M/S Admac Formulations, Panchkula V. The Income Tax Officer, Panchkula

ITA 821/CHANDI/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8453 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 17-02-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 06-11-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Advance ruling; Condonation of delay
• Section: 143(3); 244A; 80IB; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI H.L.KARWA, HONBLE VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO. 821/CHD/2015 ASSESSMENT YEAR: 2012-13 M/S ADMAC FORMULATIONS, VS THE ITO, HOUSE NO. 272, WARD-1, SECTOR 17, PANCHKULA. PANCHKULA. PAN: AAAAA5219Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI TEJ MOHAN SI NGH RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 17.02.2016 DATE OF PRONOUNCEMENT : 18.02.2016 O R D E R PER H.L.KARWA,V.P. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) PANCHKULA DAT ED 30.09.2015 RELATING TO ASSESSMENT YEAR 2012-13. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS : 1. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE R EDUCTION OF DEDUCTION UNDER SECTION 80IC OF THE ACT TO 25% AS A GAINST 100% CLAIMED AS THE ASSESSEE HAS ADMITTEDLY CARRIED OUT SUBSTANTIAL EXPANSION WHICH MAKES THE UNIT ELIGIBLE FOR 2 DEDUCTION @ 100% AND AS SUCH NON ALLOWANCE OF DEDUC TION AT 100% IS ILLEGAL, ARBITRARY AND UNJUSTIFIED. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) HAS FAILED TO CONSTRUE THE BENEVOLENT PROVISIONS AS ENACTED IN CHAPTER VI OF THE ACT IN A HARMONIOUS AND LIBERA L MANNER ESPECIALLY WHEN THERE ARE DECISIONS OF VARIOUS COUR TS IN FAVOUR OF THE ASSESSEE AND AS SUCH UPHOLDING OF THE ASSESS MENT ORDER IS ARBITRARY AND UNJUSTIFIED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF PHARMACEUTICAL PRODUCTS. FOR THE ASSESSMENT YEAR 2012-13, ASSESSEE SUBMITTED ITS RETURN OF INCOME ON 25.09.2012 DECLARING TOTAL INCOME OF RS. 40,855/- A FTER CLAIMING A DEDUCTION OF RS. 1,09,90,415/- AT 100% O F PROFIT UNDER SECTION 80IC OF THE INCOME TAX ACT, 19 61 ( IN SHORT THE ACT). THE ASSESSING OFFICER COMPLET ED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT AT AN IN COME OF RS. 68,22,800/- AFTER ALLOWING THE DEDUCTION OF RS. 22,60,648/- UNDER SECTION 80IC OF THE ACT AT 25 % OF THE PROFITS. 4. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER FOLLOWING HIS OWN OR DER PASSED IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YE AR 2011-12 DATED 22.09.2014. 5. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES AT LENGTH, WE FIND THAT THE ISSUE IS SQUARE LY COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE 3 ASSESSEE BY THE DECISION OF THIS BENCH OF THE TRIBU NAL IN THE CASE OF HYCRON ELECTRONICS, BADDI, SOLAN V ITO & OTHERS IN ITA NO. 798/CHD/2012 RELATING TO ASSESSME NT YEAR 2009-10 & OTHERS. THE TRIBUNAL VIDE ITS ORDER DATED 27.5.2015 (PARA 22 TO 49) HAS HELD AS UNDER:- 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS INCLU DING WRITTEN SUBMISSIONS IN THE LIGHT OF MATERIAL ON REC ORD, AS WELL AS JUDGMENTS CITED BY THE PARTIES. BEFORE WE CONSIDER THE RELEVANT PROVISIONS WHICH ARE REQUIRED TO BE INTERPRETED, IT WILL BE USEFUL TO DEAL WITH THE VARIOUS PRINCIPLES OF INTERPRETATI ON AS ENUNCIATED BY VARIOUS COURTS. 23. IT IS SETTLED THAT IF THE LANGUAGE OF A PARTICULAR STATUTE IS CLEAR THEN ONLY LITERAL MEANING HAS TO BE GIVEN TO SUCH LANGUAGE AS LONG THE SAME DOES NOT RESULT IN ABSURDITY OR UN INTENDED CONSEQUENCES. THEREFORE, IF THE LANGUAGE OF A PART ICULAR STATUTE IS CLEAR THEN THE SAME CANNOT BE CHANGED BY APPLYIN G 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 WHER EIN IT HAS BEEN OBSERVED AT PAGE 604 & 605 OF THE REPORT AS UN DER:- LET US, HOWEVER, AT THIS JUNCTURE, CONSIDER SOME O F THE OFT CITED DECISIONS PERTAINING TO THE INTERPRETATION OF THE F ISCAL STATUTES BEING THE FOCAL POINT OF CONSIDERATION IN THESE APP EALS. LORD HALSBURY AS EARLY AS 1901, IN COOKE V. CHARLES A. V OGELER COMPANY [1901] AC 102 (HL) STATED THE LAW IN THE MAN NER FOLLOWING: A COURT OF LAW, HAS NOTHING TO DO WITH THE REASONABLENESS OR UNREASONABLENESS OF A PROVISION O F A STATUTE EXCEPT SO FAR AS IT MAY H OLD IT IN INTERPR ETING WHAT THE LEGISLATURE HAS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY ONE MEANING, TH E LEGISLATURE MUST BE TAKEN TO HAVE MEANT AND INTENDED WHAT IT HAS PLAINLY EXPRESSED, AND WHATEVER IT HAS IN CLEAR TERMS ENACTED MUST BE ENFORCED THOUGH IT SHOULD NOT LEAD TO ABSURD OR MISCHIEVOUS RESULTS. IF THE LANGUAGE OF THIS SUB-SECTION BE NOT CONTROLLED BY SOME OF THE OTHER PROVISIONS OF THE STATUTE. IT MU ST, SINCE, ITS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED AND YOUR LORDSHIPS HOUSE SITTING JUDICIAL LY IS NOT CONCERNED WITH THE QUESTION WHETHER THE POLICY IT EMBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OR UNJUST, BENEFICIAL OR MISCHIEV OUS. THE OFT-QUOTED OBSERVATIONS OF ROWLATTT J. IN THE C ASE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT AL SO TO BE NOTICED AT THIS JUNCTURE. THE LEARNED JUDGE OBSERVE D (PAGE 71): . . . IN A TAXING STATUTE ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMEN T. 4 THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMP TION AS TO A TAX. NOTHING IS TO BE READ IN, NOTHING IS T O BE IMPLIED. ONE CAN ONLY LOOK FAIRLY AT THE LANGUAGE U SED. THE OBSERVATIONS OF ROWLATT J. AS ABOVE STAND ACCEP TED AND APPROVED BY THE HOUSE OF LORDS IN A LATER DECIS ION, IN THE CASE OF CANADIAN EAGLE OIL ALSO IN A MANNER SIMILAR IN IRC V. ROS AND COULTER (BLADNOCH DISTILLERY CO. LTD. V. THE KI NG [1946] HON'BLE APEX COURT 119; [1945] 2 ALL ER 499. LORD T HANKERTON 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 