2013 (3) TMI 488

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....actory license before starting the industrial undertaking, without appreciating the fact that production cannot be commenced without obtaining the license to run the factory from the factory inspector as per Rule 4 of Factory Rules read with Section 6 of the Factory Act?" Shortly stated, the facts are as follow:- The respondent-assessee is engaged in the business of manufacturing "article" or "thing". The assessee claimed backward area deduction on such income under Section 80IB [4] of the Income Tax Act, 1961 ["Act" for short]. One of the conditions for claiming such deduction was that the assessee must start manufacturing or producing "article" or "thing" before 31st March 2004. The respondent assessee had set-up its factory and cla....

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.... has to obtain license as envisaged under Section 6 of the Act and Rules made thereunder. The Act itself contains large number of welfare measures providing for health, safety, working hours etc. of the persons employed in the factory. It also prohibits employment of young children in factories. Such provisions can be implemented only if necessary licensing policy is framed and implemented. The license from the Factory Inspector in this respect assumes considerable significance without which it can be easily seen that it would not be possible to implement any of the welfare measures made in the Factories Act. 21. We have already noticed that the Rules prohibit use of any premises as factory without a valid license. Section 92 of the Act ....

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....e had not even applied for factory license before 31.3.2004, we cannot hold that necessary conditions under sub-section(4) of Section 80IB of the Act were fulfilled. 25. We are conscious of two different situations arising in the case of Srish Chandra Sen(deceased) and others v. Commissioner of Income-tax, West Bengal reported in 41 ITR 340 and reiterated in case of Maddi Venkataraman and Co.(P. ) Ltd.(supra) and one arising in case of Dr. T.A. Quereshi (supra). In one set of cases deduction claimed pertains to penalty on illegal expenditure while carrying on legal activities whereas in other set of cases, deduction claimed was with respect to activities which itself was per se illegal. 26. In the present group of cases, however, we n....

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....8/2010, 1116/2010, 1125/2010 and 1117/2010, assessee had already applied before 31.3.2004 and such licenses were granted shortly thereafter. In view of our answer to question (B), these Tax Appeals are dismissed. 31. In Tax Appeal No.2016/2010 the date of application for factory license is not emerging from the record. Proceedings are therefore, placed before the Assessing Officer for verifying such fact and to decide the assessee's case on the basis of findings given in this judgement. For the above purpose, the order of the Tribunal is set aside. 32. Tax Appeals are disposed of accordingly. 33. Shri Hemani for the assessees at this stage prayed that certificate of fitness to appeal to the Supreme Court in terms of Article 133(1) ....