TaxTMI 
TaxTMI 
2024 (6) TMI 1285
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....s) 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. 8. For these and other reasons that will be submitted at the time of hearing it is prayed ....
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....e 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 the assets acquired and installed during the same period. The object of the Section is in the shape of appropriate....
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....ion 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 and the State of Telangana to promote industrialization and economic growth in both the states. Manufacturing sector plays significant role in the econo....
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....tivity 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 areas in the State. When once the backward area is specified, the unit set up in that area is eligible to the deduction provided in section 32AD if all conditions laid down therein are fulfilled. The period of acquisition and installation of mach....
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....oard 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) Setting up an undertaking or enterprise for manufacture or production or 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 du....
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....ea 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 incentives to successor states. 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 Reference may now be made to the circular reported in 379 ITR Statutes-19 at page 50. The Circular while specifying the conditions does not state that the deduction u/s. 32AD is available only from the period af....
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....isfied 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 publication. Once published what is the effect of such a notification ,what are the consequences, how it should be understood falls within the realm of judicial interpretation. A notification which is beneficial may also work backwards to reduce the burden on the subject. There are several notifications which come into force upon publication in official gazette but could relate to an earlier period depending on the context and subject matter of the notification. The only....
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....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 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. 17 The decisions of the Hon'ble Supreme Court which state when in ambiguity or when two views are possible the issue has to be answered in favour of the tax payer are shown below: 391 ITR 1 @9 (SC) 300 ITR 231 @242 (SC) 89 ITR 236 @240 (SC) ....
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....ion, 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 rights are imperative. * The distinction between conditional legislation and delegated legislation is that in the former, the delegate's power is that of determining when a legislative declared rule of conduct shall become effective. * The legislature can make a law to delegate a power to determine some fact or state of things upon which the law makes or intends to make its own action depend. * The power to bring an Act into force as well as power to grant exemption are both treated without a doubt as belonging to the category of conditional legislation. * There is no promissory estoppel because i....
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....de 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 inferred, a notification takes effect from the date of its issue and not from any prior date. 11. In the case of Garikapatti Veeraya [1957 AIR 540], the Hon'ble Supreme Court reiterated the principle that provisions of a Statute dealing merely with matters of procedure may properly, unless the construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of express enactment or necessary intendment. It is humbly submitted that in the present case, the matter is related to a substantial right and not a procedural issue. A....
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....erred 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 Court of India in the case of Dilipkumar & Company cited supra. 6. Both the counsels have relied on the judgment of the Hon'ble Supreme Court in the case of Dileep Kumar & Company, 95 taxmann.com 327. 6.1 The ld. AR of the assessee relied on the following paras of the said judgment.: "11. About three years after Sun Export Case (supra), in the year 2000, this Court in Surendra Cotton Oil Mills Case (supra), expressed reservations as to the soundness of the dicta in Sun Export Case (supra), observing that Sun Export Case (supra) ignored catena of judgments of this Court expressing contra view. This Court prima facie came to the conclusion with regard to the principle that when two views are possible....
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....o 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 observed general principles applicable to statutory interpretation, it is now time to consider rules of interpretation with respect to taxation. 6.2 The ld. DR of the assessee relied on the following paras of the said judgment.: 19. The well settled principle is that when the words in a statute are clear, plain and unambiguous and only one meaning can be inferred, the Courts are bound to give effect to the said meaning irrespective of consequences. If the words in the statute are plain and unambiguous, it becomes necessary to expound those words in their natural and ordinary sense. The words used declare the intention of the Legislature. In Kanai Lal Sur v. Paramnidhi Sadhukhan, AIR 1957 SC 907, it was held that if the words u....
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....ient 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 liberally. 28. With the above understanding the stage is now set to consider the core issue. In the event of ambiguity in an exemption notification, should the benefit of such ambiguity go to the subject/assessee or should such ambiguity should be construed in favour of the revenue, denying the benefit of exemption to the subject/assessee? There are catena of case laws in this area of interpretation of an exemption notification, which we need to consider herein. The case of Commissioner of Inland Revenue vs. James Forrest, [(1890) 15 AC 334 (HL)] - is a case which does not discuss the interpretative test to be applied to exemption clauses in a taxation statute - however, it was observed that 'it would be unreasonable to suppose that an exemption was ....
