE NOT EXCEED TEN AS SESSMENT YEARS: PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SUB-SECT ION SHALL BE ALLOWED FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2004 OR ANY SUBSEQUENT YEAR TO ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTIO N (2) OF SECTION 80-IC. 37. THE CAREFUL PERUSAL OF THE ABOVE PROVISION WOUL D SHOW THAT BEFORE THE INTRODUCTION OF SECTION 80IC WHICH IS BEFORE US FOR CONSIDERATION, THE DEDUCTION TO THE BACKWARD STATES WAS AVAILABLE IN TERMS OF SECTI ON 80IB(4). THE THIRD PROVISO MAKES IT CLEAR THAT AFTER 31.3.2004, THIS DEDUCTION WILL BE AVAILABLE ONLY U/S 80IC. THE SUB SECTION FURTHER MAKES IT CLEAR THAT DEDUCTI ON WOULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREAFTER @ 25%. FURTHER, TH E FIRST PROVISO MAKES IT CLEAR THAT DEDUCTION WILL NOT EXCEED 10 CONSECUTIVE ASSESSMENT YEARS. THE SECOND PROVISO FURTHER MAKES IT CLEAR THAT IN THE CASE OF STATES O F NORTH-EASTERN REGIONS, THE DEDUCTION WOULD BE @ 100% FOR ALL THE 10 YEARS. TH US, EVEN IN THE EARLIER PROVISION ONLY IN CASE OF NORTH-EASTER STATES, THE DEDUCTION OF 100% WAS ALLOWABLE 41 FOR 10 YEARS WHEREAS IN THE CASE OF STATES OF HIMAC HAL PRADESH, THE DEDUCTION WAS ALLOWABLE @ 100% FOR FIRST FIVE YEARS AND 25% FOR N EXT FIVE YEARS. 38. FURTHER, IT SHOULD BE NOTED THAT SUB SECTION (6 ) STARTS WITH NON OBSTANTE CLAUSE AND THEREFORE, IN NO CASE THE DEDUCTION COUL D BE FOR PERIOD EXCEEDING 10 YEARS AND IN THIS REGARD WE MAY NOTE THAT EVEN THE LD. AUTHORS IN THEIR COMMENTARY OF INCOME TAX LAWS BY CHATURVEDI & PITHI SARIAS - SIXTH EDITION HAS EXPRESSED THE SAME OPINION. THE RELEVANT EXTRAC T 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 NOTWITHSTAN DING ANYTHING CONTAINED IN,AND PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER SECTION 80-IC, - WHERE THE TOTAL P ERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION - UNDER SECTION 80-IC, OR - UNDER THE SECOND PROVISO TO SECTION 80-IB(4) OR - UNDER SECTION 10C AS THE CASE MAY BE, EXCEEDS 10 ASSESSMENT YEARS. 39. LASTLY, IT WAS CONTENDED THAT INITIAL ASSESSMEN T YEAR AS DEFINED IN CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC USES THE EXPRESS ION 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 OPERATION OR C OMPLETE 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 CANNOT BE US ED TWICE BY REFERRING TO SERIES OF EVENTS. THIS CAN BE UNDERSTOOD WITH A VERY SIMPLE E XAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GET EMPLO YED AS LEGAL OFFICER IN AN 42 ORGANIZATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROFESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE. THEN IN S UCH A SITUATION IT CANNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AN D 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. THEREFORE, READING OF THE ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGISLATURE WAS VERY CL EAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE STATE OF HIM ACHAL PRADESH (SINCE ALL THE CASES BEFORE US ARE SITUATED IN THE STATE OF HIMACHAL PRA DESH) AND THEREAFTER 25% DEDUCTION FOR ANOTHER FIVE YEARS ON THE NEW UNITS O R THE EXISTING UNITS WHERE SUBSTANTIAL EXPANSION WAS CARRIED OUT. 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WITH 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 DECISI ON 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 UNDER 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 IN DIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA), IT WAS OBSERVED AS UNDE R:- THE LEARNED COUNSEL FOR THE APPELLANT THEN CONTEN DED THAT SINCE THERE IS AN AMBIGUITY ABOUT THE MEANING AND PURPORT OF ITEM-6 O F THE TABLE APPENDED TO THE EXEMPTION NOTIFICATION, THE BENEFIT OF SUCH AMB IGUITY SHOULD GO TO THE ASSESSEE MANUFACTURER AND THE ENTRY MUST BE CONSTRU ED AS TAKING IN THE MFPBS AS WELL. IT IS NOT POSSIBLE TO AGREE WITH THIS SUBMISSION. IN MANGALORE CHEMICALS& FERTILIZERS LTD.. V. DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ORS., [1992) SUPPL. 1 S.C.C, 21, A BENCH OF THIS COURT COMPRISING M.N. VENKATACHALIAH, J. (AS THE LEARNED CHIEF JUSTICE THEN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE I N THE FOLLOWING WORDS: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERV ATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN SUPPORT OF STR ICT CONSTRUCTION OF A PROVISION CONCERNING EXEMPTIONS. THERE IS SUPPORT O F JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION HAVE A TENDENCY TO INCREASE THE BURDEN ON 43 THE OTHER UN-EXEMPTED CLASS OF TAX PAYERS AND SHOUL D BE CONSTRUED AGAINST THE SUBJECT IN CASE OF AMBIGUITY. IT IS AN EQUALLY WELL KNOWN PRINCIPLE THAT A PERSON WHO CLAIMS AN EXEMPTION HAS TO ESTABLISH HIS CASE. INDEED, IN THE VERY CASE OF PARLE EXPORTS (P) LTD. RELIED UPON BY SHRI NARASIMHAMURTHY, IT WAS OBSERVED. WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VIOLE NCE IS DONE TO THE LANGUAGE EMPLOYED. IT MUST, HOWEVER, BE BORNE IN MIND THAT A BSURD RESULTS