Principal Commissioner of Income-tax-2 v. Maps Enzymes Limited
[Citation -2019-LL-0806-75]

Citation 2019-LL-0806-75
Appellant Name Principal Commissioner of Income-tax-2
Respondent Name Maps Enzymes Limited
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 06/08/2019
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags manufacture or production • disallowance of deduction • initial assessment year • industrial undertaking • manufacturing activity • disallowance of claim • claim of deduction • export of articles • grant of deduction • eligible profit • initial year • wrong claim
Bot Summary: 80JJA of The Income Tax Act, 1961 exemption under the provision of such section is Page 3 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT available up to 5 consecutive years beginning with the assessment year relevant to previous year in which such business commences. Section is reproduced as under: 80JJA. Where the gross total income of an assessee includes any profits and gains derived from the business of collecting and processing or treating of bio-degradable waste for generating power 2.4 On going through words and language of section 80JJA of The Income Tax Act, 1961 it is specifically mentioned the words in a section beginning with the assessment year relevant to the previous year in which business commences In your show case notice your good self has pointed out that Only from the previous year in which business commences. Its provided under the section itself this deduction may available to the assessee consecutive for five years from the year beginning with the year in which such business commences. The year under consideration was the eighth year from the year, in which, the business eligible for deduction under Section 80JJA was commenced. The facts clearly show that the first year of commencement of manufacturing was A.Y. 2000- 2001 whereas, the claim was made in the present year which is after six years from the end of that year. The ratio of both the decisions is that where the deduction is granted for an initial assessment year, the same cannot be rejected for the subsequent assessment years unless the relief for the initial year has withdrawn. Once deduction is granted in the initial Assessment Year, the same would continue for the period of 10 consecutive year unless the relief for initial year is also withdrawn at the time of withholding the relief under Section 80lA/lB of the Act.


C/TAXAP/82/2019 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 82 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- 1 Whether Reporters of Local Papers may be allowed to Yes see judgment ? 2 To be referred to Reporter or not ? Yes 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law No as to interpretation of Constitution of India or any order made thereunder ? PRINCIPAL COMMMISSIONER OF INCOME TAX 2 Versus MAPS ENZYMES LIMITED Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 MR B S SOPARKAR(6851) for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 06/08/2019 ORAL JUDGMENT Page 1 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This tax appeal under Section 260A of Income Tax Act, 1961 (for short Act, 1961 ) is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, SMC Bench, Ahmedabad dated 2nd August, 2018 in ITA No.267/Ahd/2015 for A.Y. 2008- 09. 2. This tax appeal was ordered to be admitted on following substantial question of law: Whether Appellate Tribunal has erred in law and on facts in deleting disallowance of claim of Rs.64,04,327/- u/s 80JJA of Income Tax Act, 1961 though years was eighth year of business operation ? 3. It appears from materials on record that appellant-assessee filed its e-return of income on 28th September, 2008, declaring its total income of Rs. NIL after claiming deductions of Rs.19,21,298/- and Rs.64,04,327/- under Sections 80IB and 80JJA respectively. return of income was processed under Section 143(1) of Act. scrutiny assessment under Section 143(3) of Act was finalized on 3rd May, 2010, determining total income at Rs.6,17,217/- 4. case was re-opened by issuing notice under Section 148 dated 19th November, 2012. reasons recorded in notice under Section 148 are as follows: On perusal of records, it is noticed that assessee has claimed deduction under section 80JJA of Act Page 2 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT amounting to Rs.64,04,327/-. assessee had commenced its business in previous year 1999-2000 relevant to A.Y.2000-01. Thus, this was eighth year of claim of deduction under section 80JJA of Act. However, deduction under section 80JJA of Act was admissible for period of five years only from previous year in which business commences. Hence assessee is not entitled for deduction under section 80JJA 0f Act in A.Y2008-09 as mentioned above. Further, assessee has also claimed deduction under section 801B of Act. deduction under section 801B is to be restricted (4)30% of eligible profit as per provision. Thus assessee has wrongly claimed deduction under section 80JJA of Act as worked under: Gross total Income Rs. 64, 04, 327/ Less : Other Income Rs.6.1 7. 217/ Eligible profit of business for Rs.5 7,87,110/ Deduction u/s.801B of Act @30% Rs. 17.36.133/ allowing deduction u/s.801B of Act. Wrong claim of deduction u/s.80JJA of Act Rs.40,50,977/- 3. In view of above facts, 1 have reasons to believe that assessee has wrongly claimed deduction u/s.80JJA and thereby failed to furnish accurate particulars of its income to tune of Rs.40,50,977/- which has escaped assessment to that extent for assessment year 2008-09 and is required to be reassessed as there was failure on part of assessee to disclose fully and truly all material facts. 5. appellant-assessee objected to reopening of proceedings under Section 147 of Act. Notice under Section 143(2) of Act came to be issued on 19th August, 2013 upon assessee. final show-cause notice under Section 142(1) of Act was issued dated 14th February, 2014. In response to same, assessee submitted as under: 2.01 As provided u/s. 80JJA of Income Tax Act, 1961 exemption under provision of such section is Page 3 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT available up to 5 (five) consecutive years beginning with assessment year relevant to previous year in which such business commences. 2.2 In show cause notice your good self has pointed out as under: It is stated that on perusal of records, it is noticed that you have claimed deduction under section 80JJA of Act amounting to Rs. 64,04,327/-. business was commenced in previous year 1999-2000 relevant to Asst. Year 2000-01. Thus, this was eighth year of claim of deduction under section 80JJA of Act. Further, deduction under section 80JJA of Act was admissible for period of five years only from previous year in which business commences. 2.03 Without prejudice to your notice we would like to distinguish provision laid down u/s. 80JJA of Income Tax Act, 1961. Section is reproduced as under: 80JJA. Where gross total income of assessee includes any profits and gains derived from business of collecting and processing or treating of bio-degradable waste for generating power (or producing bio fertilizers, bio pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure, there shall be allowed in computing total income of assessee, (a deduction of amount equal to whole of such profits and gains for period of five consecutive assessment years beginning with assessment year relevant to previous year in which such business commences) 2.4 On going through words and language of section 80JJA of Income Tax Act, 1961 it is specifically mentioned words in section "beginning with assessment year relevant to previous year in which business commences" In your show case notice your good self has pointed out that "Only from previous year in which business commences." Here "SUCH" word is missing. Financial year 2003-04 relevant to Asst. Year 2004-05 was our first year of claim in which we have started our manufacturing of Enzyme which qualify for deduction u/s. 80JJA of Page 4 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT Income Tax Act, 1961. To get deduction u/s. 801B of Income Tax Act, 1961 section is clear. To avail benefit under this section "commencement of business" is there. But as provided u/s. 8OJJA it is absolutely clear that "commencement of such business". 2.05 Considering above language and words used in section 8011A of Income Tax Act, 1961 it is clear that assessee may claim such deduction at any time, meaning thereby year in which such business is commences and not initial year from which business was commenced. 3.00 In facts, we have started our production of "Enzyme" which qualify for deduction u/s. 8OJJA of Income Tax Act, 1961 from Financial Year 2003-04 relevant to Asst. Year 2004-05. Its provided under section itself this deduction may available to assessee consecutive for five years from year beginning with year in which such business commences. 3.01 Therefore Asst. Year 2008-09 is last and fifth consecutive year of such deduction. 3.02 In support of this facts, we have to submit that Financial Year 2003-04 i.e. Asst. Year 2004-05 was our first year of claim. During assessment proceedings Leaned Assessing Officer has asked us specific question which is produced as under: "8. Show cause deduction of section 80JJA is allowable during year under consideration as no such deduction was claimed in earlier year. " 6. Assessing Officer took view that assessee had commenced business of manufacturing and exporting biological agents (Enzymes) in F.Y.1999-2000 relating to A.Y.2000-01. According to Assessing Officer as per provision of Section 80JJA, deduction would be available only for period of five years from initial year in Page 5 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT which business commenced. Assessing Officer took view that deduction was allowable upto A.Y.2004-05 being fifth and last year for claim. year under consideration was eighth year from year, in which, business eligible for deduction under Section 80JJA was commenced. 