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....ted 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 to claim deduction u/s 32AD for the impugned AY. The case law relied upon by the ld. AR of the assessee are distinguishable on facts and not applicable to the assessee's case. In view of our above observations and considering the totality of the facts and circumstances of the case as well as considering the case law cited both the counsels and considering the applicability of section 32AD for the impugned FY as well as notifications issued by the Govt. of India, we dismiss the grounds raised by the assessee on this issue. 8. In the result, appeal of the assessee is dismissed in above terms. Pronounced in the open court on April, 2022. ORDER PER K. NARASIMHA CHARY, JM: 1. Having carefully gone through the Order prepared by My learned Brother, I regret my....
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....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 as reducing the period of applicability of tax incentives provided by statute; that a notification is intended to sub serve the object of the statute and not override it; and that if the interpretation placed by the revenue were to be correct it would mean that the Rangareddy District was a forward area up to 19/7/2016 and became a backward area from 2017-18 and on the face of it such interpretation is illogical. 5. He invited our attention to the observations of the Hon'ble Apex Court in Collector of Central Excise, Bombay-I and another vs.Parle Exports (P) Ltd. reported in 183 ITR 624 (SC) in support of his submission that interpretation of the will of the lawmaker shall be resorted to by exploring his intentions at the time when the law was made with reference to the word....
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....4 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 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; and that in the memorandum explaining the provisions reported in 371 ITR, (Statutes) page-307, 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. He stressed 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. Reorganisation Act 2014; that these incentives are made available for a period of 5 years; that these incentives offered by Central Govt. cannot be defeated by reading the notification in a manner inconsistent with the statutory prov....
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.... 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), CIT Vs. Sirpur Paper Mills (1999) 237 ITR 41 (SC) and Bombay High Court in the case of Kishorebhai Harjibhai Patel Vs. ITO (2019) 417 ITR 547. He further submitted that when there is ambiguity or two view are possible, the view favourable to the assessee has to be taken. 11. Per contra, Ld. DR submitted that for availing additional investment allowance under section 32AD of the Act, the mandatory conditions to be met cumulatively are that, (i) The undertaking has to be set up after 1.4.2015, and (ii) The undertaking should be located in a notified backward area of the States of Andhra Pradesh or Telangana. In the case on hand, only the first condition is met and the second condition is not met by the assessee. According to him, Section 32AD(1) of the Act is a case of conditional legisla....
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....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 notification dated 20/07/2016 issued by the CBDT. Section 32AD(1) of the Act reads,- 32AD. (1) Where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new asset for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, there shall be allowed a deduction of a sum equal to fifteen per cent of the actual cost of such new asset for the assessment year releva....
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.... 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 power to supply details required for implementation. Such functions delegated are often ancillary in nature supplying details for implementation of the provisions. What makes the difference between the two is that in conditional legislation, the legislation is complete in all respect, but only implementation or withdrawal thereof in respect of any any class of persons, property or local areas, is left to the agency external to the legislature; whereas in the case of delegated legislation the implementational details are left to be supplied by the executive. 18. Section 32AD(1) of the Act requires the executive to notify the areas constituting backward areas in the relevant states and to that extent it cannot be said that Section 32AD(1) of the Act is complete on its own. Even according to the Revenue, the Parliament required t....
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....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 areas in the relevant states for implementation of the provision. I am, therefore, of the opinion 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 details requisite for implementation of the section. Testing on this parameter, issuance of notification in question by the DBDT is only pursuant to the delegated legislation, but not a conditional legislation. 21. Next question that falls for our consideration is that whether the assessee is entitled to claim the deduction under section 32AD(1) of the Act from the date mentioned in that provision or from the date of publication of notification. According to the Revenue the assessee is not entitled to claim the benefit of Section 32AD of the Act, only from the date of notification, whereas assessee ....
