Appeal Details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 0110 (ITAT-CHANDIGARH)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 6 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-04-2016
Appeal Filed By
Assessee
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
30-09-2015
Assessment Year
2011-2012
Appeal Filed On
07-10-2014
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 836/CHD/2014 ASSESSMENT YEAR: 2011-12 M/S AARHAM SOFTRONICS, VS THE ITO, PLOT NO. 30, BADDI. INDUSTRIAL AREA, BADDI, DISTT. SOLAN (HP). PAN: AALFA1356L (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 12.04.2016 DATE OF PRONOUNCEMENT : 13.04.2016 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS) SHIMLA DATED 23.07.20 14 FOR ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUND S :- 1. THAT THE ORDER PASSED UNDER SECTION 250(6) BY THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) SHIMLA IN APPE AL NO. 396/13- 14/SML DATED 23.07.2014 IS CONTRARY TO LAW AND FACT S OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E ID. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTION OF THE ID. ASSESSING OFFICER WHO RESTRIC TED THE DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 AT 2 5% AS AGAINST 100% CLAIMED BY THE ASSESSEE AS SUBSTANTIAL EXPANSI ON WAS DONE BY THE ASSESSEE WHICH FACT HAS NOT BEEN CONTROVERTED B Y THE ID. ASSESSING OFFICER. 2 3. THAT THE ID. COMMISSIONER OF INCOME TAX (APPEALS ) GRAVELLY ERRED IN UPHOLDING CHARGING OF INTEREST UNDER SECTION 234 B AND 234C OF THE INCOME TAX ACT WHICH IN ANY CASE IS EXCESSIVE. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE DERIVED INCOME FROM MANUFACTURING OF GEARS, AXELS A ND SHAFTS. DURING THE YEAR UNDER CONSIDERATION, ASSES SEE DECLARED GROSS SALES TO THE TUNE OF RS. 8.38 CR WIT H THE GROSS PROFIT AT RS. 1.58 CR. DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED THAT ASSESSEE FIRM STAR TED ITS MANUFACTURING ACTIVITIES W.E.F. 20.02.2006 AND THE FIRST YEAR OF CLAM OF DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT WAS ASSESSMENT YEAR 2006-07 AS IS MENTIONED IN THE AUDIT REPORT. THE ASSESSEE FIRM CLAIMED 100% DEDUCTION UNDER SECTION 80IC OF THE AC T UPTO ASSESSMENT YEAR 2010-11. IN THE FINANCIAL YEA R 2009-10, SUBSTANTIAL EXPANSION IN THE PLANT AND MACHINERY WAS MADE AND AGAINST CLAIMED DEDUCTION UNDER SECTION 80IC @ 100% FROM ASSESSMENT YEAR 2010-11 RECKONING FIRST YEAR OF DEDUCTION UNDER SEC TION 80IC OF THE ACT. REGARDING RECKONING THE PERIOD OF FIVE YEARS FOR CLAIM OF 100% DEDUCTION, ASSESSING OFFICE R HELD THAT ASSESSEE FIRM HAD BEEN CLAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT ON THE BASIS OF COMMENCEMENT OF OPERATION/ACTIVITY OF BUSINESS W.E. F. 20.02.2006 FROM THE ASSESSMENT YEAR 2006-07 AS INIT IAL ASSESSMENT YEAR AND SAID PERIOD OF FIVE YEARS COMPL ETES WITH ASSESSMENT YEAR 2010-11, WHEREAS ON THE BASIS OF 3 SUBSTANTIAL EXPANSION UNDERTAKEN DURING THE FINANCI AL YEAR 2009-10, ASSESSEE CLAIMED DEDUCTION UNDER SECT ION 80IC OF THE ACT FROM ASSESSMENT YEAR 2010-11 AND TH US, IN VIEW OF THAT, IT HAD CLAIMED DEDUCTION UNDER SEC TION 100% OF ITS BUSINESS PROFIT FROM 2010-11 TO 2014-15 FOR ANOTHER FIVE YEARS. THE ASSESSEE FIRM HAD ALREADY CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT @ 1 00% FOR FIVE YEARS UPTO ASSESSMENT YEAR 2010-11 FROM TH E DATE OF ITS SETTING UP OF THE INDUSTRIAL UNDERTAKIN G AND IT WAS ELIGIBLE FOR CLAIM OF DEDUCTION @ 100% FROM ASSESSMENT YEAR 2006-07 TO 2010-11 AND FOR THE REMAINING FIVE YEARS OUT OF THE 10 YEARS I.E. FROM ASSESSMENT YEAR 2011-12 TO 2015-16 @ 25% OF ITS ELIGIBLE BUSINESS PROFITS. 3. THE ASSESSING OFFICER AFTER DETAILED DISCUSSION, CONCLUDED THAT BENEFIT OF SUBSTANTIAL EXPANSION WAS AVAILABLE ONLY TO THE EXISTING UNITS I.E. UNIT THAT EXISTED AND WERE OPERATIONAL AS ON 07.01.2003 IN ORDER TO M AKE THEM ELIGIBLE FOR 100% DEDUCTION UNDER SECTION 80IC OF THE ACT FOR FIRST FIVE YEARS AND WAS NOT AT ALL MEA NT FOR THE UNITS THAT CAME INTO BEING ON OR AFTER THE INTRODUCTION OF THE SCHEME AS NOTED ABOVE. THE ASSESSEE'S CLAIM OF SUBSTANTIAL EXPANSION AND ON TH AT BASIS, RECKONING THE ASSESSMENT ORDER 2010-11 TO BE THE INITIAL ASSESSMENT YEAR, WAS DENIED BY THE ASSESSIN G OFFICER. IN VIEW OF THIS, ASSESSMENT YEAR 2006-07, RELATING TO THE PREVIOUS YEAR IN WHICH ASSESSEE FIR M HAD 4 COMMENCED ITS BUSINESS OPERATION/ACTIVITIES ON THE BASIS OF SETTING UP OF ITS NEW INDUSTRIAL UNDERTAKI NG WAS HELD TO BE INITIAL ASSESSMENT YEAR AND THAT OF ASSESSMENT YEAR 2010-11 TO BE THE FIFTH ASSESSMENT YEAR FOR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE AC T @ 100% OF ITS BUSINESS PROFITS. THE ASSESSEE FIRM SH ALL NOT BE ALLOWED THE BENEFIT OF 100% DEDUCTION ON IT PROFIT FOR SIXTH YEAR IN SUCCESSION I.E. FOR ASSESSMENT YE AR 2011-12. BASED ON THESE FACTS, ASSESSING OFFICER M ADE THE ADDITION OF RS. 37,43,107/- DENYING 100% DEDUCT ION UNDER SECTION 80IC OF THE ACT, RESTRICTING IT UPTO 25% OF THE PROFIT. 4. THE ASSESSEE PREFERRED APPEAL BEFORE LD. CIT(APPEALS) AND THE LD. CIT(APPEALS) ON THE SAME REASONING DISMISSED THIS GROUND OF APPEAL OF THE ASSESSEE. 5. THE APPEAL WAS ADJOURNED TWICE ON THE REQUEST OF LD. COUNSEL FOR THE ASSESSEE. ON 07.01.2016, THE A PPEAL WAS ADJOURNED TO 11.04.2016 ON THE REQUEST OF THE L D. COUNSEL FOR THE ASSESSEE. LAST OPPORTUNITY WAS GRA NTED. THE APPEAL WAS ADJOURNED TO 11.04.2016. AGAIN ON T HIS DATE, ADJOURNMENT APPLICATION WAS FILED WHICH WAS REJECTED. HOWEVER, IN THE INTEREST OF JUSTICE, APP EAL WAS ADJOURNED TO 12.04.2016. ON 12.04.2016, NO AUTHORI ZED REPRESENTATIVE OF THE ASSESSEE APPEARED TO ARGUE TH E APPEAL. AGAIN A REQUEST FOR ADJOURNMENT IS FORWARD ED FOR ADJOURNING THE APPEAL SINE-DIE WHICH WAS OBJECT ED TO 5 BY LD. DR. THE REQUEST FOR ADJOURNMENT WAS REJECTE D AND THE APPEAL IS HEARD IN THE ABSENCE OF ASSESSEE. 6. THE LD. DR CONTENDED THAT THE ISSUE INVOLVED IN THE APPEAL IS COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF HYCRON ELECTRONICS VS ITO DATE D 27.05.2015 REPORTED IN 41 ITR (TRIB) 486 IN WHICH G ROUP OF APPEALS HAVE BEEN DECIDED AND REFERRED TO THE FINDINGS GIVEN IN ITA 798/2012 WHICH READS AS UNDER : 3. FIRST WE SHALL TAKE THE APPEAL OF THE ASSESSEE IN ITA NO. 798/CHD/2012 IN THE CASE OF HYCRON ELECTRONICS VS. ITO. 4. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE ORDER DATED 11.06.2012 PASSED BY THE LD. CIT(APPEAL S), SHIMLA U/S 250(6) OF THE INCOME TAX ACT, 1961 IS BAD IN LA W, ILLEGAL, WITHOUT JURISDICTION AND VOID. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, LD. CIT(APPEALS), SHIMLA HAS ERRED IN: AFFIRMING THE ORDER OF LD. ITO, WARD-2, SOLAN IN RESTRICTING THE CLAIM OF APPELLANT OF DEDUCTION U/S 80-IC OF THE INCOME TAX ACT, 1961 AT 25%I INSTEAD OF 100% CLAIMED BY THE APPELLANT IN THE SIXTH YEAR OF OPERA TION OF NEW INDUSTRIAL UNDERTAKING OF THE APPELLANT WHEREIN SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH NEW INDUSTRIAL UNDERTAKING BY THE APPELLANT. MISINTERPRETING THE PROVISIONS OF SECTION 80-IC OF THE ACT WHICH PROVIDES FOR SUBSTANTIAL EXPANSION TO BE UNDERTAKEN DURING THE PERIOD BEGINNING ON 7 TH JANUARY 2003 AND ENDING BEFORE 1 ST APRIL 2012 AND ERRONEOUSLY UPHOLDING THAT THE BENEFIT OF 100% DEDUCTION U/S 80 -IC OF THE ACT FOR FIRST FIVE YEARS IN CASE OF SUBSTANTIAL EXPANSION 6 IS AVAILABLE ONLY TO THE UNITS THAT EXISTED AND WER E OPERATIONAL AS ON 07.01.2003 AND SUCH BENEFIT IS NO T AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTE R THE INTRODUCTION OF THE SCHEME OF SUCH DEDUCTION. UPHOLDING THAT ONCE AN INITIAL ASSESSMENT YEAR IS DETERMINED IN CASE OF AN UNDERTAKING CLAIMING BENEF IT U/S 80-IC OF THE ACT IT CANNOT BE CHANGED EVEN IF SUCH UNDERTAKING COMPLETES SUBSTANTIAL EXPANSION AND AGA IN QUALIFIES FOR DEDUCTION UNDER THE SAID SECTION ON T HE BASIS OF QUALIFYING EXPANSION. 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 S TIMULUS TO THE ECONOMY OF INDUSTRIALLY 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 A ND SUB- ASSEMBLY OF ELECTRONIC ENERGY METERS AND ALLIED PRO DUCTS. THE UNIT STARTED COMMERCIAL PRODUCTION 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 2008-0 9. SUBSEQUENTLY, DURING FINANCIAL YEAR 2008-09, THE AS SESSEE FIRM UNDERTOOK SUBSTANTIAL EXPANSION BY WAY OF ADDITION TO PLANT AND MACHINERY BY MORE THAN THE PRESCRIBED LIMIT, THEREF ORE, ASSESSEE AGAIN STARTED CLAIMING DEDUCTION U/S 80IC FROM ASSE SSMENT YEAR 2009-10 (I.E; THE YEAR BEFORE US) @ 100%. 6. THE ASSESSING OFFICER AFTER EXAMINING THE FACTS OBSERVED THAT ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR CLAIMING DEDUCTION. HOWEVER, HE NOTED THAT SINCE ASSESSEE H AS ALREADY CLAIMED 100% DEDUCTION FOR FIRST FIVE YEARS UPTO AS SESSMENT YEAR 2008-09 FROM THE DATE OF SETTING UP OF THE UNIT, TH EREFORE, ASSESSEE WAS ENTITLED ONLY TO 25% DEDUCTION FROM TH E ELIGIBLE BUSINESS PROFITS FROM ASSESSMENT YEARS 2009-10 TO 2 013-14. 