REPORTABLEIN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S). 1784 OF 2019(ARISING OUT OF SLP (C) NO. 23172 OF 2018)PR. COMMISSIONER OF INCOME TAX .....APPELLANT(S)SHIMLA VERSUSM/S. AARHAM SOFTRONICS .....RESPONDENT(S) WITH CIVIL APPEAL NO(S). 1785 OF 2019(ARISING OUT OF SLP (C) NO. 23176 OF 2018) CIVIL APPEAL NO(S). 1786 OF 2019(ARISING OUT OF SLP (C) NO. 23179 OF 2018) CIVIL APPEAL NO(S). 1788 OF 2019(ARISING OUT OF SLP (C) NO. 24678 OF 2018) CIVIL APPEAL NO(S). 1787 OF 2019(ARISING OUT OF SLP (C) NO. 23414 OF 2018) CIVIL APPEAL NO(S).1789 OF 2019(ARISING OUT OF SLP (C) NO. 24679 OF 2018) MISC. APPLICATION NO. 2880 OF 2018 Signature Not Verified IN Digitally signed by ASHWANI KUMAR Date: 2019.02.21CIVIL APPEAL NO. 7218 OF 2018 10:34:16 IST Reason:CIVIL APPEAL NO(S). 1790 OF 2019(ARISING OUT OF SLP (C) NO. 5486 OF 2019)(ARISING OUT OF DIARY NO. 34756 OF 2018) 2 MISC. APPLICATION NO. 2879 OF 2018 INCIVIL APPEAL NO. 7222 OF 2018 MISC. APPLICATION NO. 2852 OF 2018 INCIVIL APPEAL NO. 7236 OF 2018 MISC. APPLICATION NO. 2850 OF 2018 INCIVIL APPEAL NO. 7215 OF 2018 MISC. APPLICATION NO. 2841 OF 2018 INCIVIL APPEAL NO. 7221 OF 2018 MISC. APPLICATION NO. 2840 OF 2018 INCIVIL APPEAL NO. 7217 OF 2018 MISC. APPLICATION NO. 2976 OF 2018 INCIVIL APPEAL NO. 7223 OF 2018 CIVIL APPEAL NO(S). 1795 OF 2019 (ARISING OUT OF SLP (C) NO. 2296 OF 2019)CIVIL APPEAL NO(S).1796 OF 2019 (ARISING OUT OF SLP (C) NO. 1983 OF 2019) CIVIL APPEAL NO(S). 1797 OF 2019 (ARISING OUT OF SLP (C) NO. 3278 OF 2019) AND CIVIL APPEAL NO(S). 1798 OF 2019 (ARISING OUT OF SLP (C) NO. 4483 OF 2019) JUDGMENT3 A.K.SIKRI, J. SLP(C) Nos. 23172 of 2018, 23176 of 2018, 23179 of 2018, 24678 of 2018, 23414 of 2018, 24679 of 2018, 2296 of 2019, 1983 of 2019, 3278 of 2019 and 4483 of 2019 : Leave granted. 2. Origin of these appeals can be traced to judgment dated 28 thNovember, 2017 rendered by High Court of Himachal Pradesh in abatch of appeals. Vide said judgment, High Court decided manyissues. However, in these proceedings we are concerned with only onequestion of law which is formulated in following terms: "Whether assessee who sets up new industry of kind mentioned in sub-section (2) of Section 80-IC of Act and starts availing exemption of 100 per cent tax under sub-section (3) of Section 80-IC (which is admissible for five years) can start claiming exemption at same rate of 100% beyond period of five years on ground that assessee has now carried out substantial expansion in its manufacturing unit? 3. High Court has answered aforesaid question in affirmativethereby holding that when assessees started availing exemption of100% tax on setting up of new industry of kind mentioned insub-section (2) of Section 80IC, which is admissible for 5 years, andeither on expiry of 5 years or thereafter (but within 10 years) from thedate when these assessees started availing exemption, they carried outsubstantial expansion of its industry, from that year assesseesbecome entitled to claim exemption @ 100% again. 4 4. Income Tax Department (hereinafter referred to as theRevenue ) had challenged judgment of High Court on aforesaid issue by filing number of special leave petitions which were converted into appeals after leave was granted in those special leave petitions. Thereafter, these appeals were heard and decided by Division Bench of this Court, which comprised one of us (A.K. Sikri, J.). By its judgment dated August 20, 2018. judgment of High Court was reversed on aforesaid issue. 5. It so happened that in some of appeals, assessees who were respondents, were not served with notice and they remained unrepresented. Since appeals in respect of these assessees were decided in their absence, they filed miscellaneous applications for recall of order, with prayer to decide appeals afresh after giving hearing to them. Since, these assessees remained unrepresented, as even notice was not served upon them, by separate order passed in their cases, those applications have been allowed and their appeals being C.A. No. 7218, 7882, 7236, 7215, 7221, 7217 and 7223 of 2018 have been restored.Even Revenue has filed few SLPs against common judgment of High Court as these SLPs were not filed earlier when batch of appeals was decided on 20 th August, 2018 by this Court. Appeals arising out of these SLPs have also been heard along with5 other appeals in which earlier judgment rendered has been recalled. All these appeals have been heard afresh and are being disposed of by present judgment. 