DCIT, Parwanoo V. M/s Globe Precision Pvt. Ltd., Baddi

ITA 853/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0006 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 30-09-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MANJIT SINGH
• Keywords: Depreciation
• Section: 143(3); 234B; 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.835/CHD/2014 ASSESSMENT YEAR: 2010-11 M/S GLOBE PRECISION IND. PVT. LTD. VS. THE ADDL. CIT, PLOT NO. 11, INDUSTRIAL . AREA, SOLAN RANGE BADDI, DISTT. SOLAN SOLAN PAN NO. AAACG6736G ITA NO.853/CHD/2014 ASSESSMENT YEAR: 2010-11 THE DCIT VS. M/S GLOBE PRECISION PVT. LTD. CIRCLE PLOT NO. 11 PARWANOO INDUSTRIAL AREA BADDI (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 12/04/2016 DATE OF PRONOUNCEMENT : 03/05/2016 ORDER PER ANNAPURNA GUPTA, A.M. BOTH THE APPEALS HAVE BEEN FILED AGAINST THE ORDER OF LD. CIT(A), SHIMLA DT. 23/07/2014. 2. BRIEFLY STATED THE ASSESSEE COMPANY IS ENGAGED I N THE MANUFACTURING OF AXELS, GEAR AND SHAFTS, IN ITS UNIT AT BADDI AND CL AIMING DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961, @ 100% OF ITS PRO FITS SINCE ASSESSMENT YEAR 2005-06. DURING THE IMPUGNED ASSESSMENT YEAR, BEING THE SIXTH YEAR SINCE ASSESSMENT YEAR 2005-06, THE ASSESSEE FILED ITS RE TURN DECLARING INCOME OF RS. 2,11,090/- CLAIMING 100% DEDUCTION OF ITS PROFIT UN DER SECTION 80IC. ASSESSMENT UNDER SECTION 143(3) WAS FRAMED AT AN INCOME OF RS. 1,04,92,582/-AFTER 2 RESTRICTING THE ASSESSEES CLAIM FOR DEDUCTION OF I TS PROFITS UNDER SECTION 80IC TO 30% AND FURTHER DENYING DEDUCTION UNDER SECTION 80I C ON INCOME FROM SCRAP SOLD BY IT. AGGRIEVED BY THE SAME THE ASSESSEE PREF ERRED AN APPEAL BEFORE LD. CIT(A) WHO UPHELD THE RESTRICTION OF CLAIM OF DEDUC TION OF THE ELIGIBLE PROFIT UNDER SECTION 80IC, WHILE ALLOWED THE CLAIM OF THE ASSESSEE OF DEDUCTION UNDER SECTION 80IC ON THE SCRAP SOLD BY IT. 3. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), BOTH T HE ASSESSEE AND THE REVENUE HAVE FILED THE PRESENT APPEAL BEFORE US. 4. WE SHALL FIRST TAKE UP THE APPEAL FILED BY THE A SSESSEE IN ITA NO. 835/CHD/2014. 5. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTIO N OF THE LD. ASSESSING OFFICER WHO RESTRICTED THE DEDUCTION UNDER SECTION 80IC OF THE INCOME TAX ACT, 1961 AT 30% AS AGAINST 100% CLAIMED BY THE ASSESSEE AS SUBSTANTIAL EXPANSION WAS DONE BY THE ASSESSEE WHICH FACT HAS NOT BEEN CONTROVERTED BY TH E LD. ASSESSING OFFICER. 3. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS ) GRAVELLY ERRED IN UPHOLDING CHARGING OF INTEREST UNDER SECTION 234B, 234C AND 2 34A OF THE INCOME TAX ACT WHICH IN ANY CASE IS EXCESSIVE. 6. GROUND NO. 2 RAISED BY THE ASSESSEE IS AGAINST T HE ACTION OF THE LD. CIT(A)IN UPHOLDING THE RESTRICTION OF DEDUCTION UND ER SECTION 80IC OF THE INCOME TAX ACT 1961, TO 30% OF THE PROFITS AS AGAINST 100% CLAIMED BY THE ASSESSEE. 7. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE BEING ELIGIBLE FOR, HAD CLAIMED DEDUCTION OF 100% OF ITS PROFITS UNDER SECT ION 80IC SINCE ASSESSMENT YEAR 2005-06. IN THE IMPUGNED ASSESSMENT YEAR I.E . ASSESSMENT YEAR 2010-11 BEING THE SIXTH YEAR SINCE ASSESSMENT YEAR 2005-06 , THE ASSESSEE UNDERTOOK SUBSTANTIAL EXPANSION AND CONSIDERING THE SAME TO B E INITIAL YEAR FOR THE PURPOSE OF 80IC, AGAIN CLAIMED DEDUCTION OF 100% OF ITS PROFITS. LD .AO DENIED THE ASSESSEES CLAIM OF 100% DEDUCTION OF ITS ELIGI BLE PROFIT RESTRICTING IT TO 30% BY HOLDING THAT THERE CAN BE ONLY ONE INITIAL ASSESSME NT YEAR FOR THE PURPOSE OF CLAIMING 100% DEDUCTION UNDER SECTION 80IC AND THAT THE BENEFIT OF SUBSTANTIAL 3 EXPANSION IS AVAILABLE ONLY TO EXISTING UNIT I.E; U NIT THAT EXISTED AND WERE OPERATIONAL AS ON 07/01/2003 AND IS NOT MEANT FOR U NITS THAT CAME INTO BEING ON OR AFTER INTRODUCTION OF SCHEME I.E; 07/01/2003. 8. IN APPELLATE PROCEEDINGS LD. CIT(A) UPHELD THE O RDER OF THE AO AND REITERATED THAT THERE CAN BE ONLY ONE INITIAL YEAR FOR AN UNDERTAKING FOR CLAIMING DEDUCTION UNDER SECTION 80IC. 9. DURING THE COURSE OF HEARING BEFORE US NONE APPE ARED ON BEHALF OF THE ASSESSEE DESPITE REPEATED OPPORTUNITIES GIVEN. THE CASE WAS FIXED FOR HEARING ON 30/09/2015 WHEN ON REQUEST OF THE COUNSEL OF THE ASSESSEE IT WAS ADJOURNED TO 07/01/2016. ON 07/01/2015 AGAIN ON REQUEST OF TH E ASSESSEES COUNSEL IT WAS ADJOURNED TO 11/04/2016 AND ON 11/04/2016 THOUGH TH E ADJOURNMENT APPLICATION WAS REJECTED, YET IN THE INTEREST OF JU STICE THE CASE WAS ADJOURNED TO 12/04/2016. ON 12.04.2016, NO AUTHORIZED REPRESENTA TIVE OF THE ASSESSEE APPEARED TO ARGUE THE APPEAL. AGAIN A REQUEST FOR A DJOURNMENT WAS FORWARDED FOR ADJOURNING THE APPEAL SINE-DIE WHICH WAS OBJECTED TO BY LD. DR. THE REQUEST FOR ADJOURNMENT WAS REJECTED AND THE AP PEAL IS HEARD IN THE ABSENCE OF ASSESSEE. 