ACIT, Chandigarh V. M/s Vardhman Threads Ltd., Chandigarh

ITA 616/CHANDI/2008

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9828 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-03-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Keywords: Depreciation
• Section: 143(3); 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.616/CHD/2008 ASSESSMENT YEAR: 2005-06 ACIT, CIRCLE 2(1) VS. M/S VARDHMAN THREADS LTD . CIRCLE-2(1), SCO 1-2-3, SECTOR 17A, CHANDIGARH CHANDIGARH PAN NO. AABCV7449L (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MITTAL RESPONDENT BY : SH. SUBHASH AGGARWAL SH. VINEET JAIN DATE OF HEARING : 28/06/2016 DATE OF PRONOUNCEMENT : 01/07/2016 ORDER PER ANNAPURNA GUPTA A.M. THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF LD. CIT(A), CHANDIGARH DT. 21/04/2008. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(APPEAL) IN APPEAL NO. 279/P/07-08, VIDE ORDER DATED 21/04/2008, HAS A LLOWED THE DEDUCTION U/S 80IC OF THE INCOME TAX ACT AMOUNTING TO RS. 4,12,40,627/-. 2. IT IS PRAYED THAT THE ORDER OF THE LD. CIT(A) BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. THE ONLY ISSUE IN THE PRESENT APPEAL IS REGARDIN G THE ALLOWANCE OF DEDUCTION U/S 80IC AMOUNTING TO RS. 4,12,40,627/-. 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT, IN T HE ORDER PASSED U/S 143(3) DT. 28/12/2007, THE AO DENIED THE CLAIM OF THE ASSESSEE TO DEDUCTION U/S 80IC AMOUNTING TO RS. 4,12,40,627/- FOR THE REASON THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THAT THE SUBSTANTIAL EXPANSION UNDERT AKEN BY HIM WAS COMPLETED DURING THE YEAR. AS PER THE AO, A COMBINED AND HARM ONIOUS INTERPRETATION OF 2 SECTION 80IC(8)(V) & (IX) WHICH DEFINED INITIAL AS SESSMENT YEAR AND SUBSTANTIAL EXPANSION RESPECTIVELY, LEAD TO THE INTERPRETATION THAT COMPLETION OF SUBSTANTIAL EXPANSION IS A SINE QUA NON FOR CLAIMIN G DEDUCTION U/S 80IC OF THE ACT. FURTHER THE AO HELD THAT THE FACTS IN THE PRES ENT CASE SHOWED THAT THE EXPANSION UNDERTAKEN IN THE IMPUGNED YEAR BY MAKING INVESTMENT OF RS. 4,40,38,133/- IN PLANT & MACHINERY, CONTINUED IN TH E SUCCEEDING YEAR I.E; FY 2005-06 WHEREIN INVESTMENT WERE MADE IN PLANT AND M ACHINERY AMOUNTING TO RS. 90,28,319/-. FURTHER THE FACT THAT BOARD RESOLU TION REGARDING THE EXPANSION OF THE PROJECT AND OBTAINING LOAN FOR THE IMPUGNED INV ESTMENTS AS ALSO THE SANCTIONING OF THE LOAN TOOK PLACE AFTER INCURRING THE ENTIRE EXPENSES IN BOTH THE YEARS, PROVED THAT THE EXPANSION UNDERTAKEN IN TWO YEARS RELATED TO ONE PROJECT, WHICH WAS COMPLETED IN THE SUBSEQUENT YEAR . FURTHER SUPPORT WAS DRAWN BY THE AO FROM THE FIGURES OF PRODUCTION DATA , BOTH ACTUAL AND INSTALLED CAPACITY FOR THE THREE YEARS I.E; FY 2003-04, 2004- 05 AND 2005-06 TO PROVE THAT THE EXPANSION WAS COMPLETED IN FY 2005-06 AND NOT T HE IMPUGNED YEAR. THUS THE AO DISALLOWED THE CLAIM OF THE ASSESSEE FOR DED UCTION OF PROFITS AMOUNTING TO RS. 4,12,40,627/- U/S 80IC OF THE INCOME TAX ACT , 1961. 5. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A), WHO HELD THE INTERPRETATION OF THE AO OF SECTION 80IC, THAT COMP LETION OF SUBSTANTIAL EXPANSION IS ESSENTIAL, AS ERRONEOUS AND THEREBY AL LOWED THE ASSESSES APPEAL. 6. THE RELEVANT FINDINGS OF THE LD. CIT(A) IN PARA 16 21 OF HIS ORDER ARE REPRODUCED HEREUNDER: 16. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE ASSESSEE VIS--VIS ASSESSING OFFICERS ASSESSMENT ORDER AND ALSO HIS REMAND REPORT DATED 09/04/2008. THE SECTION 80IC HAS BEEN INSERTED BY T HE FINANCE ACT, 2003 WITH EFFECT FROM 01/04/2004. THE BOARD HAS ISSUED CIRCUL AR NO. 7 DATED 05/09/2003. THESE ARE THE EXPLANATORY NOTES ON PROVISIONS RELAT ING TO DIRECT TAXES ON FINANCE ACT, 2003. IN PARA-49, IT HAS BEEN STATED THAT THE UNION CABINET HAS ANNOUNCED A PACKAGE OF FISCAL AND NON-FISCAL CONCESSIONS FOR TH E SPECIAL CATEGORY STATES OF HIMACHAL PRADESH,UTTARANCHAL, SIKKIM AND NORTH-EAST ERN STATES, IN ORDER TO GIVE 3 BOOST TO THE ECONOMY IN THESE STATES. THE RELEVANT PARA-49 OF THE CIRCULAR IS REPRODUCED AS UNDER: 49. NEW PROVISIONS ALLOWING A TEN YEAR TAX HOLIDA Y IN RESPECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, SIK KIM, UTTARAKHAND AND NORTH- EASTERN STATES 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF FISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN ORDER TO GIVE B OOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PAC KAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FR OM THE PROFITS OF NEW UNDERTAKINGS OR ENTERPRISES OR EXISTING UNDERTAKING S OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HIMACHAL PR ADESH, UTTARANCHAL , SIKKIM AND NORTH-EASTERN STATES. FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PR ODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THI RTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL ARE A OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH RULES PRESCRIBED IN TH IS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECT OR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH SCHEDULE. 