7 THEREFORE, ASSESSEE WAS REQUESTED TO JUSTIFY THE CL AIM 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 A S UNDER:- REFERENCE MY APPEARANCE IN THE ABOVE SAID CASE WH EREIN A QUERY WAS RAISED REGARDING CLAIM OF ASSESSEE U/S 80 IC. IT WAS POINTED OUT THAT SUBSTANTIAL EXPANSION IS APPLICABL E TO UNITS WHICH WERE IN EXISTENCE AT THE TIME OF ANNOUNCEMENT OF SCHEME I.E. IN THE ASSESSMENT YEAR 2004-05 AND ASSESSES WH O INSTALLED THE NEW UNITS DURING THIS PERIOD AND ARE NOW GOING FOR SUBSTANTIAL EXPANSION ARE NOT ELIGIBLE TO CLAIM DED UCTION U/S 80IC. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE UN IT I.E. M/S HYCRON ELECTRONICS, BADDI FIRST CAME INTO EXISTENCE IN THE FINANCIAL YEAR 2003-04 I.E. RELEVANT TO THE ASSESSM ENT YEAR 2004- 05. THUS IT FIRST CLAIMED 100% DEDUCTION U/S 80IA/8 0IB OF THE I.T. ACT IN THE ASSESSMENT YEAR 2004-05. THE NECESSARY D EDUCTION WAS ALSO CLAIMED IN THE SUBSEQUENT ASSESSMENT YEAS I.E. 2005-06, 2006-07, 2007-08 AND 2008-09. THE ASSESSMENT FOR TH ESE YEARS WERE DECIDED 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 SECTI ON 80IC OF THE I.T. ACT. IN THIS REGARD, IT MAY BE SUBMITTED THAT THE SECTION 80IC WAS INSERTED BY THE FINANCE ACT 2003 W.E.F. 01.04.2 004 I.E. RELEVANT TO THE ASSESSMENT YEAR 2005-06 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 BEING ANY ARTICLE OR THING, NOT BEING ANY ARTICLE O R 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 1 00% OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS CONNECT ING WITH THE INITIAL ASSESSMENT 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. 80-IC, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION OF UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10-C, AS THE CASE MA Y BE EXCEEDS 10 ASSESSMENT YEARS. 8 FURTHER INITIAL ASSESSMENT YEAR HAS BEEN DEFINED IN THE ACT AS INITIAL ASSESMENT YEAR MEANS THE ASSESSMENT YEAR RE LEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR EN TERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR COMMENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION. AS ALREADY STATED, THE ASSESSEE UNIT AFTER CLAIMING 100% DEDUCTION U/S 80IA/80IB OF THE I.T. ACT FOR 5 ASSES SMENT YEARS CAME FOR SUBSTANTIAL EXPANSION IN THE ASSESSMENT YE AR 2009-10 WHICH IS THE YEAR UNDER ASSESSMENT. THUS THIS THE F IRST YEAR OF CLAIMING 100% DEDUCTION FOR SUBSTANTIAL EXPANSION A S PER PROVISIONS OF SECTION 80 IC. THE UNDERTAKING IS THU S ENTITLED TO CLAIM 100% DEDUCTION U/S 80IC OF THE I.T. ACT FOR T HE NEXT 5 ASSESSMENT YEARS PROVIDED THAT THE OVERALL PERIOD O F CLAIM OF DEDUCTION DOES NOT EXCEED 10 ASSESSMENT YEARS. AS P ER PROVISIONS OF SECTION 80IC, 100% DEDUCTION IS AVAILABLE FOR 5 ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR A ND THEREAFTER 25% IN THE NEXT 5 ASSESSMENT 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 MANUF ACTURE OR PRODUCE ARTICLES OR THINGS. OR II) MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVI OUS YEAR IN WHICH THE UNDERTAKING OR ENTERPRISE COMPLETES SUBST ANTIAL EXPANSION. THUS IT MAKES IT CLEAR THAT 100% DEDUCTION IS AVAIL ABLE TO AN UNDERTAKING OR ENTERPRISE IN THE CASE OF ITS STARTI NG MANUFACTURING BETWEEN THE PERIOD 07.01.2003 AND END ING BEFORE 01.04.2012 AND IN THIS CASE THE INITIAL ASSESSMENT YEAR WOULD BE THE YEAR WHEN IT STARTS ITS PRODUCTION. SIMILARLY I N THE CASE OF SUBSTANTIAL EXPANSION, THE INITIAL ASSESSMENT YEAR WOULD START FROM THE YEAR WHEN SUBSTANTIAL EXPANSION IS COMPLET ED. IN SUCH CASES, THE ASSESEE WOULD NOT BE ENTITLED FOR THE CL AIM OF ANY DEDUCTION BEYOND A PERIOD OF 10 ASSESSMENT YEARS AS IT HAD ALREADY AVAILED 100% DEDUCTION FOR 10 ASSESSMENT YE ARS 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 9 MOST IMPORTANT QUESTION WAS WHO COULD CARRY OUT THE SUBSTANTIAL EXPANSION. FOR THIS HE REFERRED TO CIRCULAR NO. 7 OF 2003 ISSUED BY CENTRAL BOARD OF DIRECT TAXES (FOR SHORT CBDT) A S WELL AS CIRCULAR NO 49 OF 2003 ISSUED BY CENTRAL EXCISE AUT HORITIES. HE CONCLUDED THAT ON THE BASIS OF THESE TWO CIRCULARS IT IS VERY CLEAR THAT SUBSTANTIAL EXPANSION COULD BE CARRIED ONLY BY THE EXISTING UNITS. HE ALSO REFERRED TO THE PROVISIONS OF CLAUSE (V) OF SUB SECTION (8) OF SECTION 80IC WHICH DEFINES INITIAL A SSESSMENT YEAR. ACCORDING TO HIM, THIS SECTION MAKES IT CLEAR THAT THERE COULD BE ONLY ONE INITIAL ASSESSMENT YEAR FOR CLAIMING OF BE NEFIT U/S 80IC. HE ALSO REFERRED TO SUB-SECTION (6) OF SECTION 80IC WHICH PRESCRIBED THE OVERALL LIMIT FOR DEDUCTION WHICH WA S 10 YEARS. ON THE BASIS OF THE ABOVE ANALYSIS THE ASSESSING OFFIC ER CONCLUDED 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 AVAILA BLE ONLY TO THE EXISTING UNITS I.E. THE UNITS THAT EXISTED AND WERE OPERATIONAL AS ON 07.01.2003 IN ORDER TO MAKE THEM ELIGIBLE FOR 10 0% DEDUCTION UNDER SECTION 80IC FOR FIRST FIVE YEARS A ND IS NOT AT ALL MEANT FOR THE UNITS THAT CAME INTO BEING ON OR AFTE R THE INTRODUCTION OF THE SCHEME I.E. 07.01.200. KEEPING THE ABOVE DISCUSSION IN MIND, THE ASSESSEES CLAIM OF SUBSTAN TIAL EXPANSION AND ON THAT BASIS, RECKONING THE ASST. YE AR 2009-10 TO BE THE INITIAL ASST. YEAR IS DENIED. IN VIEW OF THIS ASST. YEAR 2004-05, RELATING TO THE PREVIOUS YEAR IN WHICH THE ASSESSEE FIRM HAD COMMENCED ITS BUSINESS OPERATION / ACTIVIT Y ON THE BASIS OF SETTING UP OF ITS NEW INDUSTRIAL UNDERTAKI NG IS HELD TO BE THE INITIAL ASST. YEAR AND THAT OF ASST. YEAR 2009- 10 TO BE THE SIXTH ASST. YEAR FOR CLAIM OF DEDUCTION U/S 80-IC O F THE ACT AT THE RATE OF 25% OF ITS BUSINESS PROFITS. THE ASSESS EE FIRM SHALL NOT BE ALLOWED THE BENEFIT OF 100% DEDUCTION ON ITS PROFITS FOR SIXTH YEAR IN SUCCESSION I.E. FOR THE ASST. YEAR 20 09-2010. IN THE ABOVE BACKGROUND, FOR THE PRESENT ASSESSMENT YEAR I .E. ASSESSMENT YEAR 2009-10, DEDUCTION U/S 80IC WAS AL LOWED @ 25%. 10 9. ON APPEAL BEFORE LD. CIT(A) IT WAS MAINLY SUBMIT TED THAT COMBINED READING OF SECTION (3)(II) AND DEFINITION OF INITIAL ASSESSMENT YEAR, IT BECOMES AMPLY CLEAR THAT ASSESS EE WAS ELIGIBLE FOR 100% DEDUCTION FROM ASSESSMENT YEAR 20 09-10. IN ANY CASE THERE WAS NO PROVISION RESTRICTING THE DED UCTION OF 100% ONLY TO 5 YEARS EXCEPT SUB-SECTION (6) OF SECT ION 80IC WHICH ONLY PROVIDES THAT TOTAL PERIOD OF DEDUCTION SHOULD NOT EXCEED 10 YEARS. IT WAS FURTHER CONTENDED THAT BE NEFIT OF DEDUCTION U/S 80IC WAS AVAILABLE NOT ONLY TO PRE-EX ISTING UNIT ON THE DAY OF INTRODUCTION OF THIS SECTION WHICH UNDER TOOK SUBSTANTIAL EXPANSION BUT THE SAME WAS AVAILABLE TO ANY UNIT WHICH WAS ENGAGED IN MANUFACTURING ACTIVITY AND UND ERTOOK SUBSTANTIAL EXPANSION DURING THE PIEORD BEGINNING O F 7TH DAY OF JANUARY 2003 AND ENDING BEFORE IST APRIL 2012. THE SECTION NOWHERE PROVIDES THAT BENEFIT OF 100% DEDUCTION IN THE CASE OF SUBSTANTIAL EXPANSION SHALL BE AVAILABLE TO THE UNI TS WHICH WERE ALREADY IN EXISTENCE AT THE TIME OF THIS SECTION. EVEN THE CIRCULAR NO. 7 OF 2003 ISSUED ON 5.9.2003 CLARIFIES THAT BENEFIT OF DEDUCTION SHALL BE AVAILABLE TO ALL ENTERPRISES WHICH UNDERTAKE SUBSTANTIAL EXPANSION. 10. IT WAS FURTHER POINTED OUT THAT CLAUSE (25)(II) (D) OF FORM NO. 10CCB WHICH STATES IF THE EXISTING BUSINESS HA D UNDERTAKEN SUBSTANTIAL EXPANSION, PLEASE SPECIFY CLEARLY SH OWS THAT FORM PRESCRIBED BY THE LEGISLATURE REQUIRES INFORMA TION ON WHETHER THE EXISTING UNDERTAKING HAS UNDERTAKEN SUB STANTIAL EXPANSION. IN ANY CASE WHEN THE PROVISION WAS VERY CLEAR THE PROCESS OF INTERPRETATION COULD NOT BE ADOPTED TO D ENY DEDUCTION 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 ASSESSMENT YEAR, THEN SUB-SECTION (6) OF SECTION 80 IC WOULD BECOME REDUNDANT BECAUSE THEN DEDUCTION WOULD ALWA YS 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 AMBIGU ITY THE 11 PROVISION SHOULD BE LIBERALLY CONSTRUED SO AS TO AD VANCE THE EXEMPTION PROVISION. IN THIS REGARD RELIANCE WAS P LACED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF BA JAJ TEMPO LTD 196 ITR 188 (SC), CIT V KULLU VALLEY TRANSPORT CO. P. LTD. 77 ITR 518 (SC) AND MYSORE MINERALS LTD V CIT 239 ITR 775 (SC). 12. IT WAS ALSO CONTENDED THAT REFERENCE COULD NOT BE MADE TO THE CIRCULAR ISSUED BY CENTRAL EXCISE AUTHORITIES B ECAUSE THE LANGUAGE USED IN THE CENTRAL EXCISE ACT WAS DIFFERE NT FROM THE LANGUAGE USED IN SECTION 80IC. 13. THE LD. CIT(A) CONSIDERED THESE SUBMISSIONS AND OBSERVED THAT SECTION 80IC WAS ENACTED BY THE FINANCE ACT, 2 003 TO GIVE EFFECT TO A NEW AND REVAMPED INDUSTRIAL POLICY NOTI FIED BY THE UNION CABINET FOR THE STATE OF SIKKIM, HIMACHAL PRA DESH, UTTARANCHAL AND NORTH-EASTERN STATES. THIS INCENTIV E SCHEME PROVIDE FOR BENEFITS UNDER INCOME TAX ACT AND CENTR AL EXCISE, CAPITAL INVESTMENT SUBSIDY AND TRANSPORT SUBSIDY ET C. THE BENEFIT UNDER INCOME TAX WERE PROVIDED IN SECTION 8 0IC TO NEW UNITS COMMENCING MANUFACTURING ON OR AFTER 7 JANUAR Y OF 2003 OR TO THE EXISTING UNITS INVOLVING SUBSTANTIAL EXP ANSION AFTER THAT DATE ELIGIBLE FOR SUCH INCENTIVE. THE LD. CIT(A) T HEREAFTER REFERRED TO PARA NO. 49 OF CIRCULAR NO. 7/2003 ISS UED BY THE BOARD ON 5.9.2003. ACCORDING TO HER THE PLAIN READ ING OF SECTION 80IC ALONG WITH CIRCULAR MADE IT ABUNDANTLY CLEAR T HAT SPECIAL PROVISION OF SECTION 80IC WERE APPLICABLE TO TWO KI NDS OF UNDERTAKING OR ENTERPRISES WHICH ARE AS UNDER:- I) ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OF PRODUCE ANY ARTICLE OR THING, SPECIF IED IN THE THIRTEENTH SCHEDULE /OR HAS BEGUN OR BEGINS TO MANU FACTURE ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDU LE, WHICH MEANS A NEW UNDERTAKING OR ENTERPRISE WHICH HAS BEG UN OR BEGINS TO MANUFACTURE OR PRODUCE ANY SPECIFIED ARTI CLES 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. 