HARSHN ESS. THE DECISION OF THIS COURT IN KESHAVJI RAVJI AND C O. V. CIT[1990] 183 ITR 1 ALSO LENDS CONCURRENCE TO THE VI EWS EXPRESSED ABOVE. THIS COURT OBSERVED (PAGE 9): AS LONG AS THERE IS NO AMBIGUITY IN THE STATUTORY LANGUAGE, RESORT TO ANY INTERPRETATIVE PROCESS TO U NFOLD THE LEGISLATIVE INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTION OF THE LEGISLATURE CANNOT THEN B E APPEALED TO TO WHITTLE DOWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT I S 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 ARTIFICIAL AND UNDULY LATIDUDINARIAN RULES OF CONSTRUCTION, WHICH WITH THEIR GENERAL TENDENCY TO GIVE THE TAXPAYER THE BREAKS, ARE OUT OF PLACE WHERE TH E LEGISLATION HAS A FISCAL MISSION. BE IT NOTED THAT INDIVIDUAL CASES OF HARDSHIP AND INJUSTICE DO NOT AND CANNOT HAVE ANY BEARING FOR REJECTING THE NATURAL CONSTRUCTION BY ATTRIBUTING N ORMAL 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 CONSTRUED SO AS TO FIND OUT THE REAL INTENTION OF THE LEGISLATURE AND THEN EVERY POSSIBLE MATERIAL SH OULD BE CONSIDERED TO FIND OUT THE REAL INTENTION OF THE LE GISLATURE. IN THIS REGARD, THE OBSERVATION OF THE HON'BLE SUPREME COUR T IN THE CELEBRATED JUDGEMENT 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 POSSIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDE D. WHERE THE PLAIN LITERAL INTERPRETATION OF A STATUTO RY PROVISION PRODUCES A MANIFESTLY ABSURD 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 VIOLENCE TO IT, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGISLATURE AN D PRODUCE A RATIONAL CONSTRUCTION. 5 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 INADMISSIBLE 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 T HE PURPOSE OF ASCERTAINING THE MISCHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OBJECT AND PURP OSE FOR WHICH THE 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 INTERPRETATION OF A STATUTE BEING AN EXERCISE IN THE ASCERTAINMENT OF MEANING, EVERYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE ADMISSIBLE. THE MARGINAL NOTE TO A SECTION CANNOT BE REFERRED TO FOR THE PURPOSE OF CONSTRUING THE SECTI ON BUT IT CAN CERTAINLY BE RELIED UPON AS INDICATING THE D RIFT OF THE SECTION OR TO SHOW WHAT THE SECTION IS DEALING WITH. IT CANNOT CONTROL THE INTERPRETATION OF THE WORDS O F A SECTION, PARTICULARLY WHEN THE LANGUAGE OF THE SECT ION IS CLEAR AND UNAMBIGUOUS BUT, BEING PART OF THE STATUT E, IT PRIMA FACIE FURNISHES SOME CLUE AS TO THE MEANING A ND PURPOSE OF THE SECTION. THE HIGHLIGHTED PORTION CLEARLY SHOWS THAT EVERY MA TERIAL WHICH IS LOGICALLY RELEVANT SHOULD BE TAKEN INTO ACCOUNT FOR ASCERTAINING THE TRUE MEANING OF A PARTICULAR PROVISION. THE SA ME VIEW WAS TAKEN BY HON'BLE KARNATAKA HIGH COURT IN THE CASE O F CIT V N.K. VAIDYA 224 ITR 186 (SUPRA) AND OBSERVATIONS CONTAIN ED IN THE HEAD NOTE READS ASUNDER:- THE LEGISLATIVE HISTORY OF A FISCAL STATUTE COULD BE TRACED AND CONSIDERED TO UNDERSTAND ITS SCOPE. THE COURTS ARE PERMITTED TO TRAVEL BEYOND THE WORDS USE D IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHICH A PART ICULAR PROVISION IS ENACTED; FOR THIS PURPOSE, EVEN THE SP EECH OF THE FINANCE MINISTER, WHILE INTRODUCING THE PART ICULAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCUL ARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ARE NOT ONLY BINDING ON THE INCOME-TAX DEPARTMENT BUT ARE ALSO I N THE NATURE OF CONTEMPORANEA EXPOSITION FURNISHING LEGITIMATE AID IN THE CONSTRUCTION OF A PROVISION. 24. THE LD. COUNSEL OF THE ASSESSEE HAD REFERRED TO THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CA SE OF DINAKAR ULLAL VS. CIT (SUPRA) AND DECISION OF HON'BLE SUPREME COURT IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTI NG & WIRE (SUPRA) FOR THE PROPOSITION THAT SINCE CIRCULA RS ARE NOT BINDING ON THE COURTS, THEREFORE, THE SAME SHOULD N OT BE CONSIDERED FOR INTERPRETATION OF A PARTICULAR PROVI SION. AS FAR AS THE DECISION IN THE CASE OF COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTING & WIRE (SUPRA) IS CONCERNED, THIS DO ES NOT SUPPORT THE PROPOSITION MADE BY THE LD. COUNSEL FOR THE ASS ESSEE. 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 OR HIGH COURT IN RESPECT OF PARTICULAR PROVIS ION. THE PARA 6 6 OF THIS JUDGMENT MAKE THIS POINT ABSOLUTELY CLEAR A ND READS AS UNDER:- 6. CIRCULARS AND INSTRUCTIONS ISSUED BY THE BOARD ARE NO DOUBT BINDING IN LAW ON THE AUTHORITIES UNDER THE RESPECTIVE STATUTES, BUT WHEN THE SUPREME COURT OR THE HIGH COURT DECLARES THE LAW ON THE QUESTION ARISING FOR CONSIDERATION, IT WOULD NOT BE APPROPRIATE FOR THE COURT TO DIRECT THAT 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 GOVERNMENT AND OF THE STATE GOVERNMENT ARE CONCERNED THEY REPRESENT MERELY THEIR UNDERSTANDING OF THE STATUTORY PROVISIONS. THEY ARE NOT BINDING UPON THE COURT. IT IS FOR THE COURT TO DECLARE WHAT THE PARTICULAR PROVISION OF STATUTE SAYS AND IT IS NOT FOR THE EXECUTIVE. LOOKED AT FORM ANOTHER ANGEL, A CIRCULAR 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 ULT IMATELY MEANING OF A PROVISION AS INTERPRETED BY THE COURT WOULD PR EVAIL IN COMPARISON TO THE INTERPRETATION GIVEN IN THE CIRCU LAR. THEREFORE, IF CIRCULAR IS CONTRARY TO A PROVISION A S INTERPRETED BY THE COURT THEN THE OPINION OF THE COURT WOULD PREV AIL. THIS DECISION NOWHERE LAYS DOWN THAT CIRCULARS CANNOT BE CONSIDERED FOR INTERPRETATION OF A PARTICULAR PROVISION. 