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....oses 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 by exploring his intentions at the time when the law was made, by the signs the most natural and probable; and that such signs are either the words, the context, the subject matter, the effects and consequences or the spirit and reason of the law. In the case of Kishorebhai (supra), the Hon'ble Gujarat High Court held that while interpreting any exemption provision, once it is found that the assessee satisfies the exemption criteria, the provision has to be construed liberally. Further, in the case of Sirpur Paper Mills (supra), the Hon'ble Apex Court held that in a case, where the provision allows the deduction in its entirety and permits the agency external to the legislature, to specify the conditions, such conditions cannot have the effect of curtailing the scope of deduction. Hon'ble Apex Court held that the amplitude of the....
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....iew 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 decision did not refer to the line of authority, which made a distinction between exemption provisions generally and exemption provisions, which have a beneficial purpose. In this decision, Hon'ble Apex Court held that the beneficial purposes contained in the exemption provisions must be given full effect to, the line of authority being applicable to the facts of case being the line of authority which deals with beneficial exemptions as opposed to exemptions generally in tax statutes. It was further held that a literal formalistic interpretation of the statute has to be eschewed and the courts must first ask themselves what is the object sought to be achieved by the provision, and construe the statue in accord with such object. Further according to the Apex Court, on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that whi....
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....lowance 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 backward areas are notified by Central Government by way of notification dt.20/07/2016. No doubt, paragraph No.2 of the said notification reads that such notification shall come into force on the date of the publication in the official Gazette. If we go by the interpretation of the Revenue, this notification denies the additional investment allowance to such class of assessees, who though set up the undertaking on or after 01/04/2015, but acquired and installed the new machinery between 01/04/2015 and 19/07/2016. Such an intention is not expressed by the legislature while wording section 32AD(1) of the Act. 32. If the Section is interpreted to be applicable for such assessees, who, having set up the undertaking on or after 01/04/2015 and acquired and installed the new assets only subsequent to the notification, it would dilute the spirit of the special economic measures contemplate....
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....f 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 Y Ratnakar For the Respondent : Shri K Madhusudan, CIT(DR) 01-04-2024 ORDER Per R.K. Panda, Vice-President On account of difference between the Hon'ble Members of Hyderabad B Bench, the following points have been referred to me u/s 255(4) of the Income Tax Act for consideration and disposal in accordance with law: 1. Whether the provisions u/s 32AD(1) of the I.T. Act, 1961 ("the Act") are applicable for the investment made in financial year 2015-16?. 2. Whether the notification No. 61/2016/F.No.142/13/2015, TPL issued by the Central Board of Direct Taxes on 20.07.2016 keeps the operation of the provisions u/s 32AD of the I.T. Act in abeyance till 20/07/2016?. 3. Whether the notification stating that it shall come into force as on the date of its publication in the official gazette overrides the provisions of section 32AD(1) of the Act?. 2. Facts of the case, in brief, are that....
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.... 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 effective from 20th July, 2016. He accordingly upheld the disallowance made by the Assessing Officer. 5. Aggrieved with such order of the learned CIT (A) the assessee preferred appeal before the Tribunal. 6. The learned AM while upholding the order of the learned CIT (A) was of the opinion that in the gazette notification published on 20th July, 2016, it is clearly mentioned that the notification shall come into force on the date of publication in the official gazette i.e. 20.07.2016. He further noted that the section was inserted by the Finance Act 2015 w.e.f. 1.4.2016. The impugned financial year is 2015-16 and the impugned financial year is prior to the insertion of the section. He held that the assessee has claimed deduction u/s 32AD which was not in force for the relevant financial year. Relying on the decision of the Hon'ble Supreme Court in the case of ITC Bhadrachalam Paper Board (JT 1996 (8) 67), and the decision of the H....