10. LD. DR ON THE OTHER HAND BROUGHT TO THE NOTICE OF THE BENCH THAT THE CASE IS COVERED SQUARELY AGAINST THE ASSESSEE BY TH E DECISION OF THE CHANDIGARH BENCH OF ITAT IN THE CASE OF HYCRON ELECTRONICS & OTHERS IN ITA NO. 798/CHD/2012. 11. WE HAVE HEARD THE CONTENTION OF THE LD. DR AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE DOCUMENTS PLACED BEFO RE US. 12. THE FACTS IN THE PRESENT CASE ARE THAT THE ASSE SSEE UNDISPUTEDLY IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IC BEING A UNIT SET UP IN HIMACHAL PRADESH. THAT THE ASSESSEE HAS CLAIMED THE IMPUGNED BENEFIT FOR FIVE YEARS IS ALSO NOT IN DISPUTE. THE SOLE ISSUE IS WHETHER IN THE ABOVE BAC KDROP OF THE FACTS THE 4 ASSESSEE CAN CLAIM BENEFIT @ 100% IN THE SIXTH YEAR ON THE GROUND THAT IT HAS UNDERTAKE SUBSTANTIAL EXPANSION. WE FIND THAT THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF HONBLE ITA T CHANDIGARH BENCH IN THE CASE OF HYCRON ELECTRONICS (SUPRA) WHEREIN DECIDING THE ISSUE AGAINST THE ASSESSEE, THE HONBLE BENCH HELD A FOLLOWS AT PARA 29-42 AND PARA 49 OF ITS ORDER. 29. SUB SECTION (1) OF THE ABOVE PROVISION IS A GEN ERAL PROVISION AND DOES NOT REQUIRE ANY INTERPRETATION. SUB SECTIO N [2] IS THE ENABLING PROVISION WHICH PROVIDES FOR THE TYPES OF UNDERTAKINGS AND CIRCUMSTANCES WHERE DEDUCTION UNDER SECTION 80IC WO ULD BE ALLOWED. IT ALLOWS DEDUCTION TO VARIOUS UNDERTAKING S WHICH HAVE EITHER BEGUN OR BEGINS MANUFACTURING OF ANY ARTICLE OR THINGS NOT BEING ANY ARTICLE OR THING SPECIFIED IN SCHEDULE XI II AND ALSO UNDERTAKES SUBSTANTIAL EXPANSION. THESE DEDUCTIONS WERE AVAILABLE IN DIFFERENT STATES DURING DIFFERENT WINDOW PERIODS WHICH HAVE BEEN REFERRED TO IN CLAUSE (I), (II) & (III) OF THIS SUB SECTION. THE CONTENTION ON BEHALF OF THE ASSESSEE IS THAT SINCE DEDUCTION I S AVAILABLE TO THE UNDERTAKING WHICH UNDERTAKES SUBSTANTIAL EXPANSION AND SINCE THERE IS NO RESTRICTION IN THIS SUB SECTION ITSELF, THEREFORE, THE DEDUCTION WAS AVAILABLE ON SUBSTANTIAL EXPANSION BY OLD UNDERTAKINGS AS WELL AS NEW UNDERTAKINGS DURING THE WINDOW PERIOD. HOWEVER, THERE IS NO FORCE IN THIS INTERPRE TATION. SUB SECTION (2) BEGINS WITH THE EXPRESSION THIS SECTION APPLI ES TO ANY UNDERTAKING OR ENTERPRISE WHICH HAS BEGUN OR BEGINS THIS ITSELF SHOWS THAT PROVISION MADE EVEN THE EXISTING UNDERTA KINGS ENTITLED FOR THE DEDUCTION BECAUSE THE EXPRESSION BEGUN WO ULD REFER TO THE UNDERTAKING WHICH WERE ALREADY EXISTING AND BEG AN THE MANUFACTURE BEFORE THE WINDOW PERIOD MENTIONED IN T HE SUB SECTION. THE LAST LINE OF THE SUB SECTION READS AN D UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING ... THIS WOULD NATURALLY REFER TO THE UNDERTAKING WHICH WERE ALREADY EXISTING. IF IT IS READ THE WAY THE LD. COUNSEL OF THE ASSESSEE WOULD LIKE US TO READ THEN THE PROVISION WOULD BECOME UNW ORKABLE BECAUSE IF THERE IS AN UNDERTAKING WHICH IS ESTABLI SHED DURING THE WINDOW PERIOD THEN THE SAME CANNOT POSSIBLY UNDERTA KES SUBSTANTIAL EXPANSION ALSO SIMULTANEOUSLY. THE EXP RESSION AND WOULD REFER TO THE CUMULATIVE CONDITION THAT IS BOT H PARTS OF THE CONDITIONS NEED TO BE COMPLIED. THE EXPRESSION AND CAN BE JOINED ONLY WITH THE EXPRESSION BEGUN. THIS IS B ECAUSE BEGUN REFERS TO SOMETHING WHICH HAS ALREADY STARTED IN TH E PAST WHEREAS BEGINS CONNOTES SOMETHING WHICH WOULD COMMENCE IN THE PRESENT. THEREFORE, THE EXPRESSION AND CAN BE CO RRELATED ONLY WITH EXISTING UNIT BECAUSE AS WE HAVE ALREADY SEEN A NEW UNIT WHICH HAS BEEN SET UP AND BEGINS PRODUCTION CANNOT SIMULTANEOUSLY UNDERGO SUBSTANTIAL EXPANSION ALSO S O 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 CORRE CT INTENTION OF THE LEGISLATURE BY KEEPING VARIOUS PRINCIPLES OF IN TERPRETATION. THEREFORE, VARIOUS PRINCIPLES OF INTERPRETATION NEE DS TO BE LOOKED INTO. THIS PROVISION WAS BROUGHT INTO THE STATUTE I NDISPUTABLY IN THE 5 LIGHT OF THE INCENTIVE PACKAGE ANNOUNCED BY THE U NION CABINET. THROUGH THIS INCENTIVE PACKAGE NOT ONLY INCOME TAX CONCESSION BUT EXCISE CONCESSIONS AND SOME SUBSIDIES LIKE TRANSPOR T SUBSIDY AND CAPITAL SUBSIDY WERE ALSO PROVIDED TO VARIOUS INDUS TRIES IN THE HILLY STATED COMPRISING STATES OF HIMACHAL PRADESH, UTTAR ANCHAL, SIKKIM AND NORTH-EASTERN STATES TO BOOST THE ECONOMIES OF THESE HILLY STATES. CIRCULAR NO.7 WAS ISSUED BY THE CBDT ON 5.9 .2003 IN THIS RESPECT AND THE CIRCULAR READS AS UNDER:- CIRCULAR NO. 7/2003 DATED 05.09.2003 49. NEW PROVISIONS ALLOWING A TEN YEARS TAX HOLIDAY IN RESPECT OF CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, SIK KIM, UTTARANCHAL AND NORTH- EASTERN STATES. 