TaxTMI 
TaxTMI 
2019 (6) TMI 140
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....d in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeal) erred in confirming rejection made by the Assessing Officer of deduction under section 80IB of the Act of Rs. 2507133/-. Provisions of the Act ought to have been properly construed and regard being had to facts of the case deduction claimed under section 80IB of the Act should not have been rejected. 2. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in confirming order made under section 143(3) of the Act by the learned Assessing Officer which is illegal, bad-in-law, ultra vires and without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective, and liable to be annulled. 3. The learned assessing officer erred in charging interest under section 234A, 234B, 234C and 234D of the Act. 4. The appellant crave leave to add, amend, alter and / or vary any of the grounds of appeal before or at the time of hearing." 3. The assessee is engaged in the business of manufacturing & trading of dyes and dyes intermediates . The solitar....
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...., a summary of which is as under: Notification No. Date Limit (Rs. in Lacs) SO 232(E) 02-04-1991 100 SO 857{E) 10-12-1997 300 SO 1288(E) 24-12-1999 100 SO 1642(E) 29-09-2006 500 2. Note -2 of the Notification No, SO 857(E)/dated 10-12-1997 also defines Nature of Plant & Machinery which exclude the auxiliary and other equipment not directly related to production of an article or thing. The relevant para reads as under: "....In calculating the value of plant and machinery the following shall be excluded namely (i) the cost of equipment such as tools, jigs, dies, moulds and spare parts for maintenance and the cost of consumable stores. (ii) the cost of installation of plant and machinery; (iii) cost of research and development equipment and pollution control equipment; (iv) the cost generation sets, extra transformer, etc installed by the undertaking as per the regulations of the state Electricity Board; (v) the bank charges and service paid to the National Small Industries Corporation or the state Small Industries Corporation; (vi) the cost involved in procurement or i....
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....Plant & Machinery and only the extra transformers and generator sheds are to be excluded as per submissions of appellant himself. Further the storage tanks and piping are very much part of Plant & Machinery. Therefore looking into the facts of the case, the investments otherwise also exceeds Rs. 5 crores, and therefore the argument of the appellant does not hold ground. Hence this ground of appeal is dismissed. 6. In the result, the appeal is dismissed." 5. Aggrieved by an appellate order dated 28.06.2016 passed by learned CIT(A), the assessee has filed second appeal with the tribunal . None appeared on behalf of the assessee when the appeal was called for hearing. The Ld. DR on the other hand submitted that the issue is no more res-integra as Hon'ble Supreme Court has already adjudicated this issue in favour of Revenue in the case of DCIT v. Ace Multi Axes Systems Ltd., reported in (2018) 400 ITR 141(SC). Thus ,it was prayed by learned DR that since investment in Plant & Machinery is more than threshold limits as prescribed for small scale industrial undertaking, deductions u/s. 80IB(3) of the 1961 Act cannot be allowed. The learned DR also drew our attention to pro....
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.... with Section 80IB(14)(g) of the 1961 Act. At this stage it will be profitable to reproduce provision of Section 80IB(3)(ii) and 80IB(14)(g) of the 1961 Act, which are reproduced hereunder: "Deduction in respect of profits and gains from certain industrial undertakings other than infrastructure development undertakings. 80IB (1) Where the gross total income of an assessee includes any profits and gains derived from any business referred to in sub-sections (3) to [(11), (11A) and (11B) ] (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to such percentage and for such number of assessment years as specified in this section. *** *** (3) The amount of deduction in the case of an industrial undertaking shall be twenty-five per cent (or thirty per cent where the assessee is a company), of the profits and gains derived from such industrial undertaking for a period of ten consecutive assessment years (or twelve consecutive assess....
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....scribed limit for SSI industrial undertaking is investment of Rs. 500 lacs in Plant and Machinery , as applicable during the impugned assessment year. 6.4 Section 80IB(14)(g) has stipulated that for the purposes of claiming deduction under Section 80IB of the 1961 Act, small scale industrial undertaking shall mean an undertaking which is , as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act,1951 . It is important to refer to provisions of Section 11B of the IDR Act, 1951, which provides as under: "[11B.Power of Central Government to specify the requirements which shall be complied with by small scale industrial undertakings.-(1)The Central Government may, with a view to ascertaining which ancillary and small scale industrial undertakings need supportive measures, exemptions or other favourable treatment under this Act to enable them to maintain their viability and strength and so as to be effective in- (a)promoting in a harmonious manner the industrial economy of the country and easing the problem of unemployment, and (b)securing that the ownershi....
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....ned in sub-section (1), an industrial undertaking which, according to the law for the time being in force, fell, immediately before the commencement of the Industries (Development and Regulation) Amendment Act, 1984 (4 of 1984), under the definition of an ancillary,or small scale,industrial undertaking, shall, after such commencement, continue to be regarded as an ancillary, or small scale, industrial undertaking for the purposes of this Act until the definition aforesaid is altered or superseded by any notified order made under sub-section (1).]" 6.5 On perusal of the provisions of aforesaid Section 11B of the IDR Act,1951, it is clear that GOI issues notification while specifying criteria for an undertaking to be eligible to be classified as small scale industrial undertaking, including ceiling on investments in Plant and Machinery. Section 80IB(14)(g) of the 1961 Act stipulates that small scale industrial undertaking means an industrial undertaking which is, as on the last day of the previous year, regarded as a small-scale industrial undertaking under section 11B of the IDR Act,1951. At this stage it will be pertinent to mention about the Preamble of the IDR Act, 1951 which ....
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....ing for the purpose of the said Act. Tabular matter available on request III. Requirements to be complied with by an industrial undertaking for being regarded as small scale industrial undertaking - a. An industrial undertaking in which the investment in fixed assets in plant and machinery whether held on ownership terms or on lease or by hire purchase does not exceed rupees sixty lakhs. b. In case of an industrial undertaking referrred to in (a) above the limit of investment in fixed assets in plant and machinery shall be rupees seventy five lakhs provided the unit undertakes to export atleast 30 percent of the annual production by the end of 3rd year from the date of its commencing production. IV. Requirements to be complied with by an industrial undertaking for being regarding as ancillary industrial undertaking- In industrial undertaking which is engaged or is proposed to be engaged in the manufacture or production of parts, components, sub-assemblies, tooling or intermediates, or the rendering of services, and the undertaking supplies or renders or proposes to supply or render not less than 50 percent of its production or service....
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....on of the notification of the Government of India in the Ministry of Industry (Department of Industrial Development) number S.O.232(E), dated the 2nd April, 1991, the Central Government hereby specifies the following factors on the basis of which an industrial undertaking shall be regarded as a small scale or as an ancillary industrial undertaking for the purposes of the said Act:- 1. Small scale industrial undertaking: An industrial undertaking in which the investment in fixed assets in plant and machinery, whether held on ownership terms of on lease or on hire purchase, does not exceed rupees three crores; 2. Ancillary industrial undertaking: An industrial undertaking which is engaged or is proposed to be engaged in the manufacturing or production of parts components, sub-assemblies, tooling or intermediates, or the rendering of services, and undertaking supplies or proposes or supply or renders not more than fifty per cent of its production or services, as the case may be, to one or more other industrial undertakings and whose investment in fixed assets in plant and machinery, whether held on ownership terms or on lease or on hire purchase, does not exceed rupe....
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....r industrial undertaking or undertakings, whether small scale or otherwise, put together as well as the equity held by persons who are Directors in any other industrial undertaking or undertakings even if the person concerned is a Director in other in other Industrial Undertaking or Undertakings; c. equity held by a person, having special technical qualification and experience, appointed as a Director in a small scale industrial undertaking, to the extent of qualification shares, if so provided in the Articles of Association, shall not be counted in computing the equity held by other industrial undertaking or undertakings even if the person concerned is a Director in other industrial undertaking or undertakings; v. where an industrial undertaking is a subsidiary of, or is owned or controlled by, any other industrial undertaking or undertakings in terms of sub-clauses (i); (ii) and if the total investment in fixed assets in plant and machinery of the first mentioned industrial undertaking and the other industrial undertaking or undertakings clubbed together exceeds the limit of investment specified in paragraphs (1) or (2) of this notification as the case may be, n....