OF CONSTRUCTION SHOULD BE AVOIDED. THE CHOICE BETWEEN A STRICT AND A LIBERAL CONSTRUCT ION ARISES ONLY IN CASE OF DOUBT IN REGARD TO THE INTENTION OF THE LEGISLATURE MANIFEST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPR ETATIVE PROCESS ARISES ONLY WHERE THE MEANING IS NOT MANIFEST ON THE PLAIN WORD S OF THE STATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY THE M EANING, 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. W OOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW OF LAW. THE P RINCIPLE THAT IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASSUMING THAT THE SAID PRINCIPLE IS GOOD AND SOUND- DOES NOT APPLY TO THE CONSTRUCTION OF AN EXCEPTION OR AN EXEMPTING PROVIS ION; THEY HAVE TO BE CONSTRUED STRICTLY. A PERSON INVOKING AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX LIABILITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SAID PROVISION. IN CASE OF DOUBT OR AMBIGUITY, BENE FIT OF ITS MUST GO TO THE STATE. THE HONBLE SUPREME COURT IN ORISSA STATE WAREHOUSI NG CORPORATIONS CASE (SUPRA) HAS LAID DOWN THAT WHILE IT IS TRUE THAT I N THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL S TATUTE, THE SAME GOES IN FAVOUR OF THE ASSESSEE, BUT THE FACT REMAINS AND THE LAW I S WELL-SETTLED ON THIS SCORE THAT IN THE MATTER OF INTERPRETATION OF THE TAXING STATUTES THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCING SOME OTHER EXPRESSI ONS WHICH 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 L ANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN ASCERTAINING THE STATUTORY INT ENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTION IS AN EXCEPTION TO THE GE NERAL RULE AND SINCE THE SAME IS OPPOSED TO THE NATURAL TENOR OF THE STATUTE , THE ENTITLEMENT FOR EXEMPTION, THEREFORE, OUGHT NOT TO BE READ WITH ANY LATITUDE TO THE TAX-PAYER OR EVEN WITH A WIDER CONNOTATION. 41. THEREFORE, IT BECOMES CLEAR THAT LIBERAL INTERP RETATION OF AN INCENTIVE PROVISION IS POSSIBLE IF THERE IS ANY DOUBT. AS WE HAVE SEEN ABOVE THAT IF VARIOUS SUB SECTIONS OF SECTION 80IC ARE READ 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 44 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 N OVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) THE BURDEN WAS O N THE ASSESSEE TO SHOW UNDER WHICH CLAUSE HE WAS ENTITLED TO THE DEDUCTION BUT A SSESSEE IS SIMPLY ASSERTING BEFORE US THAT THERE IS NO RESTRICTION FOR DEDUCTIO N IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION, THAT IS NOT ENOUGH B ECAUSE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULAR DEDUCTION WAS ALLOWAB LE. 42. WE ALSO FIND FORCE IN THE SUBMISSIONS OF LD. CI T-DR THAT IF INTERPRETATION GIVEN BY THE ASSESSEE IS TO BE 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% DEDUCTION ON EXPANSION F OR FIRST FIVE YEARS AND 25% THEREAFTER WHEREAS THE NEW UNITS WOULD BECOME ENTIT LED TO DEDUCTION FOR 100% FOR FIRST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EX PANSION. 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 FOLLOWED . 44. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION IN THE CASE OF S.R. PARYAVARAN ENGINEERS PVT LTD (SUPRA) OF THE CHANDIG ARH BENCH. THE FACTS IN THAT CASE ARE THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 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 45 DEDUCTION AT THE RATE OF 100% ON THE BASIS OF SUCH SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 2006-07. HOWEVER, THE DEDUCTION WA S WRONGLY CLAIMED U/S 80IB INSTEAD OF SECTION 80IC. THE CIT(A) ALLOWED THE DE DUCTION BY OBSERVING THAT DEDUCTION COULD NOT BE DENIED SIMPLY BECAUSE ASSESS EE HAS QUOTED A WRONG SECTION. ON THE APPEAL FILED BY REVENUE, THE DEDUCTION WAS H ELD TO BE ALLOWABLE BECAUSE SUBSTANTIAL EXPANSION WAS CARRIED OUT IN A UNIT WHI CH WAS ALREADY IN EXISTENCE AS ON 7.1.2003. THEREFORE, IN OUR OPINION, THIS DECIS ION DOES NOT PROVIDE ANY ASSISTANCE TO THE CASE OF THE ASSESSEE. 45. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (SUPRA). THE FACTS IN THAT CASE ARE THAT A PARTNERSHIP FIRM NAMELY M/S. HIMACHAL POWER PRODUCTS WAS 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 PARTNE R 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 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 CAPACIT Y SO LONG IT IS NOT A CASE OF RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE. HOW EVER, 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 LEF T OPEN AND NOT DECIDED BY THE AAR. THEREFORE THIS DECISION IS TOTALLY DISTINGUISH ABLE AND DOES NOT HELP THE CASE OF THE ASSESSEE. 