49.1 THE UNION CABINET HAS ANNOUNCED A PACKAGE OF F ISCAL AND NON-FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMA CHAL PRADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES, IN ORDER TO GIVE B OOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION 80-IC HAS BEEN INSERTED TO ALLOW A DEDUCTION FOR TEN YEARS FR OM THE PROFITS OF NEW UNDERTAKING OR ENTERPRISE OR EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBSTANTIAL EXPANSION, IN THE STATES OF HIMACHAL PR ADESH, UTTARANCHAL, SIKKIM AND NORTH-EASTERN STATES . FOR THIS PURPOSE, SUBSTANTIAL EXPANSION IS DEFINE D AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUBSTANTIAL E XPANSION IS UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PR ODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THING SPECIFIED IN THE THI RTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, O R INTEGRATED INFRASTRUCTURE DEVELOPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR I NDUSTRIAL ESTATE, OR INDUSTRIAL PARK, OR SOFTWARE TECHNOLOGY PARK OR INDUSTRIAL ARE A OR THEME PARK, AS NOTIFIED BY THE BOARD IN ACCORDANCE WITH RULES PRESCRIBED IN TH IS REGARD. SIMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH SCHEDULE. 49.3 THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKING S OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE NORTH-EASTERN STATES SHALL BE ON E 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 O F UTTARANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND THEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CENT FOR COMPANIES ) FOR THE NEXT FIVE ASSESSMENT YEARS. 49.4 THE SECTION ALSO PROVIDES THAT NO DEDUCTION SH ALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SEC TION OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURTHER, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDU CTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA OR IN SECTION 10A OR 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKIN G OR ENTERPRISE. 6 49.5 A NEW THIRTEENTH SCHEDULE HAS BEEN INSERTED IN THE INCOME-TAX ACT TO SPECIFY THE LIST OF ARTICLES AND THINGS, WHICH ARE INELIGIBLE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IC. FURTHER, A NEW FOURT EENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH SPECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST SECTOR INDUSTRIES, WHICH ARE ELIGIBLE FOR THE PURPOSES OF AVAILING DEDUCTION UNDER THIS SECTION. CONSEQUENT TO THESES AMENDMENTS, THE PROVI SIONS OF SECTION 10C AND SUB-SECTION(4) OF SECTION 80-IB HAVE BEEN MADE INOP ERATIVE IN RESPECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHA L PRADESH OR IN NORTH-EASTERN REGION INCLUDING SIKKIM, WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2004. 49.6 THESE AMENDMENTS WILL TAKE EFFECT FROM 1 ST APRIL, 2004 AND WILL, ACCORDINGLY, APPLY IN RELATION TO THE ASSESSMENT YEAR 2004-05 AN D SUBSEQUENT YEARS. 31. THE CIRCULAR MAKES IT CLEAR THAT SECTION 80IC W AS INSERTED TO GIVE EFFECT TO THE NEW PACKAGE ANNOUNCED BY THE UNI ON CABINET. THE CIRCULAR FURTHER CLARIFIES THAT THIS SECTION PR OVIDES FOR DEDUCTION FOR A PERIOD OF 10 YEARS FROM THE PROFITS OF NEW UN DERTAKING OR ENTERPRISE OR EXISTING UNDERTAKING OR ENTERPRISE ON THEIR SUBSTANTIAL EXPANSION (SEE HIGHLIGHTED PORTION OF THE CIRCULAR) . THE CONTENTION OF THE LD. COUNSEL OF THE ASSESSEE WAS THAT WORD E XISTING QUALIFIES ONLY THE UNDERTAKING OR ENTERPRISES AND DOES NOT ME NTION ANY PARTICULAR DATE FOR CARRYING OUT SUBSTANTIAL EXPANS ION. WE FIND NO MERIT IN THIS CONTENTION. THE WORD EXISTING IS DE FINED IN THE DICTIONARIES ARE AS UNDER:- 32. BLACK LAW DICTIONARY 6 TH EDITION:- EXIST : TO LIVE, TO HAVE LIFE OR ANIMATION TO BE IN PRESENT FORCE , ACTIVITY, OR EFFECT AT A GIVEN TIME, AS IN SPEAKING OF EXISTING CONTRACTS, CREDITORS DEBTS, LAWS, RIGHTS OR LIENS. FOR US RELEVANT MEANING WOULD BE TO BE IN PRESENT FORCE AS PER OXFORD DICTIONARY EXIST IS DEFINED AS UNDER EXIST : 1 (NOT USED IN THE PROGRESSIVE TENSES) TO BE REAL; TO BE PRESENT IN A PLACE OR SITUATION : DOES LIFE EXIST ON OTHER PLANETS? THE PROBLEM ONL Y EXISTS IN YOUR HEAD, JANE. FEW OF THESE MONKEYS STILL EXIST IN THE WILD. ON HIS RETIREMENT THE POST WILL CEASE TO EXIST. THE CHARITY EXISTS TO SUPPORT VICTI MS OF CRIME. 2- (ON STH) TO LIVE, ESPECIALLY IN A DIFFICULT SITUATION OR WITH VERY LI TTLE MONEY: WE EXISTED ON A DIET OF RICE. THEY CANT EXIST ON THE MONEY HES EARNING 7 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 ALREADY T HERE. 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, DEPARTMEN T OF INDUSTRIAL POLICY AND PROMOTION WHICH IS PUBLISHED IN THE GAZE TTE OF INDIA REMOVED ALL THE DOUBTS. THIS NOTIFICATION IS RELEVA NT BECAUSE THIS WAS ISSUED WITH REFERENCE TO SAME PACKAGE ANNOUNCED BY THE UNION CABINET OF INDIA FOR THE DEVELOPMENT OF THE H ILLY STATES. SECTION 5, READS AS UNDER;- DEFINITIONS: (A) .. (B) .. (C) EXISTING INDUSTRIAL UNIT MEANS AN INDUSTRIAL UNIT EXISTING AS ON 7 TH JANUARY 2003. (D) . (E) . (F) THUS THE DEFINITION GIVEN ABOVE MAKES IT CLEAR THAT EXISTING INDUSTRIAL UNIT WOULD MEAN AN UNIT WHICH EXISTED ON 7.1.2003. 