17. WITH THIS BACKGROUND, I INTEND TO INTERPRET THE DEFINITIONS WHICH ARE GIVEN IN SECTION 80IC(8). THE RELEVANT DEFINITIONS ARE THE M EANING OF INITIAL ASSESSMENT YEAR AND SUBSTANTIAL EXPANSION WHICH HAVE ALREAD Y BEEN REPRODUCED ABOVE IN PARA-8. THE ASSESSING OFFICER HAS DISPUTED THE A LLOWABILITY IN THE ASSESSMENT YEAR 2005-06 TAKING THE VIEW THAT THE ASSESSEE HAS NOT COMPLETED HIS EXPANSION PLAN. THE ASSESSING OFFICER IS OF THE VIEW THAT HT ASSESSEE HAS TO SATISFY BOTH THE REQUIREMENTS I.E. MINIMUM INVESTMENT OF 50% OF BOOK VALUE AS DEFINED AND ALSO COMPLETION OF EXPANSION PLAN. THE MAIN WORDS IN THE DEFINITION OF INITIAL ASSESSMENT YEAR AS REFERRED TO ABOVE ARE COMPLETE S SUBSTANTIAL EXPANSION. IF WE SUBSTITUTE THE DEFINITION OF SUBSTANTIAL EXPANS ION WITH THE WORDS GIVEN IN THE DEFINITION OF INITIAL ASSESSMENT YEAR, IT WOULD R EAD AS COMPLETES INCREASE IN THE INVESTMENT IN THE PLANT & MACHINERY BY AT LEAST 50 % OF BOOK VALUE. IN MY OPINION, THE INTENTION OF THE LEGISLATURE IS THAT T HE ASSESSEE SHOULD MAKE FURTHER INVESTMENT IN THE PLANT & MACHINERY IN HIS EXISTING UNIT AND THE REQUIREMENT IS MINIMUM I.E. NOT LESS THAN 50% OF BOOK VALUE OF PLA NT & MACHINERY. THERE IS NO OTHER REQUIREMENT AS GIVEN IN THE DEFINITION. THE A SSESSEE IN THIS CASE HAS INVESTED MORE THAN 50% OF THE BOOK VALUE OF PLANT & MACHINER Y. THE ASSESSEE SATISFIES THE CONDITIONS MENTIONED IN SECTION 80IC(8). THE OBJECT IVE OF INSERTION OF SECTION 80IC HAS BEEN OUTLINED IN CIRCULAR NO. 7 THAT STATES THA T PROVISIONS ARE MEANT TO BOOST ECONOMY IN SPECIFIC STATES. 18. THE ASSESSING OFFICER IS OF THE VIEW THAT APART FROM INVESTMENT OF MORE THAN 50% IN THE PLANT AND MACHINERY, THE ASSESSEE SHOULD ALSO COMPLETE HIS PROPOSED EXPANSION PLAN. IN MY VIEW, THE INTERPRETATION IS E RRONEOUS AS THERE IS NO SUCH WORDS GIVEN IN THE DEFINITION THAT THE ASSESSEE SHO ULD HAVE COMPLETED THE PLANNED OR PROPOSED SUBSTANTIAL EXPANSION. IT IS A SETTLED LAW THAT NO WORDS CAN BE INTRODUCED IN THE STATUTE BY ANY AUTHORITY. THE INTERPRETATION OF THE STATUTE HAS TO BE ONLY WITH REFERENCE TO THE LANGUAGE USED IN T HE STATUTE. THE ASSESSING 4 OFFICER HAS TRIED TO INTRODUCED THE WORDS PLANNED / PROPOSED IN THE DEFINITION OF SUBSTANTIAL EXPANSION. IN MY VIEW, THE LANGUAGE IS VERY CLEAR. THE ONLY REQUIREMENT IS INVESTMENT IN PLANT & MACHINERY WHIC H THE ASSESSEE HAS DONE IN THIS ASSESSMENT YEAR. 19. IT IS WORTHWHILE TO MENTION SOME OFT CITED DECI SIONS PERTAINING TO THE FISCAL STATUES. HONBLE SUPREME COURT IN THE CASE OF ORISS A STATE WAREHOUSING CORPORATION VS. COMMISSIONER OF INCOME-TAX. 237 ITR 589 (SC) HAS NARRATED A FEW CASE LAWS TO SUPPORT THIS VIEW. THE RELEVANT PORTIO N IS REPRODUCED AS UNDER: LET US, HOWEVER, AT THIS JUNCTURE, CONSIDER SOME OF THE OFT CITED DECISIONS PERTAINING TO THE INTERPRETATION OF THE FISCAL STAT UTES BEING THE FOCAL POINT OF CONSIDERATION IN THESE APPEALS. LORD HALSBURY AS EA RLY AS 1901, IN COOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) STATE D THE LAW