25. IN THE CASE OF DINAKAR ULLAL VS CIT 323 ITR 45 2(KARNATAKA), THE ASSESSEE WAS A CIVIL CONTRACTOR AND HAD FILED B ELATED RETURN DECLARING INCOME OF RS. 50,240/- AND WAS CLAIMING R EFUND OF RS. 2,14,505/- ON ACCOUNT OF TAX DEDUCTED AT SOURCE. TH E 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 ACT WHICH WAS INITIALLY REJECTED. HOWEVER, ON A WRIT PETITION THE ORDER FOR REJECTION WAS QUASHED B Y A SINGLE JUDGE AND REMITTED THE MATTER BACK FOR FRESH CONSID ERATION. ON REMAND, THE COMMISSIONER WHO WAS VESTED WITH THE JU RISDICTION 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 INTEREST ON REFUND AMOUNT IN VIEW OF THE CON DITION SET OUT IN CIRCULAR NO. 670 DATED 26 TH OCT 1993. THEREFORE, QUESTION BEFORE THE COURT WAS WHETHER THESE INSTRUCTIONS WER E CONTRARY TO THE PROVISION OF SECTION 244A OF THE ACT WHICH PR OVIDED FOR PAYMENT OF INTEREST ON REFUNDS. THIS BECOMES ABSOL UTELY CLEAR FROM THE QUESTION FRAMED BY HON'BLE COURT WHICH IS CONTAINED AT PLACITUM 6 AND READS AS UNDER:- (I) WHETHER THE CONDITION TO DENY INTEREST ON REFUND AMOUNT DUE TO AN ASSESSEE UNDER THE ACT, WHILE ADMITTING AN APPLICATION TO CONDONE THE DELAY IN MAKING A CLAIM FOR BELATED REFUND 7 UNDER 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 THE BOARD, IS INCONSISTENT WITH SUB- SECTION (2) OF SECTION 244A OF THE ACT? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES, THE RESPONDENT WAS JUSTIFIED IN DENYING INTEREST ON BELATED REFUND CLAIMED 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 T HE PROVISIONS FOR REMOVING THE DIFFICULTIES. THEREFORE, IT IS CLEAR THAT QUESTION WHETHER A CIRCULAR CAN BE CONSIDERED IN INTERPRETAT ION OF A PARTICULAR PROVISION WAS NEVER BEFORE THE COURT AND THEREFORE, IN OUR OPINION, THIS JUDGEMENT DOES NOT SUPPORT THE PR OPOSITION THAT CIRCULAR CANNOT BE CONSIDERED FOR THE PURPOSE OF IN TERPRETING THE PARTICULAR PROVISION. 27. IT WILL BE USEFUL TO STATE ANOTHER VERY WELL S ETTLED PRINCIPLE OF INTERPRETATION I.E. WHENEVER THE PARTI CULAR PROVISION IS REQUIRED TO BE INTERPRETED, IT SHOULD BE INTERPR ETED AFTER READING THE WHOLE PROVISION AND NOT 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 MEANINGLESS. 28. HAVING CONSIDERED THE PRINCIPLES OF INTERPRETAT ION ABOVE, LET US CONSIDER THE PROVISION OF SECTION 80IC IN TH E LIGHT OF THE ABOVE PRINCIPLES LAID DOWN BY THE HON'BLE SUPREME C OURT. 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 UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SEC TION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVIS IONS 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 PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE, OR WHIC H MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEE NTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURIN G THE PERIOD BEGINNING. (I) ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE 8 TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN TH IS REGARD, IN THE STATE OF SIKKIM; OR (II) ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2012, IN ANY EXPORT PROCESSING ZONE OR INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE B OARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED B Y 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 INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN TH IS 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 SCHED ULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANUFACTURES OR PRODUCES ANY ARTICLE OR THING, SPEC IFIED IN THE 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 REFERRED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III) OF CLAUSE (B), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR TEN ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR 9 SUB-CLAUSE (II) OF CLAUSE (B), OF SUB-SECTION (2),ONE HUNDRED PER CENT OF SUCH PROFIT AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUCTION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THERE-ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS 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 PU RPOSES OF CLAUSE (II) OF THIS SUB-SECTION AS THEY APPLY FOR THE PURP OSES 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 A SSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR SECTION 10B, IN RE LATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR EN TERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUC TION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, OR U NDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS THE ASSESS MENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB- SECTIONS(7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPLY TO THE ELIGIBLE UNDERTAKING OR ENTERPRISE UNDER THI S SECTION. (8) FOR THE PURPOSES OF THIS SECTION,- (I) INDUSTRIAL AREA MEANS SUCH AREAS, WHICH THE BOARD, MAY, BE NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; (II) INDUSTRIAL ESTATE MEANS SUCH ESTATES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME 10 FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT. (III) INDUSTRIAL GROWTH CENTRE MEANS SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY 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 ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; (V) INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO MANUFACTURES OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION; (VI) INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE MEANS SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT (VII) NORTH-EASTERN STATES MEANS THE STATES OF ARUNACHAL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TRIPURA; (VIII) SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP IN ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; (IX) SUBSTANTIAL EXPANSION MEANS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN; (X) THEME PARK MEANS SUCH PARKS, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME 11 FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTION [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TY PES OF UNDERTAKINGS AND CIRCUMSTANCES WHERE DEDUCTION UNDE R SECTION 80IC WOULD BE ALLOWED. IT ALLOWS DEDUCTION TO VARIO US UNDERTAKINGS WHICH HAVE EITHER BEGUN OR BEGINS MANU FACTURING OF ANY ARTICLE OR THINGS NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN SCHEDULE XIII AND ALSO UNDERTAKES SUBSTANTIAL EXPAN SION. THESE DEDUCTIONS WERE AVAILABLE IN DIFFERENT STATES DURIN G 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 IS THAT SINCE DEDUCTION IS AVAILABLE TO THE UNDERTA KING WHICH UNDERTAKES SUBSTANTIAL EXPANSION AND SINCE THERE IS NO RESTRICTION IN THIS SUB SECTION ITSELF, THEREFORE, THE DEDUCTIO N WAS AVAILABLE ON SUBSTANTIAL EXPANSION BY OLD UNDERTAKINGS AS WEL L AS NEW UNDERTAKINGS DURING THE WINDOW PERIOD. HOWEVER, THE RE IS NO FORCE IN THIS INTERPRETATION. SUB SECTION (2) BEGI NS WITH THE EXPRESSION THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS THIS ITSELF SHOWS THAT P ROVISION MADE EVEN THE EXISTING UNDERTAKINGS ENTITLED FOR THE DED UCTION BECAUSE THE EXPRESSION BEGUN WOULD REFER TO THE UNDERTAKI NG WHICH WERE ALREADY EXISTING AND BEGAN THE MANUFACTURE BEFORE T HE WINDOW PERIOD MENTIONED IN THE SUB SECTION. THE LAST LINE OF THE SUB SECTION READS AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING... THIS WOULD NATURALLY REFER TO THE UNDERTAKING WHICH WERE ALREADY EXISTING. IF IT IS READ THE WAY THE LD. COUNSEL OF THE ASSESSEE WOULD LIKE US TO READ T HEN 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 EXP ANSION ALSO SIMULTANEOUSLY. THE EXPRESSION AND WOULD REFER T O THE CUMULATIVE CONDITION THAT IS BOTH PARTS OF THE COND ITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JOINED ONL Y WITH THE EXPRESSION BEGUN. THIS IS BECAUSE BEGUN REFERS TO SOMETHING WHICH HAS ALREADY STARTED IN THE PAST WHEREAS BEGI NS CONNOTES SOMETHING WHICH WOULD COMMENCE IN THE PRESENT. THE REFORE, THE EXPRESSION AND CAN BE CORRELATED ONLY WITH EXISTI NG UNIT BECAUSE AS WE HAVE ALREADY SEEN A NEW UNIT WHICH HAS BEEN S ET UP AND BEGINS PRODUCTION CANNOT SIMULTANEOUSLY UNDERGO SUB STANTIAL EXPANSION ALSO SO AS TO BECOME ELIGIBLE FOR DEDUCTI ON 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 PRI NCIPLES OF INTERPRETATION. THEREFORE, VARIOUS PRINCIPLES OF IN TERPRETATION NEEDS TO BE LOOKED INTO. THIS PROVISION WAS BROUGHT INTO THE STATUTE INDISPUTABLY IN THE LIGHT OF THE INCENTIVE PACKAGE ANNOUNCED BY THE UNION CABINET. THROUGH THIS INCENT IVE PACKAGE NOT ONLY INCOME TAX CONCESSION BUT EXCISE CONCESSIO NS AND SOME 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 ECONOMIES OF THESE HILL Y STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9.2003 IN THIS RESPECT AND THE CIRCULAR READS AS UNDER:- 12 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, SIKKIM, UTTARANCHAL 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 HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN ORDER TO GIVE BOOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80- IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH- EASTERN STATES . FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF T HE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEE NTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, OR INTEGRATED INFRASTRUCTUR E DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE WITH RULES PRESCRIBED IN THIS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH SCHEDULE. 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NOR TH- EASTERN STATES SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT 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 PROFIT S OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND THEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CENT FO R 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 UNDER THIS SEC TION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURTHER, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKIN G 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 13 DEDUCTION UNDER SECTION 80-IC. FURTHER, A NEW FOURTEENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH SPECIFIES THE LIST OF ARTICLES AND THINGS, BEING TH RUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR THE PURPO SES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUEN T TO THESES AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION(4) OF SECTION 80-IB HAVE BEEN MADE INOPERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHAL PRADESH OR IN NORTH-EASTERN REGION INCLUDING 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 TH E ASSESSMENT YEAR 2004-05 AND SUBSEQUENT YEARS. 31. THE CIRCULAR MAKES IT CLEAR THAT SECTION 80IC W AS INSERTED TO GIVE EFFECT TO THE NEW PACKAGE ANNOUNCED BY THE UNION CABINET. THE CIRCULAR FURTHER CLARIFIES THAT THIS S ECTION PROVIDES FOR DEDUCTION FOR A PERIOD OF 10 YEARS FROM THE PRO FITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKING O R ENTERPRISE ON THEIR SUBSTANTIAL EXPANSION (SEE HIGHLIGHTED PORTIO N OF THE CIRCULAR). THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT WORD EXISTING QUALIFIES ONLY THE UNDERTAKING OR ENTERPRISES AND DOES NOT MENTION ANY PARTICULAR DATE FOR CARRYI NG OUT SUBSTANTIAL EXPANSION. WE FIND NO MERIT IN THIS CON TENTION. THE WORD EXISTING IS DEFINED IN THE DICTIONARIES ARE A S 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 : 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 ONLY EXISTS IN YOUR HEAD, JANE . FEW OF THESE MONKEYS STILL EXIST IN THE WILD. ON HIS RE TIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUPPORT VICTIMS OF CRIME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION OR