33. EVEN IF THE ABOVE CONTROVERSY IS IGNORED REGARD ING EXISTING UNIT, THE INTENTION OF THE LEGISLATURE BECOME ABSOL UTELY CLEAR WHEN SUB SECTION (2) IS READ ALONGWITH SUB-SECTION (3) O F SECTION 80IC. AS NOTED EARLIER, SUB SECTION (2) IS ENABLING PROVISIO N WHICH PROVIDES FOR DEDUCTION IN CERTAIN KIND OF UNDERTAKINGS, I.E. NEW UNIT SET UP OR THE EXISTING UNITS WHICH CARRIES OUT SUBSTANTIAL EX PANSION DURING THE PARTICULAR WINDOW PERIOD WHICH ARE GIVEN IN CLAUSES (I), (II) & (III) OF SUB SECTION (2). THE SUB SECTION (3) PROVIDES FOR R ATES OF DEDUCTION. IT IS USEFUL TO NOTE THAT CLAUSE (I) OF SUB SECTION (3) PROVIDES FOR 100% DEDUCTION FOR A PERIOD OF 10 ASSESSMENT YEARS IN CASES COVERED BY SUB CLAUSE (I) & (III) OF CLAUSE (A) AND SUB CLAUSE (I) & (III) OF CLAUSE (B). NOW SUB CLAUSE (I ) AND (III) OF CLAUSE (A) OF SUB SECTION (2) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF SIKKIM, NORTH-EASTERN STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND STA TE OF UTTARANCHAL. SIMILARLY, SUB CLAUSE (I) & (III) OF CLAUSE (B) REFERS TO WINDOW PERIOD IN CASE OF STATE OF SIKKIM AND NORTH- EASTER STATES WHEREAS SUB CLAUSE (II) REFERS TO THE WINDOW PERIOD IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL. NOW CLAUSE (I I) 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 SUBST ANTIAL EXPANDED UNDERTAKING DEDUCTION IS TO BE ALLOWED @ 100% FOR W HOLE OF THE TEN YEARS WHEREAS IN CASE OF STATE OF HIMACHAL PRADESH AND UTTARANCHAL THE DEDUCTION WAS TO BE ALLOWED @ 100% ONLY FOR FIRST FIVE YEARS AND THEREAFTER IT WAS ONLY 25%. IF THE LEGISLATURE WANTED TO EXTEND THE BENEFIT IN THE CASE OF SUBSTANTIAL EX PANSION SEPARATELY THEN THE RATE OF DEDUCTION IN THE CLAUSE (I) & (II) OF SUB SECTION (3) WOULD NOT HAVE BEEN DIFFERENT I.E. 100% FOR WHOLE OF THE 8 10 YEARS IN CASE OF STATE OF SIKKIM & NORTH-EASTERN STATES UNDER SUB CLAUSE (I) AND FOR THE STATE OF HIMACHAL PRADESH & UTTARANCHAL UNDER SUB CLAUSE (II) 100% FOR FIRST FIVE YEARS AND THEREAFTER 25% FOR NEXT FIVE YEARS. THE CONCEPT OF SUBSTANTIAL EXPAN SION REMAINS SAME UNDER SUB SECTION (2) FOR BOTH TYPES OF STATES I.E STATE OF SIKKIM AND NORTH-EASTERN STATES AND STATE OF HIMACH AL PRADESH AND UTTRANCHAL. IF THE EXTENDED BENEFIT OF SUBSTANTIAL EXPANSION WAS TO BE SEPARATELY ALLOWED IN CASE OF STATE OF HIMACHAL PRADESH AND STATE OF UTTARANCHAL, THEN MEANING OF SUBSTANTIAL E XPANSION AS GIVEN UNDER SUB SECTION (2) WHICH IS SAME FOR THE S TATE OF SIKKIM AND NORTH-EASTERN STATES BECOME REDUNDANT. AS NOTE D EARLIER, 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 (3), THOSE DOUBTS ARE TOTALLY REMOVED AND IT BECOME ABSO LUTELY CLEAR THAT RATE OF DEDUCTION HAS TO BE 100% FOR FIRST 5 YEARS AND 25% THEREAFTER. 34. THERE IS A FORCE IN THE CONTENTION OF LD. CIT/D R THAT IF THE INTERPRETATION CONTENDED ON BEHALF OF THE ASSESSEE WAS TO BE ADOPTED THEN SUB SECTION (4) OF SECTION 80IC WOULD ALSO BECOME REDUNDANT. SUB SECTION (4) CLEARLY PROVIDES THAT TH E DEDUCTION IS AVAILABLE TO ANY UNDERTAKING OR ENTERPRISE WHICH IS NOT FORMED BY SPLITTING OR RECONSTRUCTION OF THE BUSINESS ALREADY IN EXISTENCE OR IT IS NOT FORMED BY TRANSFER TO NEW BUSINESS OF MACHIN ERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. FURTHER THE EXPLAN ATION TO THIS SUB SECTION MAKES IT CLEAR THAT EXPLANATION 1 & 2 OF SU B SECTION (3) OF SECTION 80IA ARE APPLICABLE IN THIS RESPECT. EXPLAN ATION 2 OF SUB SECTION (3) OF SECTION 80 IA READS AS UNDER: EXPLANATION 2- WHERE IN THE CASE OF AN [UNDERTAKIN G], ANY MACHINERY OR PLANT OR ANY PART THEREOF PREVIOUSLY U SED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TO TAL VALUE OF THE MACHINERY OR PLANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLA NT USED IN THE BUSINESS, THEN, FOR THE PURPOSES OF CLAUSE (II) OF THIS SUB-SECTION, THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE BEEN COMPLIED WITH. FROM THE ABOVE IT BECOMES CLEAR THAT IF 20% OF THE MACHINERY FROM THE OLD UNIT WAS USED IN THE NEW UNIT THEN SUCH UNI T WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER THIS SECTION THAT IS S ECTION 80IC. NOW FOR CARRYING OUT SUBSTANTIAL EXPANSION THE INVESTME NT IN PLANT & MACHINERY IS REQUIRED TO BE MADE BY ATLEAST 50%. S O IF 50% FRESH MACHINERY IS ADDED TO THE NEW UNIT THEN IT WILL VIO LATE SUB SECTION (4) OF SECTION 80IC, THEREFORE, INTERPRETATION CANV ASSED ON BEHALF OF THE ASSESSEE IS NOT POSSIBLE BECAUSE SECTION 80I C(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 SIN CE THERE IS NO RESTRICTION IN CARRYING OUT OF SUBSTANTIAL EXPANSIO N IN THE NEW UNITS AND AS SUCH SUBSTANTIAL EXPANSION CAN BE CARRIED OU T ANY NUMBER OF TIMES. IF THIS INTERPRETATION IS ACCEPTED THEN SUB SECTION (6) 9 WOULD BE RENDERED OTIOSE OR MEANINGLESS BECAUSE IF A UNIT WAS SET UP ON THE COMMENCEMENT OF THIS SECTION AND THE SAM E CLAIMS DEDUCTION @ 100% AND LATER ON EVERY FIVE YEARS A SU BSTANTIAL EXPANSION IS CARRIED OUT THEN ACCORDING TO THE INTE RPRETATION CANVASSED