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....1A and 13 of the said Act by the Central Government and are covered by the provisions of paragraphs (1) and (2) above relating to the ancillary or small scale industrial undertaking, may be registered, at the discretion of the owner, as such, within a period of one hundred and eighty days from the date of publication of this notification in the Official Gazette. This notification shall come into force from the date of its publication in the Official Gazette [File No.10/6/97-IP] ASHOK KUMAR. Jt. Secy." ------------------------------------------------------------------------------------------------------------------------------ This notification dated 10.12.1997 was modified by a notification dated 24.12.1999 , which is reproduced hereunder: " The Gazette of India EXTRAORDINARY PART II-Section 3-Sub-Section (iii) PUBLISHED BY AUTHORITY No.798 NEW DELHI, FRIDAY, DECEMBER 24, 1999/PAUSA 3. 1921 MINISTRY OF COMMERCE AND INDUSTRY (Department of Industrial Policy and Promotion) ORDER New Delhi, the 24th December, 1999 S.O.1288 (E). - Whereas the Central Government considers it necessary with a view to a....
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....was later clarified as under: "No. 4(I)/2000-SSI Bd 14th March, 2000 To The Secretaries/ Director of Industries of all States/ UTs. Sub: Clarification regarding investment limit for Small Scale/Ancillary Industrial Undertakings. Sir, Please refer to Notification No. S.O. 1288 (E) dated 24th December, 1999 vide which the investment limit on plant and machinery in respect of Small Scale/Ancillary Industrial Undertakings was reduced from Rs. 3 crore to Rs. 1 crore. Since then there have been queries from State Governments as well as industrial associations with regard to the status of those industrial undertakings which had either established afresh or enhanced their investment upto Rs. 3 crore before the notification dated 24th December, 1999. In this context, it is clarified as under: i. The units that have obtained permanent registration on the order dated 10th December, 1997 would continue to remain as SSI units inspite of the order dated 24th December, 1999 reducing the investment limit to Rs. 1 crore. ii. The units which had switched over to the SSI status based on the order dated 10th December, 1997 w....
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....December, 1997, and have taken concrete steps for implementing the project such as preparation of project report, sanction of loan, purchase of land, civil construction, placement of orders for plant and machinery, etc. prior to 24th December, 1999 would continue to enjoy the SSI status so long as the investment in plant machinery does not exceed Rs. 300 lakhs notwithstanding the revised investment limit of Rs. 100 lakh notified on 24th December, 1999." Please take necessary action accordingly, Yours faithfully, Sd/- (C. S. PRASAD) Additional Development Commissioner(SSI) The notification dated 24.12.1999 was further clarified as under: No. 4(I)/2000-SSI Bd. & Pol. 19th October, 2000 The Secretaries/Director of Industries (All States/UTs) The Director Small Industries Service Institute (All States/UTs) Sub: Reduction in the investment limit on SSI/Ancillary Undertakings-Clarification reg. Sir, Reference have been received from different quarters seeking clarification relating to the expansion of such units, which were provisionally/permanently, registered prior to issue of no....
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....Act deals specifically with MSME sector. Section 7 of the 2006 Act provided as under : "7. (1). Notwithstanding anything contained in section 11 B of the Industries (Development and Regulation) Act, 1951, the Central Government may, for the purposes of this Act, by notification and having regard to the provisions of sub-sections (4) and. (5), classify any class or classes of enterprises, whether proprietorship, Hindu undivided family, association of persons, co-operative society, partnership firm, company or undertaking, by whatever name called,- (a) in the case of the enterprises engaged in the manufacture or production of goods pertaining to any industry specified in the First Schedule to the Industries (Development and Regulation) Act, 1951, as- (i) a micro enterprise, where the investment in plant and machinery does not exceed twenty-five lakh rupees; (ii) a small enterprise, where the investment in plant and machinery is more than twenty-five lakh rupees but does not exceed five crore rupees; or (iii) a medium enterprise, where the investment in plant and machinery is more than .five crore rupees but does not exceed ten crore rupees....
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....mentioned in Section 7(1)(a) of the said Act, namely: (i) equipment such as tools, jigs, dyes, moulds and spare parts for maintenance and the cost of consumables stores; (ii) installation of plant and machinery; (iii) research and development equipment and pollution controlled equipment (iv) power generation set and extra transformer installed by the enterprise as per regulations of the State Electricity Board; (v) bank charges and service charges paid to the National Small Industries Corporation or the State Small Industries Corporation; (vi)procurement or installation of cables, wiring, bus bars, electrical control panels (not mounded on individual machines), oil circuit breakers or miniature circuit breakers which are necessarily to be used for providing electrical power to the plant and machinery or for safety measures; (vii)gas producers plants; (viii)transportation charges ( excluding sales-tax or value added tax and excise duty) for indigenous machinery from the place of the manufacture to the site of the enterprise; (ix)charges paid for technical know-how for erection of plant and machinery; ....
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....with MSME Act, 2006 to determine eligibility criteria for small scale industrial undertaking for computing deduction u/s 80IB(3) of the 1961 Act . We cannot read into statute any provision which is not existing in the statute. Thus, for calculating eligibility criteria/threshold limits for determining whether assessee is a small scale industrial undertaking, we have to go back to notifications issued under section 11B of IDR Act, 1951 and not under newly enacted MSME Act, 2006. The reliance of the assessee on notification SO 1642(E) issued in 29.09.2006 under MSME Act was not justified. The exclusions while computing Investments in Plant and Machinery are to computed vide notifications issued under IDR Act, 1951 and not under MSME Act, 2006. It is well settled that the exemption provisions are to be strictly construed at the first stage to establish entitlement of the tax-payer to claim exemption. Once, the assessee establishes its eligibility by fulfilling conditions stipulated at the first stage for falling within four corners of exemption provisions , then the said exemption provisions are to be liberally construed at second stage to give full effect to the exemption/deduction p....
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....h in terms refers to Section 11 B of the Industries (Development and Regulation) Act, 1951. The extent of deduction permissible is mentioned in Clause 3 which is 25% (30% in the case of a company) of the profits and gains derived from such industrial undertakings for 10 consecutive assessment years beginning with the initial assessment. The 'initial assessment year' is defined in Clause 14 (c) as the year in which manufacturing/production commences. 11. As already noted, the question for consideration is whether deduction under Clause 3 for 10 consecutive assessment years remains permissible irrespective of compliance of conditions subject to which the said deduction is permitted in the relevant assessment years. For purposes of deduction, the industrial undertakings covered by Section 80 IB are of different categories. Under the second proviso to Clause 2, disqualification applicable to industrial undertaking, other than small scale industrial undertakings, i.e., not being in 8th Schedule is not applicable. The small scale industrial undertakings eligible are only those which begin manufacture or produce, articles or things during the beginning of 1st day of April....
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....er undertakings. On this logic, incentive must be given irrespective of any condition as the incentive certainly helps further expansion by reducing the tax burden. The concept of vertical equity is well known under which all the assessees need not be uniformally taxed. Progressive taxation is a well known element of tax policy. Higher slabs of tax or higher tax burden on an assessee having higher income or higher capacity cannot in any manner, be considered unreasonable. **** **** **** 21. In view of the above judgments, we do not see any difference in the situation where the assessee, is not initially eligible, or where the assessee though initially eligible loses the qualification of eligibility in subsequent assessment years. In both such situations, principle of interpretation remains the same. 22. Thus, while there is no conflict with the principle that interpretation has to be given to advance the object of law, in the present case, the assessee having not retained the character of 'small scale industrial undertaking', is not eligible to the incentive meant for that category. Permitting incentive in such case will be again....