IN THE MANNER FOLLOWING: A COURT OF LAW, HAS NOTHING TO DO WITH THE REASONA BLENESS OR UNREASONABLENESS OF A PROVISION OF A STATUTE EXCEPT SO FAR AS IT MAY HOLD IT IN INTERPRETING WHAT THE LEGISLATURE HAS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, THE LEGISLATURE MUST BE TAKEN TO HAVE MEAN T AND INTENDED WHAT IT HAS PLAINLY EXPRESSED, AND WHATEVER IT HAS IN CLEAR TER MS ENACTED MUST BE ENFORCED THOUGH IT SHOULD LEAD TO ABSURD OR MISCHIEVOUS RESU LTS. IF THE LANGUAGE OF THIS SUB- SECTION BE NOT CONTROLLED BY SOME OF THE OTHER PROV ISIONS OF THE STATUTE. IT MUST, SINCE, ITS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE EN FORCED, AND YOUR LORDSHIPS HOUSE SITTING JUDICIALLY IS NOT CONCERNED WITH THE QUESTION WHETHER THE POLICY IT EMBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OF UNJUST BENEFICIAL OR MISCHIEVOUS. THE OFT-QUOTED OBSERVATIONS OF ROWLATT. J. IN THE C ASE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT ALSO TO BE NOTICED AT T HIS JUNCTURE. THE LEARNED JUDGE OBSERVED: IN A TAXING STATUTE ONE HAS TO LOOK MERELY AT WH AT IS CLEARLY SAID. THERE IS NOT ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS T O BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. THE OBSERVATION OF ROWLATT J. AS ABOVE STAND ACCEPT ED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECISION, IN THE CASE OF CANADIAN EABLE OIL CO. LTD. V. THE KING [1946] AC 119; [1945] 2 ALL ER 499. LORD T HANKERTON ALSO IN A MANNER SIMILAR IN IRC V. ROSS AND COULTER (BLANDNOCH DISTI LLERY CO. LTD.) [1948] 1 ALL ER 616 AT PAGE 625 OBSERVED: IF THE MEANING OF THE PROVISION IS REASONABLY CLE AR, THE COURTS HAVE NO JURISDICTION TO MITIGATE SUCH HARSHNESS. THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND CO . V. CIT[1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VIEWS EXPRESSED ABOVE. THIS COURT OBSERVED: 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 THEN B E APPEALED TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUO US. IF THE INTENDMENT IS NOT IN THE WORDS USED, IT IS NOWHERE ELSE. THE NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE, ON THEIR OWN TERMS, AMBIVALENT AND DO NOT MANIFEST THE INTENTION OF THE LEGISLATURE 5 ARTIFICIAL AND UNDULY LATITUDINARIAN RULES OF CONST RUCTION, WHICH WITH THEIR GENERAL TENDENCY TO GIVE THE TAXPAYER THE BREAKS, ARE OUT OF PLACE WHRE 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 MEANINGS TO THE WORDS USED SINCE HARD CASES DO NOT MAKE BAD LAWS. IN FINE THUS, A FISCAL STATUTE SHALL HAVE TO BE INT ERPRETED ON THE BASIS OF THE LANGUAGE USED THEREIN AND NOT DE HORS THE SAME. NO WORDS OUGHT TO BE ADDED AND ONLY THE LANGUAGE USED OUGHT TO BE CONSIDERED S O AS TO ASCERTAIN THE PROPER MEANING AND INTENT OF THE LEGISLATION. THE C OURT IS TO ASCRIBE THE NATURAL AND ORDINARY MEANING TO THE WORDS USED BY THE LEGIS LATURE AND THE COURT OUGHT NOT, UNDER ANY CIRCUMSTANCES, TO SUBSTITUTE ITS OWN IMPRESSION AND IDEAS IN PLACE OF THE LEGISLATIVE INTENT AS IS AVAILABLE FROM A PL AIN READING OF THE STATUTORY PROVISIONS. 