ON BEHALF OF THE ASSESSEE, SUCH UNIT WOUL D AGAIN BECOME ENTITLED TO 100% DEDUCTION FOR ANOTHER FIVE YEARS AND FURTHER BLOCK OF FIVE YEARS EVERY TIME SUBSTANTIAL EXPANSION IS CARRIED OUT. IF THIS INTERPRETATION IS ADOPTED THE N DEDUCTION WOULD BECOME ALMOST PERCEPTUAL AS LONG AS THE ASSESSEE HA S CARRIED OUT SUBSTANTIAL EXPANSION BUT IN THAT CASE SUB SECTION (6) WOULD LOOSE ITS MEANING. SUCH AN UNLIMITED PERIOD OF DEDUCTION WOULD NOT BE IN CONSONANCE OF LAW. AT THE COST OF REPETITION, WE W OULD LIKE TO EMPHASIZE THAT NO PRINCIPLE OF INTERPRETATION CAN B E ADOPTED WHICH LEADS TO A SITUATION WHERE A PARTICULAR PART OF THE SECTION BECOMES TOTALLY REDUNDANT. IN FACT THOUGH IT WAS C ONTENDED THAT IN THE PRESENT CASE (I.E. IN CASE OF HYCRON ELECTRO NICS) DEDUCTION HAS BEEN CLAIMED ONLY OF 10 YEARS BUT ON THE DATE O F HEARING SOME OTHER APPEALS WERE ALSO LISTED WHEREIN THE DEDUCTIO N WAS CLAIMED FOR MORE THAN 10 YEARS ADOPTING THE SAME CONTENTION WHICH HAS BEEN MADE BEFORE US. IN CASE OF M/S MAHAVIR INDUSTR IES (ITA NO. 127/CHD/2011 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 1 998-99 TO 2005- 06. LATER ON, SUBSTANTIAL EXPANSION WAS CARRIED OUT IN ASSESSMENT YEAR 2005-06 AND ON THE BASIS OF THE CONTENTION THA T ASSESSEE IS ALLOWED TO CARRY OUT ANY NUMBER OF EXPANSIONS, DED UCTION WAS CLAIMED FOR THE 12 TH YEAR FOR ASSESSMENT YEAR 2009-10 (WE MAY CLARIFY THAT REFERENCE TO THESE CASES IS MADE BECAU SE OF PARTICULAR CONTENTION AND WE ARE NOT EXPRESSING ANY OPINION ON THE MERITS OF THESE APPEALS HERE). THEREFORE, THE CONTENTION OF THE ASSESSEE THAT ANY NUMBER OF EXPANSIONS ARE ALLOWED IS NOT POSSIBL E IN VIEW OF THE RESTRICTION GIVEN IN SECTION 80IC(6). 36. THE ABOVE SITUATION AS POINTED BY THE REVENUE A LSO BECOMES CLEAR IF THE PROVISION OF SECTION 80IC IS COMPARED 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 EIGHTH SCHEDULE SHALL BE HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH IND USTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING WITH THE INITIAL ASSESSM ENT 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 UNDE RTAKING: PROVIDED THAT THE TOTAL PERIOD OF DEDUCTION DOES NO T EXCEED TEN CONSECUTIVE ASSESSMENT YEARS (OR TWELVE CONSECUTIVE ASSESSMENT YEARS WHERE THE ASSESEE IS A COMPANY-OPERATIVE SOCIETY) SUBJECT TO FULFILLMENT O F THE CONDITION THAT IT BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS OR TO OPE RATE ITS COLD STORAGE PLANT OR PLANTS DURING THE PERIOD BEGINNING ON THE IST DAY O F APRIL, 1993 AND ENDING ON THE 31 ST DAY OF MARCH, [2004]: PROVIDED FURTHER THAT IN THE CASE OF SUCH INDUSTRIE S IN THE NORTH-EASTERN REGION, AS MAY BE NOTIFIED BY THE CENTRAL GOVERNMENT, THE AMOU NT OF DEDUCTION SHALL BE HUNDRED PER CENT OF PROFITS AND GAINS FOR A PERIOD OF TEN ASSESSMENT YEARS, AND THE TOTAL PERIOD OF DEDUCTION SHALL IN SUCH A CASE NOT EXCEED TEN ASSESSMENT YEARS: 10 PROVIDED ALSO THAT NO DEDUCTION UNDER THIS SUB-SECT ION SHALL BE ALLOWED FOR THE ASSESSMENT YEAR BEGINNING ON THE 1 ST DAY OF APRIL, 2004 OR ANY SUBSEQUENT YEAR TO ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SE CTION (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 PROVISO MAK ES IT CLEAR THAT AFTER 31.3.2004, THIS DEDUCTION WILL BE AVAILABLE O NLY U/S 80IC. THE SUB SECTION FURTHER MAKES IT CLEAR THAT DEDUCTION W OULD BE @ 100% FOR THE FIRST FIVE YEARS AND THEREAFTER @ 25%. FUR THER, THE FIRST PROVISO MAKES IT CLEAR THAT DEDUCTION WILL NOT EXCE ED 10 CONSECUTIVE ASSESSMENT YEARS. THE SECOND PROVISO F URTHER MAKES IT CLEAR THAT IN THE CASE OF STATES OF NORTH-EASTERN R EGIONS, THE DEDUCTION WOULD BE @ 100% FOR ALL THE 10 YEARS. TH US, EVEN IN THE EARLIER PROVISION ONLY IN CASE OF NORTH-EASTER STAT ES, THE DEDUCTION OF 100% WAS ALLOWABLE FOR 10 YEARS WHEREAS IN THE C ASE OF STATES OF HIMACHAL PRADESH, THE DEDUCTION WAS ALLOWABLE @ 100 % FOR FIRST FIVE YEARS AND 25% FOR NEXT FIVE YEARS. 38. FURTHER, IT SHOULD BE NOTED THAT SUB SECTION (6 ) STARTS WITH NON OBSTANTE CLAUSE AND THEREFORE, IN NO CASE THE DEDUC TION COULD BE FOR PERIOD EXCEEDING 10 YEARS AND IN THIS REGARD WE MAY NOTE THAT EVEN THE LD. AUTHORS IN THEIR COMMENTARY OF INCOME TAX LAWS BY CHATURVEDI & PITHISARIAS - SIXTH EDITION HAS EXP RESSED THE SAME OPINION. THE RELEVANT EXTRACT AT PAGES 6351 OF THE COMMENTARY READS AS UNDER;- NO DEDUCTION POSSIBLE FOR MORE THAN 10 ASSESSMENT YEARS.