46 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. DC IT (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,- A. NAME OF THE EXPORT PROCESSING ZONE / INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE / INDUSTRIAL GROWTH CENTRE/INDUSTRIAL PARK/ESTATE/SOFTWARE TECHNOLOGY PARK/INDUSTRIAL AREA/THEME PARK AND THE DISTRICT/STATE IN WHICH LOCATED :------------ -------- (B) KHASRA NO. OF THE UNDERTAKING OR ENTERPRISE :-------------------- (ALSO INDICATE THE BOARDS NOTIFICATION NO. ) (C) IF THE ELIGIBLE BUSINESS IS NEW, PLEASE GIVE THE DATE OF COMMENCEMENT OF PRODUCTION OR MANUFACTUR E OF ARTICLE OR THING. :--------------------- (D) IF THE EXISTING BUSINESS HAS UNDERTAKEN SUBST ANTIAL EXPANSION, PLEASE SPECIFY,- :----------- ----------- (I) THE DATE OF SUBSTANTIAL EXPANSION (II) THE TOTAL BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR)AS ON FIRST DAY OF THE PREVIOUS YEAR IN WHICH SU B- 47 STANTIAL EXPANSION TOOK PLACE. :-------- -------------- (III) VALUE OF INCREASE IN THE PLANT AND MACHINE RY IN THE YEAR OF SUBSTANTIAL EXPANSION. :- --------------------- (E) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING) :----------------------- (F) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING O R OPERATION) :------------------------- 48. THE CAREFUL READING OF THE FORM IN A SERIAL ORD ER WOULD CLEARLY SHOW THAT THE ASSESSEE IS REQUIRED TO INFORM THE 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 BUSIN ESS HAS UNDERTAKEN SUBSTANTIAL EXPANSION, THEREFORE, THERE ARE TWO CATEGORIES OF B USINESS AND SUBSTANTIAL EXPANSION IS POSSIBLE ONLY IN CASE OF EXISTING BUSI NESS. 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/2012 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. ITA 374/CHD/2014 ASSESSMENT YEAR 2010-11 51. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE ORDER DATED 27.01.2014 PASSED BY THE LD. CIT(APPEALS), SHIMLA U /S 250(6) OF THE INCOME TAX ACT, 1961 IS BAD IN LAW, ILLEGAL, WITHOUT JURIS DICTION AND VOID. 48 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(APPEALS), SHIMLA HAS ERRED IN: I. AFFIRMING THE ORDER OF LD. ITO, BADDI IN RESTRI CTING THE CLAIM OF APPELLANT OF DEDUCTION U/S 80-IC OF THE INCOME TAX ACT, 1961 AT 25% INSTEAD OF 100% CLAIMED BY THE APPELLANT IN THE SIXTH YEAR OF OPERATION OF NEW INDUSTRIAL UNDERTAKING OF THE APPELLANT WHEREIN SUB STANTIAL EXPANSION WAS CARRIED OUT IN SUCH NEW INDUSTRIAL UNDERTAKING BY T HE APPELLANT. II. MISINTERPRETING THE PROVISIONS OF SECTION 80-I C 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 BENEFIT OF 100% DEDU CTION U/S 80-IC OF THE ACT FOR FIRST FIVE YEARS IN CASE OF SUBSTANTIAL EXP ANSION IS AVAILABLE ONLY TO THE UNITS THAT EXISTED AND WERE OPERATIONAL AS ON 07.01 .2003 AND SUCH BENEFIT IS NOT AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTER THE INTRODUCTION OF THE SCHEME OF SUCH DEDUCTION. III. UPHOLDING THAT ONCE AN INITIAL ASSESSMENT YEA R IS DETERMINED IN CASE OF AN UNDERTAKING CLAIMING BENEFIT U/S 80-IC O F THE ACT, IT CANNOT BE CHANGED EVEN IF SUCH UNDERTAKING COMPLETES SUBSTANT IAL EXPANSION AND AGAIN QUALIFIES FOR DEDUCTION UNDER THE SAID SECTION ON T HE BASIS OF QUALIFYING EXPANSION. IV. 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 ECONOMY OF INDUSTRIALLY B ACKWARD STATES SUCH AS HIMACHAL PRADESH. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT(APPEALS), SHIMLA HAS ERRED IN AFFIRMING THE ORD ER OF LD. ITO, BADDI IN RESTRICTING THE APPELLANTS CLAIM OF OTHER INCOME O F RS. 19,75,825/- BEING ELIGIBLE FOR DEDUCTION U/S 80IC OF THE IT ACT, 1961 . 4. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, LD. CIT (APPEALS), SHIMLA HAS ERRED IN AFFIRMING THE ORDER OF LD. ITO, BADDI IN LEVYING INTEREST U/S 234-B OF THE IT ACT 1961. 52. GROUND NO.1 IS OF GENERAL NATURE AND DOES NOT R EQUIRE SEPARATE ADJUDICATION AND HENCE DISMISSED. 53. GROUND NO. 2 : THE ISSUE RAISED IN THIS GROUND IS IDENTICAL TO THE MAIN ISSUE WHICH HAS BEEN ADJUDICATED BY US IN ITA NO. 798/CHD /2012 IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 IN THE ABOVE NOTED PARAS 22-49. FOLLOWING THE SAME, WE DECIDE THE ISSUE AGAINST THE ASSESSEE. 49 54. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT ASSE SSEE HAS SHOWN OTHER INCOME AMOUNTING TO RS. 19,75,825/- AS PER THE FOLLOWING D ETAILS:- PARTICULARS AMOUNT(RS.) INTEREST RECEIVED ON MARGIN MONEY 2,85,876/- INTEREST RECEIVED ON OTHERS 70,328/- FOREIGN EXCHANGE FLUCTUATION 15,46,066/- MISCELLANEOUS INCOME 73,542/- SUNDRY CREDIT BALANCES WRITTEN BACK 13/- TOTAL 19,75,825/- 55. ON THIS INCOME THE ASSESSEE HAS CLAIMED DEDUCTI ON U/S 80IC. IT WAS OBSERVED BY ASSESSING OFFICER THAT THIS INCOME HAS NOT BEEN DERIVED FROM THE INDUSTRIAL UNDERTAKING AND DOES NOT HAVE FIRST DEGR EE NEXUS WITH THE MANUFACTURING ACTIVITY. THEREFORE, ASSESSEE WAS ASK ED TO JUSTIFY THE CLAIM U/S 80IC OF THE ACT AGAINST THIS INCOME. IN RESPONSE IT WAS STATED THAT INCOME WAS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. THE ASSESSING O FFICER REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHE MICALS LTD VS. CIT 262 ITR 278 (SC) AND LIBERTY INDIA LTD V CIT 317 ITR 218 A ND DISALLOWED THE CLAIM OF DEDUCTION AGAINST OTHER INCOME. THE ACTION OF THE A SSESSING OFFICER WAS CONFIRMED BY LD. CIT(A). 56. BEFORE US LD. COUNSEL SUBMITTED THAT INTEREST O N MARGIN MONEY IS DIRECTLY RELATED THE BUSINESS. SIMILARLY, FOREIGN EXCHANGE T RANSACTIONS ARE CARRIED OUT DURING THE COURSE OF BUSINESS, THEREFORE, THE SAME IS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. IT WAS FURTHER SUBMITTED THAT CHAN DIGARH BENCH OF TRIBUNAL IN CASE OF M/S ANSYSCO VS. ACIT IN ITA NO. 895/CHD/201 2 AND OTHERS HAS HELD THAT INCOME FROM FOREIGN EXCHANGE FLUCTUATIONS WAS DIREC TLY LINKED TO THE BUSINESS ACTIVITY THEREFORE DEDUCTION SHOULD BE ALLOWED. 57. ON THE OTHER HAND THE LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 50 58. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY WE FIND THAT HON'BLE SUPREME COURT IN THE CASE OF PANDIAN CHEMICALS LTD VS. CIT (SUPRA) WAS CONCERNED WITH THE ISSUE OF DEDUCTION U/S 80HH ON I NTEREST INCOME RECEIVED ON ELECTRICITY DEPOSIT MADE BY THE ASSESSEE. ON THIS I SSUE, THE FOLLOWING OBSERVATIONS WERE MADE:- THE WORDS DERIVED FROM IN SECTION 80HH OF THE INC OME-TAX ACT, 1961, MUST BE UNDERSTOOD AS SOMETHING WHICH HAS A DIRECT OR IMMEDIATE NEXUS WITH THE ASSESSEES INDUSTRIAL UNDERTAKING. ALTHOUG H ELECTRICITY MAY BE REQUIRED FOR THE PURPOSES OF THE INDUSTRIAL UNDERTA KING, THE DEPOSIT REQUIRED FOR ITS SUPPLY IS A STEP REMOVED FROM THE BUSINESS OF THE INDUSTRIAL UNDERTAKING. 59. AFTER THE ABOVE OBSERVATION, IT WAS HELD AS UND ER:- HELD ACCORDINGLY, THAT INTEREST DERIVED BY THE IND USTRIAL UNDERTAKING OF THE ASSESSEE ON DEPOSITS MADE WITH THE ELECTRICITY BOARD FOR THE SUPPLY OF ELECTRICITY FOR RUNNING THE INDUSTRIAL UNDERTAKING COULD NOT BE SAID TO FLOW DIRECTLY FROM THE INDUSTRIAL UNDERTAKING ITSELF AND WAS NOT PROFITS OR GAINS DERIVED BY THE UNDERTAKING FOR THE PURPOSE OF THE S PECIAL DEDUCTION UNDER SECTION 80HH . 60. SAME VIEW WAS TAKEN LATER ON IN THE CASE OF LIB ERTY INDIA LTD V CIT (SUPRA). IT MAY BE NOTED THAT THAT EXPRESSION DERIVED FROM HAS BEEN USED IN SECTION 80IC ALSO, THEREFORE, AS FAR AS INTEREST RECEIVED ON MAR GIN MONEY AND INTEREST RECEIVED ON OTHER AMOUNTING TO RS. 2,85,876/- AND RS. 70,328 /- ARE NOT ENTITLED FOR DEDUCTION U/S 80IC AND ACCORDINGLY WE CONFIRM THE ACTION OF THE ASSESSING OFFICER AND CIT(A) IN THIS RESPECT. 61. AS FAR AS THE AMOUNT RECEIVED ON FOREIGN EXCHAN GE FLUCTUATION IS CONCERNED, THOUGH IN CASE OF M/S ANSYSCO VS. ACIT(SUPRA) IT WA S HELD THAT GAIN FROM FOREIGN EXCHANGE FLUCTUATIONS WAS DIRECTLY RELATED TO THE B USINESS ACTIVITY THEREFORE ASSESSEE WAS ENTITLED TO DEDUCTION. HOWEVER THE DET AILS ARE NOT INCORPORATED IN THE ASSESSMENT ORDER OR IN THE IMPUGNED ORDER, THEREFOR E, WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF ASS ESSING OFFICER WITH A DIRECTION THAT IF THE SAME RELATES TO THE BUSINESS TRANSACTIO N ON REVENUE ACCOUNT, THEN DEDUCTION MAY BE ALLOWED ON THIS AMOUNT, OTHERWISE THE ISSUE MAY BE DECIDED IN 51 ACCORDANCE WITH LAW. AS FAR AS THE ISSUE REGARDING MISC. INCOME AND SUNDRY CREDIT BALANCE WRITTEN BACK IS CONCERNED, THIS ISSUE WAS N OT SERIOUSLY PRESSED BEFORE US, THEREFORE, ACTION OF THE LD. CIT(A) IN RESPECT OF T HESE TWO ITEMS ARE ALSO CONFIRMED. 62. IN THE RESULT THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 866/CHD/2014 (ASSESSMENT YEAR 2010-11) 63. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY TWO DISPUTES ARE INVOLVED NAM ELY : ISSUE NO. 1 - DENIAL OF 100% DEDUCTION ON ACCOUNT O F SUBSTANTIALLY EXPANDED UNIT ISSUE NO. 2- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION. 64. ISSUE NO. 1 :+8 SINCE THE ISSUE AS WELL AS CO NTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 65. ISSUE NO. 2: THIS ISSUE HAS ALREADY BEEN DECID ED BY US IN CASE OF M/S HYCRON ELECTRONICS , BADDI, SOLAN IN ITA NO. 374/CHD/2014 VIDE PARA NO. 61. THEREFORE FOLLOWING THE SAME WE SET ASIDE THE ORDER OF LD. CIT AND REMI T THE MATTER BACK TO THE FILE OF AO WITH SIMILAR DIRECTION AS CONTAINED IN PARA 61. 66. IN THE RESULT APPEAL IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES ITA NO. 867/CHD//2014 (ASSESSMENT YEAR 2011-12) 67. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY THREE DISPUTES ARE INVOLVED. ISSUE NO.1 - DENIAL OF 100% DEDUCTION ON ACCOUNT OF SUBSTANTIALLY EXPANDED UNIT ISSUE NO. 2- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS ISSUE NO. 3- CONFIRMATION OF DISALLOWANCE AMOUNTING TO RS. 87,500/- UNDER SECTION 14A. . 52 68. ISSUE NO. 1: SINCE THE ISSUE AS WELL AS CONTE NTIONS REMAIN THE SAME HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 69. ISSUE NO. 2: THIS ISSUE HAS ALREADY BEEN DECID ED BY US IN CASE OF M/S HYCRON ELECTRONICS , BADDI, SOLAN IN ITA NO. 374/CHD/2014 VIDE PARA NO. 61. THEREFORE FOLLOWING THE SAME SET ASIDE THE ORDER OF LD. CIT AND REMIT T HE MATTER BACK TO THE FILE OF AO WITH SIMILAR DIRECTION AS CONTAINED IN PARA 61. 70. ISSUE NO. 3: AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS MADE C ERTAIN INVESTMENT IN SHARES AND MUTUAL FUNDS. THEREFORE, ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 14A READ WITH RULE 8D AND MADE TOTAL DISALLOWANCE OF RS . 87,500/-. 