20. THERE ARE OTHER PROMINENT DECISIONS ALSO ON THE INTERPRETATION OF THE STATUTES BY HONBLE SUPREME COURT. THE GIST OF THESE DECISIO NS IS AS UNDER: IN TURNER MORRISON & CO. LTD. V. CIT [1953] 23 ITR 152 (SC) IT WAS STATED THAT. THE COURTS HAVE TO CONSTRUE THE STATUTE ACCORDING TO TH E PLAIN LANGUAGE AND TENOR THEREOF AND IF ANY UNTOWARD CONSEQUENCE RESULT THER EFROM, IT IS FOR AUTHORITY OTHER THAN THE COURT TO RECTIFY OR PREVENT THE SAME. IN CIT V. AJAX PRODUCTS LTD [1965] 55 ITR 741 (SC), IT WAS OBSERVED THAT IF THE WORDS OF A STATUTE ARE PRECISE AND UNAMBIGUOUS, THEY MUST BE ACCEPTED AS DECLARING THE EXPRESS INTENTIONS OF THE LEGISLATURE. IN CIT V. SHAHZADA NAND & SONS [1966] 60 ITR 392 (S C), IT IS SAID THAT IN A TAXING ACT ONE HAS TO LOOK MERELY AT WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE I S NO PRESUMPTION AS TO TAX. NOTHING IS TO BE READ IN, NOTHING IS TO BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE USED. TO THIS MAY BE ADDED A RIDER: IN A C ASE OF REASONABLE DOUBT, THE CONSTRUCTION MOST BENEFICIAL TO THE SUBJECT IS TO B E ADOPTED. THE UNDERLYING PRINCIPLE IS THAT THE MEANING AN INTENTION OF A STA TUTE MUST BE CONSTRUED FROM THE PLAIN AND UNAMBIGUOUS EXPRESSION USED THEREIN RATHE R THAN FROM ANY NOTIONS WHICH MAY BE ENTERTAINED BY THE COURT AS TO WHAT IS JUST OR EXPEDIENT. IN SMT. TARULATA SHYAM V. CIT [1977] 108 ITR 345 (S C) THE COURT EXPLAINED THAT THE STATUTE MUST BE CONSTRUED IN A MANNER WHICH CARRIES OUT THE INTENTION OF THE LEGISLATURE AND THAT THE INTENTION OF THE LEGISLATU RE MUST BE GATHERED FROM THE WORDS OF THE STATUTE ITSELF. IF THE WORDS ARE UNAMB IGUOUS OR PLAIN, THEY WILL INDICATE THE INTENTION WITH WHICH THE STATUTE WAS PASSED AND THE OBJECT TO BE OBTAINED BY IT. IT IS IMPERMISSIBLE FOR THE COURT TO READ IN TO A TAXING PROVISION ANY WORDS WHICH ARE NOT THERE OR EXCLUDE WORDS WHICH ARE THER E. THE WORDS FOUND IN THE PROVISION MUST BE GIVEN THEIR NATURAL MEANING. THER E IS NO SCOPE FOR IMPORTING INTO THE STATUTE WORDS WHICH ARE NOT THERE. SUCH IMPORTA TION WOULD BE, NOT TO CONSTRUE, BUT TO AMEND THE STATUTE. EVEN IF THERE B E A CASUS OMISUS, THE DEFECT CAN BE REMEDIED ONLY BY LEGISLATION AND NOT BY JUDI CIAL INTERPRETATION. THE NORMAL RULE OF CONSTRUCTION IS THAT THE INTENTION OF THE L EGISLATURE IS PRIMARILY TO BE GATHERED FROM THE WORDS USED IN THE STATUTE. 21. KEEPING IN VIEW THESE PRINCIPALS LAID DOWN BY H ONBLE SUPREME COURT, I FIND FORCE IN THE ARGUMENTS OF THE ASSESSEE. THE ASSESSE E IS ELIGIBLE FOR DEDUCTION U/S 80IC AND THESE GROUNDS OF APPEAL OF THE ASSESSEE AR E ALLOWED. 7. AGGRIEVED BY THE SAME THE REVENUE PREFERRED THE PRESENT APPEAL BEFORE US. 6 8. DURING THE COURSE OF ARGUMENTS BEFORE US LD. DR RELIED UPON THE ORDER OF THE AO AND STATED THAT ESTABLISHING THE FACT OF COM PLETION OF SUBSTANTIAL EXPANSION IS ESSENTIAL FOR CLAIMING DEDUCTION U/S 8 0IC WHICH IS EVIDENT FROM A HARMONIOUS CONSTRUCTION OF SECTION 80IC(8)(V) & (IX ) WHICH DEFINE INITIAL ASSESSMENT YEAR AND SUBSTANTIAL EXPANSION RESPEC TIVELY. LD. DR STATED THAT WHILE SUBSTANTIAL EXPANSION HAS BEEN DEFINED U/S 80IC(8)(IX) TO MEAN INVESTMENT OF MORE THAN 50% OF THE BOOK VALUE OF OP ENING BALANCE OF PLANT AND MACHINERY, DURING THE YEAR, THE INITIAL ASSESS MENT YEAR, WHEN THE DEDUCTION IS FIRST ALLOWED AS PER SECTION 80IC(I) I S DEFINED U/S 80IC (8)(V) TO MEAN THE ASSESSMENT YEAR IN WHICH THE ASSESSEE COMPLETES SUBSTANTIAL EXPANSION. THUS LD. DR STATED THAT IT IS ESSENTIAL TO PROVE COMPLET ION OF SUBSTANTIAL EXPANSION FOR CLAIMING DEDUCTION U/S 80IC. LD. AR COUNTERED THE ARGUMENT OF THE LD. DR BY PLAC ING RELIANCE ON THE FINDINGS OF THE LD .CIT(A) WHICH HELD THE AFORESTATED INTERP RETATION OF SECTION 80IC AS ERRONEOUS AND INCORRECT. LD. AR STATED THAT IN FACT A COMBINED READING OF 80IC8(V) AND (IX) LEADS TO THE INTERPRETATION THAT FOR CLAIMING DEDUCTION U/S 80IC THE ASSESSEE ONLY HAS TO COMPLETE INCREASE IN INVES TMENT IN PLANT AND MACHINERY EXCEEDING 50% OF ITS BOOK VALUE AS INTERP RETED BY THE LD. CIT(A) AT PARA 17 OF HIS ORDER. 9. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE UNDISPUTED FACTS EMERGING IN THE PRESENT CASE ARE THAT THE ASSESSEE IS AN EXI STING UNDERTAKING IN THE SPECIAL CATEGORY STATE OF HIMACHAL PRADESH ENTITLING IT TO CLAIM DEDUCTION U/S 80IC, SUBJECT TO FULFILLMENT OF PRESCRIBED CONDITIONS UND ER THE SECTION. IT IS ALSO NOT DISPUTED THAT DURING THE YEAR THE ASSESSEE HAD MADE INVESTMENT IN PLANT & MACHINERY OF MORE THAN 50% OF ITS OPENING BOOK VALU E OF PLANT & MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR). THE MOOT QUESTION BEFORE US IS WHETHER SECTION 80IC (8)(V) AND (IX) WHICH DEFINE INITIAL ASSESSMENT YEAR AND SUBSTANTIAL EXPANSIO N RESPECTIVELY CAN BE 7 INTERPRETED TO MEAN THAT INITIAL ASSESSMENT YEAR FO R THE PURPOSE OF CLAIMING DEDUCTION U/S 80IC IS THE YEAR IN WHICH SUBSTANTIAL EXPANSION IS COMPLETED OR THE YEAR IN WHICH THE ASSESSEE COMPLETES INVESTMENT OF MORE THAN 50% OF THE OPENING BOOK VALUE OF PLANT AND MACHINERY. IN SHORT THE ISSUE PRIMARILY REVOLVES AROUND THE CORRECT INTERPRETATION OF THE DEFINITION OF INITIAL ASSESSMENT YEAR AS PROVIDED IN SECTION 80IC(8)(V) READ ALONG WITH THE DEFINITION OF SUBSTANTIAL EXPANSION AS PER SECTION 80IC(8)(IX) OF THE ACT. 10. WE FIND THAT THE LD. CIT(A) HAS CORRECTLY AND R IGHTLY INTERPRETED THE SAME I.E; INITIAL ASSESSMENT YEAR TO MEAN THE YEAR IN WHICH THE UNDERTAKING COMPLETES INCREASE IN INVESTMENT IN PLANT & MACHINE RY BY AT LEAST FIFTY PERCENT OF THE BOOK VALUE OF PLANT & MACHINERY (BEFORE TAKI NG DEPRECIATION IN ANY YEAR ) AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN, BY SUBSTITUTING THE DEFINITION OF SUBS TANTIAL EXPANSION GIVEN IN SECTION 80IC(8)(IX) WITH THE WORDS GIVEN IN THE DEF INITION OF INITIAL ASSESSMENT YEAR IN SECTION 80IC(8)(V). THE LD. CIT(A) HAS RIG HTLY APPLIED THE PRINCIPLES OF LITERAL INTERPRETATION OF STATUTES IN THE ABOVE CAS E, WHICH IS A CARDINAL RULE OF CONSTRUCTION OF STATUTES. AS PER THE PRINCIPLE OF L ITERAL INTERPRETATION STATUTES HAVE TO BE READ LITERALLY THAT IS, BY GIVING TO THE WORD S USED BY LEGISLATURE THEIR ORDINARY NATURAL AND GRAMMATICAL MEANING. THE COURT CANNOT READ ANY WORDS WHICH ARE NOT MENTIONED IN THE SECTION NOR CAN SUBS TITUTE ANY WORDS IN PLACE OF THOSE MENTIONED IN THE SECTION AND AT THE SAME TIME CANNOT IGNORE THE WORDS MENTIONED IN THE SECTION. IF THE LANGUAGE OF STATUT E IS PLAIN, SIMPLE, CLEAR AND UNAMBIGUOUS THEN THE WORDS OF STATUTE HAVE TO BE IN TERPRETED BY GIVING THEM THEIR NATURAL MEANING AS OBSERVED IN SMITA SUBHASH SAWANT VS. JAGDESHWARI JAGDISH AMIN AIR 2016 S.C. 1409 AT 1416. IF, HOWEVE R, SUCH A READING LEADS TO ABSURDITY AND THE WORDS ARE SUSCEPTIBLE TO ANOTHER MEANING, THE COURT MAY ADOPT THE SAME. BUT IF NO SUCH ALTERNATIVE CONSTRUC TION IS POSSIBLE, THE COURT MUST ADOPT THE ORDINARY RULE OF LITERAL INTERPRETAT ION. A STATUTE IS AN EDICT OF THE 8 LEGISLATURE. THE LANGUAGE EMPLOYED IN A STATUTE IS THE DETERMINATIVE FACTOR OF LEGISLATIVE INTENTION. WHILE INTERPRETING A PROVISI ON THE COURT ONLY INTERPRETS THE LAW AND CANNOT LEGISLATE IT. CLEARLY THE INTERPRETATION GIVEN BY THE LD. AO THAT INITIAL ASSESSMENT YEAR IS THE YEAR IN WHICH ASSESSEE COMPLETES PROPOSED SUBSTANTI AL EXPANSION HAS BEEN ARRIVED AT BY ADDING THE WORD PROPOSED BEFORE SUB STANTIAL EXPANSION IN THE DEFINITION OF INITIAL ASSESSMENT YEAR, WHICH AS S TATED ABOVE IS NOT PERMISSIBLE SINCE THE LANGUAGE OF THE STATUTE IS PLAIN, SIMPLE AND CLEAR AND THE NATURAL MEANING ARRIVED AT, BY INTERPRETING THE WORDS USED IN THE DEFINITION, IS IN CONSONANCE WITH THE OBJECTIVE OF INTRODUCING SECTIO N 80IC IN THE STATUTE, BEING