- SECTION 80-IC(6) ALSO OPENS WITH A NON OBSTANTE CLAUSE NOTWITHSTANDING ANYTHING CONTAINED IN,AND PROVIDES THAT NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE 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 SUBSTAN TIAL EXPANDED UNIT. WE FIND NO FORCE IN THIS CONTENTION. THE IN ITIAL ASSESSMENT YEAR HAS BEEN DEFINED AND THE EXPRESSION OR HAS B EEN USED IN RESPECT OF NEW UNITS BY STATING COMMENCES OPERATIO N OR COMPLETE SUBSTANTIAL EXPANSION. HERE THE EXPRESSI ON OR IS TO BE READ AS A MUTUALLY EXCLUSIVE EXPRESSION WHICH REFER S TO A PARTICULAR SITUATION BY EXCLUDING THE OTHER SITUATION. THEREF ORE, INITIAL ASSESSMENT YEAR WOULD CLEARLY COMMENCE EITHER ON COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBST ANTIAL EXPANSION OF EXISTING UNIT. IN ANY CASE THE WORD INITIAL CANNOT BE USED TWICE BY REFERRING TO SERIES OF EVENTS. THIS C AN BE UNDERSTOOD WITH A VERY SIMPLE EXAMPLE. LET US SAY A PERSON A PASSES OUT HIS EXAMINATION OF LLB AND GET EMPLOYED AS LEGAL OFFICE R IN AN ORGANIZATION. LATER ON, HE QUITS THE JOB AND STARTS THE PRACTICE IN 11 LEGAL PROFESSION AND ULTIMATELY HE IS ELEVATED AS A JUDGE. THEN IN SUCH A SITUATION IT CANNOT BE SAID THAT INITIALLY A WAS WORKING IN A ORGANIZATION AND THEN INITIALLY HE WAS IN THE PROFE SSION AND THEN ELEVATED AS A JUDGE. INITIALLY CAN BE USED ONLY ONC E AS A MATTER OF USAGE OF ENGLISH LANGUAGE. THEREFORE, READING OF TH E ABOVE PROVISION CLEARLY SHOWS THAT INTENTION OF THE LEGIS LATURE WAS VERY CLEAR TO ALLOW 100% FOR FIRST FIVE YEARS IN CASE OF UNITS SITUATED IN THE STATE OF HIMACHAL PRADESH (SINCE ALL THE CASES BEFO RE US ARE SITUATED IN THE STATE OF HIMACHAL PRADESH) AND THER EAFTER 25% DEDUCTION FOR ANOTHER FIVE YEARS ON THE NEW UNITS O R THE EXISTING UNITS WHERE SUBSTANTIAL EXPANSION WAS CARRIED OUT. 40. IT HAS ALSO BEEN CONTENDED THAT INCENTIVE PROVISION SHOULD BE CONSTRUED LIBERALLY. FURTHER, IT WAS CONTENDED WITH REFERENCE TO THE DECISION OF M/S NOVAPAN INDIA LTD VS COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) BY THE REVENUE IS NOT CORRECT B ECAUSE THAT PROVISION WAS RENDERED UNDER INDIRECT TAX ACT. WE F IND NO FORCE IN THESE SUBMISSIONS. EVERY DECISION OF THE HON'BLE SU PREME COURT OR FOR THAT MATTER OF ANY HIGH COURT HAS TO BE SEEN FO R THE RATIO LAID DOWN IN A PARTICULAR DECISION AND IT DOES NOT MATTE R UNDER WHICH PARTICULAR ACT SUCH PRINCIPLES HAS BEEN DECIDED. N O DOUBT THE INCENTIVE PROVISIONS ARE REQUIRED TO BE INTERPRETED LIBERALLY BUT IN CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR OF CENTRA L 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 O F THE TABLE APPENDED TO THE EXEMPTION NOTIFICATION, THE BENEFIT OF SUCH AMB IGUITY SHOULD GO TO THE ASSESSEE MANUFACTURER AND THE ENTRY MUST BE CONSTRU ED AS TAKING IN THE MFPBS AS WELL. IT IS NOT POSSIBLE TO AGREE WITH THIS SUBMISSION. IN MANGALORE CHEMICALS& FERTILIZERS LTD.. V. DEPUTY COMMISSIONER OF COMMERCIAL TAXES & ORS., [1992) SUPPL. 1 S.C.C, 21, A BENCH OF THIS COURT COMPRISING M.N. VENKATACHALIAH, J. (AS THE LEARNED CHIEF JUSTICE TH EN WAS) AND S.C AGRAWAL, J. STATED THE RELEVANT PRINCIPLE IN THE FOLLOWING WORD S: SHRI NARASIMHAMURTY AGAIN RELIED ON CERTAIN OBSERV ATIONS IN CCE V. PARLE EXPORTS (P)LTD. [1989] 1 SCC 345, IN SUPPORT OF STRICT CONS TRUCTION OF A PROVISION CONCERNING EXEMPTIONS. THERE IS SUPPORT OF JUDICIAL OPINION TO THE VIEW THAT EXEMPTIONS FROM TAXATION HAVE A TENDENCY TO INCREASE THE BURDEN ON THE OTHER UN-EXEMPTED CLASS OF TAX PAYERS AND SHOULD BE CONSTRUED AGAINST THE SUBJECT IN CASE OF AMBIGUITY. IT IS AN EQUALLY WELL KNOWN PRINCIPLE THAT A PERSON WHO CLAIMS AN EXEMPTION HAS TO ESTABLISH HIS CASE. INDEED, IN THE VERY CASE OF PARLE EXPORTS (P) LTD. RELIED UPON BY SHRI NARASIMHAMURTHY, IT WAS OB SERVED. WHILE INTERPRETING AN EXEMPTION CLAUSE, LIBERAL IN TERPRETATION SHOULD BE IMPARTED TO THE LANGUAGE THEREOF, PROVIDED NO VIOLENCE IS DO NE TO THE LANGUAGE EMPLOYED. IT MUST, HOWEVER, BE BORNE IN MIND THAT A BSURD RESULTS OF CONSTRUCTION SHOULD BE AVOIDED. THE CHOICE BETWEEN A STRICT AND A LIBERAL CONSTRUCT ION ARISES ONLY IN CASE OF DOUBT IN REGARD TO THE INTENTION OF THE LEGISLATURE MANIF EST ON THE STATUTORY LANGUAGE. INDEED, THE NEED TO RESORT TO ANY INTERPRETATIVE PR OCESS ARISES ONLY WHERE THE MEANING IS NOT MANIFEST ON THE PLAIN WORDS OF THE S TATUTE. 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 12 TAXING STATUTE SHOULD BE CONSTRUED IN FAVOUR OF THE ASSESSEE ASSUMING THAT THE SAID PRINCIPLE IS GOOD AND SOUND- DOES NOT APPLY TO THE CONSTRUCTION OF AN EXCEPTION OR AN EXEMPTING PROVISION; THEY HAVE TO B E CONSTRUED STRICTLY. A PERSON INVOKING AN EXCEPTION OR AN EXEMPTION PROVISION TO RELIEVE HIM OF THE TAX LIABILITY MUST ESTABLISH CLEARLY THAT HE IS COVERED BY THE SA ID PROVISION. IN CASE OF DOUBT OR AMBIGUITY, BENEFIT OF ITS MUST GO TO THE STATE. THE HONBLE SUPREME COURT IN ORISSA STATE WAREHOUSI NG CORPORATIONS CASE (SUPRA) HAS LAID DOWN THAT WHILE IT IS TRUE THAT I N THE EVENT OF THERE BEING ANY DOUBT IN THE MATTER OF INTERPRETATION OF A FISCAL S TATUTE, THE SAME GOES IN FAVOUR OF THE ASSESSEE, BUT THE FACT REMAINS AND THE LAW IS W ELL-SETTLED ON THIS SCORE THAT IN THE MATTER OF INTERPRETATION OF THE TAXING STATUTES THE LAW COURTS WOULD NOT BE JUSTIFIED IN INTRODUCING SOME OTHER EXPRESSIONS WHI CH THE LEGISLATURE THOUGHT FIT TO OMIT. IN THE PRESENT CONTEXT, THERE IS NO DOUBT AS TO THE MEANING OF THE WORDS USED IN THE SECTION BY REASON OF THE LANGUAGE USED, NEITHER THERE IS ANY DIFFICULTY IN ASCERTAINING THE STATUTORY INTENT. INCIDENTALLY, IT CANNOT BUT BE SAID THAT AN EXEMPTION IS AN EXCEPTION TO THE GENERAL RULE AND S INCE THE SAME IS OPPOSED TO THE NATURAL TENOR OF THE STATUTE, THE ENTITLEMENT F OR EXEMPTION, THEREFORE, OUGHT NOT TO BE READ WITH ANY LATITUDE TO THE TAX-PAYER O R EVEN WITH A WIDER CONNOTATION. 