6. We have already taken note of question of law that arises for determination. Factual background in which this question of law arises for consideration has been taken note of in judgment dated 20 th August, 2018 which may again be reiterated, in order to understand niceties of this issue: To understand aforesaid question of law in clear terms, it may be mentioned at this stage itself that sub-section (2) of Section 80-IC applies to undertaking or enterprise which has, inter alia, begun or begins to manufacture or produce any article or thing by setting up new factory in area specified therein which includes State of Himachal Pradesh as well. Sub-section (3) of Section 80-IC is in two parts: in certain cases, exemption from income is provided at rate of 100% of such profits and gains earned from aforesaid undertaking or enterprise for 10 assessment years commencing with initial assessment year. present appeals do not fall in that category. Other clause relates to another category of undertakings or enterprises (these cases belong to that category) where exemption is at rate Civil Appeal No. 7208 OF 2018 & Ors. Page 4 of 17 of 100% of profits and 6 gains for five assessment years commencing with initial assessment year and, thereafter, 25% of profits and gains. Total exemption, thus, is for period of 10 years, namely, @100% for 1st five years and @ 25% for remaining five years. In these cases, all assessees started claiming exemption @ 100% on profits and gains and availed it for period of five years. During this period these assessees carried out substantial expansionand they claimed that, on that basis, they should be allowed exemption from profits and gains for another five years @ 100% instead of 25% from 6th to 10th year as well. Interestingly, they admit that total period during which they are entitled to exemption would not exceed 10 years, as per mandate of sub-section (6). In this backdrop, question is as to whether assessees can again start claiming 100% exemption for next five years from profits and gains after availing same for first five years on ground that they have now carried out substantial expansion. High Court has answered question in affirmative and for this reason, it is department which has come up to this Court challenging said decision by filing these appeals.Section 80-IA was inserted by Finance (No. 2) Act, 1991, with effect from 1st April, 1991. By virtue of said Section, gross total income (profits and gains) of assessee derived from any business of7 industrial undertaking, so specified therein, was entitled to certain deductions for period commencing from 1st April, 1993. With effect from 1st April, 2000, said provision was bifurcated with insertion of another Section, i.e., 80-IB, dealing withcertain industrial undertakings other than infrastructure development undertakings. Thereafter, Legislator, in its wisdom, enacted special provision, in respect ofunitsestablished in certain special category States. Thus, Section 80-IC came to be inserted by virtue of Finance Act, 2003, applicable with effect from 1st April, 2004. At this point., It may only be noticed that correspondingly certain provisions of Section 80-IB were also amended/repealed. Deductions under said Section were discontinued for Assessment Years commencing from 1st April, 2004 (Sub-section (4) of Section 80- IB). 7. At this juncture, we would like to take note of relevant provisions of Section 80-IC of Act.Therefore, we extract below relevant portion of this provision: "[80-IC. Special provisions in respect of certain undertakings or enterprises in certain special category States. (1) Where gross total income of assessee includes any profits and gains derived by undertaking or enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to provisions of this section, be allowed, in computing total income of assessee, deduction from such profits and gains, as specified in sub-section (3).8 (2) This section applies to any undertaking or enterprise, (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in Thirteenth Schedule and undertakes substantial expansion during period beginning (i) on 23rd day of December, 2002 and ending before 2 [1st day of April, 2007], 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 Board in accordance with scheme framed and notified by Central Government in this regard, in State of Sikkim; or (ii) on 7th day of January, 2003 and ending before 1st day of April, 2012, 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 Board in accordance with scheme framed and notified by Central Government in this regard, in State of Himachal Pradesh or State of