71. ON APPEAL, THE ACTION OF THE ASSESSING OFFICER WAS CONFIRMED. 72. BOTH THE PARTIES WERE HEARD. 73. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT ADMITTEDLY THE ASSESSEE HAS MADE INVESTMENT IN SHARES AND MUTUAL FUNDS, INC OME FROM WHICH IS EXEMPT. CHANDIGARH BENCH OF THE TRIBUNAL IS CONSISTENTLY HO LDING THAT RULE 8D IS APPLICABLE FROM ASSESSMENT YEAR 2008-09 FOLLOWING T HE DECISION OF GODREJ & BOYCE MANUFACTURING CO. LTD V DCIT 328 ITR 81(BOMBA Y) , THEREFORE WE FIND NOTHING WRONG IN THE ORDER OF LD. CIT(A) AND CONFIR M THE SAME 74 IN THE RESULT, APPEAL IS PARTLY ALLOWED FOR STAT ISTICAL PURPOSES. ITA NO. 868/CHD/2014 (ASSESSMENT YEAR 2010-11) 75. IN THIS APPEAL THE ASSESSEE HAS RAISED ONLY ONE ISSUE REGARDING DENIAL OF DEDUCTION UNDER SECTION 80IC @100% FOR NEW UNIT WHI CH HAS BEEN EXPANDED. 76. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAI N THE SAME HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 77. IN THE RESULT APPEAL IS DISMISSED 53 ITA NO. 869/CHD/2014 (ASSESSMENT YEAR 2011-12) 78. IN THIS APPEAL THE ASSESSEE HAS RAISED ONLY ONE ISSUE REGARDING DENIAL OF DEDUCTION UNDER SECTION 80IC ON EXPANDED UNIT. 79. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 80. IN THE RESULT APPEAL IS DISMISSED ITA NO. 895/CHD/2014 81. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE ISS UE REGARDING DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS. 82. THIS ISSUE HAS ALREADY BEEN DECIDED BY US IN CA SE OF M/S HYCRON ELECTRONICS , BADDI, SOLAN IN ITA NO. 374/CHD/2014 VIDE PARA NO. 61. THEREFORE FO LLOWING THE SAME SET ASIDE THE ORDER OF LD. CIT AND REMIT THE MATTER BACK TO THE FILE OF AO WIT H SIMILAR DIRECTION AS CONTAINED IN PARA 61. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 896/CHD/2014 82. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY THREE DISPUTES ARE INVOLVED. ISSUE NO.1 - DENIAL OF 100% DEDUCTION ON ACCOUNT OF SUBSTANTIALLY EXPANDED UNIT ISSUE NO. 2- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS ISSUE NO. 3- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF LATE DEPOSIT OF EMPLOYEE CONTRIBUTION TO ESI & PF BY IGN ORING THE FACT THAT THESE STATUTORY DUES ARE CLEARLY DEPOSITED BEFORE T HE DUE DATE OF FILING OF RETURN OF INCOME. 83. ISSUE NO. 1- SINCE THE ISSUE AS WELL AS CONTE NTIONS REMAIN THE SAME HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 54 84. ISSUE NO. 2: THIS ISSUE HAS ALREADY BEEN DECID ED BY US IN CASE OF M/S HYCRON ELECTRONICS , BADDI, SOLAN IN ITA NO. 374/CHD/2014 VIDE PARA NO.61. THEREFORE FOLLOWING THE SAME SET ASIDE THE ORDER OF LD. CIT AND REMIT T HE MATTER BACK TO THE FILE OF AO WITH SIMILAR DIRECTION AS CONTAINED IN PARA 61. 85. ISSUE NO. 3: AFTER HEARING BOTH THE PARTIES W E FIND THAT DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED THAT ASSESSEE HAS DEPOSI TED PROVIDENT FUND AND ESIC DUES LATE AND THEREFORE THERE AMOUNTS WERE DISALLOWED 86. ON APPEAL THE ACTION OF THE AO WAS CONFIRMED BY THE LD. CIT(A) 87. BEFORE US THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE AMOUNT WERE PAID BEFORE THE DUE DATE OF FILING OF RETURN AND THEREFO RE THIS AMOUNT WERE ALLOWABLE. 88. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF LD. CIT(A). 89. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFUL LY WE FIND THAT HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS. NUCHEM LTD. I N ITA NO. 323 OF 2009 HAS CLEARLY HELD THAT IF AMOUNT HAVE BEEN PAID BEFORE THE DUE DATE O F FILING OF RETURN THEN SUCH DUES ARE ALLOWABLE. HOWEVER, WE FURTHER FIND THAT DATES OF D EPOSITS ARE NOT AVAILABLE ON RECORD THEREFORE WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WITH A DIRECTION TO VERIFY THAT IF AMOUNT HAVE BEEN PAID BEFORE DUE DATE OF FILING OF RETURN THEN THE SAME MAY BE ALLOWED OTHERWISE THE ISSUE SHOULD BE DECIDED IN ACCORDANCE WITH THE LAW. WE MAY ALSO LIKE TO POINT OUT THAT IF ULTIMATELY DI SALLOWANCE IS MADE ON THIS ACCOUNT THEN THE PROFIT OF THE ASSESSEE WOULD INCREASE AND ASSESSEE WOULD BE ENTITLED TO INCREASED DEDUCTION UNDER SECTION 80IC AS CONSEQUENCES. 90. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 897/CHD/2014 91. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISED BUT ONLY THREE DISPUTES ARE INVOLVED NAMELY: ISSUE NO. 1: DENIAL OF 100% DEDUCTION ON ACCOUNT OF SUBSTANTIALLY EXPANDED UNIT ISSUE NO. 2: DISALLOWANCE ON ACCOUNT OF LATE PAYMEN T OF ESI & PF DUES. ISSUE NO. 3; CONFIRMATION OF ADDITION FOR NON CHARG ING INTEREST FROM PARTNERS ON THEIR WITHDRAWALS. 55 92. ISSUE NO. 1: SINCE THE ISSUE AS WELL AS CONTENT IONS REMAINS THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMAC HAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 93. ISSUE NO. 2: THIS ISSUE HAS BEEN DECIDED BY US IN CASE OF M/S SANSUI ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 896/CHD/2014 VIDE PARA 89, FOLLOWING THE SAME WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO TH E FILE OF AO WITH A DIRECTION TO VERIFY THAT IF AMOUNTS HAVE BEEN PAID BEFORE DUE DATE OF FILING OF RETURN THEN THE SAME MAY BE ALLOWED OTHERWISE THE ISSUE SHOULD BE DECIDED IN ACCORDANCE WITH THE LAW. WE MAY ALSO LIKE TO POINT OUT THAT IF ULTIMATELY DISALLOWANCE IS MADE ON THIS ACCOUNT THE N THE PROFIT OF THE ASSESSEE WOULD INCREASE AND ASSESSEE WOULD BE ENTITLED TO INCREASED DEDUCTION U NDER SECTION 80IC AS CONSEQUENCES. 