Income Tax Appellate Tribunal - Chandigarh
Globe Precision Ind. Pvt. Ltd., Solan vs Assessee on 3 May, 2016
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 I nd. Pvt. Ltd. Vs. The Addl. CI T,
Plot No. 11, I ndustrial . Area, Solan Range
Baddi, Distt. Solan
Solan
PAN No. AAACG6736G
ITA No.853/Chd/2014
Assessment Year: 2010-11
The DCI T 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 Pr onouncement : 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 in the manufacturing of Axels, Gear and shafts, in its unit at Baddi and claiming deduction under section 80IC of the Income Tax Act, 1961, @ 100% of its profits since Assessment year 2005-06. During the impugned Assessment year, being the sixth year since Assessment year 2005-06, the assessee filed its return declaring income of Rs.
2,11,090/- claiming 100% deduction of its profit under section 80IC. Assessment under section 143(3) was framed at an income of Rs. 1,04,92,582/-after 2 restricting the assessee's claim for deduction of its profits under section 80IC to 30% and further denying deduction under section 80IC on income from scrap sold by it. Aggrieved by the same the assessee preferred an appeal before Ld. CIT(A) who upheld the restriction of claim of deduction 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 the Assessee and the Revenue have filed the present appeal before us.
4. We shall first take up the appeal filed by the assessee 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 action 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 the Ld. Assessing Officer.
3. That the Ld. Commissioner of Income Tax (Appeals) gravelly erred in upholding charging of interest under section 234B, 234C and 234A of the Income Tax Act which in any case is excessive.
6. Ground No. 2 raised by the assessee is against the action of the Ld. CIT(A)in upholding the restriction of deduction under 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 assessee being eligible for, had claimed deduction of 100% of its profits under section 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 be "initial year" for the purpose of 80IC, again claimed deduction of 100% of its profits. Ld .AO denied the assessee's claim of 100% deduction of its eligible profit restricting it to 30% by holding that there can be only one initial Assessment 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; unit that existed and were operational as on 07/01/2003 and is not meant for units that came into being on or after introduction of scheme i.e; 07/01/2003.
8. In appellate proceedings Ld. CIT(A) upheld the order 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 appeared 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 the assessees counsel it was adjourned to 11/04/2016 and on 11/04/2016 though the adjournment application was rejected, yet in the interest of justice the case was adjourned to 12/04/2016. On 12.04.2016, no authorized representative of the assessee appeared to argue the appeal. Again a request for adjournment was forwarded for adjourning the appeal sine-die which was objected to by ld. DR.
The request for adjournment was rejected and the appeal 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 the 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 before us.
12. The facts in the present case are that the assessee 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 backdrop 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 Hon'ble ITAT Chandigarh Bench in the case of Hycron Electronics (supra) wherein deciding the issue against the assessee, the Hon'ble Bench held a follows at para 29-42 and para 49 of its order.
29. S ub s ect i on ( 1 ) of t h e ab ov e p r ovi si on i s a gene ral p r o vi si on an d d o es n ot req ui re an y i n t erp ret at i o n . S ub Sect i on [ 2] i s t h e en ab l i n g p r o vi si on wh i ch p ro vi des f or t h e t yp e s of un d ert ak i n gs a n d ci rcum st an c e s wh er e de d uct i on un d er sect i on 80I C wo u l d b e al l o we d. It al l o ws d ed uct i on t o va ri o us un de rt ak i n gs wh i ch h av e ei t h er b e g un or b e g i n s m an uf act uri n g o f an y a rt i cl e or t h i ngs n ot b ei n g an y a rt i cl e or t h i n g sp eci f i ed i n Sch e d ul e xi i i and al s o un dert ak e s s ub st an t i al e xp an si on . Th e s e ded u ct i on s we re a v ai l ab l e i n di ff eren t st at es d u ri n g di ff eren t wi n d o w p eri o ds wh i ch h av e b ee n ref er re d t o i n cl a u se ( i ), ( i i ) & ( i i i ) of t h i s s ub s ect i on . Th e c on t en t i on on b eh al f of t h e a s s es se e i s t h at si n ce d ed uct i on i s av ai l ab l e t o t h e un dert ak i n g wh i ch un dert ak e s s u b st an t i al exp an si o n an d si n ce t h ere i s n o re st ri ct i on i n t h i s sub sec t i on i t sel f , t h eref or e, t h e ded u ct i on wa s av ai l ab l e o n s ub st a n t i al exp an si o n b y ol d un dert ak i n g s a s we l l a s n e w un d ert ak i n gs d uri n g t h e wi n do w p eri od . H o we ve r, t h e re i s n o f o rce i n t h i s i n t erp r et at i on . S ub s e ct i on (2) b egi n s wi t h t h e exp re s si on " t h i s sect i on ap p l i es t o an y un dert ak i n g or en t e rp ri se wh i ch h a s b e gu n o r b egi n s " t h i s i t sel f sh o ws t h at p r o vi si on m ade e ve n t h e exi st i n g un dert ak i n g s e n t i t l ed f or t h e d ed uct i on b eca u se t h e exp re s si on 'b eg un ' wo u l d r ef er t o t h e un de rt ak i n g wh i ch were a l re ad y exi st i n g an d b eg an t h e m an uf act ure b ef or e t h e wi n do w p e ri o d m en t i on ed i n t he s ub sect i on . Th e l a st l i n e of t h e s ub s ect i on re ad s " and u n d e rt ak e s s ub st an t i al exp an si on d uri n g t h e p eri od b egi n n i n g... ... ..". Th i s wo u l d n at u ral l y ref er t o t h e un d ert ak i n g wh i ch we r e al rea d y exi st i n g. If i t i s read t h e wa y t h e Ld . c o u n sel of t h e a ss e ss ee wo u l d l i k e us t o re ad t h en t h e p r o vi si on wo ul d b ec om e un wo rk ab l e b eca u se i f t h ere i s an un de rt ak i n g wh i ch i s est ab l i sh ed d uri n g t h e wi n d o w p eri od t h en t h e sam e ca n n ot p o s si b l y un d ert ak e s s ub st an t i al exp an si o n al s o si m ul t an e o u sl y. Th e ex p re s si on 'an d "
wo u l d r ef er t o t h e cum ul at i ve c on di t i on t h at i s b ot h p a rt s of t h e con di ti on s n ee d t o b e c om p l i ed. T h e exp r es si on 'an d' can b e joi n ed on l y wi t h t h e exp r es si on 'b e g un '. Th i s i s beca u se 'b eg un ' ref er s t o som et h i n g wh i ch h a s al r ea d y s t a rt ed i n t he p a st wh er ea s 'b e gi n s' c on n ot e s s om et h i n g wh i ch wo u l d c om m en ce i n t h e p re sen t . Th eref or e, t h e exp r es si on 'an d' ca n b e c or rel at e d on l y wi t h exi st i n g un i t b eca u se a s we h av e al rea d y se en a n e w u n i t wh i ch has b een s et up an d b egi n s p r od uct i on can n ot si m ul t an e o usl y un d er go s ub st an t i al exp a n si on al s o s o a s t o b e com e el i gi b l e f or de d uct i on un d er t h i s se ct i on .
30. At t h i s st age, i t can b e s ai d t h at sect i on h a s s om e c on f usi on an d som e ef f ort i s r eq ui red t o un d er st a n d t h e c or re ct i n t en t i on of t h e Le gi sl at u re b y k eep i n g v a ri o u s p ri n ci p l es of i nt erp ret at i on . Th e ref or e, va ri o us p ri n ci p l es of i n t erp ret at i on n ee d s t o b e l o ok e d i n t o. Th i s p r ovi si on wa s b r o u gh t i n t o t h e st at ut e i n di sp ut ab l y i n t h e 5 l i gh t of t h e " i n cen ti ve p ack age " an n o un ced b y t h e Un i o n C ab i n et . Th r o u gh t h i s i n cen t i ve p a ck ag e n ot on l y i n com e t a x co n ce s si on b ut exci se c on c es si on s an d s om e s ub si di es l i k e t ran sp ort s ub si dy an d cap i t al sub si dy we r e al so p r o vi ded t o v a ri ou s i n du st ri es i n t he h i l l y st at ed com p ri si n g st at es of Hi m ach al Pr ade sh , Ut t a ran ch al , Si k k i m an d N ort h - E a st ern s t at es t o b o ost t h e eco n om i es of t h es e h i l l y st at es . Ci rc ul a r N o. 7 wa s i ss u ed b y t h e CB D T on 5. 9.2 0 03 i n t h i s re sp e ct an d t h e Ci rc ul a r r ea ds a s un de r :-
"Circular No. 7/2003 dated 05.09.2003
49. New provisions allowing a ten years tax holiday in respect of certain undertakings in the States of Himachal Pradesh, Sikkim, Uttaranchal and North- Eastern States.
49.1 The Union Cabinet has announced a package of Fiscal and non-fiscal concessions for the special category States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States, in order to give boost to the economy in these States. With a view to give effect to these new packages a new section 80-IC has been inserted to allow a deduction for ten years from the profits of new undertaking or enterprise or existing undertakings or enterprises on their substantial expansion, in the States of Himachal Pradesh, Uttaranchal, Sikkim and North-Eastern States. For this purpose, substantial expansion is defined as increase in the investment in the plant and machinery by at least 50% of the book value of the plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken.
49.2 The section provides that the deduction shall be available to such undertakings or enterprises which manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule and which commence operation in any Export Processing Zone, or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate, or Industrial Park, or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with rules prescribed in this regard. Similar deduction shall be available to thrust sector industries, as specified in the Fourteenth Schedule.
49.3 The amount of deduction in case of undertakings 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 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 shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section or under section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. Further, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section 10A or 10B, in relation to the profits and gains of the undertaking 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 Fourteenth 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 provisions of section 10C and sub-section(4) of section 80-IB have been made inoperative in respect of the undertakings or enterprises in the State of Himachal Pradesh or in North-Eastern region including Sikkim, with effect from the 1st day of April, 2004.
49.6 These amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years.
31. Th e ci rc ul a r m ak e s i t cl ea r t h at sect i on 80I C wa s i n sert ed t o gi ve ef f ect t o t h e n e w p a ck ag e an n o un ced b y t h e Un i on C ab i n et . Th e Ci rcul a r f urt h e r cl a ri fi es t h at t h i s se c t i on p ro vi des f or de d uct i on f or a p e ri od of 10 y ea r s f rom t h e p r of i t s of n e w un de rt ak i n g o r en t erp ri se o r e xi st i ng un d ert ak i n g o r e n t erp ri se on t h ei r s ub st an t i al exp an si on ( se e h i gh l i gh t ed p ort i on of t h e ci rcul a r ). Th e c on t en t i on of t h e L d. C o un s el of t h e a s se s se e wa s t h at wo rd 'e xi st i n g' q u al i fi es on l y t h e u n d ert ak i n g o r e n t erp ri ses an d d oe s n ot m en t i on an y p a rt i cul a r d at e f or ca rr yi n g o ut s u b st an t i al exp an si on . We f i n d n o m eri t i n t hi s con t e n t i on . Th e wo r d ' exi st i n g i s def i n ed i n t h e di cti on a ri es a r e a s u n der :-
32. B l ack La w Di ct i on a ry - 6 t h E di t i on :-
E xis t : T o l i ve, T o h av e l i f e o r a n i m at i on To b e in pr es e nt f or c e, Act i vi t y, or ef f ect at a gi ven t i m e, a s i n sp eak i n g of " e x i sti n g"
con t r act s, c redi t or s deb t s, l a ws, ri gh t s o r l i en s.
F or u s rel ev an t m ean i n g wo u l d b e 'T o b e i n pr es ent for c e' As per Oxford Dictionary 'exist' is defined as under Exist :
1 (not used in the progressive tenses) to be real; to be present in a place or situation: Does life exist on other planets? The problem only exists in your head, Jane. Few of these monkeys still exist in the wild. On his retirement the post will cease to exist. The charity exists to support victims of crime. 2- (on sth) to live, especially in a difficult situation or with very little money: We existed on a diet of rice. They can't exist on the money he's earning 7 Th e ab o ve def i n i ti on cl e a rl y sh o ws t h at 'e xi st ' wo u l d r e f er t o s om et h i n g wh i ch i s i n f orc e p re se n t l y . 'E xi st ' wo u ld ge n e ral l y an d i n com m on sen s e ref e rs t o s om et h i n g wh i ch i s al read y t h e re . Wi t h ref er en c e t o t h i s p r o vi si on , t h i s wo ul d ref er t o an un de rt ak i n g wh i ch wa s al r ead y p re se n t on t h e dat e wh en t h i s p r o vi si on wa s i n t rodu ce d. In an y ca s e t h e n ot i fi cat i on i ssu ed b y t h e Go vt . of In di a , Mi n i st ry of C o m m erce an d I n d u st r y, D ep a rt m ent of In du st ri al P ol i cy an d Pr om ot i o n wh i ch i s p ub l i sh e d i n t h e G a z et t e of In di a rem o ve d al l t h e d o ub t s . Th i s n ot i fi cat i on i s re l e van t b eca u se t h i s wa s i ss ue d wi t h ref ere n ce t o sam e p a ck ag e an n o un ced b y t h e Un i on C ab i n et of I n di a f or t h e d ev el o p m en t of t h e hi l l y st at es . Se ct i on 5, r ea ds a s u n der ;-
" Def i n i ti on s :
( a) ... ..
( b ) ... ..
( c) E xi st i n g In du st ri al Un i t ' m ean s an i n d ust r i al un i t exi st i n g a s on 7 t h Ja n ua r y 20 03.
(d) ..........
(e) .............
(f) ..."
Th u s t h e def i n i ti on gi ven ab o ve m ak es i t cl ea r t h at exi st i n g In d ust ri al Un i t wo u l d m ean an un i t wh i ch exi st ed o n 7 .1 .2 00 3.
33. E ven i f t h e ab o ve con t r o ve rs y i s i gn or ed r eg a rdi n g exi st i ng un i t , t h e i n t en ti on of t h e L egi sl at ure b ec om e ab s ol ut el y cl ea r wh en s ub s ect i on ( 2 ) i s rea d al on g wi t h s u b - s ect i on ( 3) of sect i on 8 0I C. As n ot e d ea rl i er, s ub s ect i on ( 2 ) i s en ab l i n g p r o vi si on wh i ch p r ovi de s f or de d uct i on i n cert ai n ki n d of un d ert ak i n gs, i .e. n e w un i t set up o r t h e exi st i n g un i t s wh i ch ca r ri es o ut s ub st a n t i al exp an si on d uri n g t h e p a rt i cul a r wi n d o w p eri od wh i ch a re gi ve n i n cl a us e s ( i ), ( i i ) & ( i i i ) of s ub s ect i on ( 2 ) . Th e s ub s ect i on ( 3 ) p r o vi de s f or r at es of de d uct i on . It i s u s ef ul t o n ot e t h at cl a us e ( i ) of s u b s ect i on ( 3 ) p r ovi d es f or 10 0% d ed uct i on f or a p eri od of 10 a ss e ssm en t y ea r s i n ca s es co ve red b y s ub cl a u se ( i ) & ( i i i ) of cl a u s e ( a ) an d s ub cl a u s e ( i ) & ( i i i ) of cl a u se ( b ) . N o w s ub cl a us e ( i ) a n d ( i i i ) of cl au s e ( a ) of s ub sect i on ( 2 ) r ef er s t o t h e wi n d o w p eri o d i n ca se of St at e of Si k k i m, N ort h - E a st er n St at e s wh e rea s s ub cl a u s e ( i i ) ref er s t o t h e wi n d o w p eri od i n ca se of St at e of Hi m achal Pr ade sh an d St at e of Ut t a ran c h al . Si mi l a rl y, s ub cl a u s e ( i ) & ( i i i ) of cl a us e ( b ) r ef er s t o wi n d o w p e ri od i n c a se of St at e of Si k k i m an d N o rt h -E a st e r St at es wh e rea s s ub cl a us e ( i i ) ref e rs t o t h e wi n d o w p e ri od i n ca se of St at e of Hi m ach al Prad e s h an d Ut t a ra n ch al . No w cl a u se ( i i ) of s ub sect i on ( 3 ) p r o vi des f or 1 00 % d ed uct i o n on s uch p r of i t s f or f i ve a s se s sm en t ye a r s c om m en ci n g wi t h i ni t i al a sses sm en t yea r an d t h ereaf t er 2 5% ( or 30 % wh e re t h e a ss e ss ee i s a c om p an y ) of t h e p rof i t s an d gai n s. T h er ef or e, i t i s ab sol ut el y cl e a r t h at i n ca se of st at e of Si k k i m an d N ort h - E a st er n st at e s, Legi sl at ur e wa s v er y cl e a r t h at i n ca se of n e w un dert ak i n g o r i n c a se of s ub st an t i al exp an de d un dert ak i n g ded u ct i on i s t o b e al l o we d @ 1 00 % f or wh ol e of t h e t en y ea r s wh e rea s i n ca s e of St at e o f Hi m ach al P rad es h an d Ut t a ran c h al t h e d ed uct i on wa s t o b e al l o we d @ 1 00 % on l y f or f i rst f i ve yea r s an d t h er e af t er i t wa s on l y 2 5 % . If t h e Legi sl at ur e wa n t e d t o e xt en d t h e b e n ef i t i n t h e ca s e of s ub st an t i al exp an si on sep a rat el y t h en t h e rat e of d ed u ct i on i n t h e cl a us e ( i ) & ( i i ) of s ub sect i on ( 3 ) wo u l d n o t h ave b e en di f f eren t i .e. 10 0 % f or wh ol e of t h e 8 10 ye a r s i n ca se of S t at e of Si k k i m & Nort h - E a st e rn st at e s un d er s u b cl a us e ( i ) an d f o r t h e st at e of Hi m ach al P rad e sh & Ut t a ra n ch al un der s ub cl a us e ( i i ) 100 % f or f i rst f i ve ye a rs an d t h e reaf t er 2 5% f or n ext f i ve yea r s. T h e c on c ep t of s ub s t an t i al exp ansi on r e m ai n s sam e un d er s ub s e ct i on ( 2) f or b ot h t yp es of st at e s i .e st at e of Si k k i m an d N o rt h - E a s t ern st at es an d St at e of Hi m achal P rad e sh a n d Ut t ran ch al . If t h e ex t en de d b en ef i t of su b st an t i al exp an si on wa s t o b e s ep a rat el y al l o wed i n ca se of St at e of Hi m ach al P rad es h an d St at e of Ut t a ran ch a l , t h en m ean i n g of sub st an t i al exp an si on a s gi ven un d er s ub s ec t i on ( 2 ) wh i ch i s sa m e f or t h e st at e of Si k k i m an d N o rt h - E a st e rn st at es b ec om e r ed un dan t . As n ot e d ea rl i er, t h e p ro vi si on can n ot b e i n t erp ret ed i n s uch a wa y t h at p a rt o f t h e sect i on b e c om es r e du n dan t or ot i o se . Th e ref or e, wh at ev er do u b t s m ay b e t h e re i n s ub sect i on ( 2 ) wh en i t i s rea d wi t h s u b sect i o n ( 3 ), t h os e d o ub t s a r e t o t al l y rem ov ed an d i t b ecom e ab sol ut el y cl e a r t h at rat e of de d uc t i on h a s t o b e 1 00 % f or f i rst 5 y ea r s an d 25 % t h ereaf t er .
34. Th e re i s a f orce i n th e con t en t i on of Ld . CI T /D R t h at i f t h e i n t erp ret at i on co n t e n de d o n b e h al f of t h e a s se s se e wa s t o b e ad op t ed t h en S ub S ect i on ( 4 ) of Sect i o n 80I C wo u l d al s o b ec om e red un dan t . S ub S ect i on ( 4 ) cl ea rl y p r o vi de s t h at t he d ed uct i on i s avai l ab l e t o an y un dert ak i n g or en t e rp r i se wh i ch i s n ot f or m ed b y sp l i t ti n g or r ec on st r u ct i on of t h e b u si n es s al rea d y i n exi st en c e o r i t i s n ot f orm ed b y t ran sf e r t o n e w b u si n es s of m ach i nery o r p l an t p re vi o usl y u s ed f or a n y p urp o se . F urt h e r t h e e xp l an at i on t o t h i s S ub Se ct i on m ak e s i t cl e a r t h at E xp l an at i on 1 & 2 of S ub S ect i on ( 3 ) of Se ct i on 80I A a re ap p l i cab l e i n t hi s resp ect . E xp l an at i on 2 of S ub Se ct i on ( 3 ) of S ect i o n 8 0 I A re ad s a s un d er :
" E xp l an at i on 2- Wh ere i n t h e c a s e o f an [ un d ert ak i ng] , an y m ach i n ery or p l an t o r an y p a rt t h er e of p r evi o u sl y u s ed f or an y p u rp os e i s t ran sf e rr e d t o a n e w b u si n es s an d t h e t ot al v al ue of t h e m ach i n ery o r p l an t or p a rt s o t r an sf e rr e d d oe s n ot ex ce ed t wen t y p er cen t of t h e t ot al val u e of t h e m ach i n ery o r p l an t u se d i n t h e b u si n es s, t h en , f or t h e p u rp os e s of cl a u se ( i i ) of t hi s sub - s ect i on , t h e con di ti on s p eci f i ed t h erei n sh al l b e de em ed t o h av e b ee n com p l i ed wi t h . "
Fr om t h e ab ov e i t b ec om es c l ea r t h at i f 20 % of t h e Ma ch i n ery f r om t h e ol d un i t wa s u se d i n t h e n e w un i t t hen s uch un i t wo ul d n ot b e el i gi b l e f or d ed uct i o n un de r t h i s S ect i on t h at i s sect i on 8 0I C . N o w f or ca r r yi n g o ut s u b st an t i al exp an si on t h e i n vest m en t i n Pl an t & Mac h i n er y i s req ui re d t o b e m ad e b y at l ea st 5 0 %. S o i f 50% f resh m ach i n ery i s ad de d t o t h e n e w un i t t h en i t wi l l vi ol at e S ub S ect i on ( 4 ) of S ect i on 8 0I C, t h eref ore, i n t erp r et at i on can va s sed o n b eh al f of t h e a s s es s ee i s n ot p o s si b l e b e ca u se S ect i on 80 I C( 4 ) wo u l d b ec om e re d un da n t an d s uch an i n t erp re t ati on i s n ot p o s si b l e.
