BY TIOL NEWS SERVICE
NAINITAL, MAR 09, 2018: THE issue before the High Court was - Whether Section 10B benefits are available from the year in which the undertaking begins to manufacture, and not from the year of approval as 100% EoU. YES is the verdict.
Facts of the case
THE assessee-company filed returns for the relevant AY, claiming an amount as deduction u/s 10B of the Act. The AO noted that the assessee had submitted its audit report in Form 3CD and a report in Form 10CCB in respect of deduction u/s 80IC. The AO further noted that the assessee claimed exemption u/s 10B and did not claim deduction u/s 80IC of the Act. Considering the assessee's submissions, the AO disallowed the deduction u/s 10B. Subsequently, the CIT(A) allowed the assessee's appeal, and such findings were upheld by the Tribunal. Hence the present appeal by the Revenue, claiming that the Tribunal ignored specific provisions of Section 10B, that the deduction u/s 10B is to be allowed for a period of 10 consecutive AYs beginning with the AY relevant to the previous years in which the undertaking begins to manufacture articles or things.
On hearing the matter, the High Court held that,
++ considered the provisions of Section 10B itself. Thereupon, the conclusion is inescapable that the intent of the law-giver was to confer benefit of deduction of the profits and gains of a 100% EoU from the total income, no doubt, subject to the manner in which it has been understood by the Supreme Court in Commissioner of Income Tax & others vs. Yokogawa India Ltd., but limited to 10 consecutive years, the starting point of which was the beginning of production of the goods in question. In this regard, considered provisions of Section 10B, as it is now found in the statute book. It is a substitution of a provision, which was brought into the statute book as early as on 01.04.1989. Indeed, its ingredients were different, but the concept of 100% EoU is the same as it is found in the present version of Section 10B, namely, there had to be an approval under the Industries (Development and Regulation) Act, 1951 as a 100% EoU. There is no warrant in the provision of Section 10B to bring in an intendment to the Legislation bearing in mind, particularly, that there is no room for intendment in a taxing statute. No doubt, a taxing statute like any other statute must be interpreted fairly and even the object of the Legislature may not leave it untouched. But, having regard to the setting of the statute, the purport was only to give the benefit for a period of 10 years from the date on which the undertaking commenced production. The words are clear and there is no room for any interpretation, as contended for by the learned counsel for the assessee. Merely getting the status of a 100% EoU in the year 2007, in other words, would not result in a change in the date of beginning of production by the said unit. In fact, the Circular, to the extent it proceeds to extend the period, appears to be beneficial to the assessee and it could possibly be a case of being a clarification, which is beneficial to the assessee. On an interpretation of the Section, which is a task which is unavoidable for the Court, even if there is a Circular, in which matter the court agrees with the assessee, the assessee, which becomes a 100% EoU by virtue of the approval, could claim the benefit. But, in no case, can it go beyond 10 years from the date on which it originally started producing the goods.
++ the arguments of the assessee's counsel that, if such interpretation is accepted, it would render the obtaining of the status of a 100% EoU redundant and a futile exercise, fails to impress. The mere fact that the assessee (it may be noticed, who had in fact enjoyed the benefit of deduction u/s 80HHC from 1992-1993 and, thereafter, took further benefit u/s 80IC from 2004-2005 for a period of 5 years) thought it fit to apply and get the approval within the meaning of Section 10B cannot bind the income tax authorities to take a view contrary to the one, which we have taken, as merely obtaining the status of a 100% EoU cannot clothe the assessee with the right to claim benefit of deduction beyond 10 years, as we have explained. May be, it has impact for other purposes but the court is only concerned in this case with the question whether the assessee is entitled to the benefit u/s 10B and in the view of this court, the assessee is not entitled for the same. Therefore, that the assessee had embarked upon an exercise, which is turned out to be futile, cannot be an argument which will advance the case of the assessee.
(See 2018-TIOL-412-HC-UKHAND-IT)