94. ISSUE NO. 3: AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT THERE WAS DEBIT BALANCE IN THE CAPI TAL ACCOUNT OF PARTNER SHRI. SANJAY BAFNA AMOUNTING TO RS. 26,32,346/- AND SHRI SUNIL KUMAR D ESADLA AMOUNTING TO RS. 93,45,966/-. IT WAS FURTHER NOTICED THAT NO INTEREST WAS CHARGED FROM T HESE PARTNERS. SINCE THE ASSESSEE FIRM WAS PAYING INTEREST TO THE BANKS THEREFORE A QUERY WAS RAISED WHY INTEREST HAS NOT BEEN CHARGED FROM PARTNERS AND WHY PROPORTIONATE DISALLOWANCE OF INTEREST SHOU LD NOT BE MADE. IN RESPONSE IT WAS MAINLY SUBMITTED THAT THERE WAS CREDIT BALANCE IN THE CASE OF OTHER TWO PARTNERS I.E; MRS. KAVITA DESADLA AMOUNTING TO RS. 78,99,736/- AND MRS. SANDEEPA BAFN A AMOUNTING TO RS. 91,97,812/-. WHERE AS TOTAL DEBIT BALANCE IN THE TWO ACCOUNTS WAS ONLY RS . 1,19,78,312/-. FURTHER THE PROFITS IS EARNED FROM DAY TO DAY AND IF PROFIT EARNED DURING THE YEAR WAS CREDITED ON MONTHLY BASIS THEN THERE WOULD NOT BE ANY DEBIT BALANCE. IN ANY CASE THE FIRM HAS ITSE LF DISALLOWED THE SUM OF RS. 12,00,000/- TO COVER UP THE POSSIBLE DISALLOWANCE OF INTEREST EXPENDITUR E AND THEREFORE NO FURTHER DISALLOWANCE WAS CALLED FOR. 95. THE AO AFTER EXAMINING THESE SUBMISSIONS DID NO T FIND ANY FORCE IN THE SAME. HE WAS OF THE VIEW THAT ONCE INTEREST WAS NOT CHARGED TO THE DEBI T BALANCE OF THE PARTNERS THEN PROPORTIONATE DISALLOWANCE WHICH WAS WORKED OUT AT RS. 14,37,397/ - HAS TO BE DISALLOWED. 96. ON APPEAL BEFORE LD. CIT(A) IT WAS SUBMITTED TH AT THERE WAS NO CLAUSE IN THE PARTNERSHIP DEED WHICH REQUIRED TO CHARGE INTEREST ON DEBIT BAL ANCE ON THE PARTNERS ACCOUNT. IN FACT THERE WAS NO 56 CREDIT MADE TO THE PARTNERS ACCOUNT ON THEIR CAPITA L BALANCE THEREFORE THE DISALLOWANCE WAS NOT JUSTIFIED AND RELIANCE WAS PLACED ON FEW TRIBUNAL D ECISIONS. 97. LD. CIT DID NOT AGREE WITH THESE SUBMISSIONS HO WEVER SHE GAVE A DIRECTION THAT IN VIEW OF THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN CAS E OF MEGA PACKAGE IN ITA NO. 755/CHANDI/2011 THAT IF PROFIT IS ENHANCED BECAUSE OF ANY DISALLOWANCE THEN THE SUCH ENHANCED PROFIT WOULD BECOME ELIGIBLE FOR DEDUCTION UNDER SE CTION 80IC. 98. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERAT ED THE SUBMISSIONS MADE BEFORE LOWER AUTHORITY. 99. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER OF CIT(A). 100. AFTER CONSIDERING THE RIVAL SUBMISSIONS CAREFU LLY WE FIND FORCE IN THE SUBMISSION OF LD. COUNSEL FOR THE ASSESSEE. FIRSTLY THERE IS NO PROVI SION FOR CHARGING OF INTEREST IN THE PARTNERSHIP DE ED AND THEREFORE ASSESSEES FIRM WAS NOT BOUND TO CHAR GE INTEREST. SECONDLY SINCE NO INTEREST HAVE BEEN ALLOWED TO THE PARTNERS THEREFORE OVERALL BALANCE O F ALL THE PARTNERS SHOULD HAVE BEEN EXAMINED AND IF SUCH EXAMINATIONS IS MADE THEN THE OVERALL BALAN CES IN THE CAPITAL ACCOUNT WOULD BE CREDIT BALANCE. THIRDLY IN ANY CASE ASSESSEE HAS ALREADY D ISALLOWED THE SUM OF RS. 12,00,000/- ON THIS ACCOUNT. THEREFORE IN OUR OPINION THERE IS NO JUSTI FICATION FOR THIS DISALLOWANCE AND ACCORDINGLY WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THE SA ME. 101. IN THE RESULT APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. ITA NO. 782/CHD/2014 102. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISE D BUT THE ONLY ISSUE IS REGARDING DISALLOWANCE OF DENIAL OF CLAIM OF DEDUCTION UNDER SECTION 80IC @ 100%. 103. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAI N THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 104. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 783/CHD/2014 105. IN THIS APPEAL VARIOUS GROUNDS HAVE BEEN RAISE D BUT THE ONLY ISSUE IS REGARDING DISALLOWANCE OF DENIAL OF CLAIM OF DEDUCTION UNDER SECTION 80IC @ 1 00%. 57 106. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 107. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 175/CHD/2014 108. IN THIS APPEAL ASSESSEE HAS RAISED VARIOUS GRO UNDS : ISSUE NO. 1 - DENIAL OF 100% DEDUCTION ON ACCOUNT O F SUBSTANTIALLY EXPANDED UNIT. ISSUE NO. 2- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF TECHNICAL KNOW HOW RENDERED BY ITS PARTNER AND REDUCING THE C LAIM. 109. ISSUE NO. 1- SINCE THE ISSUE AS WELL AS CONTEN TIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 110. ISSUE NO. 2- AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEES F IRM WAS USING TECHNICAL KNOW HOW OF M/S OPTIMA DIAMOND TOOLS PVT. LTD. WHICH WAS A SISTER CONCERN BUT NO COMPENSATION WAS BEING PAID FOR THE SAME. INITIALLY ASSESSEE TRIED TO JUSTIFY THE CLAIM HOWEVER, LATER ON ASSESSEE OFFERED TO REDUCE THE ELIGIBLE PROFITS FOR DEDUCTION UNDER SECTION 80IC BY SUM OF RS. 15,00,00 0/- AND ACCORDINGLY AO MADE ADDITION OF RS. 15,00,000/-. 