12 II) ANY UNDERTAKING OR ENTERPRISE WHICH MANUFACTURE S OR PRODUCES ANY ARTICLE OR THING, NOT BEING ANY ARTICL E OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE OR WHICH MANUF ACTURES OR PRODUCES ANY ARTICLE OR THING SPECIFIED IN THE FOUR TEENTH SCHEDULE, WHICH MEANS AN ALREADY EXISTING (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 DUR ING THE PERIOD BEGINNING ON THE 7DAY OF JAN., 2003 AND ENDI NG BEFORE THE 1 ST DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PRADES H. 14. ON THE BASIS OF ABOVE, SHE MADE THE FOLLOWING C ONCLUSION IN PARAS 4.3 AND 4.4., WHICH ARE AS UNDER:- 4.3 THUS IT IS CLEAR FROM ABOVE THAT DEDUCTION U/S 80IC IS AVAILABLE TO THE PRE-EXISTING UNDERTAKING OR ENTERP RISES (WHICH EXISTED PRIOR TO THE ENACTMENT OF SECTION 80IC) ON THE CONDITION THAT THEY UNDERTAKE SUBSTANTIAL EXPANSION DURING TH E PERIOD BEGINNING ON THE 7 TH DAY OF JAN., 2003 AND ENDING BEFORE THE 1SRT DAY OF APRIL, 2012 IN THE STATE OF HIMACHAL PR ADESH AS PER THE CONDITIONS STIPULATED IN SECTION 80IC. HOWEVER, DEDUCTION U/S 80IC IS ALSO AVAILABLE TO THE NEW UNDERTAKINGS OR ENTERPRISES WHICH UNDERTAKE THE MANUFACTURE OR PROD UCTION OF THE SPECIFIED ARTICLES OR THING DURING THE PERIOD B EGINNING 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 UND ERTAKING OR ENTERPRISES DO NOT SUFFER FROM ANY HANDICAP MERELY ON ACCOUNT OF THE FACT THAT THEY WERE EXISTING PRIOR TO THE I NTRODUCTION OF SECTION 80IC. BUT TO MEET THE OBVIOUS GOAL OF EN COURAGING INVESTMENT IN THE STATE OF HIMACHAL PRADESH, THE CO NDITION OF SUBSTANTIAL EXPANSION HAS BEEN MADE A PRE-REQUISITE FOR ALLOWING DEDUCTION U/S 80IC IN THE CASE OF OLD UNDE RTAKINGS OR ENTERPRISES. IT IS, HOWEVER, CLEAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UNDERTAKINGS OR ENTERPRISES MADE E LIGIBLE FOR DEDUCTION U/S 80IC. THESE ARE TWO DISTINCT CATEGORI ES WITH DISTINCT CONDITIONS OF ELIGIBILITY LAID DOWN FOR DE DUCTION UNDER U/S 80IC. SINCE THE PRE-EXISTING UNITS CANNOT POSSI BLY CROSSOVER 13 INTO THE ZONE OF NEW UNDERTAKINGS OR ENTERPRISES, T HE NEW UNDERTAKINGS ALSO OBVIOUSLY CANNOT BE ALLOWED TO CR OSS OVER INTO THE ZONE MEANT FOR THE OLD, PRE-EXISTING UNDER TAKINGS. THE RULES OF THE GAME HAVE TO BE THE SAME FOR ALL THE P ARTICIPANTS 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 TWO DISTINCT TYPES OF UNDERTAKINGS OR ENTERPRISES A ND THEY CANNOT REPLACE EACH OTHER. 4.4 THE APPELLANTS INTERPRETATION THAT DEDUCTION U /S 80IC SHALL BE AVAILABLE @ 100% TO THE NEW UNDERTAKING OR ENTERPRISES FOR THE INITIAL FIVE YEARS AND THEN SHA LL AGAIN BE AVAILABLE @ 100% FOR ANOTHER FIVE YEARS IF THE SAID UNDERTAKINGS OR ENTERPRISES CARRY OUT SUBSTANTIAL E XPANSION HAS THE EFFECT OF CREATING A GREAT ANOMALY, BECAUSE THI S INTERPRETATION WILL RESULT IN A DISADVANTAGEOUS SIT UATION FOR THE PRE-EXISTING UNDERTAKINGS. WHILE THE NEWLY ESTABLIS HED UNDERTAKINGS SHALL BE IN A POSITION TO AVAIL TO 100 % DEDUCTION FOR A CONTINUOUS PERIOD OF 10 YEARS IF THEY CARRY O UT SUBSTANTIAL EXPANSION AFTER FIVE YEARS OF THE COMMENCEMENT OF M ANUFACTURE OR PRODUCTION; THE PRE-EXISTING UNDERTAKINGS SHALL BE ABLE TO AVAIL OF 100% DEDUCTION ONLY FOR A PERIOD OF FIVE Y EARS AFTER CARRYING OUT THE SUBSTANTIAL EXPANSION, AND AFTER F IVE 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 TWO TYPES OF INDUSTRIES MEANT TO BE EQUALLY POISED IN THE GIVEN LEGAL FRAME WORK ENACTED BY SEC TION 80IC. 15. SHE ALSO REFERRED TO THE CONTENTS OF CIRCULAR N O. 49/2003 OF CENTRAL EXCISE AND OBSERVED THAT THERE WAS NO FO RCE IN THE ASSESSEES CONTENTION THAT EXCISE AND INCOME TAX AR E TWO DIFFERENT STREAMS OF TAXATION WITH THEIR OWN INDEPE NDENT LAWS, AND THEREFORE, CIRCULAR NO. 49 OF 2003 ISSUED BY TH E EXCISE AUTHORITIES COULD NOT BE RELIED. IN THIS REGARD SH E OBSERVED THAT EXPLANATION TO FINANCE ACT 2003 MAKES IT ABSOLUTELY CLEAR THAT THESE PROVISIONS WERE BEING INSERTED ON THE BASIS O F A PACKAGE 14 ANNOUNCED BY UNION CABINET WHICH CONSISTED OF FISCA L AND NON- FISCAL COVERAGE FOR SPECIAL CATEGORY OF STATES OF S IKKAM, HIMACHAL PRADESH, UTTRANCHAL AND NORTH-EASTERN STAT ES IN ORDER TO BOOST ECONOMY OF THESE STATES. SINCE NEW PROJEC T INCLUDES CENTRAL EXCISE BENEFITS ALSO AS WELL 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 AUTHORITIES. 16. SHE ALSO REFERRED TO PROVISIONS OF SUB SECTION (6) OF SECTION 80IC AND POINTED OUT THAT SUB SECTION NOWHERE LAID DOWN THAT 100% DEDUCTION COULD BE ALLOWED TO ANY UNDERTAKING FOR A CONTINUES PERIOD OF 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 TH E ASSESSEES CASE. SHE OBSERVED THAT IN FACT CLAUSE 25 OF FORM 10CCB HELPS THE REVENUES POINT OF VIEW THAT PROVISIONS OF SECT ION 80IC WERE SEPARATELY APPLICABLE TO TWO TYPES OF BUSINESSES I. E. NEW BUSINESS AND EXISTING BUSINESS WHICH HAS UNDERGONE SUBSTANTI AL 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 OF ANY KIND AS REGARDS THE IMPORT OF THE PROVISIONS OR AS REGARDS THE INTENTION OF THE LEGISLATURE. THE LA NGUAGE OF THE PROVISIONS DOES NOT GIVE RISE TO MORE MEANING THAN ONE AND THE LEGISLATIVE INTENT IS CLEARLY REFLECTED FROM THE BA RE READING OF THE SECTION. THE GIVEN EXPRESSION OF THE STATUTE IS SO CLEAR THAT THERE IS NO NEED TO ADD ANY WORD THERETO SO AS TO M AKE OUT THE OBJECT OF THE LEGISLATURE. THEREFORE ALL THE PLEAS TAKEN BY THE APPELLANT REGARDING THE RULE OF LIBERAL INTERPRETAT ION 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. 15 19. BEFORE US LD. COUNSEL FOR THE ASSESSEE SHRI PA VAN VED LED THE ARGUMENTS BECAUSE MANY OTHER COUNSELS WERE ALSO PRESENT WHO WERE REPRESENTING OTHER GROUP CASES. SHRI RAK ESH GUPTA WHO WAS REPRESENTING MANY APPEALS PARTICULARLY IN I TA NO. 866 TO 869/CHD/2014, 895 TO 897/CHD/2014, 185/CHD/2014 ETC. ALSO MADE SOME SUBMISSIONS. ALL OTHER COUNSELS PRESENT IN THE COURT REPRESENTING VARIOUS CASES ADOPTED THE ARGUMENTS RA ISED BY SHRI PAVAN VED AND SHRI RAKESH GUPTA. SHRI PAVAN VED HA D ALSO FILED WRITTEN SYNOPSIS. VARIOUS CONTENTIONS RAISED ON BEHALF OF THE ASSESSEE CAN BE SUMMARIZED AS UNDER:- THE ASSESSING OFFICER HAS CLEARLY ADMITTED IN PARA 2.1 OF THE ASSESSMENT ORDER THAT ALL THE CONDITIONS AND GENUINENESS OF DEDUCTION CLAIMED UNDER THE SECTION HAVE BEEN FULFILLED. THERE IS NO RESTRICTION OR LIMITATION U/S 80IC THAT ONLY INDUSTRIAL UNIT WHICH HAD COME INTO BEING BEFORE TH E COMMENCEMENT OF THIS SECTION WOULD BE ELIGIBLE FOR THE BENEFIT OF SUBSTANTIAL EXPANSION. THEREFORE, THE AS SESSING OFFICER SHOULD HAVE ADOPTED A RULE OF INTERPRETATIO N WHICH WAS BENEFICIAL TO THE ASSESSEE WHILE INTERPRE TING THESE INCENTIVE PROVISIONS. ACCORDING TO HIM ASSES SEE COULD MAKE ANY NUMBER OF EXPANSIONS AND CLAIM DEDUC TION FOR MORE THAN 10 YEARS. HOWEVER, IT WAS POINTED OU T THAT ASSESSEE (HYCRON ELECTRONICS) HAS CLAIMED DEDUCTION ONLY FOR 10 YEARS. THE REFERENCE MADE TO CIRCULAR NO. 7 OF 2003 BY ASS ESSING OFFICER AND CIT(A) IS NOT PROPER BECAUSE CIRCULAR ITSELF PROVIDES FOR BENEFIT TO EXISTING UNDERTAKINGS AND T HEIR SUBSTANTIAL EXPANSION AND THE WORD EXISTING HAS N OT BEEN QUALIFIED WITH REFERENCE TO ANY PARTICULAR DATE. I T SIMPLY QUALIFIES UNDERTAKING. THE REFERENCE TO CIRCULAR NO. 49 OF 2003 ISSUED UND ER CENTRAL EXCISE ACT BY THE EXCISE AUTHORITIES IS ALS O NOT PROPER BECAUSE THIS CIRCULAR IS NOT ISSUED U/S 119 OF THE INCOME TAX ACT. FURTHER THIS CIRCULAR REFERS TO TH E 16 EXPANSION OF CAPACITY BY 25% WHEREAS UNDER THE INCO ME TAX ACT WHAT IS REQUIRED IS 50% INCREASE IN INVESTM ENT UNDER THE HEAD PLANT AND MACHINERY IN ANY CASE, CIRCULARS ARE NOT BINDING ON THE COURT S AND CIRCULAR AND SAME SHOULD NOT BE CONSIDERED IN INTERPRETATION OF PROVISIONS. IN THIS REGARD RELIAN CE WAS PLACED ON THE DECISION OF HON'BLE KARNATAKA HIGH CO URT IN CASE OF DINAKAR ULLAL VS. CIT 323 ITR 452 (KARNA TAKA), COMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTI NG & WIRE (2008) (13 (SC) 1). LD. COUNSEL VEHEMENTLY OBJECTED TO THE RELIANCE PLA CED BY THE DEPARTMENT ON THE NOTIFICATION ISSUED BY THE MI NISTRY OF COMMERCE, DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION GOVT. OF INDIA VIDE NOTIFICATION DATED 8. 