Uttaranchal; or (iii) on 24th day of December, 1997 and ending before 1st day of April, 2007, 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 Board in accordance with scheme framed and notified by Central Government in this regard, in any of North-Eastern States; (b) which has begun or begins to manufacture or produce any article or thing, specified in Fourteenth Schedule or commences any operation specified in that Schedule, or which manufactures or produces any article or thing, specified in Fourteenth Schedule or commences any operation specified in that Schedule and undertakes substantial expansion during period beginning (i) on 23rd day of December, 2002 and ending before 2 [1st day of April, 2007], in State of Sikkim; or 9 (ii) on 7th day of January, 2003 and ending before 1st day of April, 2012, in State of Himachal Pradesh or State of Uttaranchal; or (iii) on 24th day of December, 1997 and ending before 1st day of April, 2007, in any of North-Eastern States. (3) deduction referred to in sub-section (1) shall be xxx xxx xxx (ii) in case of any undertaking or enterprise referred to in sub-clause (ii) of clause (a) or sub-clause (ii) of clause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with initial assessment year and thereafter, twenty-five per cent. (or thirty per cent. where assessee is company) of profits and gains. xxx xxx xxx (6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where total period of deduction inclusive of period of deduction under this section, or under second proviso to sub-section (4) of section 80-IB or under section 10C, as case may be, exceeds ten assessment years. (8) For purposes of this section, xxx xxx xxx (v)Initial assessment yearmeans assessment year relevant to previous year in which undertaking or enterprise begins to manufacture or produce articles or things, or commences operation or completes substantial expansion; xxx xxx xxx (ix)Substantial expansionmeans increase in investment in plant and machinery by at least fifty per cent of book value of plant and machinery (before taking depreciation in any year), as on first day of previous year in which substantial expansion is undertaken. 8. This section makes special provisions in respect of certain undertakings or enterprises in certain special category States. Section 80-IC was10 inserted by Finance Act, 2003 w.e.f. Civil Appeal No. 7208 OF 2018 & Ors. Page 12 of 17 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. provisions of Section 80-IC provided deduction to manufacturing units situated in State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. deduction was provided to new units established in aforesaid States, and also to existing units in those States if substantial expansion was carried out. deduction was available @ 100% for ten Assessment Years for units located in North-Eastern and in State of Sikkim and for units located in Himachal Pradesh, deduction was available @ 100% for five years and @ 25% for next five years. 9. In all these cases assessees had started availing exemption under Section 80-IC on setting up of new industrial units. All these assessees have availed 100% deduction for period of 5 years. As noticed above, from sixth year, in normal course, deduction is admissible @ 25% of profits and gains, for next five years (or 30% where assessee is company. However, all these assessees, after expiry of five years, carried out substantial expansion of their existing units. This substantial expansion is in accordance with provisions of11 Section 80-IC and there is no dispute about same. From year such substantial explanations were carried out by assessees, assessees demanded deduction @ 100%, instead of 25%/30% for remaining period of 10 years which is maximum period for which deduction is admissible. 10.Sub-section (3), as noted above, mentions period of 10 years commencing with initial Assessment Year. Subsection (6) puts cap of 10 years, which is maximum period for which deduction can be allowed to any undertaking or enterprise under this section, starting from initial Assessment Year. Another significant feature under sub-section (3) is that deduction allowable is 100% of such profits and gains from undertaking or enterprise for five Assessment Years commencing with initial Assessment Year and thereafter deduction is allowable at 25% (or 30% where assessee is company) of profits and gains. It brings out following aspects: (a) Those undertakingsorenterprises fulfilling conditions mentioned in sub-section (2) of Section 80-IC become entitled to deduction under this provision. (b) This deduction is allowable from initial Assessment Year.Initial Assessment Yearis defined in Section 80-IB(14)(c) of Act.12 (c) deduction is @ 100% of such profits and gains for first 5 Assessment Years and thereafter deduction is permissible @ 25% (or 30% where assessee is company). (d) Total period of deduction is 10 years, which means 100% deduction for first 5 years from initial Assessment Year and 25% (or 30% where assessee is company) for next 5 years. 