TaxTMI 
TaxTMI 
TaxTMI 
2012 (12) TMI 722
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....in manufacture of polimerisation initiators, had acquired a large extent of land in Semmanikuppam Village in Cuddalore, South Arcot District, for setting up an undertaking for manufacturing these products. The said Cuddalore was declared as backward area in 1984. For the purpose of starting an industry, assessee received a letter of Indent on 12.11.1984. Assessee had entered into a collaboration agreement which was approved by Government of India on 9.11.1984. The Certificate of Incorporation of assessee was dated 14.3.1985 and it obtained its Certificate of Commencement of Business from Registrar of Companies on 2.4.1985. Assessee obtained Reserve Bank of India's approval for collaboration agreement on 4.2.1986. It had received approval of Department of Chemicals and Petrochemicals, Government of India on 8.1.1986. Application for Environment Clearance was put up by the assessee on 25.3.1986 and subsequently in December, 1986, assessee started production. Assessee filed its return for assessment year 1992-93 on 30.12.92, which was subsequently revised on 30.3.1994. Along with such revised return, assessee filed a note staking its claim for deduction under Section 80HH of the Act f....
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....he Act could be considered backward. 7. CIT(Appeals) called for a remand report from the A.O. The A.O., though he accepted in the remand report that the assessee had started all preparations to establish a unit in Cuddalore, which was a backward area as per Eighth Schedule as it stood, was of the opinion that when it started production in December, 1988, it was no more a backward area. CIT(Appeals), after going through the submissions of the assessee and remand report of the A.O., was of the opinion that in view of the decision of Hon'ble Apex Court in the case of Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188, Section 80HH had to be liberally interpreted. According to CIT(Appeals), if the subsequent notification by the Government was so interpreted to exclude certain areas, which otherwise could be considered backward by virtue of Eighth Schedule to the Act, then it would result in uncertainty and the investment made by the assessee would go in vain. CIT(Appeals) held that assessee was entitled to claim of deduction under Section 80HH since it had started all preparations to establish an industrial unit in Cuddalore, which was a backward area at the time when assessee had initiated s....
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....IT(Appeals) to consider the issues dealt with in the revisionary orders afresh. 12. Learned D.R. in support of the appeals filed by the Revenue, submitted that assessee had not started manufacture prior to 10th September, 1986 and this position remained undisputed. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 which added sub-section (11) to Section 80HH came into effect on 10.09.1986. Therefore, as per learned D.R., assessee could not say that even when production was started after that date, benefit of Section 80HH should be given to it. As per learned D.R., even if plea of the assessee that the retrospective amendment would not affect its vested rights, was accepted, it could still be not given benefit of Section 80HH. For, according to him, assessee had not started manufacture or production even when the amendment became a part of the statute on receiving President's assent. According to learned D.R., there was no estoppel against the Parliament and Parliament was well within its power to add sub-section (11) to Section 80HH, whereby some of the areas which fell under Eighth Schedule, no more became eligible for claim of deduction under Section 80HH of t....
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....85, had admittedly, started manufacture only in December, 1986. No doubt, it is not at all disputed that assessee had taken all efforts for establishing an industry in Cuddalore block, which was then an industrially backward area falling in Schedule Eight of the Act. Assessee had made massive investment, made application to the various loans, obtained approval for collaboration agreements and moved for environment clearance. In fact, Assessing Officer in his remand report has accepted this position. But, nevertheless, it remains a fact that assessee started its production only in December, 1986 only. At this juncture, it is necessary to have a look at Section 80HH of the Act as it stood before and after its amendment by Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986. Prior to the amendment, it stood as under:- 80HH.Deduction in respect of profits and gains from newly established industrial undertakings or hotel business in backward areas. - (1) Where the gross total income of an assessee includes any profits and gains derived from an industrial undertaking, or the business of a hotel, to which this section applies, there shall, in accordance with and subject to t....
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....e Central Government may, having regard to the stage of development of that area, by notification in the Official Gazette, specify in this behalf; Provided that any notification under this sub-section may be issued so as to have retrospective effect to a date not earlier than the 1st day of April, 1983. 15. The Taxation Laws (Amendment and Miscellaneous Provisions) Act, 1986 came into effect on 10.9.1986, when President gave assent. Eighth Schedule which defined 'backward area' included Cuddalore block where assessee was establishing its industry. After the above amendment, on 19.12.1986, Government issued notification S.O. 165 wherein a list of 'backward areas' was specified and such list was given effect from 1.4.1983. In such list, Cuddalore block was not there. By virtue of notification, Cuddalore District which was a part of backward area, as defined earlier under Eighth Schedule to the Act, was no more a backward area. Can we say the rule of estoppel stops the Government from withdrawing from the list of backward areas, a particular place which was already covered under an earlier provision. Of course, even the Government cannot easily go back on commitment already made, as....