GIVING A BOOST TO ECONOMY IN THE SPECIAL CATEGORY S TATES AS BROUGHT OUT BY THE BOARD CIRCULAR NO. 7 DT. 05/09/2003 CONTAINING THE EXPLANATORY NOTES ON PROVISION RELATING TO DIRECT TAXES ON FINANCE ACT, 2003, BY VIRTUE OF WHICH 80IC WAS BROUGHT ON THE STATUTE, AND AS REPRODUCED AT PA GE NO. 11-12 OF THE ORDER OF CIT(A). THE CIRCULAR WE FIND CLEARLY STATES AT P ARA 49.1 THAT THE PROVISION HAS BEEN INTRODUCED TO GIVE A BOOST TO THE ECONOMIES OF SPECIAL CATEGORY STATE BY ALLOWING DEDUCTION FOR 10 YEARS FROM THE PROFITS OF NEW UNDERTAKINGS AS ALSO EXISTING UNDERTAKINGS WHICH UNDERGO SUBSTANTIAL EXP ANSION, WHICH IN TURN HAS BEEN DEFINED AS INCREASE IN INVESTMENT IN PLANT AND MACHINERY BY AT LEAST 50% OF THE OPENING BOOK VALUE. THE RELEVANT PARA IS REP RODUCED HEREUNDER: 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF FISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN ORDER TO GIVE B OOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PAC KAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FR OM THE PROFITS OF NEW UNDERTAKINGS OR ENTERPRISES OR EXISTING UNDERTAKING S OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HIMACHAL PR ADESH, UTTARANCHAL , SIKKIM AND NORTH-EASTERN STATES. FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. IT IS CLEAR FROM THE ABOVE THAT EVEN THE OBJECTIVE AND INTENTION OF THE LEGISLATURE, WHILE INTRODUCING SECTION 80IC WAS TO GIVE INCENTIVE TO, BESIDES NEW 9 UNDERTAKINGS, EXISTING UNDERTAKINGS WHICH UNDERGO S UBSTANTIAL EXPANSION, WHICH HAPPENS THE MOMENT INVESTMENT EXCEEDING 50% IS MADE IN PLANT & MACHINERY. THERE IS NO REQUIREMENT OF EXISTENCE OF ANY PROPOSA L OF EXPANSION AND COMPLETION OF THE PROPOSED EXPANSION, AS ENVISAGED AND READ INTO THE STATUTE BY THE LD. AO. MOREOVER GOING BY THE LOGIC OF THE A O, THE ASSESSEE MAY NEVER BE ENTITLED TO CLAIM DEDUCTION U/S 80IC SINCE INVAR IABLY UNDERTAKINGS MAKE INVESTMENT IN PLANT & MACHINERY TO SOME EXTENT EVER Y YEAR AND IN SUCH CIRCUMSTANCES THE ASSESSEE WOULD NEVER BE SAID TO H AVE COMPLETED HIS PROPOSED SUBSTANTIAL EXPANSION. THIS WOULD LEAD TO AN ABSURD INTERPRETATION OF THE STATUTE, GROSSLY AGAINST THE OBJECTIVES OF INTR ODUCING THE SAME. IN VIEW OF THE ABOVE WE UPHOLD THE ORDER OF THE LD. CIT(A), HOLDING THAT THE IMPUGNED ASSESSMENT YEAR IS THE INITIAL YEAR FOR CLAIMING DEDUCTION U/S 80IC, SINCE IT HAS UNDERTAKEN SUBSTANTIAL EXPANSION DURIN G THE YEAR BY INVESTING IN PLANT & MACHINERY MORE THAN 50% OF THE OPENING BOOK VALUE. 11. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (GEORGE GEORGE K) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :01/07/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR