Income Tax Appellate Tribunal - Delhi
Modern Tyre Moulds (India) (P.) Ltd. vs Income-Tax Officer on 1 June, 1990
Equivalent citations: [1990]34ITD232(DELHI)
ORDER
J. Kathuria, Accountant Member
1. This appeal by the assessee for the assessment year 1982-83 is directed against the order dated 13-3-1987 passed by the Commissioner of Income-tax (Appeals), New Delhi.
2. The only ground raised in this appeal, reads as under:-
That the learned CIT (Appeals) erred in law as well as on the facts of the case in sustaining disallowance of deduction under Section 80-I of the Income-tax Act.
3. Brief facts of the case are these: The assessee is a Pvt. Ltd. company. Its accounting year relevant for assessment year 1982-83 ended on 30-6-1981. The assessee derives income from the business of manufacture and sale of tyre retreading plants. The assessee had claimed deduction under Section 80-I of the Income-tax Act by way of a letter dated 7-2-1985 addressed to the assessing officer. The Income-tax Officer, however, did not deal with the claim of the assessee while completing the assessment on 11-2-1985. The application under Section 154 filed by the assessee was also rejected by the Income-tax Officer vide his order dated 24-9-1985. The assessee preferred a quantum appeal before the Commissioner of Income-tax (Appeals) who also rejected the assessee's claim under Section 80-I. It is this order of the CIT (Appeals) which is under challenge before us.
4. Shri C.S. Aggarwal, the learned counsel for the assessee submitted that Section 80-I of the Income-tax Act, 1961 was inserted by the Finance (No. 2) Act, 1980 with effect from 1-4-1981. Drawing our attention to the Explanatory note issued by CBDT under Circular No. 281 dated 22-9-1980 it was submitted that the new Section 80-I "will take effect from 1st April, 1981 and will accordingly, apply in relation to the assessment year 1981-82 and subsequent years". It was submitted by him that though the manufacture of articles or things in the instant case was not begun on or after 1-4-1981 as contemplated by Section 80-I(2)(iii). the circular being benevolent in nature, would squarely apply to the assessee's case and the assessee would be entitled to deduction under Section 80-I for the assessment year 1982-83. Reliance in this regard was placed on the Tribunal's decision in the case of Softek (P.) Ltd. v. ITO [1990] 32 ITD 540 (Delhi) for the proposition that in view of the decisions of the Supreme Court in Navnit Lal C. Javeri v. K. K. Sen, AAC [1965] 56 ITR 198, Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 and K. P. Varghese v. ITO [1981] 131 ITR 597 benevolent circulars of the Board, even if they deviate from the law and from the provisions of the Act are binding on all Income-tax authorities.
5. The learned Departmental Representative, on the other hand, contended that Circulars issued contrary to the provisions of the law were bad because no Rule-making authority could circumvent, distort, abridge or whittle down the clear and unambiguous provisions of the law. It was also pointed out that the circular referred to by the learned counsel for the assessee was not a benevolent circular.
6. We have considered the rival submissions as also the facts on record. Previously the "tax holiday provisions were contained in Section 80-J of the Income-tax Act which were applicable in relation to new industrial undertakings which went into production before 1st April, 1981. Finance (No. 2) Act, 1980 inserted a new Section 80-I which applied in relation to new industrial undertakings which were set up after 31-3-1981. Sub-section (2) of Section 80-I laid down the conditions which had to be fulfilled before any industrial undertaking could claim deduction in respect of its profits and gains. This sub-section lays down four conditions. We are, however, concerned with the condition which is incorporated in Clause (iii) of the aforesaid sub-section. This clause lays down that the industrial undertaking should manufacture or produce any article or thing, not being any article or thing specified in the list in the Eleventh Schedule and it should begin to manufacture or produce such articles or things at any time within the period of 4 years, next following the 31st day of March, 1981 or such further period as the Central Govt. may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking. The said clause referred to the operation of cold storage plants as well but for the sake of brevity we have restricted ourselves to the limb regarding manufacture or production of any article or thing because the assessee is not a cold storage plant, but a manufacturer or producer of article or thing. This clause clearly lays down that two conditions must be cumulatively met. One condition is that the industrial undertaking should manufacture or produce any article or thing and secondly it should begin to manufacture or produce articles or things on or after 1-4-1981. In the instant case it is found that the assessee company was incorporated in the year 1979 and had started production during the previous year ending 30-6-1980 relevant to the assessment year 1981-82. The present assessment which relates to assessment year 1982-83 represented the second year of the commencement of the manufacturing business. It is, therefore, clear that the manufacture or production of article or thing in the instant case was not begun on or after 1-4-1981. This condition has, therefore, not been fulfilled by the assessee.
7. The Board's Circular relied upon by the learned counsel for the assessee does not say that it will be applicable to assessment year 1981-82 even if the conditions contained in Sub-section (2) of Section 80-I were not fulfilled. In fact paragraph 19.3 of the said Circular clearly states as follows:-
The Finance Act has inserted a new Section 80-I which will apply in relation to new industrial undertakings (including cold storage plants) which are set up after 31st March, 1981 or approved hotels which start functioning after that date or ships which are brought into use after 1st April, 1981. The 'tax holiday' under the new provision will be available in respect of new industrial undertakings set up before 1st April, 1985 or approved hotels which start functioning before that date or new ships which are acquired on or before that date.
All that the Circular says is that Section 80-I will be applicable for assessment year 1981-82, but the question to be decided in the instant case is whether on the facts of this case the deduction under Section 80-I will be available to the assessee or not. It was vehemently argued by the learned counsel for the assessee that if the production or manufacture of article or thing was to begin on or after 1-4-1981 how could the provisions of Section 80-I be applicable to assessment year 1981 -82. From this the learned counsel for the assessee wanted us to believe that the Circular was a benevolent circular and should be interpreted liberally and the benefit of deduction should be made available to the assessee. We candidly confess that we are not in a position to straightaway visualise or contemplate a situation where the Circular would be applicable for the assessment year 1981-82. Be that as it may, the language of Clause (iii) of Sub-section (2) of Section 80-I is quite clear and unambiguous. The Board's Circular also reiterates the position incorporated in the section. The Board's instructions, therefore, do not depart or deviate from the spirit or letter of the section. We fail to understand how the aforesaid Circular can be interpreted to mean a benevolent Circular when the intention of the Board is very clear that the new provisions of Section 80-I shall be available to an industrial undertaking which has started functioning on or after 1-4-1981. By no stretch of imagination the aforesaid Circular can be called a benevolent Circular and so the ratio of the decision in the case of Softek (P.) Ltd. (supra) is not applicable in this case.
8. Having regard to the entire facts and circumstances of the case, we are of the considered view that the assessee is not entitled to deduction under Section 80-I of the Income-tax Act. We accordingly uphold the order of the Commissioner of Income-tax (Appeals) in this regard.
9. In the result, the appeal is dismissed.