1.2003. IT WAS SUBMITTED THAT FIRSTLY THE NOTIFICATION DID NOT HAVE ANY BEARING ON THE PRESENT CASE ON INTERPRETATION O F THE PROVISIONS OF THE ACT. SECONDLY, THERE WAS CERTAIN INCONSISTENCY IN THE NOTIFICATION BECAUSE WHILE DEF INING THE EXISTING INDUSTRIAL UNIT, IT WAS STATED THAT S AME 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 INDUST RIAL UNIT. THIRDLY, NOTIFICATION CANNOT OVERRIDE THE SE CTION WHICH PROVIDES THE LEGISLATURE INTENT. FOURTHLY, T HE 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 SUBSTANTIAL EXPANSION WAS RELATED TO INCREASE IN CAPACITY BY 25% WHICH WAS CONTRARY TO T HE CRITERIA LAID DOWN IN SECTION 80IC I.E. 50% INCREAS E IN INVESTMENT. FORM NO. 10CCB CLAUSE (25)(II)(C) IS MEANT FOR NEW BUSINESS AND CLAUSE (D) IS FOR EXISTING BUSINESS. T HERE IS NO WORD IN BETWEEN CLAUSE (C) AND (D) LIKE OR/AND WHICH MEANS EVEN ACCORDING TO CBDT, BOTH SITUATIONS MAY E XIST IN A PARTICULAR CASE. 17 A REFERENCE WAS MADE TO CLAUSE (V) OF SUB-SECTION ( 8) OF SECTION 80IC WHICH DEFINES INITIAL ASSESSMENT YEA R AND IT WAS POINTED OUT THAT INITIAL ASSESSMENT YEAR WAS WI TH REFERENCE TO BOTH MANUFACTURER AND SUBSTANTIAL EXPA NSION BECAUSE THE WORD OR HAS BEEN USED BETWEEN THE TWO EXPRESSION WHICH CLEARLY SHOWS THAT IT IS A DISJOIN TED SENTENCE AND REFERS TO BOTH SITUATIONS. RELIANCE WAS ALSO PLACED ON THE DECISION OF DELHI B ENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRI ES LIMITED VS. DCIT IN ITA NO.991/DEC/2013 (COPY OF O RDER FILED). IT WAS SUBMITTED THAT IN THIS CASE IN SIMIL AR SITUATION 100% DEDUCTION WAS HELD TO BE AVAILABLE A FTER SUBSTANTIAL EXPANSION OF THE NEW UNIT. HOWEVER, ON THE QUERY BY THE BENCH, IT WAS CLEARLY ADMITTED BY ALL THE COUNSELS PRESENT IN THE COURT THAT THIS DECISION DO ES NOT DEAL WITH ANY ASPECTS OF THE PROVISIONS OF SECTION 80IC. FURTHER RELIANCE WAS ALSO PLACED ON DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF SINT EX INDUSTRIES LTD IN ITA NO. 310/AHD/2014. A REFERENCE WAS ALSO MADE TO SUB SECTION (6) TO SEC TION 80-IC WHICH PRESCRIBES OVER ALL LIMITS OF DEDUCTION FOR 10 YEARS. IT WAS CONTENDED THAT THIS LIMIT WAS WITH RE FERENCE TO THE TIME PERIOD AND NOT TO THE RATE OF DEDUCTION . RELIANCE WAS ALSO PLACED ON THE DECISION OF CHANDIG ARH BENCH OF THE TRIBUNAL IN THE CASE OF DCIT CHANDIGAR H VS. S.K. PARYAVARAN ENGINEERS (P) LTD., IN ITA NO. 340/CHD/2010. IT WAS CONTENDED THAT IN THIS CASE I T WAS HELD THAT ASSESSEE WAS ENTITLED TO DEDUCTION U/S 80 IC ON SUBSTANTIAL EXPANSION. FURTHER RELIANCE WAS ALSO PL ACED ON THE DECISION OF AUTHORITY FOR ADVANCE RULINGS IN CASE OF ABHISHEK BHARGAV AAR NO. 1097 OF 2011 (DURING TH E HEARING, LD. COUNSEL OF THE ASSESSEE WAS REQUESTED TO EITHER GIVE CITATION OF THE DECISION OR FILE CERTIF IED COPY OF THE ORDER. THIS HAS NOT BEEN DONE. HOWEVER, WE HAV E CONSIDERED THIS DECISION ALSO.) 18 LASTLY, IT WAS CONTENDED THAT INCENTIVE PROVISION S HOULD BE CONSTRUED LIBERALLY IN VIEW OF THE DECISION OF HON' BLE SUPREME 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 WRITTE N 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 INCENTIVES IN THE FORM OF INCOME TAX CONCES SIONS, EXCISE CONCESSIONS, SUBSIDIES IN THE FORM OF CAPITA L INVESTMENT SUBSIDY, TRANSPORT SUBSIDY ETC. 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 CLA RIFIED BY CIRCULAR NO. 7 OF 2003 BY THE CENTRAL BOARD OF DIRE CT TAXES ISSUED ON 5.9.2003. SINCE THE SOURCE OF THIS SECTION AND OTHER BENEFITS AVAILABLE TO THE HILLY STATES OF HIMACHAL PRADESH, UTTRANCHAL, NORTH-EASTERN STATES AND STATE OF SIKKIM WAS THE SCHEME CLEARED BY THE UNION CABINET, THEREFORE, IT IS IMPORTANT TO CONSIDER ALL THE MATE RIAL 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 COMMERC E AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POLICY AND PROMO TION, GOVT. OF INDIA. THE WORD EXISTING UNIT IS NOT ME NTIONED IN SECTION 80IC BUT THIS CAN BE ASCERTAINED EASILY IF THE SECTION IS PROPERLY CONSTRUED. IN ANY CASE, THE CIR CULAR NO. 49/2003 ISSUED BY CENTRAL EXCISE DEPARTMENT AS WELL AS NOTIFICATION ISSUED BY MINISTRY OF COMMERCE VERY CL EARLY MENTION THAT EXISTING UNIT WOULD MEAN AN INDUSTRIA L UNIT EXISTING BEFORE 7.1.2003. BY CONSIDERING THE VARIO US MATERIALS, THE NOTIFICATION OF THE GOVERNMENT BECOM ES ABSOLUTELY CLEAR. 19 II) SUBSECTION (2) OF SECTION 80IC WHICH IS AN ENA BLING PROVISION FOR GRANT OF DEDUCTION VERY CLEARLY PROVI DES THAT DEDUCTION IS AVAILABLE TO THE UNDERTAKING WHICH EIT HER BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE AN ARTICL E OR THING OR UNDERTAKE SUBSTANTIAL EXPANSION WITH REFER ENCE 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 CA RRIED OUT ONLY ON OR AFTER 7.1.2003 BY AN INDUSTRIAL UNDE RTAKING 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 EXISTIN G U/S 80IB(4). IT WAS POINTED OUT THAT DEDUCTION U/S 80 IB(4) IS AVAILABLE TO AN INDUSTRIAL UNDERTAKING WHICH WAS LO CATED IN THE INDUSTRIAL BACKWARD STATE SPECIFIED IN THE 8 TH SCHEDULE WHICH BASICALLY CONSISTED OF THE SAME AREA S AS MENTIONED IN SECTION 80IC . UNDER SECTION 80IB(4) ALSO, THE DEDUCTION WAS TO BE ALLOWED TO THE INDUSTRIAL UNDERTAKING @ 100% OF PROFITS AND GAINS FOR THE FIV E ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSM ENT 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 DEDUCTION U/S 80IB(4), THERE WAS A SECOND PROVIS O IN THE SECTION BY WHICH IT IS CLARIFIED THAT THE 100% DEDU CTION WAS AVAILABLE FOR 10 ASSESSMENT YEARS IN CASE SUCH UNDERTAKINGS WHICH WERE LOCATED IN NORTH-EASTERN RE GION. SIMILAR PROVISION IS MADE U/S 80IC(3)(II). THUS, I T IS CLEAR THAT PROVISIONS OF SECTION 80IC(3) IS ONLY AN EXTEN SION OF SECTION 80IB(4) AND THROUGH SECTION 80IC, ONLY DIFF ERENCE 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 SECTIONS 80IC(2(A) AND 80IC(2)(B). HOWEVER, IT IS TO BE 20 NOTED THAT SECTION 80IC(2)(A)(II) IS APPLICABLE TO THE STATE OF HIMACHAL PRADESH OR UTTARANCHAL AND SIMILARLY SE CTION 80IC(2)(B)(II) IS APPLICABLE TO THE STATE OF HIMACH AL PRADESH AND STATE OF UTTARANCHAL WHEREAS SECTION 80IC(A)(III) AND (B)(III) ARE APPLICABLE TO THE NOR TH- EASTERN STATES AND WHEN THIS IS COMPARED WITH THE R ATE OF DEDUCTION PROVIDED UNDER SUB SECTION (3) OF SECTIO N 80IC, IT WOULD BE NOTED THAT UNDER SUB SECTION 3(II) THE RATE HAS BEEN GIVEN @ 100% FOR FIVE YEARS FOR THE STATES OF HIMACHAL PRADESH AND UTTARANCHAL AND THEREAFTER 25% FOR NEXT 5 YEARS WHEREAS UNDER SUB SECTION 3(I) THE RAT E HAS BEEN GIVEN AT 100% IN THE NORTH EASTERN STATES AND STATE OF SIKKIM FOR WHOLE OF TEN YEARS. IF THE INTERPRETATI ON ADOPTED BY THE ASSESSEE IS CORRECT THEN THE MEANING OF SUBSTANTIAL EXPANSION WOULD BECOME REDUNDANT FOR TH E NORTH-EASTERN STATES AND STATE OF SIKKIM BECAUSE IN THOSE CASES DEDUCTION HAD BEEN STRAIGHT AWAY PROVIDED @ 1 00% FOR ALL THE 10 YEARS. IT WAS SUBMITTED THAT ANY INTERPRETATION OF A PROVISION WHICH WOULD RENDER SO ME PART OF THE SECTION OTIOSE IS NOT PERMISSIBLE UNDER ANY RULE OF INTERPRETATION. EVEN THE EXPRESSION USED IN SECTIO N 80IC(3)(II) THEREAFTER WOULD BECOME REDUNDANT IN TH E CASE OF STATE OF HIMACHAL PRADESH. V) A REFERENCE WAS MADE TO THE DEFINITION OF THE I NITIAL ASSESSMENT YEAR U/S 80IC(8)(V). IT WAS POINTED OU T THAT AS PER THIS SECTION THERE COULD BE ONLY ONE INITIAL AS SESSMENT YEAR FOR THE PURPOSE OF SECTION 80IC. THIS BECOME VERY CLEAR BECAUSE THE LEGISLATURE HAS USED EXCLUSIONARY WORD OR BEFORE THE WORDS COMPLETE SUBSTANTIAL EXPANSI ON THEREFORE, INITIAL ASSESSMENT YEAR WOULD BE THE YEA R IN SEPARATE SITUATION AS UNDER:- THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OF THINGS [RELEVANT FOR PURPOSE OF SECTION 80IC(2)(A) OR : 21 THE UNDERTAKING OR ENTERPRISE COMMENCES OPERATION [ RELEVANT FOR THE PURPOSE OF SECTION 80IC(2)(B) ] OR 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 INIT IAL ASSESSMENT YEAR FOR CLAIM UNDER THE SAME SECTION BY THE SAME UNDERTAKING. IT WAS CONTENDED THAT IF THE DEC ISION BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIP UTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) IS ACCEPTED; T HE FACT THAT THERE WAS NO BAR ON CARRYING OUT THE NUMBER OF SUBSTANTIAL EXPANSIONS AND EVERY YEAR OF SUBSTANTIA L EXPANSION WOULD BECOME INITIAL ASSESSMENT YEAR. IF , THIS THEORY IS ACCEPTED AND GOING BY THE SAME ANALOGY EV ERY ASSESSMENT YEAR WOULD BECOME INITIAL ASSESSMENT YEA R SINCE THE UNDERTAKING COMMENCES PRODUCTION ON THE F IRST DAY OF EACH ACCOUNTING YEAR. SUCH AN INTERPRETATIO N WOULD NOT ONLY RESULT INTO ABSURDITY BUT ABSOLUTELY AN IM PROBABLE AND UNWORKABLE SITUATION. VI) IF THE BENEFIT OF DEDUCTION OF SUBSTANTIAL EXP ANSION WAS TO BE ALLOWED TO THE NEW UNDERTAKING WHICH COMMENCE D PRODUCTION ON OR AFTER 7.1.2003, THEN SUCH UNDERTAK ING WOULD AUTOMATICALLY BE DISQUALIFIED FOR THE DEDUCTI ON BECAUSE OF THE RESTRICTION PROVIDED IN SUB SECTION (4) OF SECTION 80IC BECAUSE SUCH SUBSTANTIAL EXPANSION WOU LD AMOUNT TO RECONSTRUCTION OF THE BUSINESS. VII) IF THE INTERPRETATION ADOPTED BY THE ASSESSEE WAS TO BE FOLLOWED, THE SAME WOULD RESULT IN DISCRIMINATION B ETWEEN THE NEW UNITS AND THE EXISTING UNITS. THE NEW UNITS WOULD BECOME ELIGIBLE FOR 100% DEDUCTION FOR THE FIRST FI VE YEARS THEN AGAIN FOR 100% DEDUCTION FOR ANOTHER SET OF FI VE YEARS ON CARRYING OUT THE SUBSTANTIAL EXPANSION WHEREAS T HE EXISTING UNIT WOULD GET BENEFIT ONLY OF 100% DEDUCT ION FOR 22 INITIAL FIVE YEARS AND LATER ON THE DEDUCTION WOULD BE RESTRICTED TO 25% IN SUCH CASE. SUCH A DISCRIMINAT ORY 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 THA T DEDUCTION U/S 80IC IS PERMITTED TO TWO DISTINCT KI ND OF UNDERTAKING I.E NEW ELIGIBLE BUSINESS WHICH COMMENC ES PRODUCTION DURING THE WINDOW PERIOD I.E. 7.1.2003 T O 31.3.2012 WHICH IS NEW UNDERTAKING AND SECONDLY IN THE CASE OF AN EXISTING BUSINESS WHICH UNDERTAKES SUBST ANTIAL EXPANSION. IX) IT WAS CONTENDED THAT ASSESSEE HAS RAISED THE CONTENTION THAT CONDITION ON CARRYING OUT SUBSTANTI AL EXPANSION WAS DURING THE WIDOW PERIOD. HOWEVER IF THIS INTERPRETATION IS ACCEPTED THEN THE CONSEQUENCES WO ULD BE THAT IN THE GUISE OF EXPANSION BY INVESTING A VERY SMALL SUM, THE ASSESSEE WOULD CLAIM DEDUCTION OF 100% FOR WHOLE OF THE PROFITS OF SUCH EXPANDED UNDERTAKING WHICH W OULD MEAN THAT PROFIT OF OLDER UNIT ALSO GETS BENEFIT OF 100% DEDUCTION WHICH CANNOT BE THE INTENTION OF THE LEGI SLATURE. X) WHILE CONCLUDING HIS ARGUMENT IT HAS BEEN SUBMIT TED THAT THERE IS NO AMBIGUITY IN THE PROVISIONS AND TH E DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) WA S PER INQUERIM BECAUSE IT HAS NOT CONSIDERED ALL THE PROV ISIONS 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 NOVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS, APPEAL (CIVIL) 3356 OF 1984 HAS CLEARLY H ELD THAT IT IS NOT POSSIBLE TO AGREE WITH THE SUBMISSIONS T HAT IF THERE WAS CONFLICT OF DECISION, THEN BENEFIT OF SUC H AMBIGUITY SHOULD GO TO THE ASSESSEE. IT WAS ALSO VEHEMENTLY CONTENDED THAT ALL THE DECISIONS OF VARI OUS HIGH COURTS AND SUPREME COURT ARE UNANIMOUS IN HOLD ING 23 THAT BOARD HAS POWER TO ISSUE OF CIRCULAR U/S 119 O F THE INCOME TAX ACT AND SUCH CIRCULARS ARE BINDING ON TH E AUTHORITIES. THE ONLY QUESTION IS WHETHER SUCH CIRC ULARS CAN BE CONSIDERED FOR INTERPRETATION OF A PROVISION OR NOT. IT WAS POINTED OUT THAT HON'BLE SUPREME COURT IN TH E CASE OF K.P. VARGHESE VS INCOME TAX OFFICER 131 ITR 597 (SC) HAS CLEARLY OBSERVED THAT IF A PARTICULAR PROVISION IS REQUIRED TO BE INTERPRETED THEN NOT ONLY CIRCULAR B UT ANYTHING WHICH IS LOGICALLY RELEVANT SHOULD BE CONSIDERED. A SIMILAR VIEW WAS TAKEN BY THE KARNAT AKA HIGH COURT IN THE CASE OF CIT VS. M.S. VAIDYA 224 I TR 186 (KARNATAKA). XI) A REFERENCE WAS ALSO MADE TO THE DECISION RELIE D ON BEHALF OF THE ASSESSEE OF THE CHANDIGARH BENCH OF T HE TRIBUNAL IN THE CASE OF DCIT CHANDIGARH VS. S.K. PARYAVARAN ENGINEERS (P) LTD. (SUPRA). IT WAS POIN TED OUT THAT DECISION IS TOTALLY DISTINGUISHABLE BECAUSE IN THAT CASE ASSESSEE CLAIMED DEDUCTION U/S 80IB IN 1999-2000 FO R THE FIRST TIME. LATER ON, AFTER FIVE YEARS THE ASSESSEE CLAIMED BENEFIT @ 30%. THE ASSESSEE ALSO UNDERTOOK SUBSTANT IAL EXPANSION IN FINANCIAL YEARS 2004-05 AND 2005-06 AN D AGAIN CLAIMED DEDUCTION OF 100% OF PROFITS ON THE S TRENGTH OF SUBSTANTIAL EXPANSION BUT WRONGLY MENTIONED THE SECTION AS 80IB INSTEAD OF SECTION 80IC. THEREFORE, IT IS C LEAR THAT THIS IS A CLEAR CASE OF EXPANSION OF EXISTING UNIT WHICH EXISTED BEFORE 7.1.2003 AND THEREFORE, IT IS CLEARL Y DISTINGUISHABLE FROM THE FACTS OF THE CASE OF THE A SSESSEE. IT WAS FURTHER POINTED OUT THAT DECISIONS RELIED ON BEHALF OF THE ASSESSEE ARE TOTALLY DISTINGUISHABLE ON THEIR O WN 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 ASSESSMENT YEAR HAS BEEN DEFINED IN SECTION 80IC(8 )(V) WHICH CLEARLY PROVIDES THAT INITIAL ASSESSMENT YEAR FOR A UNIT GOING FOR THE SUBSTANTIAL EXPANSION IS THE YE AR IN 24 WHICH SUCH EXPANSION IS COMPLETED AND, THEREFORE, I N 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 COMM ENCING PERIOD OF 10 YEARS FROM THE INITIAL ASSESSMENT YEAR . THOUGH IT WAS CLARIFIED THAT ASSESSEE HAD NOT CLAIMED DEDU CTION AFTER PERIOD OF 10 YEARS. IF SUBSTANTIAL EXPANSION WAS CARRIED OUT FOR THE FIRST TIME THEN ASSESSEE WAS EN TITLED TO BENEFIT OF 100% DEDUCTION EXCLUDING PROFITS OF EXIS TING UNITS, THEREFORE, THE ONLY INFERENCE SHOULD BE THAT IN CASE OF SUBSEQUENT EXPANSION ALSO 100% PROFIT WOULD BE ELIGIBLE. THERE CANNOT BE A THEORY OF SEGREGATION O F PROFITS INTO PROFITS RELATABLE TO EXISTING UNITS AND PROFIT S RELATED OF EXPANDED UNITS. FURTHER, SINCE SUBSTANTIAL EXPAN SION 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 INCREASE OF CAPACITY TO SAY 10% OR OTHER PERCENTAGE. C) THOUGH THERE IS NO DOUBT THAT AN EXISTING UNIT CLAIMING BENEFIT US 80IB(4) WOULD NECESSARILY SWITC H OVER THE SECTION 80IC W.E.F. 1.4.2004 BY OPERATION OF L AW BUT THE SAME WOULD STILL BE ELIGIBLE FOR SUBSTANTIAL EX PANSION 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 E LIGIBLE UNIT IS ELIGIBLE FOR DEDUCTION U/S 80IC IF THE ASSE SSEE MAKES INVESTMENT IN THE SAME UNITS AND THEREFORE, SECTION 80IC SHOULD BE INTERPRETED TO GIVE BENEFIT TO THE ASSESS EE ON THE BASIS OF SUBSTANTIAL EXPANSION. 25 E) THE DECISION IN THE CASE OF M/S NOVAPAN INDIA LT D V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) WAS RELATED TO AN EXEMPTION AND THEREFORE, CANNOT BE US ED WHILE INTERPRETING AN INCENTIVE PROVISION. IN CASE OF INCENTIVE PROVISION, IT IS BASICALLY A PROMISE BY T HE LEGISLATURE THAT YOU MAKE THIS INVESTMENT WE WELL G IVE YOU THIS BENEFIT AND THEREFORE, CAN BE IN THE FORM OF A CONTRACT BETWEEN THE STATE AND THE ASSESSEE. FURTH ER THE DECISION IN THE CASE OF M/S NOVAPAN INDIA LTD VS CO LLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) RELATED TO IN DIRECT TAX AND, THEREFORE, CANNOT BE RELIED 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 CON TENDED BY THE REVENUE, IT WAS POINTED OUT THAT LEGISLATURE CAN CHOOSE TO GIVE MORE BENEFIT TO ANY PARTICULAR AREA. 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS INCLUD ING WRITTEN SUBMISSIONS IN THE LIGHT OF MATERIAL ON REC ORD, AS WELL AS JUDGMENTS CITED BY THE PARTIES. BEFORE WE CONSID ER THE RELEVANT PROVISIONS WHICH ARE REQUIRED TO BE INTERP RETED, IT WILL BE USEFUL TO DEAL WITH THE VARIOUS PRINCIPLES OF INTERPRETATION 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 APPEALS. LORD HALSBURY AS EARLY AS 26 1901, IN COOKE V. CHARLES A. VOGELER COMPANY [1901] AC 102 (HL) STATED THE LAW IN THE MANNER FOLLOWING: A COURT OF LAW, HAS NOTHING TO DO WITH THE REASONA BLENESS OR UNREASONABLENESS OF A PROVISION OF A STATUTE EXCEPT SO FAR AS IT MAY H OLD IT IN INTERPRETING WHAT THE LEGISLATURE H AS SAID. IF THE LANGUAGE OF A STATUTE BE PLAIN, ADMITTING OF ONLY O NE MEANING, THE LEGISLATURE MUST BE TAKEN TO HAVE MEANT AND INT ENDED 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 PROV ISIONS OF THE STATUTE. IT MUST, SINCE, ITS LANGUAGE IS PLAIN AND UNAMBIGUOUS, BE ENFORCED AND YOUR LORDSHIPS HOUSE SITTING JUDIC IALLY IS NOT CONCERNED WITH THE QUESTION WHETHER THE POLICY IT E MBODIES IS WISE OR UNWISE, OR WHETHER IT LEADS TO CONSEQUENCES JUST OR UNJUST, BENEFICIAL OR MISCHIEVOUS. THE OFT-QUOTED OBSERVATIONS OF ROWLATTT J. IN THE C ASE OF CAPE BRANDY SYNDICATE V. IRC [1921] 1 KB 64 OUGHT ALSO T O BE NOTICED AT THIS JUNCTURE. THE LEARNED JUDGE OBSERVED (PAGE 71) : . . . IN A TAXING STATUTE ONE HAS TO LOOK MERELY A T WHAT IS CLEARLY SAID. THERE IS NO ROOM FOR ANY INTENDMENT. THERE IS NO EQUITY ABOUT A TAX. THERE IS NO PRESUMPTION AS TO A TAX. N OTHING 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] HO N'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. LT D. [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 V IEWS 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 INTENT BECOMES IMPERMISSIBLE. THE SUPPOSED INTENTIO N OF THE LEGISLATURE CANNOT THEN BE APPEALED TO TO WHITTLE D OWN THE STATUTORY LANGUAGE WHICH IS OTHERWISE UNAMBIGUOUS. IF THE INTENDMENT IS NOT IN THE WORDS USED. IT IS NOWHERE ELSE. THE 27 NEED FOR INTERPRETATION ARISES WHEN THE WORDS USED IN THE STATUTE ARE, ON THEIR OWN TERMS, AMBIVALENT AND DO NOT MANI FEST THE INTENTION OF THE LEGISLATURE ARTIFICIAL AND UNDULY LATIDUDINARIAN RULES OF CONST RUCTION, WHICH WITH THEIR GENERAL TENDENCY TO GIVE THE TAXPAYER T HE 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 N ATURAL CONSTRUCTION BY ATTRIBUTING NORMAL MEANING TO THE W ORDS 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 COURT 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 POS SIBLE, THAT ABSURDITY AND MISCHIEF MAY BE AVOIDED. WHERE T HE PLAIN LITERAL INTERPRETATION OF A STATUTORY PROVISION PRO DUCES A MANIFESTLY ABSURD AND UNJUST RESULT WHICH COULD NEV ER HAVE BEEN INTENDED BY THE LEGISLATURE, THE COURT MAY MOD IFY THE LANGUAGE USED BY THE LEGISLATURE OR EVEN DO SOME VI OLENCE TO IT, SO AS TO ACHIEVE THE OBVIOUS INTENTION OF THE LEGIS LATURE AND PRODUCE A RATIONAL CONSTRUCTION. LUKE V. IRC [1963] HON'BLE APEX COURT 557; [1964] 5 4 ITR 692 (HL) FOLLOWED. SPEECHES MADE BY THE MEMBERS OF THE LEGISLATURE ON THE FLOOR OF THE HOUSE WHEN THE BILL IS BEING DEBATED A RE INADMISSIBLE FOR THE PURPOSE OF INTERPRETING THE ST ATUTORY PROVISION BUT THE SPEECH MADE BY THE MOVER OF THE B ILL EXPLAINING THE REASON FOR ITS INTRODUCTION CAN CERT AINLY BE REFERRED TO FOR THE PURPOSE OF ASCERTAINING THE MIS CHIEF SOUGHT TO BE REMEDIED BY THE LEGISLATION AND THE OBJECT AN D PURPOSE FOR WHICH THE LEGISLATION IS ENACTED. THIS IS AN ACCORD WITH THE RECENT TREND IN JURISTIC THOUGHT NOT ONLY IN WESTER N COUNTRIES BUT ALSO IN INDIA, THAT THE INTERPRETATION OF A STA TUTE BEING AN EXERCISE IN THE ASCERTAINMENT OF MEANING, EVERYTHIN G WHICH IS LOGICALLY RELEVANT SHOULD BE ADMISSIBLE. 28 THE MARGINAL NOTE TO A SECTION CANNOT BE REFERRED TO FOR THE PURPOSE OF CONSTRUING THE SECTION BUT IT CAN CE RTAINLY BE RELIED 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 SECTION, PARTICULARLY WHEN THE LA NGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS BUT, BEING PART OF THE STATUTE, IT PRIMA FACIE FURNISHES SOME CLUE AS TO THE MEANIN G AND 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 PROVI SION. THE SAME VIEW WAS TAKEN BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT V N.K. VAIDYA 224 ITR 186 (SUPRA) AND O BSERVATIONS CONTAINED IN THE HEAD NOTE READS ASUNDER:- THE LEGISLATIVE HISTORY OF A FISCAL STATUTE COULD BE TRACED AND CONSIDERED TO UNDERSTAND ITS SCOPE. THE COURTS ARE PERMITTED TO TRAVEL BEYOND THE WORDS USED IN A STATUTE, TO FIND OUT THE PURPOSE FOR WHICH A PARTICULAR PROVISION IS ENACTED ; FOR THIS PURPOSE, EVEN THE SPEECH OF THE FINANCE MINISTER, W HILE INTRODUCING THE PARTICULAR FISCAL LEGISLATION COULD BE LOOKED INTO. THE CIRCULARS ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES ARE NOT ONLY BINDING ON THE INCOME-TAX DEPARTMENT B UT ARE ALSO IN THE NATURE OF CONTEMPORANEA EXPOSITION FURNISHIN G 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 MELTING & WIRE (SUPRA) FOR THE PROPOSITION T HAT SINCE CIRCULARS ARE NOT BINDING ON THE COURTS, THEREFORE, THE SAME SHOULD NOT BE CONSIDERED FOR INTERPRETATION OF A PA RTICULAR PROVISION. AS FAR AS THE DECISION IN THE CASE OF C OMMISSIONER OF CENTRAL EXCISE VS. M/S RATTAN MELTING & WIRE (SUPRA ) IS CONCERNED, THIS DOES NOT SUPPORT THE PROPOSITION MA DE BY THE LD. COUNSEL FOR THE ASSESSEE. IN THAT CASE THE QUESTIO N WAS WHETHER A CIRCULAR ISSUED BY THE DEPARTMENT WHICH IS GENERA LLY BINDING ON THE AUTHORITIES WOULD TAKE PRECEDENCE OVER THE I NTERPRETATION MADE BY THE SUPREME COURT OR HIGH COURT IN RESPECT OF 29 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 UNDE R 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 CIRCUL AR SHOULD BE GIVEN EFFECT TO AND NOT THE VIEW EXPRESSE D IN A DECISION OF THIS COURT OR THE HIGH COURT. SO FAR AS THE CLARIFICATIONS/CIRCULARS ISSUED BY THE CENTR AL 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 PROVISI ONS 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 PREVAIL IN COMPARISON TO THE INTERPRETATION GIVEN IN THE CI RCULAR. 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 452(KARNATAKA), THE ASSESSEE WAS A CIVIL CONTRACTOR AND HAD FILED BELATED RETURN DECLARING INCOME OF RS. 50,240 /- AND WAS CLAIMING REFUND OF RS. 2,14,505/- ON ACCOUNT OF TAX DEDUCTED AT SOURCE. THE LAST DATE OF FILING THE RETURN WAS 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 30 REJECTED. HOWEVER, ON A WRIT PETITION THE ORDER F OR REJECTION WAS QUASHED BY A SINGLE JUDGE AND REMITTED THE MATT ER BACK FOR FRESH CONSIDERATION. ON REMAND, THE COMMISSIONER W HO WAS VESTED WITH THE JURISDICTION UNDER INSTRUCTION NO.1 3 OF 2006 IN RESPECT OF CLAIM UPTO RS. 10 LAKHS ACCEPTED THE CAU SE SHOWN FOR DELAY IN FILING THE RETURN BUT DENIED INTEREST ON R EFUND AMOUNT IN VIEW OF THE CONDITION SET OUT IN CIRCULAR NO. 670 D ATED 26 TH OCT 1993. THEREFORE, QUESTION BEFORE THE COURT WAS WHE THER THESE INSTRUCTIONS WERE CONTRARY TO THE PROVISION OF SE CTION 244A OF THE ACT WHICH PROVIDED FOR PAYMENT OF INTEREST ON R EFUNDS. THIS BECOMES ABSOLUTELY CLEAR FROM THE QUESTION FRAMED B Y 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 APPLICATION TO CONDONE THE DELAY IN MA KING A CLAIM FOR BELATED REFUND 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-SEC TION (2) OF SECTION 244A OF THE ACT? (II) WHETHER IN THE FACTS AND CIRCUMSTANCES, THE RESPONDENT WAS JUSTIFIED IN DENYING INTEREST ON BEL ATED 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 CLAR IFY THE PROVISIONS FOR REMOVING THE DIFFICULTIES. THEREFOR E, IT IS CLEAR THAT QUESTION WHETHER A CIRCULAR CAN BE CONSIDERED IN INTERPRETATION OF A PARTICULAR PROVISION WAS NEVER BEFORE THE COURT AND THEREFORE, IN OUR OPINION, THIS JUDGEMENT DOES NOT SUPPORT THE PROPOSITION THAT CIRCULAR CANNOT BE CON SIDERED FOR THE PURPOSE OF INTERPRETING THE PARTICULAR PROVISIO N. 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 31 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 UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUC TION 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 SP ECIFIED IN THE THIRTEENTH SCHEDULE, OR WHICH MANUFACTURES OR PRODU CES ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SP ECIFIED IN THE THIRTEENTH SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPA NSION 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 IND USTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PA RK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEM E PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCH EME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS REGA RD, 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 O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTI FIED 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 O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH CENTRE OR INDUSTRIAL ESTATE OR INDUSTRIAL PARK OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTI FIED BY 32 THE CENTRAL GOVERNMENT IN THIS REGARD, IN ANY OF TH E NORTH- EASTERN STATES; (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THING, SPECIFIED IN THE FOURTEENTH SCHEDULE OR C OMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANU FACTURES OR PRODUCES ANY ARTICLE OR THING, SPECIFIED IN THE FOU RTEENTH SCHEDULE OR COMMENCES ANY OPERATIONS SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING- ON THE 23 RD DAY OF DECEMBER, 2002 AND ENDING BEFORE THE 1 ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM; OR ON THE 7 TH DAY OF JANUARY, 2003 AND ENDING BEFORE THE 1 ST DAY OF APRIL 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR ON THE 24 TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1 ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN STATES. (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-C LAUSES (I) AND (III) OF CLAUSE (B), OF SUB-SECTION (2), ON E HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR TEN ASSESSME NT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR; IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERR ED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE (II) OF CLAUSE (B), OF SUB-SECTION (2),ONE HUNDRED PER CENT OF SUCH PROFIT AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS . (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- IT IS NOT FORMED BY SPLITTING UP, OR THE RECONSTRUC TION, OF A BUSINESS ALREADY IN EXISTENCE: PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THERE - ESTABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASS ESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS IS REFER RED 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 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 CL AUSE (II) OF THIS SUB- SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (I I) OF THAT SUB-SECTION. 33 (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHA PTER VIA OR IN SECTION 10A OR SECTION 10B, IN RELATION TO THE PROF ITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER T HIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERI OD OF DEDUCTION UNDER THIS SECTION, OR UNDER THE SECOND PROVISO TO SUB-SE CTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXC EEDS 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, APPL Y TO THE ELIGIBLE UNDERTAKING OR ENTERPRISE UNDER THIS SECTION. (8) FOR THE PURPOSES OF THIS SECTION,- INDUSTRIAL AREA MEANS SUCH AREAS, WHICH THE BOARD , MAY, BE NOTIFICATION IN THE OFFICIAL GAZETTE, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT; INDUSTRIAL ESTATE MEANS SUCH ESTATES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE , SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT. INDUSTRIAL GROWTH CENTRE MEANS SUCH CENTRES, WHIC H THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, SPECIFY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMENT; INDUSTRIAL PARK MEANS SUCH PARKS, WHICH THE BOARD , MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE CENTRAL GOVERNMENT; INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAK ING OR THE ENTERPRISE BEGINS TO MANUFACTURES OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATION OR COMPL ETES SUBSTANTIAL EXPANSION; INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE MEAN S SUCH CENTRES, WHICH THE BOARD, MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY IN ACCORDANCE WITH TH E SCHEME FRAMED AND NOTIFIED BY THE CENTRAL GOVERNMEN T NORTH-EASTERN STATES MEANS THE STATES OF ARUNACH AL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TRIPURA; SOFTWARE TECHNOLOGY PARK MEANS ANY PARK SET UP I N ACCORDANCE WITH THE SOFTWARE TECHNOLOGY PARK SCHEME 34 NOTIFIED BY THE GOVERNMENT OF INDIA IN THE MINISTRY OF COMMERCE AND INDUSTRY; SUBSTANTIAL EXPANSION MEANS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST F IFTY 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, SPECI FY IN ACCORDANCE WITH THE SCHEME FRAMED AND NOTIFIED BY T HE 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 TH E TYPES 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 RE AD THEN THE PROVISION WOULD BECOME UNWORKABLE BECAUSE IF THERE IS AN 35 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 HA S BEEN SET UP AND BEGINS PRODUCTION CANNOT SIMULTANEOUSLY UNDE RGO SUBSTANTIAL 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 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:- 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 P RADESH, SIKKIM, UTTARANCHAL AND NORTH-EASTERN STATES. 