7. In such circumstances, referred to above, deduction of Rs.64,07,327/- claimed under Section 80JJA came to be disallowed and was added to total income of assessee. At same time, assessee was held eligible for deduction under Section 80IB at rate of 30% of eligible profit of business carried out by assessee. 8. appellant, being dissatisfied with order of Assessing Officer, preferred appeal before Commissioner of Income Tax. Commissioner of Income Tax dismissed appeal and thereby affirmed order passed by Assessing Officer. While dismissing appeal, CIT (A), observed as under: On careful consideration of entire facts of case, it is noted that appellant is in business of manufacturing enzymes. It started production of enzymes from A.Y. 2000-2001. They are producing biological agents, biocatalyst which is used in various industries like textiles, leather, baking, brewing, alcohol, detergent, starch etc. enzymes are produced by treating agricultural biodegradable waste i.e. wheat bran flax, maize grits, de-oil groundnut cake etc. which are chemically processed for producing enzymes. appellant has submitted that process of manufacturing was changed in year 2003 and it had adopted new state of art technique of solid State fermentation technology with newly developed and isolated microorganisms from soil. technology was Page 6 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT received from U.S. Company. claim is of no help to appellant as, product nature, that is, enzyme remains same. claim of appellant that since it had employed new process from 2003, this year should be treated as first year of production, cannot be accepted as appellant was producing 'enzyme' earlier as well as it is producing enzyme now. deduction is available in section 80JJA for processing or treatment of biodegradable waste for generating power or producing bio fertilizers, biopesticides or other biological agents etc. appellant falls in category of producer of biological agents and therefore, deduction has been claimed. appellant is rightly entitled for deduction as it clearly falls in definition of section 80JJA but year of production has to be taken from A.Y.2000-2001, as appellant has begun production tram that year. it has started producing enzymes from that year. It is not relevant for provisions of section 80JJA that it has changed manufacturing process for producing enzymes. It has not been able to demonstrate that it has completely changed product and earlier product which was being produced is not being produced now and new type of product which is different and not enzyme is being produced now. appellant still fails in same category of producer of biological agent. Therefore, claim of appellant that first year of production should be taken as A.Y. 2004-05 is not acceptable. other important aspect which is to be kept in mind is that section 80JJA provide calculation of five years from year in which such" business commences. It is not related to year in which deduction is claimed for first time as is available in section 80I-A etc. Therefore, claim of appellant cannot be accepted and I am constrained to uphold decision of A0. appellant has also placed reliance on judgement of Honourable Gujarat High Court in case of T J Agro Fertilisers Pvt. Ltd. (supra). I have carefully gone through judgement delivered by Honourable High Court, it is noted that facts of case are different. In present case, limitation of number of years were involved whereas in that case allowability of claim itself was involved. Accordingly, judgement is respectfully distinguished. claim of appellant is not being allowed on basis of limitation. It is not Page 7 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT case where dispute is regarding entitlement of claim and manufacturing activity of assessee. appellant is otherwise entitled for claim considering activity of production of biological agents but since five years from commencement of business have elapsed it shall not be entitled for deduction under section 80JJA any further. other judgements relied by appellant are also respectfully distinguished as facts and dispute involved are entirely different. appellant has also disputed that all details regarding claim of deduction were given by it to A0 in first round of proceedings and therefore reopening is without any basis. claim of appellant is not acceptable. reopening was done on 09/11/2012 which is within four years from end of assessment year. facts clearly show that first year of commencement of manufacturing was A.Y. 2000- 2001 whereas, claim was made in present year which is after six years from end of that year. claim is therefore factually incorrect. appellant has also not given any evidence to demonstrate that allowability of deduction with reference to year of production was examined by AO during course of scrutiny proceedings. Therefore, reopening cannot be considered to be on basis of change of opinion. Accordingly, reopening of case is held to be valid 9. appellant, being dissatisfied with order passed by CIT(A), preferred further appeal before Income Tax Appellate Tribunal. Tribunal allowed appeal of respondent-assessee holding as under: I find that. as clearly borne out of material on record, first year in which 80JJA deduction was claimed, was assessment year 2004-05 and, during course of scrutiny assessment proceedings. Assessing Officer had specifically asked assessee to show cause deduction of section 80JJA is allowable during year under consideration as no such deduction was claimed in earlier years . claim was explained at length and Assessing Officer duly accepted it as first year of claim. By this basis, current year s claim is fifth and Page 8 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT final year. There is no infirmity in claim thus. mere fact that assessee was involved in somewhat similar activity is not really relevant inasmuch as character of activity was materially distinct from assessment year 2004-05 and that aspect of matter, by Assessing Officer having accepted it as first year of claim, has reached finality. In view of these discussions, I find merits in plea of assessee. disallowance of claim under section 80JJA is thus devoid of legally sustainable merits, and cannot be upheld. Accordingly, I direct Assessing Officer to delete impugned disallowance of section 80JJA claim of Rs.64,04,327/- 10. Thus, Appellate Tribunal took into consideration fact emerging from record that first year, in which, Section 80JJA deduction was claimed, was A.Y. 2004-05 and during course of scrutiny assessment proceedings, Assessing Officer had specifically called upon assessee to show that deduction under Section 80JJA was allowable during year under consideration and no such deduction was claimed in earlier years. Appellate Tribunal further notes, in its impugned order, that Assessing Officer had duly accepted it as first year of claim. Considering same, Appellate Tribunal took view that claim of current year was fifth and final year. 11. revenue, being dissatisfied with order passed by Appellate Tribunal is here before this Court with present appeal. 12. Ms. Bhatt, learned counsel appearing for revenue vehemently submitted that Appellate Tribunal committed error in passing impugned order. It is submitted that business of assessee had commenced in F.Y. 1999- Page 9 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT 2000 relevant to A.Y.2000-2001. Therefore, first year for claim of deduction under Section 80JJA of Act should be determined as A.Y.2000.2001 and not A.Y. 2004- 05. Ms. Bhatt submitted that deduction under Section 80JJA of Act is admissible for period of five year only from year, in which, business commenced. 13. In such circumstances, referred to above, Ms. Bhatt prays that there being merit in this appeal, same be allowed and substantial question of law, as framed by this Court, be answered in favour of revenue and against assessee. 14. On other hand, Mr. B.S. Soparkar, learned counsel appearing for assessee has vehemently opposed this appeal. Mr. Soparkar submitted that no error, not to speak of any error of law, could be said to have been committed by Appellate Tribunal in passing impugned order. 15. principal argument of Mr. Soparkar is that business of assessee might have commenced in F.Y. 1999-2000 relating to A.Y.2000-2001, but process of manufacturing was changed in 2003. To put it in other words, argument of Mr. Soparkar is that for first time, Enzyme in question came to be manufactured in year 2003, for which, deduction has been claimed. In such circumstances, according to Mr. Soparkar, deduction was claimed, for first time, in A.Y. 2004-05. 16. Mr. Soparkar made available for us, paper-book of documents, i.e, very same paper-book which was before Appellate Tribunal. Mr. Soparkar invited attention of Page 10 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT this Court to letter issued by Income Tax Officer to respondent-assessee, calling for certain information. information, called for, reads as follows: What is Enzyme, it is used by whom and for what purposes. Furnish copies of sample sales bills. Furnish proof of staring of business of manufacture or production between 1.4.1991 to 31.03.2002. Show how deduction of section 80JJA is allowable during year under consideration as no such deduction was claimed in earlier year. 17. questions which were raised by Income Tax Officer came to be answered by respondent-assessee as under: We are core industrial Biotechnology Company producing various Enzymes which are Bio-logical agents, Bio-catalyst using Solid State Fermentation (SSF) technology.The main Enzymes we are producing as are follows: 1) Alpha Amylase Enzyme (Palkozyme Ultra 1OOS, Palkozyme HT Plus, Palkozyme Plus SPL. Palkozyme CLL, Palkolase HT) 2) Fungal Alpha Amylase Enzyme (Pidkoamylo SOS) 3) Alkaline Protease Enzyme (Palkobate Ultra 10X) 4) Acid Protease Enzyme (Palkocid Conc. 80S) 5) Protease + Lipase Enzymes (Palkosoak Conc.) 6) Amylase + Protease Enzymes (Palkofeed AP, Palkotreat SP 60) 7) Amylase + Protrase + Beta Glucanase (Palkofeed APG) 8) Fungal Protease Enzyme (Palkotase ACP 500S) Page 11 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT 9) Neutral Celulase Enzyme (Palkostone NCA 5) 10) Xylanase Enzyme (Palkobake X 360S) 11) Catalase Enzyme (Palkoperox CT 10L) These Enzymes are used in various industries like Textile, Leather, Baking, Brewing. Alcohol. Detergent, Starch, Animal feed, Effluent treatment, etc. We have enclosed technical bulletins, MSOS (Material Safety Data Sheet) and product labels of these Enzymes for your reference. As regards to technology for producing these Enzymes, we are treating agriculture biodegradable waste ; i.e. Wheat Bran Flex, Maize Grits, De-oil Groundnut cake, De-oil Soya cake, Rioe Bran Flex, Sorghum straw, ; etc. as substrate media using Solid State Fermentation by newly isolated micro-organisms like Bacillus Subtitles. Bacillus lichenifomis, Aspergillus Niger, Trichoderma Reseei, etc., from year 2003. We inoculate these micro-organisms in above agriculture biodegradable wastes with 40-50% moisture content for Solid State Fermentation. following fermentation parameters maintained to produce Enzymes:' Temperature: 35-40'C Relative humidity: 85% Incubation/fermentation time: 48 to 64 hours After end of incubation I fermentation, biomass is dried and pulverised to get Crude Enzyme. This Crude Enzyme is then standardized with various diluents and tillers to make final finished goods i.e. Enzyme powder and in this Crude Enzyme is timber extracted with buffer solution and filtrated to get final finished goods i.e. Enzyme liquid. Further, these Biological agents, Bio-catatyst (Enzymes) produced are from agricultural biodegradable wastes involve Bio-remediates, otherwise causing issues of agro- waste management Hence end products (Enzyme) so Page 12 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT produced can be further utilized for Bio-remediation and Biodegradable waste management Based on above explanations, we request you to cover us under section 130.1.IA of Income Tax Act. 18. aforesaid questions were raised by Income Tax Officer in connection with A.Y. 2004-05. Ultimately, assessment order for A.Y. 2004-05 came to be passed as under: return of income was filed by assessee company on 31.10.2004 showing income of Rs.NIL after claiming deductions under chapter VIA of Income Tax Act, 1961. return was processed under section 143(1) without making any adjustment on 04.03.2005. case was selected for scrutiny assessment by issuing notice u/s.143 [2] on 27-07-2005 which was duly served on assessee by RPAD. assessee is engaged in business of Manufacturing of Enzyme. During course of assessment proceedings Shri D.R. Thakkar C.A., A.R. attended alongwith director Shri Dipal P. Palkhiwala, director from time to time as per dates mentioned in order sheet and produced details called for. During course of assessment proceedings following points arose for consideration: Claim of deduction u/s 80IB is allowable after reducing profit to extent of deduction claimed under section 80HHC and similarly claim of other deduction is to be computed after reducing deduction claimed in other sections of chapter VIA. However, since there is eligibility of deduction in excess of positive income and fact that assessee company has paid tax on book profit of Rs. Page 13 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT 36,58,565/4 amounting to Rs. 3,02,576/- including interest return income as per return filed on 31- 10-2004 is accepted u/s.143(3) of Act. Book profit of Rs. 36,78,565/- remains unchanged. Give credit for prepaid taxes. Charge interest u/s 234A,B,C and D as case may be. Issue D.N./challan accordingly. 19. It is also pertinent to note that revenue accepted order of assessment. 20. One another important aspect which Mr. Soparkar brought to our notice is that claim towards deduction for A.Ys. 2004-05, 2005-06, 2006-07 and 2007-08 came to be allowed. It is only with respect to fifth and last A.Y.2008-09 that this issue was raised by department. According to Mr. Soparkar, having allowed deduction under section 80JJA for four consecutive years, department could not have raised objection with respect to last and fifth year of assessment i.e., 2008-09. Mr. Soparkar, in support of his aforesaid submission, has placed reliance on two orders. One order passed by this Court in case of Principal Commissioner of Income Tax vs. Quality BPO Services Pvt. Ltd., Tax Appeal No.439 of 2016, decided on 14th June, 2016 and judgment of Bombay High Court in case of Simple Food Products (P.) Ltd. vs. Commissioner of Income-Tax-II, Nagpur, reported in (2017) taxmann.com 239 (Bombay). 21. We take notice of fact that decision of this Court in case of Quality BPO Services Pvt. Ltd. (supra) was one with respect to disallowance of deduction as claimed under Page 14 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT Section 10B of Act, 1961, whereas in Bombay High Court decision in case of Simple Food Products (P.) Ltd. (supra), subject matter of deduction under Section 80IB of Act. However, ratio of both decisions is that where deduction is granted for initial assessment year, same cannot be rejected for subsequent assessment years unless relief for initial year has withdrawn. We may quote relevant observations made by Bombay High Court in Simple Food Products (supra). According to us. entire issue is no longer res-integra. impugned order of Tribunal has. after recording that appellant Assessee relies upon decision of this Court in Paul Brothers (supra) has not dealt with same. It gives no finding as to why and in what manner it would not apply to present facts. Further, we find that distinction which has been made in impugned order of Tribunal with regard to Dinshaw Frozen Foods Ltd. (supra) viz. that assessment in that case has been completed under Section 143(3) of Act in initial year and it is only in such cases that Revenue be barred from denying claim for deduction in subsequent Assessment Years, unless claim for deduction has been withdrawn in initial year when deduction was claimed and allowed unlike assessment which is completed under Section 143(1) of Act. We have perused decision of this Court in Dinshaw Frozen Food Ltd. Nagpur (supra) which in turn has followed decision Paul Brothers (supra). We note that there is no finding in two orders to effect that in initial year claim under Section 8OIA/IB of Act was granted by virtue of order passed under Section 143(3) of Act. Nothing has been brought on record to indicate that there has been some change in manufacturing process from that existing when claim was allowed in initial year i.e. Assessment Year 1996- 1997 and subject Assessments. intent/object of deduction under Section 8OIA/IB of Act is to encourage setting up of industries to manufacture goods which are not specified in Eleventh Schedule to Act. Page 15 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT (k) distinction sought to be made by Mr. Bhattad learned counsel for Revenue that claim for deduction in Paul Brothers (supra) deduction was investment based deduction, while in present case. we are concerned with performance base deduction. This is in fact no distinction. In absence of Revenue being able to establish that for subject Assessment Years. facts with regard to performance were different from facts with regard to performance in which claim for deduction in initial year was allowed, grant of deduction in subsequent subject Assessment Year cannot be withheld. other issue raised by Mr. Bhattad that merely because claim was allowed in earlier year would not prohibit revenue from disallowing claim in subsequent assessment years is no longer res-integra as this Court in Paul Brothers (supra) as it is categorically held that in absence of deduction granted in initial Assessment Years being withdrawn, relief for subsequent Assessment Years could not be withheld. basis for same is found in sub-clause (3) under Section 80lA/IB of Act which gives deduction for 10 consecutive years to profit and gains of Industrial undertaking from initial year of assessment when deduction was allowed. subject to condition laid down therein. It is not Revenue's contention that condition in clause (3) of Section 8013 of Act has not been fulfilled. Therefore, once deduction is granted in initial Assessment Year, same would continue for period of 10 consecutive year unless relief for initial year is also withdrawn at time of withholding relief under Section 80lA/lB of Act. (I) Mr. Bhattad also points out that under Act, there is distinction between assessment which has been completed under Section l43(3) of Act and intimation given to Assessee under Section 143(1) of Act. In support of, he places reliance in Rajesh Jhaveri Stock Brokers, (supra) which brings out distinction, by pointing out that intimation under Section 143(1) of Act is only ministerial act and no examination of claim is made by Assessing Officer. However, one must recognize fact that aforesaid decision in case of Rajesh Jhaveri Stock Brokers (supra) was rendered in context of reopening of assessments. As Page 16 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT against that decisions of this Court in Paul Brothers (supra) and Dinshaw Frozen Food Ltd. Nagpur (supra) were while dealing with deduction under Chapter VI-A of Act. This Court in above two cases has very categorically held that in absence of relief/deduction for initial year being withdrawn, relief under Chapter Vl-A of Act (Section 801A/801B of Act) in case of Dinshaw Frozen Food Ltd, Nagpur (supra) cannot be withheld for subsequent years. manner in which relief has been granted in initial Assessment Year is not determinative for withholding relief in subsequent Assessment Years. In-fact, in Paul Brothers (supra), our Court had occasion to observe deduction allowed in initial year i.e. Assessment Year, l980-l98] was without any discussion. (m) According to us, decision of this Court in Paul Brothers (supra) and Dinshaw Frozen Food Ltd. Nagpur (supra), conclude issue in favour of appellant Assessee and against Revenue. (n) Thus, substantial questions of at No.1 is answered in affirmative i.e. in favour of appellant-Assessee and against Revenue. 5. Regarding Question No.2::- (a) Mr. Thakar, learned counsel for appellant Assessee states that in view of our answer to question No.1 above, he does not press this question. (b) Therefore, no occasion to examine question No.2 arises 6. Accordingly, appeal allowed. No order as to costs. 22. We may also quote relevant observations made by this Court in Quality BPO Services Pvt. Ltd. (supra). 2. issue pertains to assessment year 2008-09 and concerns respondent-assessee's deduction of Rs. 67.08 lacs (rounded off) claimed under Section 10B of Income Tax Act, 1961 ['the Act' for short]. contention of Revenue is that, assessee had not produced approval by Board appointed for such Page 17 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT purpose by Central Government in exercise of powers conferred under Section 14 of Industries (Development and Regulation) Act, 1951, as required under Explanation 2 Clause (iv) to Section 10B of Act. 3. Learned counsel Mr. Patel for Revenue vehemently contended that assessee had obtained such approval certificate from Director, Software Technology Park of India, which may be Government of India Authority cannot substitute authority prescribed in Clause (iv) to said explanation. 4. This contention we are not inclined to examine in view of fact that, admittedly, in first year of claim of assessee under Section 10B of Act i.e. assessment year 2007-08, such claim was granted. In subsequent assessment years also, i.e. in assessment years 2010-11 and 2011-12, such claim was made and accepted by Department. We may notice that Section 10B pertains to special provisions in respect of newly established hundred per cent export-oriented undertakings. Sub-section (1) of Section 10B provides for deduction of profits and gains derived by hundred per cent export-oriented undertaking from export of articles or things or computer software for period of ten consecutive years beginning with assessment relevant to previous year in which undertaking begins to manufacturer, produce articles or things or computer software from total income of assessee. Thus, provision envisaged is for period of ten consecutive years commencing from first year during which undertaking begins to manufacture or produce articles, things or computer software, as case may be. When Revenue therefore, did not question certification by Director, Software Technology Park of India, in initial year of claim made by assessee as well as in subsequent years, it would not be open for Revenue to pick one year out of total of ten consecutive years for different treatment that too without offering any explanation for same. We would refer to Gujarat High Court Judgement in case of Saurashtra Cement & Chemical Industries Ltd. vs. Commissioner of Income Tax, Gujarat-V reported in 123 ITR 669 and later judgement in Tax Appeal No. 1367 of 2010 dated 14.09.2011 in case of Commissioner of Income Tax vs. M/s. T.J.Agro Fertilizers Pvt. Ltd. Page 18 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT 5. In result, tax appeal is dismissed. 23. Delhi High Court, in Commissioner of Income-Tax vs. Rio Tinto India (P.) Ltd., reported in (2012) taxmann.com 259 (Delhi), observed as under: This Court is of opinion that reasoning given by AO in his order for assessment year 1998-99 is clear and conclusive. It accepted assessee's contentions with regard to having commenced business with effect from 01.01.1997. It was only on basis of such fundamental premise that income was assessed and certain disallowances were made. In these circumstances, it would be unfair for revenue to contend for each successive assessment year that assessee had to establish that it "commenced business." evidence on record clearly shows that substantial services were being rendered and salaries etc. were disbursed even though on reimbursement basis. mere fact that other service charges are meagre in nature would not, in any way, influence decision as to whether business was commenced. Furthermore, in line with decision of this Court in ESPN (supra) question of date of commencement of business is one of fact. Having regard to these circumstances, it is held that findings of Tribunal in impugned common judgment and order are sound and do not call for interference. question of law is accordingly answered in favour of assessee and against revenue. 24. We are of view that Appellate Tribunal committed no error, not to speak of any error of law in passing impugned order. When department thought fit to grant deduction for four consecutive years, there was no reason to raise any objection with regard to admissibility of such deduction under Section 80JJA in fifth and final assessment year 2008-09. 25. In view of aforesaid, this appeal fails and is hereby dismissed. substantial question of law, formulated by this Page 19 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 C/TAXAP/82/2019 JUDGMENT Court, is answered in favour of assessee and against Revenue. (J. B. PARDIWALA, J) (A. C. RAO, J) Vahid Page 20 of 20 Downloaded on : Mon Dec 02 14:32:46 IST 2019 Principal Commissioner of Income-tax-2 v. Maps Enzymes Limited
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