TaxTMI 
TaxTMI 
2018 (3) TMI 435
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....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 dispute that it was set-up in the year 1950). It is engaged in ....
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....n 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 Section 10B having regard to the fact that it is not a new unit, which has commenced production and ....
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....port 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 of Sub-section (8) of Section 10B, it was mandatory for the assessee to claim the benefit of Secti....
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....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 assessment year 2005-06 i.e., the year in which it fulfils the basic condition of being a 100% EOU. Further, the deduction shall be available only for the remaining period of ten years i.e. from assessm....
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....70 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 requisite documents. 12. Section 10B was inserted for the first time by the Finance Act, 1988 (26 of 1988) w.e.f. 01.04.1989. The Section, as it is contained in the Act today, was the result of a substitution by the Finance Act, 2000 ....
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....nd 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 total income of the assessee as provided therein. In fact, Section 10A and Section 10AA of the Act also have a similar legislative history, namely, originally when they were inserted, they provided for non-inclusion in the total income and, later on, they became the provisions by which the Legislature provided for d....
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....rom 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 assessee has made available written submissions also. We may refer to and extract from the written submissions the following para: "2. M/s Windlass Steel Craft was established in 1950 & is engaged in manufacture of Handicrafts like artificial swords, artificial helmets, body covers etc. & exporting such Handicrafts overseas. Deduction u/s 80 HHC was being claimed from assess....
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....ction 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 of the period of deduction under Section 80IC or under the second proviso to Sub-section (4) of Section 80IB or under Section 10C, as the case may be, exceeds 10 assessment years. Learned counsel for the assessee would submit that the absence of such a provision in Section 10B would militate against the contention of the department that, having regard to the fact that the assessee had enjoyed the benefit of deduction und....
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....o 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 proviso to Section 10B, which declares that the benefit of deduction will not be available beyond 2012-2013; but the Circular provides that, in a case, where there is a subsequent emergence of a 100 per cent export oriented undertaking, the benefit will not extend beyond 2009-2010. He would, therefore, submit that there is a direct conflict between the Circular and the statutory provision and, therefore, the statutory provis....
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.... 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 manufacture beyond 10 years from the date 20.06.2007, this provision does not leave room for any interpretation, as contended. 26. We must, now, consider the effect of the Circular dated 06.01.2005. We proceed on the basis that it is a Circular, which is issued under Section 119 of the Act. It may be true that it was open to the authorities to issue a circular under the said Act, which may be beneficial to the interest of the assessee. Bef....
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....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 11 in SCC). It must be remembered that law laid down by this Court is law of the land. The law so laid down is binding on all courts/tribunals and bodies. It is clear that circulars of the Board cannot prevail over the law laid down by this Court. However, it was pointed out that during hearing of Dhiren Chemical case because of the circulars of the Board in many cases the Department had granted benefits of exemption notifications. It was submitted that on the interpreta....
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....ntrol 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 consideration of the Circular. The Circular is issued in the form of a clarification in response to queries, which were raised about the fate of the applicants, who were doing business in the domestic tariff area, ("Domestic Tariff Area" is defined in the Special Economic Zones Act, 2005 as follows: "(i) 'Domestic Tariff Area' means the whole of India (including the territorial waters and continental shelf) but does not include the areas of the Special Economic Zones") and who we....
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....s. 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 oriented undertaking. If that is so, unless we do violence to Section 10B and take the view that beginning of production, which is a reality in this case from since much before the date on which it was given approval, is to be totally ignored. We see no warrant in the provision of Section 10B to bring in an intendment to the Legislation bearing in mind, particularly, that there is no room for intendment in a taxing statute. No doubt, a taxing statute like any other statute must be interpreted fa....
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....t 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 this case with the question whether the assessee is entitled to the benefit under Section 10B and, in our view, the assessee is not entitled. Therefore, that the assessee had embarked upon an exercise, which is turned out to be futile, cannot be an argument, which will advance the case of the assessee. 35. Therefore, the result is that we must answer the question of law in favour of the appellant / revenue and against the respondent / assessee. We do so. The order of the Tribunal will stand set aside i....