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF F ISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EAS TERN STATES, IN ORDER TO GIVE BOOST TO THE ECONOMY IN TH ESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDUCTIO N FOR TEN 36 YEARS FROM THE PROFITS OF NEW UNDERTAKING OR ENTERP RISE OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBST ANTIAL EXPANSION, IN THE STATES OF HIMACHAL PRADESH, UTTAR ANCHAL, 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 B OOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIAT ION 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 MANUFACTU RE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THIRTEENTH SCHEDULE AND WHICH COMM ENCE OPERATION IN ANY EXPORT PROCESSING ZONE, OR INTEGRA TED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GRO WTH 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 PRES CRIBED IN THIS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE T O THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH S CHEDULE. 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH- EASTERN STATES SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT YEARS. THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTARANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDR ED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR FIVE ASS ESSMENT YEARS, AND THEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CEN T 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 TH E PERIOD OF DEDUCTION UNDER THIS SECTION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESS MENT YEARS. FURTHER, IN COMPUTING THE TOTAL INCOME OF THE ASSES SEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR 10B, IN RELATIO N TO THE PROFITS 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 S ECTION 80- IC. FURTHER, A NEW FOURTEENTH SCHEDULE HAS ALSO BEE N INSERTED, WHICH SPECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR TH E PURPOSES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUENT T O THESES 37 AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-S ECTION(4) OF SECTION 80-IB HAVE BEEN MADE INOPERATIVE IN RESP ECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHA L PRADESH OR IN NORTH-EASTERN REGION INCLUDING SIKKIM, WITH E FFECT 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 ASS ESSMENT 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 POR TION 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 THES E MONKEYS STILL EXIST IN THE WILD. ON HIS RETIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUPPORT VICTIMS OF CRI ME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION OR WITH V ERY LITTLE MONEY: 38 WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON T HE 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 PROVISION WAS INTRODUCED. IN ANY CASE THE NOTIFICATION ISSUED BY THE GOVT. OF INDIA, MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT OF INDUSTRIAL POL ICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZETTE OF INDI A REMOVED ALL THE DOUBTS. THIS NOTIFICATION IS RELEVANT BECAUSE T HIS WAS ISSUED WITH REFERENCE TO SAME PACKAGE ANNOUNCED BY THE UNION CA BINET OF INDIA FOR THE DEVELOPMENT OF THE HILLY STATES. SECTION 5 , READS AS UNDER;- DEFINITIONS: .. .. EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 7 TH JANUARY 2003. . . THUS THE DEFINITION GIVEN ABOVE MAKES IT CLEAR THAT EXISTING INDUSTRIAL UNIT WOULD MEAN AN UNIT WHICH EXISTED ON 7.1.2003. 33. EVEN IF THE ABOVE CONTROVERSY IS IGNORED REGARD ING EXISTING UNIT, THE INTENTION OF THE LEGISLATURE BECOME 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 UND ERTAKINGS, 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). TH E SUB 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 39 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-EAS TERN STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND STATE OF UTTARANCHAL. SIMILARLY, SUB CLAUSE (I) & (III) OF CLAUSE (B) REFERS TO WIND OW PERIOD IN CASE OF STATE OF SIKKIM AND NORTH-EASTER STATES WHE REAS 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 PRO FITS FOR FIVE ASSESSMENT YEARS COMMENCING WITH INITIAL ASSESSMENT YEAR AND THEREAFTER 25% (OR 30% WHERE THE ASSESSEE IS A COM PANY) OF THE PROFITS AND GAINS. THEREFORE, IT IS ABSOLUTELY CLE AR THAT IN CASE OF STATE OF SIKKIM AND NORTH-EASTERN STATES, LEGISLATU RE WAS VERY CLEAR THAT IN CASE OF NEW UNDERTAKING OR IN CASE OF SUBSTANTIAL EXPANDED UNDERTAKING DEDUCTION IS TO BE ALLOWED @ 1 00% FOR WHOLE OF THE TEN YEARS WHEREAS IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL THE DEDUCTION WAS TO BE ALL OWED @ 100% ONLY FOR FIRST FIVE YEARS AND THEREAFTER IT WA S ONLY 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EXPANSION SEPARATELY THEN THE RATE OF D EDUCTION 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 STAT E OF SIKKIM & NORTH-EASTERN STATES UNDER SUB CLAUSE (I) AND FOR T HE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II ) 100% FOR FIRST FIVE YEARS AND THEREAFTER 25% FOR NEXT FIVE Y EARS. THE CONCEPT OF SUBSTANTIAL EXPANSION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES OF STATES I.E STATE OF SIKKIM AN D 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 STATE OF HIMACHAL PRADESH AND ST ATE OF UTTARANCHAL, THEN MEANING OF SUBSTANTIAL EXPANSION AS GIVEN UNDER SUB SECTION (2) WHICH IS SAME FOR THE STATE O F SIKKIM AND NORTH-EASTERN STATES BECOME REDUNDANT. AS NOTED EA RLIER, THE PROVISION CANNOT BE INTERPRETED IN SUCH A WAY THAT PART OF THE SECTION BECOMES REDUNDANT OR OTIOSE. THEREFORE, WH ATEVER DOUBTS MAY BE THERE IN SUB SECTION (2) WHEN IT IS READ WIT H SUB SECTION 40 (3), THOSE DOUBTS ARE TOTALLY REMOVED AND IT BECOME ABSOLUTELY CLEAR THAT RATE OF DEDUCTION HAS TO BE 100% FOR FI RST 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 O F THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF TH E MACHINERY OR PLANT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, TH E 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 THE N IT WILL VIOLATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPRETATION 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 41 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 L AW. AT THE COST OF REPETITION, WE WOULD LIKE TO EMPHASIZE THAT NO PRINCIPLE OF INTERPRETATION CAN BE ADOPTED WHICH LEADS TO A SITU ATION WHERE A PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDU NDANT. IN FACT THOUGH IT WAS CONTENDED THAT IN THE PRESENT CASE (I .E. IN CASE OF HYCRON ELECTRONICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE 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). 42 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 SPECIFIED IN THE EIG HTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED F ROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WIT H THE INITIAL ASSESSMENT YEAR AND THEREAFTER TWENTY-FIVE PER CENT (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS 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) S UBJECT TO FULFILLMENT OF THE CONDITION THAT IT BEGINS TO MANUFACTURE OR P RODUCE ARTICLES OR THINGS OR TO OPERATE ITS COLD STORAGE PLANT OR PLAN TS DURING THE PERIOD BEGINNING ON THE IST DAY OF APRIL, 1993 AND ENDING ON THE 31 ST DAY OF MARCH, [2004]: PROVIDED FURTHER THAT IN THE CASE OF SUCH INDUSTRIE S IN THE NORTH-EASTERN REGION, AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMEN T, THE AMOUNT OF DEDUCTION SHALL BE HUNDRED PER CENT OF PROFITS AND GAINS FOR A PERIOD OF TEN ASSESSMENT YEARS, AND THE TOTAL PERIOD OF DEDUC TION SHALL IN SUCH A CASE NOT EXCEED TEN ASSESSMENT YEARS: PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SUB-SECT ION SHALL BE ALLOWED FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2004 OR ANY SUBSEQUENT YEAR TO ANY UNDERTAKING OR ENTERPRISE RE FERRED TO IN SUB- SECTION (2) OF SECTION 80-IC. 37. THE CAREFUL PERUSAL OF THE ABOVE PROVISION WOUL D SHOW THAT BEFORE THE INTRODUCTION OF SECTION 80IC WHICH IS 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 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. 43 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 DEDUCTION WAS ALLOWABLE @ 100% FOR FIRST FIVE YEARS AND 25% F OR NEXT 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 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 CLA USE NOTWITHSTANDING ANYTHING CONTAINED IN,AND PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR EN TERPRISE UNDER SECTION 80-IC, - WHERE THE TOTAL PERIOD OF DE DUCTION 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 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 UNIT. IN ANY C ASE THE WORD 44 INITIAL CANNOT BE USED TWICE BY REFERRING TO SERI ES OF EVENTS. THIS CAN BE UNDERSTOOD WITH A VERY SIMPLE EXAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GE T EMPLOYED AS LEGAL OFFICER IN AN ORGANIZATION. LATER ON, HE Q UITS THE JOB AND STARTS THE PRACTICE IN LEGAL PROFESSION AND ULT IMATELY HE IS ELEVATED AS A JUDGE. THEN IN SUCH A SITUATION IT CA NNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AN D THEN INITIALLY HE WAS IN THE PROFESSION AND THEN ELEVATED AS A JUD GE. INITIALLY CAN BE USED ONLY ONCE AS A MATTER OF USAGE OF ENGLI SH LANGUAGE. THEREFORE, READING OF THE ABOVE PROVISION CLEARLY S HOWS THAT INTENTION OF THE LEGISLATURE WAS VERY CLEAR TO ALLO W 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE STATE O F 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 W HERE SUBSTANTIAL EXPANSION WAS CARRIED OUT. 