TaxTMI 
TaxTMI 
TaxTMI 
2011 (3) TMI 1024
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....isen in the following factual backdrop. The appellant (hereinafter referred to as "the assessee") herein is an individual who is running his proprietorship concern under the name and style of M/s. Ragnik Exports. This concern is engaged in the business of manufacturing and exports of readymade garments. To manufacture these garments for the purpose of exports, the assessee started to manufacture articles from July 1, 1997. The assessee could avail of the benefit of section 80-IB of the Income-tax Act (for brevity "I. T. Act") from the date of manufacture of these articles, i.e., the assessment year 1998-99, which was the first year of the assessee's manufacture, the assessee did not claim the deduction under the said provision in that assessment year. Obviously, since this claim was not raised in that assessment year, it could not be examined as to whether the assessee fulfilled the conditions prescribed in section 80-IB of the Act for claiming exemption under the said provision. The assessee did not claim this benefit even in succeeding years. Section 80-IB of the Act further provides that once an industrial undertaking which fulfils the condition stipulated therein gets the benef....
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....ond question of law is concerned, viz., whether the assessee can be denied the benefit of section 80-IB of the Income-tax Act simply because of the reason that he did not avail of this benefit in the initial assessment year, i.e., 1998-99, it should not detain us for long. Section 80-IB is a special provision giving benefits to certain classes of industries. It provides for deduction in respect of profits and gains to industrial undertakings other than infrastructure development undertakings. The conditions for claiming this benefit are stipulated in sub-section (2) thereof. One of the conditions, with which we are concerned, is that the assessee manufactures or produces any article or thing, not being any article or thing specified in the list in the Eleventh Schedule, or operates one or more cold storage plant or plants, in any part of India. Special provision is made in respect of those industrial undertakings which fulfil the conditions prescribed in sub-section (2) of section 80-IB of the Income-tax Act, if such industrial undertaking happens to be a small scale industry. This is incorporated in sub-section (3) of section 80-IB of the Income-tax Act. In such a case, the amount....
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....rial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 (65 of 1951)." 9. As pointed out above, as per sub-clause (3) of section 80-IB of the Income-tax Act where an industrial undertaking is a small scale industrial undertaking, it is entitled to deduction of 25 per cent. of the profits and gains derived from such industrial undertaking for a period of 10 consecutive years. Small scale industrial undertaking for this purpose is defined in clause (g) of sub-section (14) of section 80-IB of the Income-tax Act reproduced above. As per this provision, small scale industrial undertaking is regarded as "small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act". The Industries (Development and Regulation) Act is enacted to provide for development and regulation of certain industries. For the purpose of regulating those industries in the meaning prescribed under the Act, industrial undertaking is defined in section 3(d) to mean any undertaking pertaining to a scheduled industry carried on in one or mo....
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.... Provided that no industrial undertaking shall be regarded as an ancillary industrial undertaking unless it is, or is proposed to be, engaged in- (i) the manufacture of parts, components, sub-assemblies, tooling or intermediates ; or (ii) rendering of services, or supplying or rendering, not more than fifty per cent of its production or its total services, as the case may be, to other units for production of other articles. (2) The factors referred to in sub-section (1) are the following, namely :- (a) the investment by the industrial undertaking in- (i) plant and machinery, or (ii) land, buildings, plant and machinery ; (b) the nature of ownership of the industrial undertaking ; (c) the smallness of the number of workers employed in the industrial undertaking ; (d) the nature, cost and quality of the product of the industrial undertaking ; (e) foreign exchange, if any, required for the import of any plant or machinery by the industrial undertaking ; and (f) such other relevant factors as may be prescribed." 10. Section 29B of the Industries (Development and Regulation) Act gives power t....
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.... under sections 11, 11A and 13 of the Industries (Development and Regulation) Act by the Central Government and is covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered at the discretion of the owner as such within a period of 180 days from the date of publication of this notification. Two things follow from the reading of the aforesaid notification : (a) To be regarded as a small scale industrial undertaking-such an undertaking should be given which has invested in fixed assets in plant and machinery either on ownership terms or on lease or on hire purchase. (b) Worth of the said asset does not exceed Rs. 3 crores. The prescription of Rs. 3 crores was reduced to Rs. 1 crore vide amendment notification dated December 4, 1995. 13. It is not in dispute that the appellant-assessee fulfils these requirements. However, as mentioned above, the benefit is denied only on the ground that it is not registered under the provisions of the Industries (Development and Regulation) Act. We are of the considered opinion that the registration under the Industries (Development and Regulation....
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.... the purpose of section 11B of the Industries (Development and Regulation) Act inasmuch as the assessee is called upon to give the value of machinery or plant, number of workers employed in the manufacturing process, total sales of the undertaking and also profits and gains derived by the undertaking from the eligible business and deduction under section 80-IB of the Income-tax Act. 15. The purpose for industrial undertaking to be regarded as small scale industrial undertaking as per section 11B of the Industries (Development and Regulation) Act is not far to seek. It was to maintain parity in prescribing the conditions which are required to be fulfilled by the industrial undertaking to qualify itself as small scale industrial undertaking. Since the Central Government has to prescribe such conditions by notification in view of the provisions of section 11B of the Industries (Development and Regulation) Act, the Legislature in its wisdom deemed it fit to incorporate those conditions for the purpose of the Income-tax Act as well. This issue came up for consideration before the Gujarat High Court, albeit, in the context of depreciation which is to be allowed to an assessee und....