Income Tax Act, 1961:
s.80-IC – Deduction under – Entitlement for – To the industrial undertakings which completed substantial expansion – The assesseeindustrial undertaking in question started availing deduction u/s. 80-IA from the assessment year 1998-99 for two assessment years – From the assessment years 2000-01 to assessment year 2005-06, the assessee availed deduction u/s. 80-IB – After s. 80-IC came into effect, the assessee having carried out substantial expansion in the assessment year 2006-07, claimed exemption u/s. 80-IC for assessment years 2006-07 onwards – Deductions for assessment years 2006-07 and 2007-08 were allowed by Assessing Officer – However, deductions for assessment years 2008-09 and 2009-10 were rejected on the ground that the years 2008-09 and 2009-10 being 11th and 12th years of deduction cannot be permitted in view of s.80-IC(6) – The order of Assessing Officer was upheld by appellate authority as well as appellate Tribunal – High Court also held that ten years period to be counted from the assessment year 1998-99 i.e. when the assessee had claimed deduction for the first time u/s. 80-IA and hence deductions for the years 2008-09 and 2009-10 not to be allowed – On appeal, held: The purport behind three types of deductions u/ss.80-IA, 80-IB and 80-IC is different – Therefore, the deductions u/ss.80-IA and 80-IB would be of no concern so far as deduction for carrying out substantial expansion u/s.80-IC is concerned – The assessee became entitled to deduction u/s.80-IC from the initial year i.e. the year in which substantial expansion was completed – The inclusion of period of deduction u/ss.80-IA and 80-IB for the purpose of counting 10 years as provided in s. 80-IC (6) is limited to those industries which are set-up in North-Eastern region – Therefore, period of deduction u/ss. 80-IA and 80-IB not to be reckoned for the purpose of benefit of deduction u/s.80-IC to the assessee.
Allowing the appeals, the Court
HELD: 1. It was wrong on the part of the Assessing Officer not to allow deduction to the assessee under Section 80-IC for the Assessment Years 2008-09 and 2009-2010. [Para 14][495-C]
2. As per the provisions of sub-section (6) of Section 80-IC no deduction is 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 the second proviso to sub-section (4) of Section 80-IB or under Section 10C, as the case may be, exceeds ten assessment years. The total period of ten years, thus, is to be counted in the three circumstances: (a) When the deduction has been given under Section 80-IC for a period of ten years, no further deduction is admissible. (b) When the deduction is given under second proviso to sub-section (4) of Section 80-IB. This provision pertains to those industries which are in the North-Eastern Region. (c) When the deduction is claimed under Section 10C. It is again a special provision in respect of certain industrial undertakings in NorthEastern Region. [Para 10][492-D-H]
3. The assessee in the instant case has not got deduction under Section 80-IC for a period of ten years as he started claiming deduction under this provision w.e.f. Assessment Year 2006-07. Situation Nos. (b) and (c) mentioned above would not apply to the assessee as it’s undertaking/enterprise is not established in North-Eastern Region. It is, thus, clear that the High Court has failed to appreciate that the provisions of Section 80-IC(6) of the Act state that the total period of deduction under Section 80-IC and Section 80-IB cannot exceed ten assessment years only if the manufacturing unit was claiming deduction under second proviso to Section 80-IB(4) of the Act i.e. units located in the North-Eastern State. [Para 11][492-A-C]
4. The purport behind the three types of deductions specified in Section 80-IA, Section 80-IB and Section 80-IC is different. Section 80-IC stipulates the period for which hundred per cent deduction is to be given and then deduction at reduced rates is to be given. If the assessee had earlier availed deduction under Section 80-IA and Section 80-IB, that would be of no concern inasmuch as on carrying out substantial expansion, which was carried out and completed in the Assessment Year 2006-07, the assessee became entitled to deduction under Section 80-IC from the initial year. The term ‘initial year’ is referable to the year in which substantial expansion has been completed, which legal position is stated by the High Court itself and even accepted by the Department as it has not challenged that part of the judgment. The inclusion of period for the deduction is availed under Section 80-IA and Section 80-IB, for the purpose of counting ten years, is provided in sub-section (6) of Section 80-IC and it is limited to those industrial undertakings or enterprises which are set-up in the North-Eastern Region. By making specific provision of this kind, the Legislature has shown its intent, namely, where the industry is not located in North-Eastern State, the period for which deduction is availed earlier by an assessee under Section 80-IA and Section 80-IB will not be reckoned for the purpose of availing benefit of deduction under Section 80-IC of the Act. [Para 12][493E-H; 494-A] Textile Machinery Corporation Limited, Calcutta v. The Commissioner of Income Tax, West Bengal, Calcutta (1977) 2 SCC 368: [1977] 2 SCR 762 – held
inapplicable.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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