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 HON'BLE SUPREME COURT OR FOR THAT MATTER OF ANY HIGH COURT HAS TO BE SEEN FOR THE RATIO LAID DOWN IN A PARTICULAR DECISI ON AND IT DOES NOT MATTER UNDER WHICH PARTICULAR ACT SUCH PRINCIPL ES HAS BEEN DECIDED. NO DOUBT THE INCENTIVE PROVISIONS ARE REQ UIRED 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 UNDER:- THE LEARNED COUNSEL FOR THE APPELLANT THEN CONTEN DED THAT SINCE THERE IS AN AMBIGUITY ABOUT THE MEANING AND PURPORT OF ITEM-6 OF THE TABLE APPENDED TO THE EXEMPTION NOTIFICATION, T HE BENEFIT OF SUCH AMBIGUITY SHOULD GO TO THE ASSESSEE MANUFACTUR ER AND THE ENTRY MUST BE CONSTRUED AS TAKING IN THE MFPBS AS W ELL. IT IS NOT POSSIBLE TO AGREE WITH THIS SUBMISSION. IN MANGALORE CHEMICALS& FERTILIZERS LTD.. V. DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ORS., [1992) SUP PL. 1 S.C.C, 21, A BENCH OF THIS COURT COMPRISING M.N. 45 VENKATACHALIAH, J. (AS THE LEARNED CHIEF JUSTICE TH EN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE IN TH E FOLLOWING WORDS: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERV ATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN S UPPORT OF STRICT CONSTRUCTION OF A PROVISION CONCERNING EXEMP TIONS. THERE IS SUPPORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPT IONS FROM TAXATION HAVE 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 OB SERVED. WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDE D NO VIOLENCE IS DONE TO THE LANGUAGE 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 INTENTION OF THE LEGISLATURE MANIFEST ON THE STATUTORY LANGUAGE. INDEED, THE NEE D TO RESORT TO ANY INTERPRETATIVE PROCESS ARISES ONLY WHERE THE ME ANING IS NOT MANIFEST ON THE PLAIN WORDS OF THE STATUTE. IT THE WORDS ARE PLAIN AND CLEAR AND DIRECTLY CONVEY THE MEANING, THERE IS NOT NEED FOR ANY INTERPRETATION. WE ARE, HOWEVER, OF THE OPINION THAT, ON PRINCIPLE , THE DECISION OF THE COURT IN MANGALORE CHEMICALS AND IN UNION OF INDIA V. WOOD PAPERS , REFERRED TO THEREIN REPRESENTS THE CORRECT VIEW OF LAW. THE PRINCIPLE THAT IN CASE OF AMBIGUITY, A TAX ING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASS UMING 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 LI ABILITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SAID PR OVISION. IN CASE OF DOUBT OR AMBIGUITY, BENEFIT OF ITS MUST GO TO TH E 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 M ATTER OF INTERPRETATION OF A FISCAL STATUTE, THE SAME GOES I N FAVOUR OF THE ASSESSEE, BUT THE FACT REMAINS AND THE LAW IS WELL- SETTLED ON THIS SCORE THAT IN THE MATTER OF INTERPRETATION OF THE T AXING STATUTES THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCING SO ME OTHER EXPRESSIONS WHICH THE LEGISLATURE THOUGHT FIT TO OM IT. IN THE PRESENT CONTEXT, THERE IS NO DOUBT AS TO THE MEANIN G OF THE WORDS 46 USED IN THE SECTION BY REASON OF THE LANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN ASCERTAINING THE STATUTORY INT ENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTION IS AN EXCEP TION TO THE GENERAL RULE AND SINCE THE SAME IS OPPOSED TO THE N ATURAL TENOR OF THE STATUTE, THE ENTITLEMENT FOR EXEMPTION, THEREFO RE, 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 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 Q UESTION OF GIVING ANY INTERPRETATION MUCH LESS LIBERAL INTERPR ETATION TO SECTION 80IC WHEN THE READING OF WHOLE SECTION MAKE S THE PROVISION VERY CLEAR. AS OBSERVED IN CASE OF M/S N OVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPR A) THE BURDEN WAS ON THE ASSESSEE TO SHOW UNDER WHICH CLAUSE HE W AS ENTITLED TO THE DEDUCTION BUT ASSESSEE IS SIMPLY ASSERTING B EFORE US THAT THERE IS NO RESTRICTION FOR DEDUCTION IN CASE OF SU BSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION, THAT IS NO T ENOUGH BECAUSE ABSENCE OF RESTRICTION DOES NOT MEAN THAT P ARTICULAR 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 INDUSTRIES 47 LIMITED VS. DCIT(SUPRA). IN THIS DECISION, THE BEN CH HAS SIMPLY 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, THEREFORE, THIS DECISION, IN OUR OPINION, IS P ER 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 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 A SSESSEE 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 CAS E 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 C OMMENCED COMMERCIAL PRODUCTION IN MARCH, 2010. SHRI ABHISHEK BHARGAV WHILE PLANNING TO JOIN THE FIRM AS PARTNER BY ACQUI RING 20% SHARE OF PROFIT AND ENHANCING ADDITIONAL MANUFACTUR ING FACILITY BY UNDERTAKING SUBSTANTIAL EXPANSION SOUGHT ADVANCE RULING ON THE ISSUE WHETHER THE INTRODUCTION OF NEW PARTNER W OULD BE TREATED AS RECONSTRUCTION OF THE EXISTING BUSINESS OR THE FIRM WILL BE ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION AS PER THE 48 PROVISIONS OF SECTION 80IC(2)(A)(II) IF IT STARTS C OMMERCIAL PRODUCTION BEFORE 01.04.2012. THE AUTHORITY HELD TH AT THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF SUBSTANTIAL EXPANSION IN TERMS OF AND TO THE EXTENT PROVIDED BY SECTION 80IC OF THE ACT IF IT STARTS COMMERCIAL PRODUCTION IN THE SUBSTANTIALL Y EXPANDED UNIT BEFORE 01.04.2012. IN THIS CASE THE ASSESSE SH ALL 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 DEDUCTION CANNOT BE DENIED MERELY ON THE GROUND OF EXPANSION OF MANUFACTURING CAPACITY SO LONG IT IS NOT A CASE OF RESTRUCTURING OF BUSINESS ALREADY IN EXISTENCE. HOWEVER, THE QUES TION 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 BEYON D A.Y. 2014- 15 IS LEFT OPEN AND NOT DECIDED BY THE AAR. THEREFO RE THIS DECISION IS TOTALLY DISTINGUISHABLE AND DOES NOT HE LP 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 INDUST RIES 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 FACT THE BENCH REFERRED TO THE DECISION OF DELHI BENCH IN THE CASE OF TRIPUTI LPG INDUSTRIES LIMITED VS. DCIT (SUPRA) WITHOUT CONSIDERING THE P ROVISION OF SECTION 80IC IN DETAIL FOR REACHING THE CONCLUSION THAT IT IS ONE OF THE POSSIBLE VIEW. SINCE WE HAVE ALREADY DISCUS SED THE DECISION OF TRIPUTI LPG INDUSTRIES LIMITED VS. DC IT (SUPRA) AND FOUND THAT ALL THE PROVISIONS OF THE SECTION WE RE NOT DISCUSSED IN THAT SECTION AND THAT IS PER INQUERIM, THEREFORE, IN OUR OPINION, THIS ORDER DOES NOT HELP THE CASE OF T HE 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:- 49 25 (I) WHETHER THE UNDERTAKING OR ENTERPRISE IS LO CATED IN AN AREA NOTIFIED BY THE BOARD FOR THE PURPOSES OF SEC TION 80-IC :---YES ---NO (II) IF YES PLEASE INDICATE,- NAME OF THE EXPORT PROCESSING ZONE / INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE / INDUSTRIAL GROWTH CENTRE/INDUSTRIAL PARK/ESTATE/SOFTWARE TECHNOLOGY PARK/INDUSTRIAL AREA/THEME PARK AND THE DISTRICT/STATE IN WHICH LOCATED :------------- ------- (B) KHASRA NO. OF THE UNDERTAKING OR ENTERPRISE : -------------------- (ALSO INDICATE THE BOARDS NOTIFICATION NO. ) (C) IF THE ELIGIBLE BUSINESS IS NEW, PLEASE GIVE THE DATE OF COMMENCEMENT OF PRODUCTION OR MANUFACTUR E OF ARTICLE OR THING. :--------------------- (D) IF THE EXISTING BUSINESS HAS UNDERTAKEN SUBST ANTIAL EXPANSION, PLEASE SPECIFY,- :------------ ---------- (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 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 INFOR M THE LOCATION 50 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 UNDE RTAKEN 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 UPHOLD THE SAME. ACCORDINGLY, ASSESSEES APPEAL IS DISMIS SED. 50. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMIS SED. 7. CONSIDERING THE SUBMISSION OF THE LD. DR IN THE LIGHT OF THE FACTS OF THE CASE AND IN THE LIGHT OF DECISION OF THE TRIBUNAL IN THE CASE OF HYCRON ELECTRONICS ( SUPRA) WE ARE OF THE VIEW THAT ISSUE IS COVERED AGAINST TH E ASSESSEE FOR CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT BY THE ORDER IN THE CASE OF HYCRON ELECTRON ICS (SUPRA). FOLLOWING THE SAID ORDER, WE DISMISS GROU ND NOS. 1 & 2 OF THE APPEAL OF THE ASSESSEE. 7(I) CHARGING OF INTEREST UNDER SECTION 234B & C OF THE INCOME TAX ACT IS CONSEQUENTIAL AND MANDATORY AND NO 51 INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW HA VE BEEN POINTED OUT. THEREFORE, THIS GROUND OF APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( ANNAPURNA GUPTA) (BHAVNESH SAIN I) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13 TH APRIL, 2016. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT/CHD
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