11.In judgment dated 20th August, 2018, while holding that deduction @ 100% cannot be allowed for more than 5 years from theinitial assessment year , reasoning that was given is contained in paragraph 20 of judgment. Which reads as under: "When we keep in mind aforesaid scheme and spirit behind this provision, such situation cannot be countenanced where Civil Appeal No. 7208 OF 2018 & Ors. Page 14 of 17 assessee is able to secure deduction @ 100% for entire period of 10 years. If that is allowed it will amount to doing violence to provisions of sub-section (3) read with sub-section (6) of Section 80-IC. pragmatic and reasonable interpretation of Section 80-IC would be to hold that once initial Assessment Year commences and assessee, by virtue of fulfilling conditions laid down in sub-section (2) of Section 80-IC, starts enjoying deduction, there cannot be anotherInitial Assessment Yearfor purposes of Section 80-IC within aforesaid period of 10 years, on basis that it had carried substantial expansion in its unit. 12.As can be seen from aforesaid passage, this Court took view that onceinitial assessment yearstarts on fulfilling conditions laid down in sub-section (2) of Section 80-IC, there cannot be anotherinitial13 assessment yearfor purposes of Section 80-IC within aforesaid period of 10 years. While doing so, Court referred to Section 80-IB(14)(c) of Act, on basis of which opinion was formed that there cannot be anotherinitial assessment yearfor purpose of Section 80-IC within aforesaid period of 10 years. As pointed out in later part of judgment, this is apparent error which was committed. Section 80-IB(14) starts with wordsfor purpose of this section . Thus,initial assessment yeardefined therein is relatable only to deductions that are provided under provisions of Section 80-IB, namely, in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. Section 80-IB is materially different from Section 80-IC of Act. Inasmuch as Section 80-IC is special provision in respect of certain undertakings, all enterprises mentioned in Section 80-IC are limited in contrast with Section 80-IB, deduction under this Section is available only when such undertakings or enterprises are established in particular States, Sikkim, Himachal Pradesh, Uttaranchal or any of North-Eastern States. Therefore, definition ofinitial assessment year mentioned in Section 80-IB could not have been basis of finding out definition ofinitial assessment yearwhich is different from definition contained in Section 80-IB. Further, Sub-section (3) of Section 80-IC mentions about deduction that is permissible, namely, 100%14 deduction of profits and gains for first five years and 25% (or 30% where assessee is company) for next five years.This sub-section, in any case, does not deal with theinitial assessment year . 13.Learned counsel appearing for assessees pointed out before us that clause (v) of sub-section (8) of Section 80-IC is concerned provision which provides definition ofinitial assessment year , for purpose of this very Section, i.e., Section 80-IC, which was not noticed while pronouncing judgment in Commissioner of Income Tax vs. M/s. Classic Binding Industries case. We find substance in this submission of assessees. We have no hesitation to accept this mistake which occurred in aforesaid judgment. Court specifically dealt withinitial assessment yearand came into conclusion that there cannot be two initial assessment years within span of 10 years which is maximum period for allowing deduction as per sub-section (6) of Section 80-IC. As issue directly concerned with initial assessment year, its definition contained in that very Section was missed out. To that extent, there is error in judgment dated 20 th August, 2018 in Classic Binding Industries case. 14.In aforesaid conspectus, focus has to be on question as to whether definition ofinitial assessment yearcontained in clause (v) of sub-section (8) of Section 80-IC makes any difference? We would like to15reproduce said definition once again, hereunder, for purpose ofcontinuity of thought process."S. 80-IC : xxx xxx xxx(8) xxxxxx xxx(v)Initial assessment yearmeans assessment yearrelevant to previous year in which undertaking or theenterprise begins to manufacture or produce articles or things, orcommences operation or completes substantial expansion 15.On basis of this definition, counsel for assessees before us haveargued that there can be more than oneinitial assessment yearwhichcan be triggered by contingency provided therein. 