WITH VERY LITTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING THE ABOVE DEFINITION CLEARLY SHOWS THAT EXIST WOU LD REFER TO SOMETHING WHICH IS IN FORCE PRESENTLY. EXIST WOUL D GENERALLY AND IN COMMON SENSE REFERS TO SOMETHING WHICH IS ALREAD Y THERE. WITH REFERENCE TO THIS PROVISION, THIS WOULD REFER TO AN UNDERTAKING WHICH WAS ALREADY PRESENT ON THE DATE WHEN THIS PRO VISION WAS INTRODUCED. IN ANY CASE THE NOTIFICATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMEN T OF INDUSTRIAL POLICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZETTE OF INDIA REMOVED ALL THE DOUBTS. THIS NOTIFICATION IS RELEVANT BECAUSE THIS WAS ISSUED WITH REFERENCE TO SAME PACK AGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEV ELOPMENT OF THE HILLY STATES. SECTION 5, READS AS UNDER;- DEFINITIONS: 14 (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 ABSOL UTELY CLEAR WHEN SUB SECTION (2) IS READ ALONGWITH SUB-SECTION (3) OF SECTION 80IC. AS NOTED EARLIER, SUB SECTION (2) IS ENABLIN G PROVISION WHICH PROVIDES FOR DEDUCTION IN CERTAIN KIND OF UNDERTAKI NGS, I.E. NEW UNIT SET UP OR THE EXISTING UNITS WHICH CARRIES OUT SUBSTANTIAL EXPANSION DURING THE PARTICULAR WINDOW PERIOD WHICH ARE GIVEN IN CLAUSES (I), (II) & (III) OF SUB SECTION (2). THE S UB SECTION (3) PROVIDES FOR RATES OF DEDUCTION. IT IS USEFUL TO NO TE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUSE (A) AND SUB CLAUSE (I) & (III) OF CLAUSE (B) . NOW SUB CLAUSE (I ) AND (III) OF CLAUSE (A) OF SUB SECTION (2) REF ERS TO THE WINDOW PERIOD IN CASE OF STATE OF SIKKIM, NORTH-EASTERN ST ATES 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 I N CASE OF STATE OF SIKKIM AND NORTH-EASTER STATES WHEREAS SUB CLAUSE ( II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRAD ESH AND UTTARANCHAL. NOW CLAUSE (II) OF SUB SECTION (3) PR OVIDES FOR 100% DEDUCTION ON SUCH PROFITS FOR FIVE ASSESSMENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE 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 VERY 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 IN CASE OF STATE OF HIMACHAL PRADESH AND UT TARANCHAL THE DEDUCTION WAS TO BE ALLOWED @ 100% ONLY FOR FIR ST FIVE YEARS AND THEREAFTER IT WAS ONLY 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EXPAN SION SEPARATELY THEN THE RATE OF DEDUCTION IN THE CLAUSE (I) & (II) OF SUB SECTION (3) WOULD NOT HAVE BEEN DIFFERENT I.E. 100% FOR WHO LE OF THE 10 YEARS IN CASE OF STATE OF SIKKIM & NORTH-EASTERN ST ATES UNDER SUB CLAUSE (I) AND FOR THE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FOR FIRST FIVE YEARS AND THEREAFTER 25% FOR NEXT FIVE YEARS. THE CONCEPT OF SUBSTANTIAL E XPANSION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES O F STATES I.E STATE OF SIKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACHAL PRADESH AND UTTRANCHAL. IF THE EXTENDED BENEFIT OF SUBSTANTIAL EXPANSION WAS TO BE SEPARATELY ALLOWED IN CASE OF S TATE OF HIMACHAL PRADESH AND STATE OF UTTARANCHAL, THEN MEA NING OF SUBSTANTIAL EXPANSION AS GIVEN UNDER SUB SECTION (2 ) WHICH IS SAME FOR THE STATE OF SIKKIM AND NORTH-EASTERN STAT ES BECOME REDUNDANT. AS NOTED EARLIER, THE PROVISION CANNOT BE INTERPRETED IN SUCH A WAY THAT PART OF THE SECTION BECOMES REDU NDANT OR OTIOSE. THEREFORE, WHATEVER DOUBTS MAY BE THERE IN SUB SECTION (2) WHEN IT IS READ WITH SUB SECTION (3), THOSE DOU BTS ARE TOTALLY 15 REMOVED AND IT BECOME ABSOLUTELY CLEAR THAT RATE O F DEDUCTION 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 ADOPTED THEN SUB SECTION (4) OF SECTION 80IC WOULD ALSO BECOME REDUNDANT. SUB SECTION (4) CLEARLY PROVIDES THAT TH E DEDUCTION IS AVAILABLE TO ANY UNDERTAKING OR ENTERPRISE 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 MAC HINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLAN ATION TO THIS SUB SECTION MAKES IT CLEAR THAT EXPLANATION 1 & 2 O F SUB SECTION (3) OF SECTION 80IA ARE APPLICABLE IN THIS RESPECT. EXPLANATION 2 OF SUB SECTION (3) OF SECTION 80 IA READS AS UNDER: EXPLANATION 2- WHERE IN THE CASE OF AN [UNDERTAKING], ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY USED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL 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 CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH. FROM THE ABOVE IT BECOMES CLEAR THAT IF 20% OF THE MACHINERY FROM THE OLD UNIT WAS USED IN THE NEW UNIT THEN SUC H UNIT WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER THIS SECTION TH AT IS SECTION 80IC. NOW FOR CARRYING OUT SUBSTANTIAL EXPANSION TH E INVESTMENT IN PLANT & MACHINERY IS REQUIRED TO BE MADE BY ATLE AST 50%. SO IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN I T WILL VIOLATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPR ETATION CANVASSED ON BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80IC(4) WOULD BECOME REDUNDANT 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 Y EARS INCLUDING DEDUCTION AVAILED UNDER SUB SECTION (4) OF SECTION 80IB AND SECTION 10A AND 10B. IT WAS CONTENDED BEFORE US THAT SINCE THERE IS NO RESTRICTION IN CARRYING OUT OF SUBSTANT IAL EXPANSION IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARRIED OUT ANY NUMBER OF TIMES. IF THIS INTERPRETATION IS ACCEPTED THEN SUB SECTION (6) WOULD BE RENDERED OTIOSE OR MEANING LESS BECAUSE IF A UNIT WAS SET UP ON THE COMMENCEMENT OF THIS SE CTION AND THE SAME CLAIMS DEDUCTION @ 100% AND LATER ON EVERY FIV E YEARS A SUBSTANTIAL EXPANSION IS CARRIED OUT THEN ACCORDING TO THE INTERPRETATION CANVASSED ON BEHALF OF THE ASSESSEE, SUCH UNIT WOULD AGAIN BECOME ENTITLED TO 100% DEDUCTION FOR A NOTHER FIVE YEARS AND FURTHER BLOCK OF FIVE YEARS EVERY TIME SU BSTANTIAL EXPANSION IS CARRIED OUT. IF THIS INTERPRETATION IS ADOPTED THEN DEDUCTION WOULD BECOME ALMOST PERCEPTUAL AS LONG AS THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE SUB SECTION (6) WOULD LOOSE ITS MEANING. SUCH AN UN LIMITED PERIOD OF DEDUCTION WOULD NOT BE IN CONSONANCE OF LAW. AT THE COST OF REPETITION, WE WOULD LIKE TO EMPHASIZE THAT NO PRIN CIPLE OF INTERPRETATION CAN BE ADOPTED WHICH LEADS TO A SITU ATION WHERE A 16 PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDU NDANT. IN FACT THOUGH IT WAS CONTENDED THAT IN THE PRESENT CASE (I .E. IN CASE OF HYCRON ELECTRONICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE OF HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTION WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHICH HAS BEEN MADE BE FORE US. IN CASE OF M/S MAHAVIR INDUSTRIES (ITA NO. 127/CHD/201 1 AND ITA NO. 791/CHD/2012) THOUGH THOSE CASES WERE ADJOURNED BECAUSE SOME OTHER ISSUES WERE ALSO THERE BUT IN THOSE TWO CASES ASSESSEE HAD COMMENCED THE OPERATION ON 8.5.1997 AND CLAIMED DEDUCTION U/S 80IB FROM ASSESSMENT 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 ALLOWED TO CARRY OUT ANY NUMBER OF EXPANSIONS, DEDUCTION WAS CLAIMED FOR THE 12 TH YEAR FOR ASSESSMENT YEAR 2009-10 (WE MAY CLARIFY T HAT REFERENCE TO THESE CASES IS MADE BECAUSE OF PARTICU LAR CONTENTION AND WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THESE APPEALS HERE). THEREFORE, THE CONTENTION OF THE AS SESSEE THAT ANY NUMBER OF EXPANSIONS ARE ALLOWED IS NOT POSSIBLE IN VIEW OF THE RESTRICTION GIVEN IN SECTION 80IC(6). 36. THE ABOVE SITUATION AS POINTED BY THE REVENUE A LSO BECOMES CLEAR IF THE PROVISION OF SECTION 80IC IS C OMPARED TO THE PROVISION OF SECTION 80IB(4). RELEVANT PROVISION OF SECTION 80IB (4) READS AS UNDER:- (4) THE AMOUNT OF DEDUCTION IN THE CASE OF AN INDU STRIAL UNDERTAKING IN AN INDUSTRIALLY BACKWARD STATE SPECI FIED IN THE EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PR OFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE A SSESSMENT 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 SOCI ETY) SUBJECT TO FULFILLMENT OF THE CONDITION THAT IT BEGINS TO M ANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPERATE ITS COLD S TORAGE PLANT OR PLANTS DURING THE PERIOD BEGINNING ON THE IST DAY O F 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 G OVERNMENT, THE AMOUNT OF DEDUCTION SHALL BE HUNDRED PER CENT O F PROFITS AND GAINS FOR A PERIOD OF TEN ASSESSMENT YEARS, AND THE TOTAL PERIOD OF DEDUCTION SHALL IN SUCH A CASE NOT EXCEED TEN ASSES SMENT 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 E NTERPRISE REFERRED TO IN SUB-SECTION (2) OF SECTION 80-IC. 37. THE CAREFUL PERUSAL OF THE ABOVE PROVISION WOUL D SHOW THAT BEFORE THE INTRODUCTION OF SECTION 80IC WHICH IS BE FORE US FOR CONSIDERATION, THE DEDUCTION TO THE BACKWARD STATES WAS AVAILABLE IN TERMS OF SECTION 80IB(4). THE THIRD P ROVISO MAKES IT CLEAR THAT AFTER 31.3.2004, THIS DEDUCTION WILL BE AVAILABLE ONLY U/S 80IC. THE SUB SECTION FURTHER MAKES IT CLEAR T HAT DEDUCTION 17 WOULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREA FTER @ 25%. FURTHER, THE FIRST PROVISO MAKES IT CLEAR THAT DEDU CTION 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. THUS, EVEN IN THE EARLIER PROVISION ONLY IN CASE OF NORTH-EASTER STATES, THE DEDUCTION OF 100% WAS ALLOWABLE FOR 10 YEARS WHEREAS IN THE CASE OF STATES OF HIMACHAL PRADESH, THE DEDU CTION 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 D EDUCTION COULD BE FOR PERIOD EXCEEDING 10 YEARS AND IN THIS REGARD WE MAY NOTE THAT EVEN THE LD. AUTHORS IN THEIR COMMENTARY OF IN COME TAX LAWS BY CHATURVEDI & PITHISARIAS - SIXTH EDITION HAS EXPRESSED THE SAME OPINION. THE RELEVANT EXTRACT AT PAGES 635 1 OF THE COMMENTARY READS AS UNDER;- NO DEDUCTION POSSIBLE FOR MORE THAN 10 ASSESSMENT YEARS.- SECTION 80-IC(6) ALSO OPENS WITH A NON OBST ANTE CLAUSE NOTWITHSTANDING ANYTHING CONTAINED IN,AND PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER SECTION 80-IC, - WH ERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERI OD 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 EXPRESSION OR THEREFORE, IT CAN BE CONSTRUED THAT IT RELATES TO BOTH SITUATIONS SEPARATELY I.E. FOR NEW UNIT AND SU BSTANTIAL EXPANDED UNIT. WE FIND NO FORCE IN THIS CONTENTION . THE INITIAL ASSESSMENT YEAR HAS BEEN DEFINED AND THE EXPRESSION OR HAS BEEN USED IN RESPECT OF NEW UNITS BY STATING COMME NCES OPERATION OR COMPLETE SUBSTANTIAL EXPANSION. HER E THE EXPRESSION OR IS TO BE READ AS A MUTUALLY EXCLUSI VE EXPRESSION WHICH REFERS TO A PARTICULAR SITUATION BY EXCLUDING THE OTHER SITUATION. THEREFORE, INITIAL ASSESSMENT YEAR WOUL D CLEARLY COMMENCE EITHER ON COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBSTANTIAL EXPANSION OF EXISTING UNI T. IN ANY CASE THE WORD INITIAL CANNOT BE USED TWICE BY REFERRI NG 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 EMPLOYED AS LEGAL OFFICER IN AN ORGANIZATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROFESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE. THEN IN SUCH A SITUATION IT CANNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATI ON AND THEN INITIALLY HE WAS IN THE PROFESSION AND THEN ELEVATE D AS A JUDGE. INITIALLY CAN BE USED ONLY ONCE AS A MATTER OF USAG E OF ENGLISH LANGUAGE. THEREFORE, READING OF THE ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGISLATURE WAS VERY CLEAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE S TATE OF HIMACHAL PRADESH (SINCE ALL THE CASES BEFORE US ARE SITUATED IN THE STATE OF HIMACHAL PRADESH) AND THEREAFTER 25% DEDUCTION FOR ANOTHER FIVE YEARS ON THE NEW UNITS OR THE EXISTING UNITS WHERE SUBSTANTIAL EXPANSION WAS CARRIED OUT. 18 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WITH REFERENCE TO THE DECISION OF M/S NOVAPAN INDIA LTD VS COLLECT OR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) BY THE REVENUE IS NOT CO RRECT BECAUSE THAT PROVISION WAS RENDERED UNDER INDIRECT TAX ACT. WE FIND NO FORCE IN THESE SUBMISSIONS. EVERY DECISION OF THE H ON'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 DOE S NOT MATTER UNDER WHICH PARTICULAR ACT SUCH PRINCIPLES HAS BEEN DECIDED. NO DOUBT THE INCENTIVE PROVISIONS ARE REQUIRED TO BE I NTERPRETED LIBERALLY BUT IN CASE OF M/S NOVAPAN INDIA LTD V CO LLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA), IT WAS OBSERVED AS UNDER:- THE LEARNED COUNSEL FOR THE APPELLANT THEN CONTEN DED THAT SINCE THERE IS AN AMBIGUITY ABOUT THE MEANING AND PURPORT OF ITEM-6 OF THE TABLE APPENDED TO THE EXEM PTION NOTIFICATION, THE BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE MANUFACTURER AND THE ENTRY MUST BE CONSTRUED 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) SUPP L. 1 S.C.C, 21, A BENCH OF THIS COURT COMPRISING M.N. VENKATACHALIAH, J. (AS THE LEARNED CHIEF JUSTICE TH EN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE I N THE FOLLOWING WORDS: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERVATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN SUPPORT OF STRICT CONSTRUCTION OF A PROVISI ON CONCERNING EXEMPTIONS. THERE IS SUPPORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION H AVE A TENDENCY TO INCREASE THE BURDEN ON THE OTHER UN- EXEMPTED CLASS OF TAX PAYERS AND SHOULD BE CONSTRUE D 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 INTERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VIOLENCE IS DONE TO THE LANGUA GE EMPLOYED. IT MUST, HOWEVER, BE BORNE IN MIND THAT ABSURD RESULTS OF CONSTRUCTION SHOULD BE AVOIDED. THE CHOICE BETWEEN A STRICT AND A LIBERAL CONSTRUCT ION ARISES ONLY IN CASE OF DOUBT IN REGARD TO THE INTEN TION OF THE LEGISLATURE MANIFEST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPRETATIVE PR OCESS ARISES ONLY WHERE THE MEANING IS NOT MANIFEST ON TH E PLAIN WORDS OF THE STATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY THE MEANING, THERE IS NOT NEED FOR ANY INTERPRETATION. WE ARE, HOWEVER, OF THE OPINION THAT, ON PRINCIPLE , THE DECISION OF THE COURT IN MANGALORE CHEMICALS AND IN UNION OF INDIA V. WOOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW OF LAW. THE PRINCIPLE T HAT IN CASE OF AMBIGUITY, A TAXING STATUTE SHOULD BE CONST RUED 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; 19 THEY HAVE TO BE CONSTRUED STRICTLY. A PERSON INVOKI NG AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX LIABILITY MUST ESTABLISH CLEARLY THAT HE IS COV ERED BY THE SAID PROVISION. IN CASE OF DOUBT OR AMBIGUITY, BENEFIT OF ITS MUST GO TO THE STATE. THE HONBLE SUPREME COURT IN ORISSA STATE WAREHOUSI NG CORPORATIONS CASE (SUPRA) HAS LAID DOWN THAT WHIL E IT IS TRUE THAT IN THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL STATUTE, THE S AME GOES IN FAVOUR OF THE ASSESSEE, BUT THE FACT REMAINS AND THE LAW IS WELL-SETTLED ON THIS SCORE THAT IN THE MATTE R OF INTERPRETATION OF THE TAXING STATUTES THE LAW COURT S WOULD NOT BE JUSTIFIED IN INTRODUCING SOME OTHER EXPRESSI ONS WHICH THE LEGISLATURE THOUGHT FIT TO OMIT. IN THE P RESENT CONTEXT, THERE IS NO DOUBT AS TO THE MEANING OF THE WORDS USED IN THE SECTION BY REASON OF THE LANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN ASCERTAINING THE STATUTORY INTENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTION IS AN EXCEPTION TO THE GENERAL RULE AND S INCE THE SAME IS OPPOSED TO THE NATURAL TENOR OF THE STA TUTE, THE ENTITLEMENT FOR EXEMPTION, THEREFORE, OUGHT NOT TO BE READ WITH ANY LATITUDE TO THE TAX-PAYER OR EVEN WIT H 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 SEC TION 80IC ARE READ CAREFULLY IT LEAVES NO DOUBT THAT DEDUCTION WA S MEANT ONLY FOR NEW UNITS OR IN CASE OF OLD UNITS IF SUBSTANTIA L EXPANSION WAS CARRIED OUT IN SUCH OLD UNITS AND DEDUCTION WAS AVA ILABLE ONLY FOR A PERIOD OF 10 YEARS. THEREFORE, THERE IS NO QUEST ION OF GIVING ANY INTERPRETATION MUCH LESS LIBERAL INTERPRETATION TO SECTION 80IC WHEN THE READING OF WHOLE SECTION MAKES THE PROVISI ON VERY CLEAR. AS OBSERVED IN CASE OF M/S NOVAPAN INDIA LTD V COLL ECTOR 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 ASSESSEE IS SIMPLY ASSERTING BEFORE U S THAT THERE IS NO RESTRICTION FOR DEDUCTION IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION, THAT IS NOT ENOUGH BECA USE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULAR DEDUCTION WAS ALLOWABLE. 42. WE ALSO FIND FORCE IN THE SUBMISSIONS OF LD. CI T-DR THAT IF INTERPRETATION GIVEN BY THE ASSESSEE IS TO BE ACCEP TED, THE PROVISION WOULD BECOME DISCRIMINATORY FOR TWO CLASS ES 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 WOUL D BECOME ENTITLED TO DEDUCTION FOR 100% FOR FIRST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EXPANSION. SUCH DISCRIMINATORY INTENTION CANNOT BE IMPUTED TO THE LEGISLATURE. 43. BEFORE US, RELIANCE WAS ALSO PLACED ON THE DECI SION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG IN DUSTRIES LIMITED VS. DCIT(SUPRA). IN THIS DECISION, THE BENCH HAS S IMPLY OBSERVED THAT MAIN DISPUTE IS ON THE DEFINITION OF INITIAL ASSESSMENT YEAR. THE PROVISIONS OF SUB SECTION (2) AND SUB SECTION ( 3) AS DISCUSSED IN DETAIL ABOVE HAVE BEEN TOTALLY IGNORED AND, THER EFORE, THIS DECISION, IN OUR OPINION, IS PER INQUERIM AND CANNO T BE FOLLOWED. 