AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (6) TMI 1285
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.... claimed. 4. The learned Commissioner of Income Tax (Appeals) erred in rejecting the appellant's plea that the notification No.6l/2I06 dt. 20-7-20I6 issued by the Central Board of Direct Taxes entitles the appellant to claim the deduction of Rs. 13,02,71,498 u/s 32AD of the I.T Act. 5. The learned Commissioner of Income Tax (Appeals) as well as the learned Assessing Officer erred in construing that the notification dt. 20-7-2016 issued by the Central Board of Direct Taxes specifying the backward areas is effective only from 20-7-2016 and therefore the appellant is not entitled to claim the deduction u/s 32AD of the I.T Act for the assessment year 2016-17 6. It is contended that the learned Commissioner of Income Tax (Appeals) erred in not appreciating that once notified the provisions of section 32AD of the I.T Act becomes attracted from the assessment year 2016-17. At the time when the assessment was completed the notification was very much in vogue and effective from the date of the insertion of section 32AD of the I.T Act. 7. The appellant craves leave to add, amend or alter any of the aforesaid grounds as the occasion may require. ....
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.... the appellant company is not eligible for deduction prior to the date of notification. Based on this, the AO disallowed Rs. 13,02,71,498/- and added to the loss returned of Rs. 69,20,33,492/-. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A). The CIT(A) after considering the submissions of the assessee, confirmed the disallowance made by the AO by observing as under: "5.4 The AR's contention is that the Section 32AC/32AD very clearly states that it applies to units set up after 01-04-2015. The allowance is calculated on the assets acquired and installed during the period from 01-04-2015 to 31-03-2020 and the requirement of the notification was only to specify the backward areas in the states When once the backward area is specified the unit set up in that area is eligible to the deduction provided in section 32AD if ail conditions laid down therein are fulfilled. The period of acquisition and installation of machinery is specified as 01-04-2015 to 31-03-2020. This period is not relatable to the date of notification specified on the backward areas. Section 32AD is available for Units set up between 01-04-2015 to 31-03-2020 and for ....
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.... Ranga Reddy District as backward area was published on 20.07.2016 and therefore the Appellant Company is not eligible to the deduction as the addition and installation of the machinery were made prior to the said date. Aggrieved with the action of the Assessing Officer the Assessee filed this appeal. 3. The only issue in the appeal before the Hon'ble Commissioner is the eligibility of the Appellant Company to the deduction/s 32AD of the Income Tax Act. Section 32AD was introduced vide finance Act 2015 with effect from the Assessment year 2016-17. The section is applicable to units set up in the backward areas on or 1st April 2015 and the allowance is calculated on the costs of new assets acquired and installed during the period from 1st April, 2015 to 31st March 2020. 4. In the Memorandum explaining the amendment by way of introduction of 32AD is explained as under: Incentives for the state of Andhra Pradesh and the State of Telangana Section 94 of the Andhra Pradesh Re-organization Act 2014 inter alia provided that the Central Government shall take appropriate fiscal measures, including offer of tax incentives to the State of Andhra Pradesh....
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....ness or profession" of any previous year. With a view to ensure that the manufacturing units which are set up by availing this proposed incentive actually contribute to economic growth of these backward areas by carrying out the activity of manufacturing for a Substantial period of time, it is proposed to provide suitable safeguards for restricting the transfer of the plant of machinery for a period of 5 years. However, this restriction shall not apply to the amalgamating or demerged company, of the predecessor in a case of amalgamation or demerger or business reorganization but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be." 5. The Section is very clear that it applies to units set up after 01-04-2015. The allowance is calculated on the assets acquired and installed during the period from 01-04-2015 to 31-03-2020. The object is to provide a period of 5 years for giving this benefit. The states of Andhra Pradesh, Bihar, Telangana and West Bengal were selected for this benefit and the backward areas in these States are to be notified. The only requirement of the notification is only to specify the backward ....
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....AD for the financial year 2015-16 relevant to the assessment year 2016-17, wherein the notification has not come into force at all. Even though this provision has come into effect from 01.04.2016, the Government of India, Ministry of Finance, Central Board of Direct Taxes has released the Gazette Notification or 20.07.2016, specifying the backward areas of districts under different states. Therefore, the applicability of the said provisions to backward areas will be effective from 20.07.2016. Hence, the addition of Rs. 13,02,71,498/- made by the AO denying the claim u/s 32AD by the appellant is correct and confirmed. The appeal raised on this ground is dismissed." 4. Aggrieved by the order of CIT(A), the assessee is in appeal before the ITAT and filed written submissions, and relied on case laws, which are as under: 1. Section 32AD was inserted by Finance Act, 2015 w.e.f Asst. year 2016-17 to provide for an additional investment allowance of 15% of the cost of new asset acquired and installed by the assessee 2 It is applicable for 5 asst. years i.e. from asst. years 2016-17 to 2020-21 3 The two requirements spelt out by the section are a) Sett....
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....he A.P. Re-organization Act cannot be diluted by interpreting the notification as reducing the period of applicability of tax incentives provided by statute d) A notification is intended to sub serve the object of the statute and not override it. e) lf the interpretation placed by the revenue were to be correct it would mean that the R.R.Dist. was a forward area upto 19/7/2016 and became a backward area from 20/7/2016. On the face of it such interpretation is illogical. f) Kind attention is invited to the following passage in Collector of Central Excise, Bombay- 1 and another vs. Parle Exports (P) Ltd. reported in 183 ITR 624 (SC). "The fairest and most rational method to interpret the will of the lawmaker is by exploring his intentions at the time when the law was made, by the signs the most natural and probable. And these signs ate either the words, the context, the subject matter, the effects and consequences or the spirit and reason of the law." 7 Applying this test for ascertaining the purport of notification, reference should be made section-94 of the A.P. Re-organization Act 2014 which provides for fiscal measure including tax inc....
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....;s case a) The assessee set up an undertaking for manufacture or production of article after 1st April, 2015 b) The undertaking was set up in a notified backward area of the state of Telangana c) The new assets ate acquired and installed for the purpose of said undertaking during the period beginning from 1st April, 2015 and ending on 31/3/2020. 12 Thus the eligibility criteria laid down in the section is satisfied. Once satisfied the exemption notification should be construed liberally . The obvious answer is once a notification is issued u/s. 32AD specifying the area to be a backward area it relates back to 11/04/2015 onwards. There are no further restricting words to support that the allowance shall be available for the period after the date of notification of the backward area. Section 32AD of the I.T. Act being a beneficial provision and when the assessee falls in the beneficial provision the provision or the notification needs to be liberally interpreted. 13 Every notification needs to be published in the official gazette for the information of the public at large. AlI notifications will come into force from the date of their publi....
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....tion permitted by the section cannot be cut down under the guise of imposing a 'condition". In fact, this is not a condition but an impermissible attempt in rewrite the section' . It is submitted that the revenue's contention falls within the above passage of the judgement of the Hon'ble Supreme Court. The revenue cannot impose or read conditions into the notification which will have the effect of re-writing the statutory provisions and reducing the 5 year period. 16 Without prejudice to the above submissions, for the sake of argument, even if be understood whether the notification has the effect of restricting the deduction u/s. 32AD for the period subsequent to the date of notification or relates back to 1.4.2015, from which date Section 32AD is introduced, are made applicable, there is an ambiguity and the matter is not free from doubt. In such a situation where there is an ambiguity or the matter could be answered both ways or two views are possible, the Hon'ble Supreme Court has been repeatedly holding that the issue will have to be interpreted in favour of the tax payer. This becomes all the more relevant as the section 32AD is a benefici....
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....of the issue of conditional legislation. Hence, the arguments of the assessee are untenable. The case law relied upon by the assessee on statutory interpretation, liberal view of exemption provisions and ambiguity are also not applicable. 4. It is humbly submitted that the undersigned filed a paper-book containing relevant case laws on 10.2.2021. In the case of ITC Bhadrachalam Paper Board [I.T. 1996(8) 67], the Hon'ble Supreme Court explained the date of application of a GO which was supposed to be published in the Gazette but published at a later date. From the above decision, the following principles laid down by Hon'ble Supreme Court may be noticed: * The power of exemption is not a species of delegated legislation; it is an instance of conditional legislation. * The object of publication is not merely to give information to public. Publication of order or rule is official confirmation of making such an order or rule. * Where the parent statute prescribes the mode of publication or promulgation, that mode has to be followed and such requirement is imperative and cannot be dispensed with. * The provisions conferring private ri....