16.As per this definition, there can beinitial assessment year , relevant toprevious year, in any of following contingencies:(i) previous year in which undertaking or enterprisebegins to manufacture or produce article or things; or(ii)Commences operation; or(iii) Completes substantial expansionFirst two events are relatable to new units whereas third incidentwould occur in respect of existing units. benefit of Seciton 80-IC is,thus, admissible not only when undertaking or enterprise sets up newunit and starts manufacturing or producing article or things.Theadvantage of this provisions is also accrued to those existing units, ifthey carry outsubstantial expansionof their units by investing requiredcapital, in assessment year relevant to previous year.16 Substantial expansionis defined in clause (ix) of sub-section (8) of Section 80-IC and it reads as under: "(ix)Substantial expansionmeans increase in investment in plant and machinery by at least fifty per cent of book value of plant and machinery (before taking depreciation in any year), as on first day of previous year in which substantial expansion is undertaken; 17.As per aforesaid definition, existing unit would be treated as having carried out substantial expansion when there is increase in investment in plant and machinery by at least 50% of book value of plant and machinery (before taking depreciation in any year). As already noted above, in all these cases at hand, assessees had initially set up new industry in State of Himachal Pradesh of nature specified under Section 80-IC of Act. As result, they became entitled to avail concession provided in said provision. It is also admitted fact that after five years and before expiry of 10 years, assessees had carried substantial expansion of their units in terms of aforesaid definition. When we consider definition of initial assessment year , keeping in view these factors, we find substance in submissions made by learned counsel for assessees and are inclined to accept that there can be anotherinitial assessment yearon fulfillment of condition mentioned in said definition, namely, completion of substantial expansion of existing unit. 18.The Court is supposed to give effect to provisions of Section 80-IC17 by reading various provisions conjointly. For purpose of these cases, relevant provisions are sub-section (2)(a)(ii), sub-section 3(ii), sub-section (6) and sub-section (8)(v) and (ix). Clause (ii) of sub-section (2) provides that in case undertaking or enterprise sets up unit of nature specified therein in State of Himachal Pradesh or State of Uttaranchal between 7th January, 2003 and 1st April, 2015, such undertaking or enterprise shall become eligible for deductions from such profits and gains, as specified in sub-section (3). In respect of State of Himachal Pradesh (in respect of which these cases pertain to) sub-section (3) enumerates extent of deduction. It is 100% of profits and gains for first five initial assessment years commencing with initial assessment year and thereafter 25% (or 30% where assessee is company) of profits and gains. deduction @ 25% for neat five years in on assumption that new unit remains static insofar as expansion thereof is concerned. However, moment substantial expansion takes place, anotherinitial assessment yeargets triggered. This new event entitles that unit to start getting deduction @ 100% of profits and gains. At same time, new period of 10 years does not start. It is because of reason that total period for which deduction can be allowed is capped at 10 years, inasmuch as sub-section (6) in no uncertain terms stipulates that deduction shall be not allowed for period exceeding 10 assessment 18 years. In fact, this period of 10 years relates not only in respect of deduction under Section 80-IC but under second proviso to sub-section (4) of Section 80-IB as well. It would mean that total deduction under Section 80-IB as well as 80-IC is for period of 10 years. 19.Having examined scheme in aforesaid manner, we arrive at conclusion that definition ofinitial assessment yearcontained in clause (v) of sub-section (8) of Section 80-IC can lead to situation where there can be more than oneinitial assessment yearwithin said period of 10 years.As per sub-section (6), cap is on 10 assessment years. It is not on quantum. We have also to keep in mind purpose for which Section 80-IC was enacted. purpose was to establish business of nature specified in said provision in specified States. This provision was, thus, aimed at encouraging undertakings or enterprises to establish and set up such units in aforesaid States to make them industrially advanced States as well. Undoubtedly, these are difficult States as most of these States fall in hilly areas. Therefore, cost of production and transportation may also go up. 20.When we keep in mind these objectives for which Section 80-IC was enacted, irresistible conclusion would be to grant 100% deduction of profits and gains even from year when there is substantial expansion in existing unit.After all, this substantial expansion 19 involves great deal of investment which has to be, at least 50% in plant and machinery, of book value thereof before taking depreciation in any year. With expansion of such nature not only there would be increase in production but generation of more employment as well, which would benefit local populace. It is for this reason, carrying out substantial expansion by itself is treated asinitial assessment year . It would mean that even when old unit completes substantial expansion, such unit also becomes entitled to avail benefit of Section 80-IC. If that is purpose of legislature, we see no reason as to why 100% deduction of profits and gains be not allowed to even those units who had availed this deduction on setting up of new unit and have now invested huge amount with substantial expansion of those units. We would like to reproduce following discussions from Constitution Bench judgment in Commissioner of Customs (Import), Mumbai vs. Dilip Kumar and Company and Others1 :"20. It is well accepted that statute must be construed accordingto intention of legislature and courts should act uponthe true intention of legislation while applying law and whileinterpreting law. If statutory provision is open to more than onemeaning, Court has to choose interpretation whichrepresents intention of legislature. In this connection, thefollowing observations made by this Court in District MiningOfficer v. TISCO [District Mining Officer v. TISCO, (2001) 7 SCC358] , may be noticed: (SCC pp. 382-83, para 18) 1(2018) 9 SCC 1 20 18. statute is edict of legislature and in construing statute, it is necessary, to seek intention of its maker. statute has to be construed according to intent of them that make it and duty of court is to act upon true intention of legislature. If statutory provision is open to more than one interpretation court has to choose that interpretation which represents true intention of legislature. This task very often raises difficulties because of various reasons, inasmuch as words used may not be scientific symbols having any precise or definite meaning and language may be imperfect medium to convey one's thought or that assembly of legislatures consisting of persons of various shades of opinion purport to convey meaning which may be obscure. It is impossible even for most imaginative legislature to forestall exhaustively situations and circumstances that may emerge after enacting statute where its application may be called for. Nonetheless, function of courts is only to expound and not to legislate. Legislation in modern State is actuated with some policy to curb some public evil or to effectuate some public benefit. legislation is primarily directed to problems before legislature based on information derived from past and present experience. It may also be designed by use of general words to cover similar problems arising in future. But, from very nature of things, it is impossible to anticipate fully varied situations arising in future in which application of legislation in hand may be called for, and, words chosen to communicate such indefinite referents are bound to be in many cases lacking in clarity and precision and thus giving rise to controversial questions of construction. process of construction combines both literal and purposive approaches. In other words, legislative intention i.e. true or legal meaning of enactment is derived by considering meaning of words used in enactment in light of any discernible purpose or object which comprehends mischief and its remedy to which enactment is directed. "28. decision of this Court in Punjab Land Development and Reclamation Corpn. Ltd. v. Labour Court [Punjab Land Development and Reclamation Corpn. Ltd.v. Labour Court, (1990) 3 SCC 682 : 1991 SCC (L&S) 71] , made said distinction, and explained literal rule: (SCC p. 715, para 67) 67. literal rules of construction require wording of Act to be construed according to its literal and grammatical meaning, whatever result may be. Unless 21 otherwise provided, same word must normally be construed throughout Act in same sense, and in case of old statutes regard must be had to its contemporary meaning if there has been no change with passage of time. That strict interpretation does not encompass strict literalism into its fold. It may be relevant to note that simply juxtaposingstrict interpretationwithliteral rulewould result in ignoring important aspect that isapparent legislative intent . We are alive to fact that there may be overlapping in some cases between aforesaid two rules. With certainty, we can observe that,strict interpretationdoes not encompass such literalism, which lead to absurdity and go against legislative intent. As noted above, if literalism is at far end of spectrum, wherein it accepts no implications or inferences, thenstrict interpretationcan be implied to accept some form of essential inferences which literal rule may not accept. 29. We are not suggesting that literal rule dehors strict interpretation nor one should ignore to ascertain interplay betweenstrict interpretationandliteral interpretation . We may reiterate at cost of repetition that strict interpretation of statute certainly involves literal or plain meaning test. other tools of interpretation, namely, contextual or purposive interpretation cannot be applied nor any resort be made to look to other supporting material, especially in taxation statutes. Indeed, it is well settled that in taxation statute, there is no room for any intendment; that regard must be had to clear meaning of words and that matter should be governed wholly by language of notification. Equity has no place in interpretation of tax statute. Strictly one has to look to language used; there is no room for searching intendment nor drawing any presumption. Furthermore, nothing has to be read into nor should anything be implied other than essential inferences while considering taxation statute. 30. Justice G.P. Singh, in his treatise Principles of Statutory Interpretation (14th Edn. 2016 p. 879) after referring to Micklethwait, In re [Micklethwait, In re, (1855) LR 11 Ex 452 : 156 ER 908] ; Partington v. Attorney General [Partington v. Attorney General, (1869) LR 4 HL 100] , Rajasthan Rajya Sahakari Spg. & Ginning Mills Federation Ltd. v. CIT [Rajasthan Rajya Sahakari Spg. & Ginning Mills Federation Ltd. v. CIT, (2014) 11 SCC 672] , State Bank of Travancore v. CIT [State Bank of Travancore v. CIT, (1986) 2 SCC 11 :1986SCC(Tax) 289] and Cape Brandy22 Syndicate v. IRC [Cape Brandy Syndicate v. IRC, (1921) 1 KB 64] , summed up law in following manner: taxing statute is to be strictly construed. well-established rule in familiar words of Lord Wensleydale, reaffirmedbyLordHalsbury [Ed.: Tennant v. Smith, 1892 AC 150 at p. 154] and Lord Simonds [Ed.: St Aubyn v. Attorney General, 1952 AC 15 at p. 32 (HL)] , means: subject is not to be taxed without clear words for that purpose; and also that every Act of Parliament must be read according to natural construction of its words. In classic passage Lord Cairns stated principle thus: If person sought to be taxed comes within letter of law he must be taxed, however great hardship may appear to judicial mind to be. On other hand, if Crown seeking to recover tax, cannot bring subject within letter of law, subject is free, however apparently within spirit of law case might otherwise appear to be. In other words, if there be admissible in any statute, what is called equitable construction, certainly, such construction is not admissible in taxing statute where you can simply adhere to words of statute. Viscount Simon quoted [Ed.: Canadian Eagle Oil Co. Ltd. v. Selection Trust Ltd., 1946 AC 119 at p. 140 (HL)] with approval passage [Cape Brandy Syndicate v. IRC, (1921) 1 KB 64] from Rowlatt, J. expressing principle in following words: (Cape Brandy case [Cape Brandy Syndicate v. IRC, (1921) 1 KB 64] , KB p. 71)in taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at language used. 21.The High Court has interpreted these provisions in following manner: "80-IC(3)(ii) [for Himachal Pradesh] stipulates that deduction shall be @ 100% for five years commencing withinitial assessment yearand thereafter @ 25%.Initial assessment year , as per 23 Section 80-IC (8)(v) means, year in which unit begins/commences to manufacture/produce or completes substantial expansion[As per Section 80-IC(8)(ix)]. 46. momentsubstantial expansionis completed as per Section 80-IC(8)(ix), statutory definition ofinitial assessment year[Section 80-IC(8)(v)] comes into play. And consequently, Section 80-IC(3)(ii) entitles unit to 100% deduction for five years commencing with completion ofsubstantial expansion , subject to maximum of ten years as per Section 80-IC(6). 47. 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 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). We are inclined to agree with aforesaid interpretation. 22.It would be pertinent to point out that in Para 20 of judgment in Classic Binding Industries, this Court observed that if deduction @ 100% for entire period of 10 years, it would be doing violence to language of sub-section (6) of Section 80-IC. However, this observation came without noticing definition ofinitial assessment yearcontained in same very provision. 23.Having examined matter in aforesaid perspective, judgment in case of Mahabir Industries v. Principal Commissioner of Income Tax2 would, in fact, help assessee. fine distinction pointed out in Classic Binding Industries elopes thereby.To recapitulate, in Mahabir Industries, it was held that if assessee get 100% 2 Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018 24 exemption under Section 80-IB of Act for five years and thereafter carries out substantial expansion because of which said assessee becomes entitled to exemption under new provision i.e. Section 80-IC of Act, assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on ground that there can be two initial assessment years, one for purpose of Section 80-IB and other for purposes of Section 80-IC of Act. Once we find that there can be two initial assessment years, even as per definition thereof in Section 80-IC itself, legal position comes at par with one which was discussed in Mahabir Industries. 24.The aforesaid discussion leads us to following conclusions:(a)Judgment dated 20th August, 2018 in Classic BindingIndustries case omitted to take note of definitioninitialassessment yearcontained in Section 80-IC itself and instead basedits conclusion on definition contained in Section 80-IB, which doesnot apply in these cases. definitions ofinitial assessment yearin two sections, viz. Sections 80-IB and 80-IC are materiallydifferent. definition ofinitial assessment yearunder Section80-IC has made all difference. Therefore, we are of opinionthat aforesaid judgment does not lay down correct law.(b)An undertaking or enterprise which had set up new unitbetween 7th January, 2003 and 1st April, 2012 in State of Himachal 25 Pradesh of nature mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction at rate of 100% of profits and gains for five assessment years commencing with initial assessment year . For next five years, admissible deduction would be 25% (or 30% where assessee is company) of profits and gains. (c)However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such undertaking or enterprise, within aforesaid period of 10 years, said previous year in which substantial expansion is undertaken would becomeinitial assessment year , and from that assessment year assessee shall been entitled to 100% deductions of profits and gains. (d)Such deduction, however, would be for total period of 10 years, as provided in sub-section (6). For example, if expansion is carried out immediately, on completion of first five years, assessee would be entitled to 100% deduction again for next five years. On other hand, if substantial expansion is undertaken, say, in 8th year by assessee such assessee would be entitled to 100% deduction for first five years, deduction @ 25% of profits and gains for next two years and @ 100% again from 8 th year as this year becomesinitial assessment yearonce again. 26However, this 100% deduction would be for remaining three years,i.e., 8th, 9th and 10th assessment years. 25.In view of aforesaid, we affirm judgment of High Court on thisissue and dismiss all these appeals of Revenue. Likewise, appealsfiled by assessees are hereby allowed..............................................J.(A.K. SIKRI).............................................J. (A. ABDUL NAZEER).............................................J.(M. R. SHAH) NEW DELHI; February 20, 2019. Pr. Commissioner of Income-tax, Shimla v. Aarham Softronic