20 44. THE LD. COUNSEL HAS ALSO RELIED ON THE DECISION IN THE CASE OF S.R. PARYAVARAN ENGINEERS PVT LTD (SUPRA) OF THE CHANDIGARH BENCH. THE FACTS IN THAT CASE ARE THAT ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB IN ASSESSMENT YEAR 1999-2000 @ 100% . THE DEDUCTION WAS CLAIMED @ 100% FOR FIVE YEARS AND THE N DEDUCTION WAS CLAIMED @ 30% ON THE PROFITS IN THE NEXT YEAR. THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION IN FINANCIAL YEARS 2004-05 & 2005-06 AND CLAIMED DEDUCTION AT THE RATE OF 100% O N THE BASIS OF SUCH SUBSTANTIAL EXPANSION IN ASSESSMENT YEAR 20 06-07. HOWEVER, THE DEDUCTION WAS WRONGLY CLAIMED U/S 80IB INSTEAD OF SECTION 80IC. THE CIT(A) ALLOWED THE DEDUCTION BY OBSERVING THAT DEDUCTION COULD NOT BE DENIED SIMPLY BECAUSE ASSESS EE HAS QUOTED A WRONG SECTION. ON THE APPEAL FILED BY REV ENUE, THE DEDUCTION WAS HELD TO BE ALLOWABLE BECAUSE SUBSTANT IAL EXPANSION WAS CARRIED OUT IN A UNIT WHICH WAS ALREA DY IN EXISTENCE AS ON 7.1.2003. THEREFORE, IN OUR OPINIO N, THIS DECISION 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 23.05.2009. THE FIRM COMMENCED COMMER CIAL PRODUCTION IN MARCH, 2010. SHRI ABHISHEK BHARGAV WH ILE PLANNING TO JOIN THE FIRM AS PARTNER BY ACQUIRING 20% SHARE OF PROFIT AND ENHANCING ADDITIONAL MANUFACTURING FACILITY BY UNDE RTAKING SUBSTANTIAL EXPANSION SOUGHT ADVANCE RULING ON THE ISSUE WHETHER THE INTRODUCTION OF NEW PARTNER WOULD BE TREATED AS RECONSTRUCTION OF THE EXISTING BUSINESS OR THE FIRM WILL BE ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION AS PER THE PROVISIONS OF SECTION 80IC(2)(A)(II) IF IT STARTS COMMERCIAL PROD UCTION BEFORE 01.04.2012. THE AUTHORITY HELD THAT THE ASSESSEE WA S ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION IN TERMS OF AN D TO THE EXTENT PROVIDED BY SECTION 80IC OF THE ACT IF IT STARTS CO MMERCIAL PRODUCTION IN THE SUBSTANTIALLY EXPANDED UNIT BEFOR E 01.04.2012. IN THIS CASE THE ASSESSE SHALL BE ENTITLED TO DEDUC TION OF 100% OF ITS PROFITS UPTO A.Y. 2014-15 SINCE THE INITIAL ASS ESSMENT YEAR WAS A.Y. 2010-11 AND CLAIM OF DEDUCTION CANNOT BE DENIE D MERELY ON THE GROUND OF EXPANSION OF MANUFACTURING CAPACITY S O LONG IT IS NOT A CASE OF RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE. HOWEVER, THE QUESTION WHETHER THE ASSESSEE SHALL BE ENTITLED TO DEDUCTION OF 100% OF ITS PROFIT EVEN AFTER A.Y. 201 4-15 I.E. FOR 2 MORE YEARS BEYOND A.Y. 2014-15 IS LEFT OPEN AND NOT DECIDED BY THE AAR. THEREFORE THIS DECISION IS TOTALLY DISTING UISHABLE AND DOES NOT HELP THE CASE OF THE ASSESSEE. 46. THE LAST DECISION RELIED ON WAS IN THE CASE OF SINTEX INDUSTRIES LTD V CIT (SUPRA). IN THIS CASE THE DED UCTION U/S 80IC WAS ALLOWED BY THE ASSESSING OFFICER BUT LATER ON A REVISIONARY ORDER WAS PASSED U/S 263 OF THE ACT. THE BENCH MAIN LY DEALT WITH THE PROVISION OF SECTION 263 AND IN VIEW OF THE DEC ISION 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 ASSE SSING OFFICER IS ALSO POSSIBLE VIEW, THEREFORE, ASSESSMENT ORDER WAS NOT ERRONEOUS. IN FACT THE BENCH REFERRED TO THE DECISI ON 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 P OSSIBLE VIEW. SINCE WE HAVE ALREADY DISCUSSED THE DECISION OF TR IPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) AND FOUND THAT ALL THE PROVISIONS OF THE SECTION WERE NOT DISCUSSED IN THA T SECTION AND 21 THAT IS PER INQUERIM, THEREFORE, IN OUR OPINION, TH IS ORDER DOES 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 UND ER:- 25 (I) WHETHER THE UNDERTAKING OR ENTERPRISE IS LOCATED 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 GIV E THE DATE OF COMMENCEMENT OF PRODUCTION OR MANUFACTURE O F 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- STANTIAL EXPANSION TOOK PLACE. :-------- -------- (III) VALUE OF INCREASE IN THE PLANT AND MACHINE RY IN THE YEAR OF SUBSTANTIAL EXPANSION. :- --------------------- (E) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTUR E OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING) :----------------------- (F) DOES THE UNDERTAKING OR ENTERPRISE MANUFACTURE OR PRODUCE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDULE. :---YES ---NO (IF YES, PLEASE SPECIFY THE ARTICLE OR THING O R OPERATION):------------------------- 48. THE CAREFUL READING OF THE FORM IN A SERIAL ORD ER WOULD CLEARLY SHOW THAT THE ASSESSEE IS REQUIRED TO INFOR M THE LOCATION OF THE INDUSTRY AND COLUMN (C) SPECIFICALLY ASK THE ASSESSEE TO STATE WHETHER BUSINESS IS A NEW BUSINESS? COLUMN (D) CLEARLY ASK THE ASSESSEE WHETHER EXISTING BUSINESS HAS UNDERTAK EN SUBSTANTIAL EXPANSION, THEREFORE, THERE ARE TWO CAT EGORIES OF BUSINESS AND SUBSTANTIAL EXPANSION IS POSSIBLE ONLY IN CASE OF EXISTING BUSINESS. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY ADJUDICATED THIS ISSUE. 49. IN VIEW OF THE ABOVE DETAILED DISCUSSION WE HOL D THAT THE ASSESSEE BEFORE US I.E. M/S HYCRON ELECTRONICS IN I TA NO. 798/CHD/2012 IS ENTITLED TO ONLY 25% OF DEDUCTION D URING THE PRESENT YEAR BECAUSE THE ASSESSEE HAS ALREADY AVAI LED THE PERIOD OF FULL DEDUCTION @ 100% IN THE EARLIER FIVE YEARS I.E. FROM ASSESSMENT YEARS 2004-05 TO 2008-09. IN THIS BACKGR OUND, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE U PHOLD THE SAME. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 22 7. THE FACTS OF THIS CASE ARE SIMILAR TO THAT OF TH E CASE OF HYCRON ELECTRONICS, BADDI, SOLAN V ITO & OTHERS REFERRED TO ABOVE. RESPECTFULLY FOLLOWING THE ORDE R OF THE TRIBUNAL IN THE CASE OF HYCRON ELECTRONICS, BADDI, SOLAN V ITO & OTHERS (SUPRA), WE DO NOT SEE ANY MERIT IN TH IS APPEAL. ACCORDINGLY, WE DISMISS THE SAME. 8. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH FEBRUARY, 2016. SD/- SD/- ( RANO JAIN) (H.L.KA RWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED: 18 TH FEBRUARY, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD