TaxTMI 
TaxTMI 
2011 (12) TMI 413
X X X X Extracts X X X X
X X X X Extracts X X X X
....taining the ground that the investments in new plant and machinery made after 1.4.2001 constituted an independent new industrial undertaking in itself and hence eligible for deduction under section 10B on the footing such a fresh claim that cannot be advanced during the proceedings of section 263. 4. The CIT erred in concluding 10 year period mentioned in section 10B(1) will be recovered from assessment year 1995-96 and not from A.Y. 2000-01? 5. The CIT erred in holding that the new plant and machinery does not constitute new industrial undertaking even when the said plant and machinery fulfilled all the requirements of a new industrial undertaking like being capable of final independent operation, etc. 6. The CIT erred in not appreciating that on a true construction of section 10B of the Act, section is applicable to an approval a 100% EOU and hence the earlier period of its operation as an ordinary unit/non- EOU is not relevant for applying/computing 10 year period of exemption. 7. The CIT erred in not appreciating the fact that 2 new industrial undertakings have been formed in the year 2001-02 and 2004-05, which are distinct from the exist....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct. Aggrieved by the order of CIT, the assessee company is in appeal before us. 4. The learned counsel for the assessee submitted that Section 10B (1) of the Act is a provision consciously enacted by the parliament conferring incentive to assessee. This is also established by contemporaneous circular dated 16.02.1998 of CBDT and circular No.528 dated 16th December, 1988. Hence, it is obvious that the said Section 10B of the Act was inserted to provide incentives to the EOUs. This incentive is over and above existing incentives for export given by the Government. It is submitted that an inventive provision should be liberally construed. For this proposition he relied on the decision in the case of Bajaj Tempo v. CIT, (1992) 3 SCC 78. He also referred clause 9.15[b] of the EXIM policy for the proposition that the period of tax holiday would be 10 years even while para 9.28 provides for conversion of existing DTA units into EOU. Therefore, it is submitted that the benefit is to be available to an EOU for the period of 10 years after conversion. Expression "undertaking" employed in Section 10B applies only to an undertaking approved by the competent authority as EOU. It is th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....[1] of the Act, the assessee company is eligible for benefit under section 10B of the Act for balance nine years. Further he submitted that the assesee has invested substantial amounts equivalent to Rs. 97.79 crores in increasing the capacity of SD-1 as well as towards procurement of a Spray Dried Unit and also formation of a Freeze Dried Unit. As a result of additional investments, in financial year 2005-2006 the production achieved was 6825 tonnes. It is submitted that the investments of Rs. 97.79 Crores resulted in the setting up of a new undertaking for the purpose of section 10B.This stands evidenced from the fact that these units are physically identifiable as separate, manufacture marketable commodities from inputs and inter-se the spray dried technology and freeze dried technology employed differently skilled labour as well as plant and machinery, building etc. In support of this contention, the authorised representative drew our attention the sworn affidavit and also copies of invoices for installing new machineries, copies of plans showing the extensions of buildings and also filed photos of factory. 6. It is submitted that since two views are possible in the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... adopted when the language of the section is clear and unambiguous. In a taxing act, one has to look merely at what is clearly said. There is no room for any liberal interpretation. Since the assessee, commenced its production in the assessment year 1996-97, it is eligible to claim benefit under section 10B of the Act up to the assessment year 2005-06 only, which is the 10th and final year of the claim. The time span from the first year of commencement is to be reckoned for the purpose of benefit under the particular provision. Hence, the interpretation given by the assessee to the word 'any' in the section to mean 'any' and every year irrespective of commencement of production is not acceptable in law. The circular [supra], relied on by the CIT, is only clarifying the position of law, on the representations received from the exporters. The time period starts from the first year of manufacture and extends to first 10 years only. It is not as if after the approval is obtained that one gets a fresh lease of 10 years of life. Even illustrations at sub (iv) and sub (v) of Para 5 of this circular also got to establish that the assessee can claim the benefit only if falls within the peri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ted that there is no question of liberal interpretation in these kinds of cases. He submitted that the rule of construction that if the statutory provision is susceptible to, or admits of, two reasonably possible views, then the one which would promote its constitutionality should be preferred on the ground that the Legislature is presumed not to have intended an excess of its own jurisdiction, is subject to the further rule that it applies only where two views are reasonably possible on the statutory language. If the words of the statute, on a proper constitution, can be read only in a particular way, then they cannot be read in another way by a court of construction anxious to avoid its unconstitutionality. For this purpose he relied on the judgement of Supreme Court in the case of CIT vs. Hashmatunnisa Begum and Ors., 176 ITR 98, Petron Engineering Construction P. Ltd. and Another vs. CBDT, 175 ITR 523 (SC), CIT vs. N.C. Budharaja and Co. and Anr., 204 ITR 412 (SC), CIT vs. Cellulose Products of India Ltd., 192 ITR 155 (SC), IPCA Laboratory Ltd. vs. DCIT, 266 ITR 521 (SC). 11. He submitted that the assessing officer hastily allowed the deduction taking the first year a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if he is satisfied that the order of the assessing officer sought to be revised is (i)erroneous; and also (ii) prejudicial to the interests of the revenue. The word 'erroneous' has not been defined in the Income Tax Act. It has been however defined at page 562 in Black's Law Dictionary (seventh Edition) thus'; 'erroneous, adj. Involving error, deviating from the law'. The word 'error' has been defined at the same page in the same dictionary thus: 'error No. 1 : A psychological state that does not conform to Objective reality; a brief that what is false is true or that what is true is false'. At page 649/650 in P. Ramanatha Aiyer's Law Lexicon Reprint 2002, the word 'error' has been defined to mean- "'Error. A mistaken judgement or deviation from the truth in matters of fact, and from the law in matters of judgement 'error' is a fault in judgement, or in the process or proceeding to judgement or in the execution upon the same, in a Court of Record; which in the Civil Law is called a Nullityie" (termes de la ley)' Something incorrectly done through ignorance or inadvertence S.99 CPC and S.215 Cr.PC. 'Error, Fault, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....kes a decision without making an enquiry into the matters, where such inquiry was prima facie warranted. The Commissioner will be well within his powers to regard an order as erroneous on the ground that in the circumstances of the case, the Assessing Officer should have made further inquiries before accepting the claim made by the assessee in his return. The reason is obvious. Unlike the Civil Court which is neutral in giving a decision on the basis of evidence produced before it, the role of an Assessing Officer under the Income-tax Act is not only that of an adjudicator but also of an investigator. He cannot remain passive in the face of a return, which is apparently in order but calls for further enquiry. He must discharge both the roles effectively. In other words, he must carry out investigation where the facts of the case so require and also decide the matter judiciously on the basis of materials collected by him as also those produced by the assessee before him. The scheme of assessment has undergone radical changes in recent years. It deserves to be noted that the present assessment was made under Section 143(3) of the Income-tax Act. In other words, the Assessing Officer ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt has held as under: "There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall the orders passed without applying the principles of natural justice or without application of mind. 17. In its humble view, arbitrariness in decision-making would always need correction regardless of whether it causes prejudice to an assessee or to the State Exchequer. The Legislature has taken ample care to provide for the mechanism to have such prejudice removed. While an assessee can have it corrected through revisional jurisdiction of the Commissioner under Section 264 or through appeals and other means of judicial review, the prejudice caused to the State Exchequer can also be corrected by invoking revisional jurisdiction of the Commissioner under Section 263. Arbitrariness in decision-making causing prejudice to either party cannot therefore be allowed to stand and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage. The appellate or revisional authority, if it affirms such an order, need not give separate reasons if the appellate or revisional authority agrees with the reasons contained in the order under challenge." 18. Similar view was earlier taken by the Hon'ble Supreme Court in Siemens Engg. and Mfg. Co. Ltd. v. Union of India AIR 1976 SC 1785. It is settled law that while making assessment on assessee, the ITO acts in a quasi-judicial capacity. An assessment order is amenable to appeal by the assessee and to revision by the Commissioner under Sections 263 and 264. Therefore, a reasoned order on a substantial issue is legally necessary. The judgments on which reliance was placed by the learned Counsel for the assessee also points to the same direction. They have held that orders, which are subversive of the administration of revenue, must be regarded as erroneous and prejudicial to the interests of the revenue. If the Assessing Officers are allowed to make assessments in an arbitrary manner, as has been done in the case before us, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssment order under discussion. Hence, it is clear that the assessing officer had not applied his mind while granting the exemption under section 10B of the Act. In the case under consideration, there are no two opinions possible. Hence, the action under section 263 of the Act is valid in law. There are no two possible ways of interpreting section 10B of the Act in the instant case. Under these circumstances, the CIT had rightly assumed his jurisdiction under section 263 of the Act. Therefore, the ground raised by the assessee on issue of validity of the jurisdiction, is rejected. 21. On merit, the first moot question arising out of this appeal is whether the period of ten consecutive assessment years is to be reckoned from the date of commencement of the manufacturing as a DTA Unit or from the date of commencement of manufacture as a EOU Unit. We find that that CBDT in its circular number 1 dated 6- 1-2005 has clearly clarified that in case of a DTA Unit, which converts into an EOU Unit, the unit can avail the deduction under Section 10B of the Act from the year in which it receives the EOU status approval. Given the fact that the said CBDT circular recognize the conversi....