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.... 9. In the case of HP State Electricity Regulatory Commission [CA No.6128 to 6133/2019], Hon'ble Supreme Court held that it is a well settled proposition of law that enactments dealing with substantive rights are primarily prospective unless it is expressly or by necessary intention or implication given retrospectivity. In the said case, a vested right was sought taken away retrospectively. It is humbly submitted that in the present case, no vested right was granted to the assessee till the date of notification was issued, more so when it is stated that it will come into effect from the date of notification i.e, 20.7.2016. 10. In the case of Agri Trade India Services Pvt Ltd[132(2006)DLT 500], the Hon'ble Delhi High Court held that when the express wording of a Section does not permit a change or an amendment to the policy in a manner other than what is contemplated in that Section. It was held that the amendment should only be by way of notification and not by any other means. In this case also it was held that it is a well recognised rule of interpretation that in the absence of express words of appropriate language from which retrospectivity may be inferr....
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.... issued. Even if there is ambiguity, the benefit will flow to Revenue as per the above referred decision. 14. It is humbly submitted that the case-law relied upon by the assessee in the case of Mavilayi Service Cooperative Band Ltd [123 Taxmann.com 161(SC)J is not applicable to facts of the present case because the issue under dispute in the said case was related to a Circular No.14j2006 of CBDT and not that of conditional legislation. Also the dispute was on treating a Primary Agricultural Cooperative Society as Bank. In the said decision, a limited reference was made to decision in the case of Dilip Kumar Singh and not to that in the case of Dilip Kumar & Company as sought to be referred by the learned AR. 15. In light of the above, the appeal filed by the assessee may kindly be dismissed." 5.1 In addition to the above written submissions, the ld. DR vehemently argued the case and submitted that the assessee has not earned any revenue from its operations. He submitted that the notification was issued after the FY, therefore, section 32AD is not applicable to the assessee and strict interpretation should be applied as per the judgment of the Hon'ble Supreme Co....
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....in view. If while interpreting a Statutory law, any doubt arises as to the meaning to be assigned to a word or a phrase or a clause used in an enactment and such word, phrase or clause is not specifically defined, it is legitimate and indeed mandatory to fall back on General Clauses Act. Notwithstanding this, we should remember that when there is repugnancy or conflict as to the subject or context between the General Clauses Act and a statutory provision which falls for interpretation, the Court must necessarily refer to the provisions of statute. 20. In applying rule of plain meaning any hardship and inconvenience cannot be the basis to alter the meaning to the language employed by the legislation. This is especially so in fiscal statutes and penal statutes. Nevertheless, if the plain language results in absurdity, the Court is entitled to determine the meaning of the word in the context in which it is used keeping in view the legislative purpose.2 Not only that, if the plain construction leads to anomaly and absurdity, the court having regard to the hardship and consequences that flow from such a provision can even explain the true intention of the legislation. Having ob....
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....ict interpretation is used in the precise sense. To say that strict interpretation involves plain reading of the statute and to say that one has to utilize strict interpretation in the event of ambiguity is selfcontradictory. 27. Now coming to the other aspect, as we presently discuss, even with regard to exemption clauses or exemption notifications issued under a taxing statute, this Court in some cases has taken the view that the ambiguity in an exemption notification should be construed in favour of the subject. In subsequent cases, this Court diluted the principle saying that mandatory requirements of exemption clause should be interpreted strictly and the directory conditions of such exemption notification can be condoned if there is sufficient compliance with the main requirements. This, however, did not in any manner tinker with the view that an ambiguous exemption clause should be interpreted favouring the revenue. Here again this Court applied different tests when considering the ambiguity of the exemption notification which requires strict construction and after doing so at the stage of applying the notification, it came to the conclusion that one has to consider....
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....ation published on 20th July, 2016, it is clearly mentioned that the notification shall come into force on the date of its publication in the official gazette i.e. on 20th July, 2016. It is also interesting to note that the section was inserted by the Finance Act. 2015 w.e.f 01.04.2016. The impugned FY is 31st March, 2016, (2015-16) as per the insertion of this section, the impugned FY is prior to insertion of the section. The assessee has claimed the deduction u/s 32AD which was not in force for the relevant FY. The Act is very clear in this regard. On perusal of the judgment of the Hon'ble Supreme Court in the case of Dilip Kumar & Company (supra), there is no ambiguity in the Act that the Act is very clear that exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that its case comes within the parameters of the exemption clause or exemption notification. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of revenue. Therefore, the assessee is not eligible....
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....beginning from 01/04/2015 to 31/3/2016, thereby meeting the criteria fixed by section 32AD(1) of the Act, thus the eligibility criteria laid down in the section is satisfied. According to the Ld. DR, once the exemption criteria is satisfied, the notification should be interpreted liberally. According to him, once a notification is issued u/s. 32AD specifying the area to be a backward area it relates back to 11/4/2015 onwards, and there are no further restricting words to support that the allowance shall be available for the period after the date of notification of the backward area. Section 32AD of the I.T. Act being a beneficial provision and when the assessee falls in the beneficial provision the provision or the notification needs to be liberally interpreted. 4. It is the further argument of the learned AR that Section 94 of the A.P. Reorganisation Act provides for fiscal measures including tax incentives to the successor states (Telangana & A.P.) for development of backward areas and to promote industrialization and Economic growth in both states; that the Special Economic measures in part-X of the A.P. Re-organization Act cannot be diluted by interpreting the notification a....
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....ys or two views are possible, the Hon'ble Supreme Court has been repeatedly holding that the issue will have to be interpreted in favour of the tax payer. While making a particular reference to the decision of the Hon'ble Supreme Court in the case of Government of Kerala vs. Mother Superior Adoration Convent (2021) 3 I.T 75, he submitted that this becomes all the more relevant as the section 32AD of the Act is a beneficial provision intended to give relief to the tax payer, promote rapid industrialisation in the successor states pursuant to the bifurcation of A.P.State, and forms part of the promise held out by the Central Government while effecting bifurcation. According to him, to apply the test for ascertaining the purport of notification, reference should be made section-94 of the A.P.Re-organization Act 2014 which provides for fiscal measure including tax incentives to successor states. According to him, these are special economic measures to be taken in the form of tax incentives to successor states a promise under which the reorganization was effected. 8. He also made a reference to the circular reported in 379 ITR Statutes-19 at page 50, and submitted that the Circul....
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....ut specifically stipulates as 01/04/2016, it does not admit of any doubt. Lastly he submits that in a long list of cases, the decisions of the Hon'ble Supreme Court stated that when in ambiguity or when two views are possible the issue has to be answered in favour of the tax payer. 10. Sum and substance of the argument of the Ld. AR is that any notification issued by the Central Government, pursuant to the intention of the legislature, must be in conformity with the provision and it shall not in any way delay or abridge the effectiveness of the provision. He, therefore, submits that the notification shall be read as part and parcel of the provision itself, which came into force on 01/04/2016 giving benefit to the acquisitions of new asset on or after 01/04/2015. He submitted that if we go by the interpretation of the Revenue, it would amount to accepting the superiority of the delegated legislation over the parent provision, which is impermissible. He distinguished the citations relied upon by the Revenue and placing reliance on the decisions of Hon'ble Apex Court, in the cases of Collector of Central Excise, Bombay Vs. Parley Exports Pvt. Ltd., (1990) 183 ITR 62 (SC), C....
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....951 AIR 128]. Lastly he placed reliance on the decision of the Constitutional Bench of Hon'ble Supreme Court in the case of Dilip Kumar & Company [(2018) 95 taxmann.com 327], in support of his contention that taxing statute has to be considered liberally while exemption notification has to be construed strictly. Sum and substance of his argument is that inasmuch as the provisions under Section 32AD(1) of the Act are ineffective and not implementable until and unless the notification issued specifying the backward areas infuses life into it, such a provision has to be effective only after the notification is issued and, therefore, while strictly interpreting so, the assessee must be held not eligible to claim the deduction for the additional investment allowance. He, accordingly, prayed that the orders of the authorities below may be up held, while dismissing this appeal. 13. I have gone through the record in the light of the submission made on either side. For proper appreciation of the contentions on either side and determining the entitlement of the assessee to claim the deduction for the AY 2016-17, I deem it necessary to refer to Section 32AD of the Act and also to the n....
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....ssment Years 2016-17 to 2020-21. Applicability of Section 32AD(1) of the Act to the Assessment Years 2016-17 is, thus, beyond any controversy. 16. Coming to the nature of notification dated 20/07/2016 issued by the CBDT, Revenue argues that this is a case of conditional legislation because, the Parliament imposed the condition that the backward areas are to be notified by the Central Government, without which, no effect could be given to this section. According to the learned AR, no power is invested in the executive to legislate upon the time of Section coming into force, but the executive has only to supply the details as to which areas constitute backward areas. 17. Conditional legislation is understood to mean the legislation, which is complete in all respects, but leaves to the executive the power to notify the date of its future applicability; or to withdraw in any given area or given situations or its applicability to any given assessees or class of assessees; or to grant benefit of the enactment to one class of assessees by depriving the other clause such benefits etc., In delegated legislation, on the other hand, while making the legislation, executive is delegated p....
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.... done under that order. 20. This conditional aspect is conspicuous in case of Section 32AD(1) of the Act by its absence and the section does not deal with any empowerment of the executive to either promulgate or exempt any class of persons or properties or areas from the operation of the section. Section itself says that subject to the twin conditions as to setting up the undertaking in the backward areas and acquiring and installing the new asset, all the assessees are entitled to claim the additional investment allowance in the AYs 2016-17 to 2020-21. Both the counsel adverted to the principle that a taxing provision has to be interpreted liberally and any exemption notification has to be interpreted strictly, the benefit of doubt in the former case going to the assessee whereas to the Revenue in the latter case. In this case, however, what I find is that, the provision itself is in the nature of beneficial legislation favourable to the assessee, and the notification neither brings the provision into force on any later day nor does it extend or exempt the operation of the provision to any class of persons, properties or areas. It only specifies details regarding the backward a....
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....erpretation of the Revenue, it will lead to a situation, where the assessee set up the undertaking and acquires and installs the new asset on or after 01/04/2015, but before 20/07/2016 would not be entitled to claim the deduction provided by the section. If it were the legislative intention to deny the additional investment allowance to such class of assessees till the date of notification, nothing prevented the legislature from specifying so in the Section stating that "......and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the date of notification and ending before the first day of April, 2020 in the said backward area..................". However, the legislative intention is clear in the expression that "......and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the first day of April, 2015 and ending before the first day of April, 2020 in the said backward area..................". 25. In Parley Exports (supra), the Hon'ble Apex Court observed that the fairest and most rational method to interpret the will of the lawmaker is....
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....ecision in ITC, Bhadrachalam (supra), has, therefore, no application to the facts of the case. 28. Next case on which the Revenue places heavy reliance is the case of Dileep Kumar (supra). In such case, the Hon'ble Apext Court concluded that 52. To sum up, we answer the reference holding as under - "(1) Exemption notification should be interpreted strictly; the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification. (2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export Case (supra) stands over-ruled." 29. Hon'ble Apex Court, however, subsequently in the case of Government of Kerala Vs. Mother Superior Adoration Convent (2021) SCC online SC 151 (decided on 01/03/2021), noticed the decision in the case of Dileep Kumar (supra), and observed that such dec....
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....r a substantial period of time, it is proposed to provide suitable safeguards for restricting the transfer of the plant or machinery for a period of 5 years. However, this restriction shall not apply to the amalgamating or demerged company or the predecessor in a case of amalgamation or demerger or business reorganization but shall continue to apply to the amalgamated company or resulting company or successor, as the case may be. It is therefore clear that in order to give effect to Section 94 of the A.P. Reorganization Act, for fiscal measures including tax incentives to the successor states, namely Talangana and Andhra Pradesh for development of backward areas and to promote industrialization and economic growth, Section 32AD(1) of the Act is enacted. 31. Provision u/s. 32AD(1) of the Act in unequivocal terms states that the assessee is entitled to additional investment allowance for the assessment year relevant to the previous year, in which such asset is installed, whereby allowing the deduction in the AY.2016-17 in respect of the assets that were purchased subsequent to 01/04/2015 and before 31/03/2016, subject to the fulfilment of other conditions of the section. The backw....
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....to read down the notification dt.20/07/2016 in conformity with the provisions under Section 32AD(1) of the Act so as to give effect to the legislative intention in tune with the objective of enacting Section 32AD(1) of the Act vis-à-vis Section 94 of the Andhra Pradesh Re- organisation Act. On this premise, I find that the notification dt.20/07/2016 shall be read as a part of Section 32AD(1) of the Act and its coming into force would relate back to the date of Section 32AD(1) of the Act coming into force. 33. For these reasons, I am are of the considered opinion that since the assessee set up the undertaking in the notified backward area in the state of Telangana after 01/04/2015, such part of the assets acquired and installed subsequent to 01/04/2015 and before 31/03/2016 are qualified for deduction in terms of Section 32AD(1) of the Act. 34. In the result, the appeal of the assessee is allowed. Order pronounced in the open court. Shri R.K. Panda, Vice-President (3rd Member) ITA No.1220/Hyd/2019 Assessment Year: 2016-17 Maheswari Mining & Energy Pvt. Ltd Hyderabad Vs. Dy. Commissioner of Income Tax, Circle 16(1) Hyderabad For the Appellant : Advocate....
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.... notification. Accordingly, the Assessing Officer rejected the claim of deduction u/s 32AD at Rs. 13,02,71,498/-. 4. In appeal, the learned CIT (A) upheld the action of the Assessing Officer. While doing so, he held that as per the provisions of section 32AD, the enterprise should be set up in any backward area notified by the Central Govt. The notification to this effect was issued on 20th July,2016 and it is clearly mentioned that the applicability of it comes into effect from the date of publication in the official gazette. Therefore, the areas notified in the gazette are treated as backward areas "only from the date of the publication i.e. w.e.f. 20th July, 2016". However, the assessee has claimed the investment allowance u/s 32AD for the financial year 2015-16 relevant to A.Y 2016-17 wherein the notification has not come into force at all. He further held that even though this provision has come into effect from 1.4.2016, the Govt. of India, Ministry of Finance, CBDT has released the gazette notification on 20th July, 2016, specifying the backward areas of districts under different states. Therefore, the applicability of the said provisions to backward areas will be effecti....
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.... asset for the A.Y relevant to the previous year in which such new asset is installed. He further noted that the CBDT vide its circular reported in 379 ITR at page No.51, vide para-No.14.4 makes it amply clear that the amendment shall take effect from 1.4.2016 and will accordingly apply in relation to A.Y 2016-17 and subsequent years. Further, the section clearly indicates that such a deduction is allowable for the previous years between 2015-16 and 2019-20 corresponding to the A.Ys 2016-17 to 2020-21. Thus, applicability of section 32AD(1) of the Act to the A.Ys 2016-17 is beyond any controversy. 9. So far as the nature of the notification dated 20/07/2016 issued by the CBDT is concerned, the learned JM held that the notification is neither taxing nor exempting the tax either in full or in part to any class of assessees but it only specifies the detail requisites for implementation of the section. Therefore, issuance of notification, in question, by the CBDT is only pursuant to the delegated legislation, but not a conditional legislation. 10. So far as the entitlement of the assessee to claim the benefit of deduction under section 32AD of the Act from the date mentioned in t....
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....ring to the above provision, he submitted that the two requirements spelt out by the said section are: a) Setting up an undertaking or enterprise for manufacture or production of an article or thing after 1st day of April, 2015 in any notified backward area in the state of Telangana. b) The new assets are acquired and installed for the purpose of the said undertaking or enterprise during the period beginning from the 1st of April, 2015 and ending on 31st March, 2020. 12) Referring to the Memorandum explaining the provisions of the Finance Bill, 2015 reported in 371 ITR St 307 and the CBDT circular reported in 379 ITR (St.) 50 (Para 14.2) he drew the attention of the Bench to the same and submitted that the only requirement is that it should be a notified backward area and neither the section nor the circular stipulates that the deduction of 15% shall be allowed only for the period after the notification of backward area. 13) Coming to the case of the assessee, the learned Counsel for the assessee submitted that the assessee company set up two solar power plants one at Peerampalli village and the other at Kothagudi village, Vikarabad Mandal, R.R. Distt, durin....
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....ed that reference should be made to section 94 of the A.P. Reorganization Act, 2014 which provides for fiscal measure including tax incentives to successor states. These are the special economic measures to be taken in the form of tax incentives to successor states a promise under which the reorganization was effected. 16.1) Referring to the CBDT circular No.19 of 2015 dated 27.11.2015 reported in 379 ITR (statutes-19), he submitted that the circular while specifying the conditions does not state that the deduction u/s 32AD is available only from the period after the date of issue of notification. Referring to the Memorandum explaining the provisions reported in 371 ITR (Statute 307) he submitted that it is nowhere stated that the additional investment allowance will be available only after the period from the date of notification as a backward area. 17) He submitted that the special economic measures including tax incentives to the successor states is a part of the commitment of the Central Govt. under the A.P. Reorganization Act, 2014. He submitted that these incentives are available for a period of 5 years and the incentives so offered by the Central Government cannot be r....
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.... Mills reported in 237 ITR 41, the learned Counsel for the assessee drew the attention of the Bench to the relevant observation of the Hon'ble Supreme Court at page 45 which reads as under: "This section states that the deduction shall be wholly allowed. It permits the Board to specify conditions but conditions cannot have the effect of curtailing the scope of the deduction granted by the section. The amplitude of the deduction permitted by the section cannot be cut down under the guise of imposing a "condition". In fact, this is not a condition but an impermissible attempt in rewrite the section". 23) He submitted that the contention of the Revenue falls within the above passage of the judgment of the Hon'ble Supreme Court. He submitted that the Revenue cannot impost or read conditions into the notification which will have the effect of re-writing the statutory provisions and reducing the 5-year period. 24) Referring to the decision of the Hon'ble Supreme Court in the case of Govt. of Kerala & Another vs. Mother Superior Adoration Convent, vide Civil Appeal No.202 of 2012 order dated 1.3.2021, he submitted that the Hon'ble Supreme Court in the said d....
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....im exemption with regard to additional investment allowance u/s 35AD of the I.T. Act. Referring to various decisions filed in the case law compilation, the learned DR submitted that exemption notification should be interpreted strictly and conditional legislation will be operative only when the notification is issued. He accordingly submitted that since order of the learned AM is in conformity with the law, the same should be applied and the appeal filed by the assessee be dismissed. He also relied on the following decisions: i) Sri B.K. Srinivasan & Another Etc. Etc. vs. State of Karnataka &Ors. reported in 1987 AIR 1059/1987 SCR(1)1054. ii) M/s. Universal Pipes (P) Ltd vs. The State of Assam & 3 Ors. In Writ Appeal No.393 of 2010. iii) Sri Vijayalakshmi Rice Mills vs. State of Andhra Pradesh, reported in 1976 AIR 1471.1976 SCR (3) 775. iv) H.P State Electricity Regulatory Commission vs. H.P. State Electricity Board in Civil Appeal No.6128 of 2009. v) Agri Trade India Services Pvt. Ltd vs. Union of India &Ors. reported in 132(2006) DLT 500/ELT 161 Del. vi) GarikapatiVeerayya vs. N. Subbaiah Choudhury, reported in 1957 AIR 540. ....
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....alled during the period between 1.4.2015 and 31.02.2016. This fact is evidenced from the letter dated 24.5.2016 issued by the Chief General Manager (Commercial & RAC) TSSPDCL, Corporate Office, Hyderabad to the Chief Engineer (Planning, Commercial & Coordn.) TS TRANSCO Hyderabad and the Revenue is also not disputing the same. 30) I find the Memorandum explaining the provisions in the Finance Bill 2015 reported in 371 ITR (St.) 307 reads as under: "Section 94 of the Andhra Pradesh Reorganization Act, 2014 inter alia provides that the Central Government shall take appropriate fiscal measures including offer of tax incentives to the State of Andhra Pradesh and the State of Telangana, to promote industrialization and economic growth in both the States. Manufacturing sector plays significant role in the economic growth of any region. Therefore, in order to encourage the setting up of industrial undertaking in the backward areas of the State of Andhra Pradesh and the State of Telangana, it is proposed to provide following income-tax incentives:- (A) Additional Investment Allowance It is proposed to insert a new section 32AD in the Act to provide for....
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....amalgamation or demerger or business reorganization but shall continue to apply to the amalgamated Company or resulting company or successor, as the case may be." (B) Additional Depreciation at the rate of 35%.......... .................... These amendments will take effect from 1st April, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years." 31) I find the CBDT Circular No.19 of 2015, dated 27.11.2015 reported in 379 ITR (St.)50 reads as under: "14.2 Additional investment allowance 14.2.1 Section 32AD has been inserted in the Income-tax Act to provide for an additional investment allowance of an amount equal to 15 per cent of the cost of new asset acquired and installed by an assessee, if- (a) he sets up an undertaking or enterprise for manufacture or production of any article or thing on or after 1st April, 2015 in any notified backward area in the State of Andhra Pradesh or the State of Bihar or the State of Telangana or the State of West Bengal; and (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during t....
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....ril, 2016 and will, accordingly, apply in relation to the assessment year 2016-17 and subsequent assessment years." 32) A combined reading of the Memorandum explaining the provisions in the Finance Bill 2015 as well as the CBDT Circular No.19 of 2015 reproduced above clearly mentions that the provisions of section 32AD are applicable from A.Y 2016-17 for a period of 5 years. Therefore, the first question i.e. as to whether the provisions u/s 32AD of the Act, 1961 are applicable for the investment made in financial year 2015-16 is concerned, the answer, in my opinion, is Yes and is applicable for financial year 2015-16 i.e. assessment year 2016-17. 33) So far as the remaining two questions referred to me are concerned, I find the assessee in the instant case has set up the undertaking or enterprise for manufacture or production of an article or thing after 1.4.2015 and the new asset has been acquired and installed for the said purpose, during the period beginning from 1.4.2015 from which the date the section 32AD is introduced. Therefore, I am of the considered opinion that the assessee is entitled for the allowance u/s 32AD. I find force in the argument of the learned Counsel....
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....e exemption clause or exemption notification. 66.2. When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the Revenue. 66.3. The ratio in Sun Export case [Sun Export Corpn. v. Collector of Customs, (1997) 6 SCC 564] is not correct and all the decisions which took similar view as in Sun Export case stand overruled." 23. It may be noticed that the 5-Judge Bench judgment did not refer to the line of authority which made a distinction between exemption provisions generally and exemption provisions which have a beneficial purpose. We cannot agree with Shri Gupta's contention that sub-silentio the line of judgments qua beneficial exemptions has been done away with by this 5- Judge Bench. It is well settled that a decision is only an authority for what it decides and not what may logically follow from it (see Quinn v. Leathem [1901] AC 495 as followed in State of Orissa v. Sudhansu Sekhar Misra (1968) 2 SCR 154 at 162,163). 24. This being the case, it is obvious that the beneficial purpose of the exemptio....
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....re answered accordingly. 39. The matter may now be placed before the regular Bench for decision in accordance with law. Order pronounced in the Open Court on 1st April, 2024. SHRI LALIET KUMAR, JUDICIAL MEMBER AND SHRI MANJUNATHA, G. ACCOUNTANT MEMBER ITA No.1220/Hyd/2019 Assessment Year: 2016-17 Maheswari Mining & Energy Pvt. Ltd Hyderabad Vs. Dy. Commissioner of Income Tax, Circle 16(1) Hyderabad For the Appellant : Advocate Y Ratnakar For the Respondent : Shri K Madhusudan, CIT(DR) 06-05-2024 ORDER Per MANJUNATHA, G. A.M In accordance with the view expressed by the third Member, Hon'ble Vice-President, Hyderabad in the above case vide order dated 1/04/2024, we agree with the order proposed by the learned JM that the assessee is entitled to deduction u/s 32AD of the I.T. Act. 2. In the result, appeal of the assessee is allowed. Order pronounced in the Open Court on 6th May, 2024. ============= Document 1 CBDT notifies 9 districts in the State of Telangana, 11 Districts in the State of West Bengal and 17 Districts in State of Bihar as backward areas under the first proviso to clause (iia) of sub-section (1) of section 32 ....