111. ON APPEAL THE LD. CIT(A) CONFIRMED THE ADDITIO N IN VIEW OF THE OFFER MADE BY THE ASSESSEE. 112. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT TECHNOLOGY WAS PROVIDED IN THE INITIAL YEARS AND ALREADY TIME OF F IVE YEARS HAVE BEEN LAPSED FROM THE DATE OF PRODUCTION AND PRODUCTION HAS STABILIZE D AND THEREFORE THERE WAS NO JUSTIFICATION OF THE ADDITION. 113. ON THE OTHER HAND LD. DR REFERED TO THE ASSESS MENT ORDER AND POINTED OUT THAT ASSESSEE HAS AGREED FOR THIS ADDITION. 114. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIN D THAT LD. CIT(A) HAS ADJUDICATED THIS ISSUE VIDE PARA 6.3 WHICH IS AS UN DER: 58 6.3 AFTER CONSIDERATION OF THE FACTS OF THE CASE AN D APPELLANTS SUBMISSION IT IS NOTED THAT APPELLANT I TSELF HAS OFFERED THE REDUCTION OF RS. 15,00,000/- FROM ELIGI BLE PROFITS FOR DEDUCTION U/S 80IC ON ACCOUNT OF TECHNICAL KNOW -HOW SERVICES RENDERED BY ITS PARTNER. THE A.O. HAS ALSO AGREED AND CONSIDERED THE SUM OF RS. 15,00,000/- AS NOT EL IGIBLE FOR DEDUCTION U/S 80IC ON ACCOUNT TECHNOLOGICAL KNOW-HO W SERVICES AS AGREED BY THE APPELLANT SUBJECT TO NO P ENAL ACTION. THE APPELLANT ALSO AGREED FOR THE SAID ADDI TION AS INCOME FROM OTHER SOURCES BEFORE THE A.O. SINCE T HE OFFER FOR DEDUCTION OF RS. 15,00,000/- FROM ELIGIBLE PROF ITS U/S 80IC WAS ITSELF AGREED BY THE APPELLANT SUBJECT TO NO PE NAL PROVISION WHICH THE A.O. ALSO AGREED, THEREFORE I D O NOT FIND ANY DEFECT IN THE ADDITION MADE BY THE A.O. THE APP ELLANT FAILS ON THIS GROUND OF APPEAL. SINCE ASSESSEE HAS ALREADY AGREED FOR THE ADDITION THEREFORE ASSESSEE CANNOT BE SAID TO BE AGGRIEVED ABOUT THIS ADDITION AND THEREF ORE SAME WAS NOT EVEN APPEALABLE AS THE ASSESSEE CANNOT BE SAID TO BE AGG RIEVED BY SUCH ORDER WHICH IS MADE ON THE BASIS OF CONCESSION. IN THIS REGARD REF ERENCE MAY BE MADE TO THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BANTA SINGH KARTAR SINGH VS. CIT 125 ITR 239. THEREFORE WE FIND NOTHING WRONG IN THE ORDER OF LD. CIT AND CONFIRM THE SAME. 115. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. 176/CHD/2014 116. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY TWO DISPUTES ARE INVOLVED NAM ELY : ISSUE NO. 1 - DENIAL OF 100% DEDUCTION ON ACCOUNT O F SUBSTANTIALLY EXPANDED UNIT. ISSUE NO. 2- DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF TECHNICAL KNOW HOW RENDERED BY ITS PARTNER AND REDUCING THE C LAIM 117. ISSUE NO. 1- SINCE THE ISSUE AS WELL AS CONTEN TIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 118. ISSUE NO. 2- THIS ISSUE HAS BEEN DECIDED BY US IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2010-11 IN ITA NO. 175/CHD/2011 VID E PARA 114. FOLLOWING THE SAME WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 59 119. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 185/CHD/2014 120. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE IS SUE I.E; DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANTIAL EXPAND ED UNIT. 121. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN S THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 122. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 195/CHD/2014 123. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE IS SUE I.E; DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANTIAL EXPAND ED UNIT. 124. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN S THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 125. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 776/CHD/2014 126. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY TWO DISPUTES ARE INVOLVED NAM ELY : ISSUE NO.1- GROUND NO. 1-DENIAL OF 100% DEDUCTION O N ACCOUNT OF SUBSTANTIALLY EXPANDED UNIT. ISSUE NO. 2. CONFIRMATION OF DISALLOWANCE AMOUNTING TO RS. 66,826/- FOR NON PAYMENT OF INTEREST 127. ISSUE NO. 1- SINCE THIS ISSUE AS WELL AS CONTE NTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 128. ISSUE NO. 2- THE BRIEF FACTS ARE THAT SHRI. UM ESH ANAND WAS RUNNING A SOLE PROPRIETORSHIP CONCERN UNDER THE NAME AND STYLE OF M/S PRANAV ASSOCIATES IN HIS HUF CAPACITY AS KARTA. UPTO THE ASSESSMENT YEAR 200 7-08 THE ASSESSEE FIRM WAS HAVING BUSINESS TRANSACTIONS WITH M/S PRANAV ASSOCI ATES FOR PURCHASE OF RAW 60 MATERIAL AND COMPONENTS. THE LAST TRANSACTION OF PU RCHASE WAS MADE BY THE ASSESSEE IN JANUARY 2007. THEREAFTER NO BUSINESS WA S DONE. THERE WAS A SUM OF RS. 5,56,886 RECEIVABLE FROM M/S PRANAV ASSOCIATES DUE FROM 31/03/2007. THE AMOUNT WAS RECEIVED ON 01/03/2011 I.E; IN ASSESSMENT YEAR 2011-12. THE AO WAS OF THE VIEW THAT ASSESSEE SHALL HAVE CHARGED INTEREST ON T HE SAME. IN RESPONSE TO THE QUERY IT WAS SUBMITTED THAT ADVANCE WAS OUTSTANDING FROM 2007-08 AND NO BUSINESS TRANSACTION WAS CARRIED OUT AFTER THAT DATE. HOWEVE R, NO ADVERSE INFERENCE WAS TAKEN IN ASSESSMENT YEAR 2007-08, 2008-09 AND 2009- 10 WHERE ASSESSMENTS WERE COMPLETED UNDER SECTION 143(3). FURTHER IT WAS A TR ADE ADVANCE AND NO INTEREST COULD HAVE BEEN CHARGED. 