TaxTMI 
TaxTMI 
2018 (3) TMI 435
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.... allowed the appeal. In further appeal filed by the appellant, the appellant was unsuccessful. Hence, the present appeal. 3. Notice was issued on the following substantial question of law: "1. Whether the Hon'ble ITAT, Delhi 'H' Bench, New Delhi was justified in allowing claim of the assessee made u/s 10B ignoring specific provisions of Section 10B of the Act which specifies that the deduction u/s 10B is to be allowed for a period of 10 consecutive assessment years beginning with the assessment year relevant to the previous years in which the undertaking begins to manufacture articles or things keeping in view the fact that the assessee had been claiming deduction u/s 80HHC from A.Y. 1992-93 to 2003-04 and u/s 80IC from A.Y. 2004-05 to 2008-09 and from this A.Y.2009-10 the assessee started claiming deduction u/s 10B?" 4. We have heard Mr. Hari Mohan Bhatia, learned counsel for the appellant and Mr. Pulak Raj Mullick, learned counsel appearing for the respondent / assessee. 5. Mr. Hari Mohan Bhatia, learned counsel for the appellant would point out that the unit of the respondent / assessee was set-up long time back (it is not in dispu....
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.... no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139." 6. The present form is the result of a substitution, which was carried out in the year 2000 w.e.f. 01.04.2001. He would submit that the Tribunal has overlooked the vital requirement to be fulfilled under Section 10B, namely, that deduction, as provided therein, could be claimed only for a period of 10 years from the date of commencement of production. In this case, it is not in dispute that the unit, being established in the year 1950, had commenced production long time ago far beyond 10 years and was, in fact, claiming the benefit initially under Section 80HHC and, thereafter, under Section 80IC. The present claim is sought to be supported on the basis of the grant of approval as a 100 per cent export oriented undertaking, apparently, under Section 14 of the Industries (Development and Regulation) Act, 1951. He would submit that even if it became a 100 per cent export oriented undertaking in terms of the approval given, it would not clothe the assessee with the right to claim deduction under Secti....
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....enefit under Section 10B of the Act with reference to the date on which it became a 100 per cent export oriented undertaking and, therefore, production must also be treated as having commenced from the date on which it became a 100 per cent export oriented undertaking. Learned counsel for the assessee would submit that it is a time consuming affair and the requirements, as provided, have to be complied with. The respondent / assessee was pursuing the matter and it was only on 20.06.2007 that it was conferred with the status of a 100 per cent export oriented undertaking. There is nothing in the provisions under Section 80IC or Section 80HHC, which would rob it of its entitlement under Section 10B the moment it fulfilled its requirements. Moreover, as in fact held by the Tribunal also, it is not a case where the assessee has claimed the benefit under Section 80IC. In fact, on the basis that it was entitled to the benefit under Section 10B, it had given up its claim even though, of course, it had complied with the requirements in relation to production of the audit report and the Forms. He would, in fact, submit that, having regard to the provisions....
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.... IT Act, on getting approval as 100% export oriented undertaking. In such a case, the deduction shall be available only from the year in which it has got the approval as 100% EOU and shall be available only for the remaining period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as a DTA unit. Further, in the year of approval, the deduction shall be restricted to the profits derived from exports, from and after the date of approval of the DTA unit as 100% EOU. Moreover, the deduction to such units in any case will not be available after assessment year 2009- 10. 5. To clarify the above position, certain illustrations are given as under:- (i) Undertaking 'A' is set up in Domestic Tariff Area and starts manufacture or production of computer software in Financial Year 1999-2000 relevant to assessment year 2000-01. It gets approval as 100% EOU on 10th September, 2004 in the financial year 2004-05 relevant to assessment year 2005-06. Accordingly, it shall be eligible for deduction under section 10B from assessmen....
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....rs, reported in (1990) 1 SCC 400. He also relied upon a decision of the Division Bench of the Delhi High Court in the case of Intercontinental Consultants and Technorats Pvt. Ltd. vs. Union of India and another passed in WP(C) 6370 of 2008 and also a judgment of the Apex Court in the case of Commissioner of Central Excise, Bolpur vs. M/s Ratan Melting & Wire Industries passed in Civil Appeal No. 4022 of 1999. 10. In other words, learned counsel for the assessee would submit that, if there is any part in the Circular, which has been produced by him, which goes against the Section, then the Section would necessarily override the terms of the Circular. He would submit that, upon a proper interpretation of Section 10B, the assessee is entitled to claim the benefit under Section 10B. He also made reference to Sub-section (6) of Section 10B, as also the provisions of Sub-sections (5) & (6) of Section 80IC, which we will advert to. 11. Learned counsel for the assessee would further submit that, even if the Court does not accept the case of the assessee in regard to Section 10B, the assessee would be entitled to the benefit of Section 80IC, insofar as the assessee had produced the re....
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....f this section, - (i) "hundred per cent export-oriented undertaking" means an undertaking which has been approved as a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;" 13. It is to be noted that Section 10B figures in Chapter III of the Act. Chapter III of the Act has a chapter heading, which declares that it deals with incomes, which do not form part of the total income. In fact, a perusal of Section 10B, as it was originally inserted, shows that it did justice to its inclusion in Chapter III, as what was provided was that the profits and gains derived from a 100 per cent export oriented undertaking, to which the Section applied, was not to be included in the total income of the assessee. However, as we have noted, w.e.f. 01.04.2001, after the substitution, what the Legislature has provided is not that it will not form part of the total income; but that the profits and gains derived by a 100 per cent export oriented undertaking will be deducted from the to....
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....as been retained in Chapter III. The introduction of the word 'deduction' in Section 10A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by Section 10A as already discussed, it has to be understood that the Section embodies a clear enunciation of the legislative decision to alter its nature from one providing for exemption to one providing for deductions." Thereafter, the court, on further discussion, held as follows: "18. For the aforesaid reasons we answer the appeals and the questions arising therein, as formulated at the outset of this order, by holding that though Section 10A, as amended, is a provision for deduction, the stage of deduction would be while computing the gross total income of the eligible undertaking under Chapter IV of the Act and not at the stage of computation of the total income under Chapter VI. All the appeals shall stand disposed of accordingly." Therefore, this judgment may not assist the assessee in advancing the submissions, which he has made, as the issue was what would be the stage of deduction. 15. In this case, learned counsel for the asse....
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....ed under any other Section or Section 10B inter alia in relation to the profits and gains of the undertaking. Therefore, it is clear that simultaneously claiming the benefit of deduction under Section 80IC and Section 10B is not permitted. Therefore, the assessee would rely on this provision and would contend that this is not a case, where the assessee has claimed simultaneously the benefit of deduction under Section 80IC and the benefit of deduction under Section 10B. As already noted from the assessment order, though, according to the assessee, it has complied with the requirements for claiming the benefit under Section 80IC, as, according to it, it fulfilled the requirement for claiming the benefit under Section 10B, it claimed the benefit under Section 10B. It has not given the declaration, which is contemplated under Sub-section (8) of Section 10B and, therefore, nothing stood in the way of it claiming the benefit under Section 10B. 19. The appellant has also relied on Sub-section (6) of Section 80IC, which proclaims that notwithstanding anything contained in the Act, no deduction will be given under Section 80IC, where the total period of deduction, inclusive o....
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....ied that it will be available only for the remaining period of 10 consecutive assessment years, beginning with the assessment year relevant to the previous year in which manufacture was commenced. Further, we may notice that, among the illustrations, illustration no. 2 is the closest to the facts of the instant case. It provides as follows: "(ii) Undertaking 'B' set up in Domestic Tariff Area, begins to manufacture or produce computer software in financial year 1996-97 relevant to assessment year 1997-98. It gets approval as 100% EOU in financial year 2007-08 relevant to assessment year 2008-09. No deduction under section 10B shall be admissible to undertaking B as the period of 10 years expires in financial year 2005-06 relevant to assessment year 2006-07, prior to its approval as 100% EOU." 21. If this illustration is to cover the destiny of this case, then there can be no doubt that the question of law must be answered against the assessee and in favour of the department. It is here that the learned counsel for the assessee would submit that, having regard to the Section, the Court may not rely on the Circular. He would, for instance, point out the ....
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.... in this case) and it becomes a 100 per cent export oriented undertaking by virtue of the approval given, the commencement of manufacture should be treated as having happened from the point of time when it became a 100 per cent export oriented undertaking and, therefore, it would become entitled to the benefit of Section 10B from the said date. In other words, though it may have been manufacturing and exporting all its production abroad since much prior to the date of approval as a 100 per cent export oriented undertaking, since in law it could claim the benefit of Section 10B only upon it satisfying the requirement that it was approved as a 100 per cent export oriented undertaking in 2007, the production and the export which is carried out prior to it is to be obliterated and the Court must interpret this Section as meaning that it is a case of a 100 per cent export oriented undertaking beginning its production only when it became a 100 per cent export oriented undertaking. 25. The other way to look at it, as is contended by the Revenue, is that, having regard to the employment of the words "begins to manufacture", since, admittedly, the respondent / assessee has began manufact....
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....he revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution." Therefore, it becomes necessary also to refer to para 2 of the said judgment, wherein the decision in Kalyani Packaging Industry vs. Union of India and another, reported in (2004) 6 SCC 719 was referred to: "2. It was noted by the three-Judge Bench that the effect of the aforesaid observations was noted in several decisions. In Kalyani Packaging Industry v. Union of India and Anr. (2004 (6) SCC 719), it was noted as follows: "We have noticed that para 9 (para 11 in SCC) of Dhiren Chemical case (2004 (6) SCC 722) is being misunderstood. It, therefore, becomes necessary to clarify para 9 (para 11 in SCC) of Dhiren Chemical case (2004 (6) SCC 722). One of us (Variava, J.) was a party to the judgment of Dhiren Chemical case and knows what was the intention in incorporating para 9 (para....
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....ovision. Hence, we need not be detained by the said judgment. 29. As far as the issue relating to how a Section is to be interpreted, when there is a heading, which may not be borne out as such in the body of the Section, we may only advert to the judgment of the Apex Court in Frick India Ltd. vs. Union of India and others, reported in (1990) 1 SCC 400. It was inter alia laid down as follows: "It is well settled that the headings prefixed to sections or entries cannot control the plain words of the provision; they cannot also be referred to for the purpose of construing the provision when the words used in the provision are clear and unambiguous; nor can they be used for cutting down the plain meaning of the words in the provision. Only, in the case of ambiguity or doubt, the heading or sub-heading may be referred to as an aid in construing the provision but even in such a case it could not be used for cutting down the wide application of the clear words used in the provision." It appears to have been followed in Forage & Company (of Lushala) vs. Municipal Corporation of Greater Bombay & others, reported in 1999 Supp. (4) SCR 184. 30. Now, we may pass on to the co....
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....hat we should now focus our attention on the provision of Section 10B itself. We would think that, on a consideration of Section 10B, as also the other provisions, which we have noted, the conclusion is inescapable that the intent of the law-giver was to confer benefit of deduction of the profits and gains of a 100 per cent export oriented undertaking from the total income, no doubt, subject to the manner in which it has been understood by the Supreme Court in Commissioner of Income Tax & others vs. Yokogawa India Ltd., reported in (2017) 391 ITR 274, but limited to 10 consecutive years, the starting point of which was the beginning of production of the goods in question. In this regard, we must notice Section 10B, as it is now found in the statute book. It is a substitution of a provision, which was brought into the statute book as early as on 01.04.1989. Indeed, its ingredients were different, as we have already noticed; but the concept of 100 per cent export oriented undertaking is the same as it is found in the present version of Section 10B, namely, there had to be an approval under the Industries (Development and Regulation) Act, 1951 as a 100 per cent export orie....
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....ction 10B is conditioned upon the assessee being entitled to the deduction under Section 10B and also it is subject to the right of the assessee to give a declaration and he can always opt out of the benefit of Section 10B. 34. There remains the argument of Mr. Pulak Raj Mullick that, if this interpretation is accepted, it would render the obtaining of the status of a 100 per cent export oriented undertaking redundant and a futile exercise. We are not impressed by the said argument. The mere fact that the assessee (it may be noticed, who had in fact enjoyed the benefit of deduction under Section 80HHC from 1992-1993 and, thereafter, took further benefit under Section 80IC from 2004-2005 for a period of 5 years) thought it fit to apply and get the approval within the meaning of Section 10B cannot bind the income tax authorities to take a view contrary to the one, which we have taken, as merely obtaining the status of a 100 per cent export oriented undertaking cannot clothe the assessee with the right to claim benefit of deduction beyond 10 years, as we have explained. May be, it has impact for other purposes and on which we do not wish to pronounce; but, we are only concerned in ....