35. F urt h e r, s ub se ct i on ( 6 ) p r o vi des t h at i n n o ca se t h e t ot al p eri od of de d uct i on co ul d e xc eed t h e p eri od of 10 ye a r s i n cl udi n g ded u ct i on avai l ed u n der s ub s ect i on ( 4 ) of sect i on 8 0IB an d s ect i on 10 A an d 10 B . It wa s c on t en d ed b ef or e u s t h at si nce t h er e i s n o re st ri cti on i n ca rr yi n g o ut of s u b st an t i al exp an si on i n t h e n e w u n i t s an d a s s uc h s ub st an t i al exp an si on can b e ca rri ed o ut an y n um b e r of t i m es. If t hi s i n terp r et at i on i s acce p t ed t h en s ub s ect i on ( 6 ) 9 wo u l d b e ren de red ot i os e o r m ean i n gl e s s b ec a us e i f a un i t wa s set up on t h e c om m en cem en t of t h i s sect i on an d t h e sam e cl ai m s ded u ct i on @ 1 00 % an d l at e r o n ev er y fi ve y ea rs a s ub st an t i al exp an si on i s ca r ri ed o ut t h en a cc or d i n g t o t h e i n t erp r e t ati on can va s se d on b eh al f of t h e a s s es s ee , su ch un i t wo u ld agai n b ec om e en t i t l ed t o 10 0 % d ed u ct i on f o r an ot h e r f i ve yea r s an d f urt h e r b l o ck of f i ve y ea rs ev er y t i m e s ub st an t i al exp a n si on is ca rri ed o ut . If t h i s i n t erp r et at i on i s ad o p t ed t h en de d uct i on wo u l d b ec om e al m o st p erc ep t u al a s l on g a s t h e a s se s se e h as c a rri ed o u t s ub st an t i al exp an si on b ut i n t h at ca se s ub se ct i on ( 6 ) wo ul d l o o se i t s m ean i n g. S uch an un l i m i t ed p e ri od of ded u ct i on wo u l d n ot b e i n con s on an ce of l a w. At t h e c ost of r e p et i ti on , we wo u l d l i k e t o em p h a si z e t h at n o p ri n ci p l e of i n t erp ret at i on can be a do p t ed wh i ch l e ad s t o a si tuat i on wh er e a p a rt i cul a r p a rt of t h e s ect i on b ec om e s t ot al l y red un dan t . I n f act t h o ug h i t wa s c on t e n d e d t h at i n t h e p res en t ca s e ( i .e. i n ca se of H yc r on E l ect r on i c s ) d ed uct i on h a s b ee n cl ai m ed o n l y of 1 0 ye a r s b ut o n t h e dat e of h e a ri n g s om e ot h e r ap p eal s we r e al s o l i st ed wh e rei n t h e d ed uct i on wa s cl ai m ed f or m or e t h an 1 0 y ea r s ad op t i n g t h e s am e con t en t i on wh i ch h a s b een m ade b ef or e u s. In ca s e of M/ s Mah avi r In d ust ri es ( I T A N o. 12 7/ C h d /2 01 1 an d I T A N o. 79 1 / Ch d / 20 12 ) t h o ugh t h o se c a s es wer e adj o urn ed b eca u s e s om e ot h er i ss u es were al s o t h e re b ut i n t h os e t wo ca se s a s se ss ee h ad c om m en ce d t h e op erat i on on 8 .5. 1 99 7 an d cl ai m ed ded uct i on u /s 80 IB f rom a ss e ssm en t y ea r s 1 99 8- 99 t o 20 05-
06. Lat e r on , s ub st a n t i al exp an si on wa s ca rri ed o ut i n a sse ssm e n t y ea r 2 00 5- 0 6 an d o n t h e b a si s of t h e con t e n t i on t h at a ss es se e i s al l o we d t o ca rr y o u t an y n um b er of e xp an si on s, d ed uct i o n wa s cl ai m ed f or t h e 12 t h y ea r f or a s se s sm e n t yea r 2 00 9- 1 0 ( We m ay cl a ri f y t h at ref er en c e t o t h e se c a s es i s m ade b ec a us e of p a rt i cul a r con t e n t i on an d we a re n ot e xp r es si n g a n y op i n i on o n t h e m eri t s of t h ese ap p eal s h er e ). Th er ef o re, t h e co n t en t i on of t h e a ss e ss e e t h at an y n um b e r of exp a n si on s a re al l o we d i s n ot p o ssi b l e i n vi e w of t h e re st ri cti on gi ven i n s ect i on 8 0I C( 6 ).
36. Th e ab o ve si t uat i on a s p oi n t ed b y t h e R e ven u e al s o b ec om e s cl ea r i f t h e p ro vi si on of sect i on 8 0I C i s c o m p a red t o t h e p r ovi s i on of sect i on 80 IB ( 4 ) . R el evan t p r ovi si on of Se ct i on 8 0IB ( 4 ) re ads a s un der :-
"(4) The amount of deduction in the case of an industrial undertaking in an industrially backward State specified in the Eighth Schedule shall be hundred per cent of the profits and gains derived from such industrial undertaking for five assessment years beginning 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 derived from such industrial undertaking:
Provided that the total period of deduction does not exceed ten consecutive assessment years (or twelve consecutive assessment years where the assesee is a company-operative society) subject to fulfillment of the condition that it begins to manufacture or produce articles or things or to operate its cold storage plant or plants during the period beginning on the Ist day of April, 1993 and ending on the 31st day of March, [2004]:
Provided further that in the case of such industries in the North-Eastern Region, as may be notified by the Central Government, 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 deduction shall in such a case not exceed ten assessment years:10
Provided also that no deduction under this sub-section shall be allowed for the assessment year beginning on the 1st day of April, 2004 or any subsequent year to any undertaking or enterprise referred to in sub-section (2) of section 80-IC."
37. Th e c a ref ul p e r us al of t h e ab o ve p r o vi si on wo u l d sh o w t h at b ef or e t h e i n t ro d uc t i on of sect i on 8 0I C wh i ch i s b ef o re u s f or con si der at i on , t h e d ed uct i on t o t h e b ac k wa r d st at e s wa s a v ai l ab l e i n t erm s of sect i on 80IB ( 4 ) . Th e t h i rd p ro vi so m ak es i t cl ea r t h at af t er 3 1. 3. 20 04, t h i s ded u ct i on wi l l b e a v ai l ab l e on l y u / s 80I C . Th e s ub se ct i on f u rt h er m ak es i t cl ea r t h at ded u ct i on wo u l d b e @ 10 0 % f or t h e f i rst fi ve ye a rs an d t h er eaf t er @ 2 5 %. F u rt h er, t h e f i rst p ro vi s o m ak es i t cl ea r t h at de d uct i on wi l l n ot exc ee d 10 con se c ut i ve a s s es sm en t y ea rs . Th e s ec o n d p r o vi so f urt h er m ak e s i t cl ea r t h at i n t h e ca s e of st at e s of N ort h - E a st er n re gi o n s, t h e ded u ct i on wo u l d b e @ 1 00 % f or al l t h e 1 0 ye a r s. Th u s, e ven i n t h e ea rl i er p r o vi si on on l y i n ca se of N ort h - E a st er st at e s, t h e ded uct i on of 10 0 % wa s al l o wa b l e f or 1 0 y ea r s wh er e a s i n t h e ca se of st a t es of Hi m ach al Pra de sh , t h e d ed u ct i on wa s al l o wa b l e @ 1 00 % f or f i rst f i ve y ea r s an d 2 5% f o r n e xt f i ve y ea r s .
38. F urt h e r, i t sh o ul d b e n ot e d t h at sub se ct i on ( 6 ) st a rt s wi t h n on ob st an t e cl a us e an d t h eref or e, i n n o c a s e t h e de d uct i on c o u l d b e f or p e ri od exc ee di n g 10 y ea rs a n d i n t h i s r ega rd we m a y n ot e t h at ev en t h e L d. a ut h or s i n t h ei r Com m en t a ry of In c om e T a x L a ws B y Ch at ur v edi & Pi t h i sa ri a's - Si xt h E di ti on h a s exp re ss ed t h e sam e op i n i on . Th e rel ev a n t ext ract at p ages 635 1 of t h e com m en t a r y rea ds a s un de r;-
"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 deduction inclusive of the period of deduction -
- under section 80-IC, or
- under the second proviso to section 80-IB(4) or
- under section 10C as the case may be, exceeds 10 assessment years."
39. La st l y, i t wa s c on t en d ed t h at i n i ti al a s se s sm en t yea r as def i n ed i n cl ause ( v ) of s ub s ect i on ( 8 ) of sect i on 80I C u s es t h e exp r e ssi on ' or ' t h er e f ore, i t can b e con st ru ed t h at i t rel at es t o b ot h si t uat i on s s ep a rat el y i .e. f or n e w un i t an d s ub st ant i al exp an de d un i t . We f i n d n o f o rce i n t h i s con t en t i on . Th e i ni ti al a sse ssm e n t y ea r h a s b e en d ef i n ed a n d t h e exp re s si on ' o r' h a s be en u se d i n re sp e ct of n e w u n i t s b y st at i n g 'c om m en ce s op erat i on ' or 'c om p l et e s ub st an t i al exp a n si on '. Her e t h e exp re ssi on ' or ' i s t o b e rea d a s a m ut ual l y e xcl usi ve exp re ssi on wh i ch r ef er s t o a p a rt i cul a r si t uat i on b y excl u di n g t h e ot h e r si tuat i on . Th er ef or e, i n i ti al a s se s sm en t y ea r wo ul d cl e a rl y com m en ce ei th er on com m en c em en t of op e rat i on o r at com p l et i on of su b s t an t i al exp an si on of exi st i n g un i t . In an y ca se t h e wo r d 'i n i ti al ' can n ot b e u se d t wi c e b y ref e rri n g t o s eri es of ev en t s. Th i s c an b e un der st o od wi t h a ve r y si m p l e e xam p l e. Let u s sa y a p er s on ' A ' p a ss e s o ut h i s exam i n at i on of L LB an d g et em p l o y e d a s L egal Of f i cer i n an or gan i zat i on . L at er on , h e q ui t s t h e j ob an d st a rt s t h e p r ac t i ce i n 11 l egal p r of es si on an d ul t i m at el y h e i s el e vat ed a s a Ju d g e. T h en i n s uch a si t uat i on i t can n ot b e sai d t h at i n i ti al l y ' A ' wa s wo r k i n g i n a or gan i zat i on an d t h en i n i ti al l y h e wa s i n t h e p r of es si on a n d t h en el e vat ed a s a Ju d g e . In i t i al l y can b e us e d o n l y on c e a s a m a t t er of u sag e of E n gl i sh l an g ua ge. Th e ref or e , readi n g of t he ab o ve p ro vi si on cl ea rl y sh o ws t h at i n t en t i on of t h e l egi sl at ur e wa s ve r y cl ea r t o al l o w 1 00 % f or f i rst f i ve ye a r s i n ca se of un i t s si t uat ed i n t h e St at e of Hi m ach al Pra de sh ( si n ce al l t h e ca s es b ef o re u s a r e si t uat ed i n t h e St at e of Hi m ach al Pra de sh ) an d t h er eaf t er 2 5 % ded u ct i on f or an ot h er f i ve yea rs on t h e n e w un i t s o r t h e exi st i n g un i t s wh er e s ub st an t i al e xp an si on wa s ca r ri ed o ut .
40. It h a s al s o b e en c o n t en de d t h at i n cen t i ve p ro vi si on sh o ul d b e c on st r ue d l i b eral l y. F u rt h er, i t wa s co n t en de d wi t h ref e ren ce t o t h e deci si on of M/ s N ov ap an In di a Lt d v s Col l ect or of C en t ra l E xci se an d C ust om s ( s up r a ) b y t h e Re ve n ue i s n ot co rr ect bec a us e t h at p ro vi si on wa s r en der ed un d er In di rect T a x Act . We f i n d n o f o rce i n t h ese s u b m i ssi on s . E ver y d eci si on of t h e Ho n ' b l e S up rem e C o urt or f or t h at m at t er of an y Hi gh C ou rt h a s t o b e se en f or t h e ra t i o l ai d do wn i n a p a rt i cul a r deci si on an d i t doe s n ot m at t er un de r wh i ch p a rt i cul a r Act s u ch p ri n ci p l es h a s b een deci de d. No d o u b t t h e i n cen t i ve p ro vi si on s a re req ui re d t o b e i n t erp r et ed l i b er al l y b ut i n ca s e of M/ s N o vap an In di a Lt d v C ol l e ct or of C en t ral E xci se an d C u st om s ( s up ra ), i t wa s ob s er ved a s un de r :-
" The learned counsel for the appellant then contended that since there is an ambiguity about the meaning and purport of item-6 of the table appended to the Exemption Notification, the benefit of such ambiguity should go to the assessee manufacturer and the entry must be construed as taking in the MFPBs as well. It is not possible to agree with this submission.
In Mangalore Chemicals& Fertilizers Ltd.. v. Deputy Commissioner of Commercial Taxes & Ors., [1992) Suppl. 1 S.C.C, 21, a Bench of this Court comprising M.N. Venkatachaliah, J. (as the learned Chief Justice then was) and S.C Agrawal, J. stated the relevant principle in the following words:
"Shri Narasimhamurty again relied on certain observations in CCE v. Parle Exports (P)Ltd. [1989] 1 SCC 345, in support of strict construction of a 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 observed.
"While interpreting an exemption clause, liberal interpretation should be imparted to the language thereof, provided 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 construction arises only in case of doubt in regard to the intention of the legislature manifest on the statutory language. Indeed, the need to resort to any interpretative process arises only where the meaning 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 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 be construed strictly. A person invoking an exception or an exemption provision to relieve him of the tax liability must establish clearly that he is covered by the said provision. In case of doubt or ambiguity, benefit of its must go to the State".
The Hon'ble Supreme Court in Orissa State Warehousing Corporation's case (supra) has laid down that "While it is true that in the event of there being any doubt in the matter of interpretation of a fiscal statute, the same goes in 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 taxing statutes the law courts would not be justified in introducing some other expressions which the legislature thought fit to omit. In the present context, there is no doubt as to the meaning of the words used in the section by reason of the 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 since the same is opposed to the natural tenor of the statute, the entitlement for exemption, therefore, ought not to be read with any latitude to the tax-payer or even with a wider connotation."
41. Th e ref or e, i t b ecom es cl ea r t h at l i b eral i n t erpret at i on of an i n cen t i ve p r ovi si on i s p os si b l e i f t h ere i s a n y d o ub t . As we h av e se en ab o ve t h at i f va ri ous su b se ct i on s of sect i on 8 0I C a r e r ead ca r ef ul l y i t l eaves n o d o ub t t h at ded u ct i on wa s m ean t on l y f or n e w un i t s o r i n ca se of ol d un i t s i f sub st an t i al exp an si on wa s c a r ri ed o ut i n s uch ol d un i t s an d de d uct i on wa s a vai l ab l e on l y f or a p e ri od of 1 0 y ea r s. Th e ref or e, t h ere i s n o q ue st i on of gi vi n g an y i n t erp ret at i on m uch l es s l i b eral i n t erp r et a t i on t o sect i on 80I C wh en t h e re adi n g of wh o l e sect i on m ak es t h e p r ovi si on v er y cl ea r. A s ob se rv ed i n ca se of M/ s N ov ap an In di a Lt d v C ol l e ct or of C e n t ral E xci se an d C u st om s ( s up r a ) t h e b u rd en wa s o n t h e a s se s se e t o sh o w un d er wh i ch cl a us e h e wa s en t i t l ed t o t h e d ed uct i on b ut a ss e ss ee i s si m p l y a ss ert i n g b ef or e us t h at t h er e i s n o re st ri cti on f or de d uct i on i n ca se of s ub st an t i al exp an si o n of n e w un i t s. In o ur op i n i on, t h at i s n ot en o ugh b eca u se a b se n ce of re st ri ct i on d o es n ot m ea n t h at p a rt i cul a r d ed uct i on wa s al l o wa b l e .
42. We al s o f i n d f orc e i n t h e su b m i ssi on s o f Ld. C I T- D R t h at i f i n t erp ret at i on gi ven b y t h e a ss e ss ee i s t o b e a cce pt ed , t h e p ro vi si on wo u l d b ec om e di sc ri mi n ator y f or t wo cl a ss es of un dert ak i n g s i .e. n e w u n i t s an d ol d un i t s. B eca u se t h e ol d u n i t s wo u l d b e en t i t l ed t o 10 0 % d ed uct i on on ex p an si on f or f i rst f i ve y ea r s an d 2 5% t h er eaf t er wh e re a s t h e n e w un i t s wo u l d b ec om e en t i t l ed t o de d uct i on f or 1 0 0% f or f i rst f i ve y ea r s an d ag ai n @ 1 00 % on s ub st an t i al exp a n si on . S u ch di sc ri mi n at or y i n t ent i on can n ot b e i m p ut ed t o t h e Le gi sl at ur e.
49. In vi e w of t h e a b o v e d et ai l ed di sc u ssi o n we h ol d t h at t h e a s se s see b ef or e u s i .e. M/ s H yc r on E l ect r on i c s i n IT A N o . 79 8/ C h d /2 01 2 i s en t i t l ed t o on l y 2 5 % of de d uct i on d u ri n g t h e p re sen t y ea r b eca u s e t h e a s se s se e h a s al rea d y avai l ed t h e p eri od of f ul l d ed uct i on @ 10 0% i n t h e ea rl i er f i ve yea r s i .e. f rom a s se s sm en t yea rs 2 0 04- 05 t o 20 08- 09 . I n t h i s b ack g r o un d, we f i n d n ot h i n g wr o n g wi t h t h e o rd er of L d. CI T( A ) an d we up h ol d t h e sam e. Ac c ordi n gl y, a s se s see ' s a p p e al i s di sm i ssed. "
1313. Briefly stated the Hon'ble Bench held that benefit of 100% deduction of profits from the initial assessment year is available to only two categories of eligible units i.e; 1) those which existed when the 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 units which came it existence after the introduction of the provision and thereafter undertook substantial expansion, claiming the year in which substantial expansion 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 assessee having already claimed the benefit of 100% deduction of its profits under section 80IC for five years by taking Assessment year 2005-06 as its 'initial' 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 the 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 dismissed.
14. Ground No. 3 raised by the assessee is against the charging of interest under section 234B, 234C and 234A of the Act . We find 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 Hon'ble Supreme 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 charged 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 dismissed.14
17. We shall now take up the appeal filed by the Revenue in ITA No. 853/Chd/2014 The Revenue has raised the following grounds 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 income derived from scrap sale."
18. Brief facts relating to the issue are that during assessment proceedings the AO found that the assessee had claimed deduction under section 80IC on sale of scrap. Ld. AO held that the income cannot be said to be directly derived from manufacturing activity of the Industrial undertaking 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 holding that since the assessee's books of account are audited and have been test checked by the AO and the AO has not been able to establish that the 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 follows:
" The issue is whether deduction u/s 80IC is available 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 deduction 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 section 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 that manufacturing of axels, shaft and gears do not generate scrap, and since the books of accounts of assessee are audited and test checked by the A.O. , the contention of A.O. canot be upheld and the contention of the assessee is accepted. 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 AO 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 decision of the Hon'ble Supreme Court in the case of Liberty India Ltd. and other Vs. CIT 317 ITR 218 (SC) and hence the assessee was not eligible to deduction under section 80IC on the same.
22. None appeared on behalf of the assessee .
23. We have heard the submissions made before us and also perused the orders of the authorities below.
24. We do not find any infirmity in the order of the Ld. CIT(A). Undisputedly income from sale of scrap generated during the course of activity carried out by an assessee is income "derived" from the activity of the assessee. In the impugned case, it is not in dispute that the assessee is carrying out manufacturing activity. The assessee has claimed scrap to have generated from its manufacturing activity and has substantiated this 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 specific finding to establish that the scrap has not been generated in the manufacturing process. We therefore hold that the scrap has been generated from the manufacturing activity of the assessee and thus can be held to be derived from the activity of the industrial undertaking of the assessee.
The assessee, we therefore hold, is entitled to claim deduction under section 80IC on the income generated from the sale of scrap as per the decision of the Hon'ble Supreme Court rendered in the case of Liberty India (Ltd.) (supra). In 16 view of the above we uphold the order of the Ld. CIT(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 dismissed.
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, The CIT(A), The DR