129. ON APPEAL THE ACTION OF AO WAS CONFIRMED BY TH E LD. CIT(A). 130. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITT ED THAT IT WAS A CASE OF TRADE ADVANCE AND THEREFORE NO INTEREST COULD HAVE BEEN C HARGED IN ANY CASE NO DISALLOWANCE WAS MADE IN THE EARLIER ASSESSMENT YEA R WHICH WERE COMPLETED UNDER SECTION 143(3) THEREFORE OUR VIEW SHOULD NOT HAVE B EEN TAKEN IN THIS YEAR. 131. ON THE OTHER HAND LD. DR SUPPORTED THE ORDER O F LD. CIT(A). 132. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE AGR EE WITH THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE FIRSTLY BECAUSE IT IS A CASE OF TRADE ADVANCE AND THEREFORE IT WAS NOT NECESSARY TO CHARGE INTEREST. IN ANY CASE KEEPING THE SMALLNESS OF AMOUNT WE ARE OF THE OPINION THAT LENIENT APPROA CH SHOULD HAVE BEEN ADOPTED. THEREFORE WE SET ASIDE THE ORDER OF LD. CIT(A) AND DELETE THIS ADDITION. 133. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO. 777/CHD/2014 134. IN THIS APPEAL THE ASSESSEE HAS RAISED VARIOUS GROUNDS. HOWEVER, IT WAS POINTED OUT THAT ONLY THREE DISPUTES ARE INVOLVED N AMELY : ISSUE NO.1- GROUND NO. 1-DENIAL OF 100% DEDUCTION O N ACCOUNT OF SUBSTANTIALLY EXPANDED UNIT. ISSUE NO. 2. CONFIRMATION OF DISALLOWANCE ON ACCOUN T OF LATE PAYMENT OF PROVIDENT FUND AMOUNTING TO RS. 44,588/- . 61 ISSUE NO. 3. CONFIRMATION OF DISALLOWANCE ON ACCOUN T OF LATE PAYMENT OF ESI CONTRIBUTION AMOUNTING TO RS. 2529/- . 135. ISSUE NO. 1- SINCE THE ISSUE AS WELL AS CONTEN TIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PRADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 136. ISSUE NO. 2 & 3- SINCE THE ISSUE AS WELL AS CO NTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S SANSUI ELECTRONIC S VS. ITO, HIMACHAL PRADESH IN ITA NO. 896/CHD/2014 VIDE PARA NO. 89. THEREFORE FOLLOWING THIS DECISION WE SET ASIDE THE ORDER OF LD. CIT(A) AND REMIT THE MATTER BACK TO THE FILE OF AO WHO IS DIRECTED TO FOLLOW THE DIRECTIONS CONTAINED IN PARA 89 OF THIS ORDER. 137. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO. 780/CHD/2014 138. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE IS SUE I.E; DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANTIAL EXPAND ED UNIT. . 139- SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN S THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 140- IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 1007/CHD/2014 140. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE IS SUE I.E; DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANTIAL EXPAND ED UNIT. . 141- SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN S THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 142- IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. ITA NO. 1051/CHD/2014 143. IN THIS APPEAL ASSESSEE HAS RAISED ONLY ONE IS SUE I.E; DENIAL OF DEDUCTION UNDER SECTION 80IC ON ACCOUNT OF SUBSTANTIAL EXPAND ED UNIT. . 62 144. SINCE THIS ISSUE AS WELL AS CONTENTIONS REMAIN THE SAME AS HAS BEEN DECIDED BY US IN CASE OF M/S HYCRON ELECTRONICS VS. ITO, HIMACHAL PR ADESH IN ITA NO. 798/CHD/2012 IN VIDE PARA NO. 22-49. FOLLOWING THE SAME, WE DECIDE THIS ISSUE AGAINST THE ASSESSEE. 145. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMIS SED. 146. THE CONSOLIDATED RESULTS OF EACH APPEAL ARE AS UNDER: ITA NO. PARTY NAME RESULT ITA NO. 798/CHD/2012 HYCRON ELECTRONICS, BADDI, SOLAN DISMISSED ITA NO. 374/CHD/2014 HYCRON ELECTRONICS, BADDI, SOLAN PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 866/CHD/2014 M/S STOVE KRAFT INDIA, VILL- BURANWALA, SOLAN, HP PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 867/CHD/2014 M/S STOVE KRAFT INDIA, VILL- BURANWALA, SOLAN, HP PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 868 & 869/CHD/2014 M/S VANSER METALLICS, BADDI, SOLAN, HP DISMISSED ITA NO. 895/CHD/2014 M/S SANSUI ELECTRONICS, PARWANOO PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 896/CHD/2014 M/S SANSUI ELECTRONICS, PARWANOO PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 897/CHD/2014 M/S SANSUI ELECTRONICS, PARWANOO PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 782/CHD/2014 LYON DC, PARWANOO DISMISSED ITA NO. 783/CHD/2014 LYON DC, PARWANOO DISMISSED ITA NO. 175 & 176/CHD/2014 CUTTING EDGE TECHNOLOGIES, BADDI, SOLAN, HP DISMISSED ITA NO. 185/CHD/2014 M/S UPS INVERTOR. COM, PARWANOO, SOLAN DISMISSED ITA NO. 195/CHD/2014 SH. RAKESH VERMA, PARWANOO, SOLAN DISMISSED ITA NO. 776 & 777/CHD/2014 USAKA ELECTRICALS, PARWANOO PARTLY ALLOWED FOR STATISTICAL PURPOSES ITA NO. 780/CHD/2014 M/S DIGITAL SYSTEMS INCOME, BADDI, SOLAN DISMISSED ITA NO. 1007/CHD/2014 ADMAC FORMULATIONS, PANCHKULA DISMISSED ITA NO. 1051/CHD/2014 SH. VIPAN GUPTA, BADDI, SOLAN DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 27/05/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27/05/2015 RKK / AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR
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