41. THEREFORE, IT BECOMES CLEAR THAT LIBERAL INTERP RETATION OF AN INCENTIVE PROVISION IS POSSIBLE IF THERE IS ANY DOU BT. AS WE HAVE SEEN ABOVE THAT IF VARIOUS SUB SECTIONS OF SECTION 80IC ARE READ CAREFULLY IT LEAVES NO DOUBT THAT DEDUCTION WAS MEANT ONLY FO R NEW UNITS OR IN CASE OF OLD UNITS IF SUBSTANTIAL EXPANSION WAS C ARRIED OUT IN SUCH OLD UNITS AND DEDUCTION WAS AVAILABLE ONLY FOR A PE RIOD OF 10 YEARS. THEREFORE, THERE IS NO QUESTION OF GIVING ANY INTER PRETATION MUCH LESS LIBERAL INTERPRETATION TO SECTION 80IC WHEN TH E READING OF WHOLE SECTION MAKES THE PROVISION VERY CLEAR. AS OBSERVE D IN CASE OF M/S NOVAPAN INDIA LTD V COLLECTOR OF CENTRAL EXCISE AND CUSTOMS (SUPRA) THE BURDEN WAS ON THE ASSESSEE TO SHOW UNDE R WHICH CLAUSE HE WAS ENTITLED TO THE DEDUCTION BUT ASSESSEE IS SI MPLY ASSERTING BEFORE US THAT THERE IS NO RESTRICTION FOR DEDUCTIO N IN CASE OF SUBSTANTIAL EXPANSION OF NEW UNITS. IN OUR OPINION , THAT IS NOT ENOUGH BECAUSE ABSENCE OF RESTRICTION DOES NOT MEAN THAT PARTICULAR DEDUCTION WAS ALLOWABLE. 42. WE ALSO FIND FORCE IN THE SUBMISSIONS OF LD. CI T-DR THAT IF INTERPRETATION GIVEN BY THE ASSESSEE IS TO BE ACCEP TED, THE PROVISION WOULD BECOME DISCRIMINATORY FOR TWO CLASS ES OF UNDERTAKINGS I.E. NEW UNITS AND OLD UNITS. BECAUSE THE OLD UNITS WOULD BE ENTITLED TO 100% DEDUCTION ON EXPANSION F OR FIRST FIVE YEARS AND 25% THEREAFTER WHEREAS THE NEW UNITS WOUL D BECOME ENTITLED TO DEDUCTION FOR 100% FOR FIRST FIVE YEARS AND AGAIN @ 100% ON SUBSTANTIAL EXPANSION. SUCH DISCRIMINATORY INTEN TION CANNOT BE IMPUTED TO THE LEGISLATURE. 49. IN VIEW OF THE ABOVE DETAILED DISCUSSION WE HOL D THAT THE ASSESSEE BEFORE US I.E. M/S HYCRON ELECTRONICS IN I TA NO. 798/CHD/2012 IS ENTITLED TO ONLY 25% OF DEDUCTION D URING THE PRESENT YEAR BECAUSE THE ASSESSEE HAS ALREADY AVAI LED THE PERIOD OF FULL DEDUCTION @ 100% IN THE EARLIER FIVE YEARS I.E. FROM ASSESSMENT YEARS 2004-05 TO 2008-09. IN THIS BACKGR OUND, WE FIND NOTHING WRONG WITH THE ORDER OF LD. CIT(A) AND WE U PHOLD THE SAME. ACCORDINGLY, ASSESSEES APPEAL IS DISMISSED. 13 13. BRIEFLY STATED THE HONBLE BENCH HELD THAT BENE FIT OF 100% DEDUCTION OF PROFITS FROM THE INITIAL ASSESSMENT YEAR IS AVAILAB LE TO ONLY TWO CATEGORIES OF ELIGIBLE UNITS I.E; 1) THOSE WHICH EXISTED WHEN TH E PROVISION WAS INTRODUCED ON THE STATUTE AND UNDERTOOK SUBSTANTIAL EXPANSION AND 2) THOSE WHICH CAME INTO EXISTENCE AFTER THE INTRODUCTION OF THE PROVISION. AS A COROLLARY BENEFIT OF 100% DEDUCTION UNDER SECTION 80IC IS NOT AVAILABLE TO UN ITS WHICH CAME IT EXISTENCE AFTER THE INTRODUCTION OF THE PROVISION AND THEREAF TER UNDERTOOK SUBSTANTIAL EXPANSION, CLAIMING THE YEAR IN WHICH SUBSTANTIAL E XPANSION TOOK PLACE TO BE THE INITIAL YEAR. IN SUM AND SUBSTANCE IT WAS HELD THAT THERE CAN BE ONLY ONE INITIAL YEAR FOR THE PURPOSE OF SECTION 80IC. RESPECTFULLY FOLLOWING THE SAME WE HOLD THAT THE AS SESSEE HAVING ALREADY CLAIMED THE BENEFIT OF 100% DEDUCTION OF ITS PROFIT S UNDER SECTION 80IC FOR FIVE YEARS BY TAKING ASSESSMENT YEAR 2005-06 AS ITS IN ITIAL YEAR IT IS NOT ENTITLED TO CLAIM 100% DEDUCTION OF PROFITS UNDER SECTION 80IC OF THE ACT IN THE IMPUGNED YEAR BEING THE SIXTH YEAR. ACCORDINGLY WE UPHOLD TH E ORDER OF THE LD. CIT(A) RESTRICTING THE CLAIM OF THE ASSESSEE TO 30% OF THE ELIGIBLE PROFIT. THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS THEREFORE DISMISSE D. 14. GROUND NO. 3 RAISED BY THE ASSESSEE IS AGAINST THE CHARGING OF INTEREST UNDER SECTION 234B, 234C AND 234A OF THE ACT . WE F IND NO MERIT IN THIS GROUND OF APPEAL SINCE IT IS SETTLED LAW THAT THE CHARGING OF INTEREST UNDER SECTION 234A, 234B AND 234C IS MANDATORY AS HELD BY HONBLE SUPRE ME COURT IN THE CASE OF CIT VS. ANJUM M.H. GHASWALA & OTHERS (2001) 252 ITR 1. FURTHER WE FIND NO MERIT IN THE ARGUMENT OF THE LD. AR THAT THE INTEREST CHARGE D IS EXCESSIVE SINCE THE SAME HAS TO BE CHARGED AS PER THE PROVISIONS OF THE ACT AS SPECIFIED IN SECTION 234A, 234B AND 234C. 15. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS THEREFORE DISMISSED. 16. IN EFFECT THE APPEAL OF THE ASSESSEE IS DISMISS ED. 14 17. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE RE VENUE IN ITA NO. 853/CHD/2014 THE REVENUE HAS RAISED THE FOLLOWING G ROUNDS OF APPEAL.: 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES THE LD. CIT( A) HAS ERRED IN ALLOWING RELIEF OF RS. 53,74,59/- ON ACCOUNT OF CLAIM U/S 80IC ON THE INCO ME DERIVED FROM SCRAP SALE. 18. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURI NG ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD CLAIMED DEDUCTION UN DER SECTION 80IC ON SALE OF SCRAP. LD. AO HELD THAT THE INCOME CANNOT BE SAI D TO BE DIRECTLY DERIVED FROM MANUFACTURING ACTIVITY OF THE INDUSTRIAL UNDER TAKING AND THEREFORE DENIED DEDUCTION ON THE SAME UNDER SECTION 80IC OF THE ACT . ACCORDINGLY AN AMOUNT OF RS 53,74,591/- WAS HELD TO BE INELIGIBLE FOR THE COMPUTATION OF PROFIT FOR THE CLAIM OF DEDUCTION UNDER SECTION 80IC. 19. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO VIDE HER ORDER DT. 23/07/2014 ALLOWED THE ASSESSEES APPEAL BY HOLD ING THAT SINCE THE ASSESSEES BOOKS OF ACCOUNT ARE AUDITED AND HAVE BE EN TEST CHECKED BY THE AO AND THE AO HAS NOT BEEN ABLE TO ESTABLISH THAT T HE SCRAP HAS NOT BEEN GENERATED BY THE ASSESSEE DURING THE MANUFACTURING PROCESS, THE CONTENTION OF THE AO THAT THE SCRAP GENERATED IS NOT DERIVED FROM THE MANUFACTURING ACTIVITY OF THE ASSESSEE IS UNACCEPTABLE. 20. LD. CIT(A) HELD AT PARA 6 OF ITS ORDER AS FOLLO WS: THE ISSUE IS WHETHER DEDUCTION U/S 80IC IS AVAILA BLE TO THE ASSESSEE ON SALE OF SCRAP GENERATED DURING THE COURSE OF MANUFACTURING ACTIVITY OR NOT. UNDISPUTEDLY IN PRESENT CASE ASSESSEE IS ENGAGED IN BUSINESS OF MANUFACTURING AXELS, GEAR AND SHAFT. THE ASSESSING OFFICER HAS AGREED THAT AS PER VARIOUS COURTS JUDGMENTS ANY SCRAP GENERATED AS A NECESSARY BY PRODUCT WHEN SOLD IN THE MARKET, THE PROFITS ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IC. THE A.O. HAS SIMPLY STATED THAT IN THE PRESENT CASE THE SCRAP IS NOT DIRECTLY DERIVED FROM MANUFACTURING ACTIVITY. ASSESSEE DURING THE COURSE OF APPELLATE PROCEEDINGS HAS DISTINGUISHED THE CASE LAWS RELIED UPON BY THE ASSESSING OFFICER AS UNDER: IN CASE OF M/S. LIBERTY INDIA LTD. THE SUPREME CASE HELD THAT INCOME DERIVED FROM DUTY DRAW BACK AND DEPB ARE NOT ELIGIBLE FOR DEDUCT ION UNDER SECTION 80IC. IN CASE OF STERLING FOOD(SC) 237 ITR 579, IT WAS HELD THAT INCOME FROM SALE OF IMPORT ENTITLEMENTS IS NOT ELIGIBLE FOR DEDUCTION UNDER SE CTION 80HH. IN CASE OF PANDIAN CHEMICALS LTD. THERE WAS A FINDING THAT NO DETAILS OF SCRAP WERE FURNISHED BY THE ASSESSEE IN RESPECT OF THE SCRAP SOLD BY IT. 15 IN ABSENCE OF ANY SPECIFIC FINDING TO ESTABLISH THA T MANUFACTURING OF AXELS, SHAFT AND GEARS DO NOT GENERATE SCRAP, AND SINCE THE BOOK S OF ACCOUNTS OF ASSESSEE ARE AUDITED AND TEST CHECKED BY THE A.O. , THE CONT ENTION OF A.O. CANOT BE UPHELD AND THE CONTENTION OF THE ASSESSEE IS ACCEPT ED. RELIANCE IS PLACED ON CIT VS. JIKAR A SAYED 221 TAXMAN 451 (GUJ) AND CIT VS. MICRO TUNERS ITA NO. 225/2011. THUS ASSESSEE SUCCEEDS ON THIS GROUND. 21. BEFORE US LD. DR RELIED UPON THE ORDER OF THE A O AND STATED THAT INCOME FROM THE SALE OF SCRAP CANNOT BE SAID TO HAVE BEEN DERIVED FROM THE ACTIVITY OF THE UNDERTAKING OF THE ASSESSEE IN VIEW OF THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF LIBERTY INDIA LTD. AND OTHER V S. CIT 317 ITR 218 (SC) AND HENCE THE ASSESSEE WAS NOT ELIGIBLE TO DEDUCTION UN DER SECTION 80IC ON THE SAME. 22. NONE APPEARED ON BEHALF OF THE ASSESSEE . 23. WE HAVE HEARD THE SUBMISSIONS MADE BEFORE US AN D ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. 24. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF TH E LD. CIT(A). UNDISPUTEDLY INCOME FROM SALE OF SCRAP GENERATED DURING THE COUR SE OF ACTIVITY CARRIED OUT BY AN ASSESSEE IS INCOME DERIVED FROM THE ACTIVIT Y OF THE ASSESSEE. IN THE IMPUGNED CASE, IT IS NOT IN DISPUTE THAT THE ASSESS EE IS CARRYING OUT MANUFACTURING ACTIVITY. THE ASSESSEE HAS CLAIMED SC RAP TO HAVE GENERATED FROM ITS MANUFACTURING ACTIVITY AND HAS SUBSTANTIATED TH IS FACT FROM ITS AUDITED BOOKS OF ACCOUNTS WHICH HAVE BEEN TEST CHECKED BY THE AO. THE REVENUE WE FIND HAS NOT CONTROVERTED THESE FACTS NOR GIVEN ANY SPEC IFIC FINDING TO ESTABLISH THAT THE SCRAP HAS NOT BEEN GENERATED IN THE MANUFACTURI NG PROCESS. WE THEREFORE HOLD THAT THE SCRAP HAS BEEN GENERATED FROM THE MAN UFACTURING ACTIVITY OF THE ASSESSEE AND THUS CAN BE HELD TO BE DERIVED FROM TH E ACTIVITY OF THE INDUSTRIAL UNDERTAKING OF THE ASSESSEE. THE ASSESSEE, WE THEREFORE HOLD, IS ENTITLED TO CLA IM DEDUCTION UNDER SECTION 80IC ON THE INCOME GENERATED FROM THE SALE OF SCRAP AS PER THE DECISION OF THE HONBLE SUPREME COURT RENDERED IN THE CASE OF LIBER TY INDIA (LTD.) (SUPRA). IN 16 VIEW OF THE ABOVE WE UPHOLD THE ORDER OF THE LD. CI T(A) AND ALLOW THE ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IC ON THE INCOME GENERATED FROM THE SALE OF SCRAP. 25. THE APPEAL OF THE REVENUE IS THEREFORE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 03/05/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR