(1)
M/S. B. HIMMATLAL AGRAWAL Vs.
COMPETITION COMMISSION OF INDIA AND ANR .....Respondent D.D
18/05/2018
Facts: The appellant, M/S. B. Himmatlal Agrawal, was penalized by the Competition Commission of India (CCI) for alleged anti-competitive and unfair trade practices. The appellant filed an appeal before the National Company Law Appellate Tribunal challenging the CCI's order. The Appellate Tribunal granted a stay on the CCI's order subject to the condition that the appellant deposits 10% o...
(2)
MEENAKSHI SAXENA & ANR ..... Vs.
ECGC LTD. (FORMERLY KNOWN AS EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD.) AND ANR. .....Respondent D.D
18/05/2018
Facts:Meenakshi Saxena (Appellant) purchased an insurance policy from ECGC Ltd. against loss in export business.Dispute arose when ECGC Ltd. did not fully pay the insurance claim as per the terms of the policy.The District Forum ordered ECGC Ltd. to pay 90% of the claimed amount along with interest and litigation expenses.ECGC Ltd. paid a partial amount during execution proceedings, calculated bas...
(3)
MAHABIR INDUSTRIES ..... Vs.
PRINCIPAL COMMISSIONER OF INCOME TAX .....Respondent
Sections, Acts, Rules, and Articles mentioned:
Section 80IB, Section 80IC(6): Income Tax Act, 1961
Finance Act, 1991
Finance Act, 1999
Finance Act, 2003
Section 15C: Income Tax Act, 1922
Subject:
Interpretation of deductions under Section 80-IC of the Income Tax Act, 1961, concerning substantial expansion in industrial undertakings.
Headnotes:
Facts:
Mahabir Industries, engaged in polythene manufacturing, availed deductions under Section 80-IA of the Income Tax Act for two assessment years.
The company underwent substantial expansion in its factory in Shimla, Himachal Pradesh, qualifying for deductions under Section 80-IC from the assessment year 2006-07 onwards.
The Assessing Officer disallowed deductions claimed for the assessment years 2008-09 and 2009-2010, citing the limitation of ten assessment years under Section 80-IC(6).
The High Court upheld the AO's decision, holding that deductions could not exceed ten assessment years, counting from the initial assessment year when deductions were first availed under Section 80-IA.
Issues:
Whether deductions claimed by Mahabir Industries under Section 80-IC for the assessment years 2008-09 and 2009-2010 were rightly disallowed by the Assessing Officer and upheld by the High Court?
Whether the provisions of Section 80-IC(6) of the Income Tax Act apply to industrial undertakings established outside the North-Eastern Region?
Held:
The Supreme Court held that deductions under Section 80-IC should not be limited to ten assessment years for industrial undertakings established outside the North-Eastern Region.
The Court interpreted the provision to clarify that the inclusion of periods for deductions availed under Section 80-IA and Section 80-IB was limited to industrial undertakings or enterprises set up in the North-Eastern Region, as specified in Section 80-IC(6).
The Court rejected the Revenue's argument regarding the interpretation of Section 15C of the Income Tax Act, 1922, stating it was irrelevant to the case.
Accordingly, the Supreme Court set aside the High Court's decision and allowed Mahabir Industries' appeals, holding that the Assessing Officer was wrong in disallowing deductions under Section 80-IC for the assessment years 2008-09 and 2009-2010.
Referred Cases:
Textile Machinery Corporation Limited, Calcutta Vs. Commissioner of Income Tax, West Bengal, Calcutta, (1977) 2 SCC 368
JUDGMENT
A.K. Sikri, J. - A short question of law arises for consideration in these appeals. All the appeals are filed by the same party, namely, Mahabir Industries (hereinafter referred to as the `assessee') in which common respondent is Principal Commissioner of Income Tax (hereinafter referred to as the `Department'). Before stating the question of law, it may be necessary to mention in brief the background under which the said question of law has arisen inasmuch as this background would be an enabling factor in understanding the true ambit and scope of the question of law.
The assessee manufactures polythene for which it is having its factory in Shimla, Himachal Pradesh. The activity undertaken by the assessee, an industrial undertaking, qualified for exemption from income tax under Section 80-IA of the Income Tax Act (hereinafter referred to as the `Act'). Section 80-IA of the Act provides for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc. if it fulfills the conditions mentioned in subsection (4) thereof. Such a deduction is of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive Assessment Years. In nutshell, those undertakings or enterprises, which fulfill the conditions mentioned in sub-section (4) of Section 80-IA of the Act, are entitled to total deductions of their profits, which means, no tax is payable and the period for which such undertakings or enterprises are exempted from payment of tax is ten consecutive Assessment Years. The assessee admittedly qualified for this deduction which it started availing from the Assessment Year 1998-99. This deduction under Section 80-IA was claimed and allowed for two Assessment Years i.e. 1998-99 and 1999-2000.
2. Section 80-IA of the Act was originally introduced in the year 1991 by the Finance (No.2) Act, 1991 w.e.f. April 1, 1991. There were amendments in the Section from time to time. This Section was amended by the Finance Act, 1999 w.e.f. April 1, 2000. Along with this provision, Section 80-IB was also introduced for the first time by the same Finance Act, 1999. This provision allows deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Deduction from such profits and gains is of an amount equal to such percentage and for such number of Assessment Years as specified in Section 80-IB. Sub-section (4) of Section 80-IB provides for hundred per cent deduction for a period of five years and thereafter twenty-five per cent. First proviso thereto states that total period of deduction is not to exceed ten consecutive Assessment Years. Second proviso is a specific provision for industries in the North-Eastern Region to which we shall advert to at the appropriate stage. Sub-section (2) enumerates the conditions which are to be fulfilled by such industrial undertakings in order to qualify for deductions from profits and gains under that provision.
3. As mentioned above, for the Assessment Years 1998-99 and 1999-2000 (i.e. two Assessment Years), the assessee was allowed deduction under Section 80-IA. From the Assessment Year 2000-01 to Assessment Year 2005-06, the assessee claimed deduction under Section 80-IB.
4. Interestingly, another provision in the form of Section 80-IC was inserted by Finance Act, 2003 w.e.f. April 1, 2004. As per this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in sub-section (3) of Section 80-IC. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. The deduction was provided to new units established in the aforesaid States, and also to existing units in those States if substantial expansion was carried out. The deduction was available @100% for ten Assessment Years for the units located in North-Eastern and in the State of Sikkim and for the units located in Himachal Pradesh, the deduction was available @100% for five years and @25% for next five years. The assessee completed substantial expansion (by investing in new plant and machinery of value more than 50% of the value of plant and machinery already installed as on 1 April, 2005) to the manufacturing unit situated at Baddi, Himachal Pradesh in the Assessment Year 2006-07. In view of the substantial expansion, the accused claimed deduction under Section 80-IC @100% for Assessment Years 2006-07 and 2007- 08, which was also allowed by the Assessing Officer (AO) after passing the order under Section 143(3) of the Act.
5. Sub-section (3), as noted above, mentions the period of ten Assessment Years commencing with the initial Assessment Year. Sub-section (6) may also be taken note of at this stage which reads as under:
"(6) Notwithstanding anything contained in this Act, 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 the second proviso to sub-section (4) of section 80- IB or under section 10C, as the case may be, exceeds ten assessment years."
6. As noted above, the assessee had carried out substantial expansion in the Assessment Year 2006-07 and, therefore, claimed exemption under Section 80-IC of the Act for Assessment Year 2006-07 onwards. Deductions for the year 2006-07 and 2007-08 were allowed. However, thereafter, deductions for the Assessment Year 2008-09 and Assessment Year 2009-2010 were rejected by the AO on the ground that this was 11th and 12th year of deduction and as per Section 80-IC(6), total deductions under Section 80-IC and Section 80-IB cannot exceed the total period of ten years. Commissioner of Income Tax (Appeals) {CIT(A)} and Income Tax Appellate Tribunal (ITAT) upheld the order of the AO. The High Court took up the appeals of the assessee along with other similar enterprises who had claimed the benefits. It framed the following question in those appeals:
"The moot issue involved in these appeals, inter alia, is as to whether an "undertaking or an enterprise" (hereinafter referred to as the Unit), established after 7th January, 2003, carrying out "substantial expansion" within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @100%, under Section 80-IC of the Income Tax Act. Also, if so, then for what period."
7. This question has been decided in favour of all the assessees. However, insofar as the assessee herein is concerned, keeping in view that there is a ceiling of ten years as stipulated under Section 80-IC(6), the High Court has held that ten years period shall be counted from the Assessment Year 1998-99 when the assessee had claimed deduction for the first time under Section 80-IA and, therefore, deductions for the Assessment Years 2008- 09 and 2009-2010 would not be allowed. This is clear from the following discussion in the High Court judgment:
"46. The moment "substantial expansion" is completed as per Section 80-IC (8)(ix), the statutory definition of "initial assessment year" [Section 80-IC(8)(v)] comes into play. And consequently, Section 80-IC(3)(ii) entitles the unit to 100% deduction for five years commencing with completion of "substantial expansion", subject to maximum of ten years as per Section 80-IC(6).
47. A unit that started operating/existed before 7.1.2003 was entitled to 100% deduction for first five years under Section 80-IB(4). If this unit completes substantial expansion during the window period (7.1.2003 to 31.3.2012), it would be eligible for 100% deduction again for another five years under Section 80-IC(3)(ii), subject to ceiling of ten years as stipulated under Section 80-IC(6).
48. Applying the aforesaid interpretation, we find there can be different fact situations, some of which, we have tried to illustrate; (i) a "Unit" established prior to 7.1.2003, claiming deduction under Section 80-IB, post insertion of Section 80-IC carries out substantial expansion, would be entitled to deduction only under Section 80-IC, at the admissible percentage, for the remaining period, which in any case when combined, cannot exceed ten years, (ii) just as in the case of the present assessee, a unit established after 7.1.2003, carries out substantial expansion only in the 8th year of its establishment, for the first five years would have already claimed deduction @ 100%; for the 6th and 7th years @ 25%, and then for the period post substantial expansion, in our considered view, the initial year of assessment being in the 8th year, would be entitled for deduction @ 100%, subject to the cap of ten assessment years, (iii) the assessee establishes a unit after January 2003, say in the year 2005-06 and claims deduction under Section 80-IC for the first time in the assessment year 2006-2007 @ 100% of its profits. Thereafter, substantially expands the Unit in the year 2009-10, relevant to Assessment Year 2010-11 can claim deduction @ 100% for next five years subject to the cap of ten assessment years, (iv) an existing unit not claiming any deduction under Section 80-IA, 80-IB or 80-IC substantially expands in the year 2003 and claims deduction under Section 80-IC first time in Assessment Year 2004-2005 and then substantially expands in the year 2007-2008, can claim deduction @ 100% w.e.f. Assessment Year 2008-2009 for next five years, (v) the assessee sets up its unit in the year 2000- 2001, claiming deduction under Section 80-IB till the Assessment Year 2003-2004 and thereafter under Section 80-IC as per law. Carrying out Substantial expansion in the Assessment Year 2004-2005, now claims deduction @ 100% w.e.f. Assessment Year 2004-05 again substantially expands in the Assessment Year 2008-2009 can claim 100% deduction w.e.f. 2008-2009, (vi) the assessee sets up a unit in the year 2005-2006 and does not undergo substantial expansion at all can claim deduction under Section 80-IC."
8. As can be discerned, all other aspects are decided in favour of the assessees except what is illustrated at (i) and (iv). However, the effect thereof is that insofar as appeals of the assessee herein are concerned, they are dismissed on the ground that it cannot claim deduction under Sections 80-IC, 80-IB or 10C for a period exceeding ten years.
9. In this backdrop, the questions of law which have been framed by the assessee in these appeals are the following:
"(a) Whether the Hon'ble High Court was justified in holding that the petitioner was not entitled to deduction under Section 80-IC of the Act by virtue of provision sub-section (6), when the same was not even applicable to the petitioner?
(b) Whether the Hon'ble High Court was justified in holding that the provisions of Section 80-IC(6) of the Act apply to all the undertaking claiming deduction under Section 80-IB(4) of the Act when 80-IC(6) refers to only those undertakings which are covered by second proviso to Section 80-IB(4)?
(c) Whether the Hon'ble High Court was justified in holding that the petitioner is not eligible for deduction under Section 80-IC for a period of 10 assessment years when substantial expansion was carried out by the Petitioner and a substantially new unit was claiming deduction under Section 80-IC of the Act?
(d) Whether the Hon'ble High Court was justified in holding that the petitioner was not entitled to deduction under Section 80-IC of the Act for assessment year 2008-09 and 2009-10 when the total period of deduction of ten years was expiring after assessment year 2009-10?"
10. As can be seen from the reading of paras 46 and 47 of the High Court judgment, it has taken a categorical view that the moment `substantial expansion' is completed as per Section 80-IC(8)(ix), the statutory definition of `initial assessment year' {Section 80- IC(8)(v)} comes into play. As a consequence, Section 80-IC(3)(ii) would entitle the unit to hundred per cent deduction for five years commencing with completion of `substantial expansion' followed by twenty-five per cent deduction for next five years i.e. subject to maximum of ten years. Thus, the High Court accepts that when the substantial expansion is done in a particular Assessment Year and that is made during the period mentioned in sub-section (2) of Section 80-IC, not only benefit admissible under Section 80-IC shall get triggered, the year in which such substantial expansion is completed is to be treated as `initial assessment year'. Having said so, it has put a cap of ten years by invoking the provision of Section 80-IC(6). We have already reproduced the provisions of sub-section (6) of Section 80-IC. As per this provision, no deduction is allowed to any undertaking or enterprise under this D.D
18/05/2018
Facts:Mahabir Industries, engaged in polythene manufacturing, availed deductions under Section 80-IA of the Income Tax Act for two assessment years.The company underwent substantial expansion in its factory in Shimla, Himachal Pradesh, qualifying for deductions under Section 80-IC from the assessment year 2006-07 onwards.The Assessing Officer disallowed deductions claimed for the assessment years ...
(4)
LT. COL. VIJAYNATH JHA Vs.
UNION OF INDIA & ORS .....Respondent D.D
18/05/2018
Facts: Lt. Col. Vijaynath Jha, a Commissioned Officer in the Indian Army, sought permanent secondment in the Directorate General of Quality Assurance (DGQA), an organization under the Ministry of Defence. The Quality Assurance Selection Board (QASB) of DGQA deemed him unfit for permanent secondment, which was subsequently challenged before the Armed Forces Tribunal.Issues:Whether the refusal of pe...
(5)
E. SIVAKUMAR ..... Vs.
UNION OF INDIA AND ORS .....Respondent D.D
18/05/2018
Facts:The petitioner, E. Sivakumar, challenged a judgment and order of the High Court of Judicature at Madras dated April 26, 2018, in Writ Petition No. 19335 of 2017.The High Court had issued a writ of mandamus to transfer the investigation of a criminal case concerning the illegal manufacture and sale of Gutkha and Pan Masala containing Tobacco and/or Nicotine to the CBI.The petitioner, named as...
(6)
SWARAJ ABHIYAN (VI) ..... Vs.
UNION OF INDIA & ORS .....Respondent D.D
18/05/2018
Facts: The writ petition, filed under Article 32 of the Constitution, highlighted deficiencies in the implementation of the Mahatma Gandhi National Rural Employment Guarantee Act, 2005 (MGNREGA). The petitioner alleged that the "approved labor budget" fixed by the Central Government violated the essence of the Act. Additionally, it was contended that there was an unreasonable reduction i...
(7)
STATE OF TAMIL NADU Vs.
P.K. SINHA AND ANR .....Respondent D.D
18/05/2018
Facts: The case involves Contempt Petition (Civil) No. 898 of 2018 in Civil Appeal No. 2453 of 2007, concerning the Cauvery Water Dispute.Issues: The objections raised by the States of Karnataka and Kerala regarding the framing of a scheme for the Cauvery Water Dispute.Held:The objections raised by the States of Karnataka and Kerala regarding the framing of a scheme for the Cauvery Water Dispute w...
(8)
STATE OF UTTAR PRADESH THROUGH PRINCIPAL SECRETARY & ORS Vs.
ALL U.P. CONSUMER PROTECTION BAR ASSOCIATION .....Respondent D.D
18/05/2018
Facts:The issue brought before the Supreme Court pertains to the inadequacy of infrastructure within Consumer Fora throughout the nation.Issues:The primary issue for consideration in this civil appeal and writ petition is the deficiency in infrastructure within Consumer Fora across the country.Held:After hearing all parties involved, including representatives of various states, the Court accepted ...
(9)
AMRIT PAUL SINGH & ANR ..... Vs.
TATA AIG GENERAL INSURANCE CO. LTD. & ORS .....Respondent D.D
17/05/2018
Facts:The deceased's legal representatives filed a claim petition under Section 166 of the Motor Vehicles Act, 1988 before the Motor Accident Claims Tribunal, alleging that the deceased died in a motor vehicle accident involving a truck owned by the appellant. The insurance company opposed the claim on grounds that the vehicle was driven without a valid permit and other breaches of the insura...