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....DT 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 the notification or from the A.Y 2016-17 is concerned, the learned JM held that the undertaking was set up subsequent to 1.4.2015 and the new assets were acquired and installed during the period between 1.4.2015 and 31.03.2016. This fact is evidenced from the letter dated 24.05.2016 issued by the Chief General Manager (Comml. & RAC) TSSPDCL, Corporate Office, Hyderabad to the Chief Engineer (Planning, Comml. &Cordn), TS TRANSCO, Hyderabad. He held that the mandate of legislation is that section 32AD(1) of the Act shall come into force with effect from 1.4.2015. The Legislature does not empower the Executive to notify the provision coming into force at any later point of time. When the letter of law is clear and otherwise, assuming that section 32AD(1) of the Act will be effective only from the date of notification would lead to unintended consequences. He observed that if we go by the interpretation of the Revenue, it will lead to a situation, where the assessee ....
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....e, 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, during the A.Y 2016-17 the value of which comes to Rs. 86,84,76,653/- and accordingly claimed deduction u/s 32AD at Rs. 13,02,72,498/-. The notification was issued u/s 32AD dated 20.07.2016 notifying Ranga Reddy District as backward area. The assessee filed return of income on 10.10.2016 by which date the notification was already issued. 14) So far as the plea of the Revenue that the assessee is not entitled to allowance u/s 32AD because there was no notification as on 31.3.2016 and it came into effect on 20.07.2016 is concerned, he submitted that the same is not tenable for the following reasons: a) Neither the section nor the notification states that the deduction u/s 32AD is allowable only for the period starting from the date of notification. b) The purpose of section 32AD is to give the benefit for the period of 5 years. Once notified, the benefit accrues for full 5 years. c) Section 94 of the A.P. Reorganization Act provides for fiscal measures including tax incentives to t....
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....n 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 read down by reading the notification in a manner inconsistent with the statutory provisions. He submitted that the will of the law maker should be understood by their intentions when section 32AD was put on the statute book. 18) Referring to the decision of the Hon'ble Gujarat High Court in the case of Kishorebhai Harjibhai Patel v. Income Tax Officer reported in 417 ITR 547, he submitted that the Hon'ble High Court in the said decision at para 575 has observed as under: "It is now a well-established principle of law that whereas eligibility criteria laid down in an exemption notification are required to be construed strictly, once it is found that the applicant satisfied the same, the exemption notification should be construed liberally". 19) He submitted that while applying the principles to the facts of the present case, the eligibility criteria laid down in the section is satisfied. Once the assessee satisfies the eligibility criteria, the exemption notification should be construed liberally. He submitted that the ....
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....n Convent, vide Civil Appeal No.202 of 2012 order dated 1.3.2021, he submitted that the Hon'ble Supreme Court in the said decision has held that wherever there is exemption provision and if there is ambiguity, such ambiguity must be interpreted in favour of that which is exempted. 25) Referring to the following decisions, the learned Counsel for the assessee submitted that the law as it stands on the first day of the A.Y is applicable unless and until any amendment made in the Act or the notification issued therein is specifically made applicable from an anteriordate: a) CIT vs. Rama Shanker reported in (2005) 277 ITR 69 (All.) dated 2nd November, 2004 b) CIT vs. Isthmian Steamship Lines reported in (1951) 20 ITR 572 (S.C) dated 12th November, 1951. c) Karimtharuvi Tea Estate Ltd vs. State of Kerala reported in (1996) 60 ITR 262 (S.C) 26) Without prejudice to the above submissions, the learned Counsel for the assessee submitted that even if for the sake of argument, it is to be understood that 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 32A....
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....aiah Choudhury, reported in 1957 AIR 540. vii) Keshavan Madhava Menon vs. The State of Bombay reported in 1951 AIR 128. 28) I have heard the rival arguments made by both the sides and perused the record. I have also considered the various decisions cited before me by both sides. I find the AO in the instant case disallowed the claim of additional investment allowance made u/s 32AD of the I.T. Act amounting to Rs. 13,02,71,498/- on the ground that the Central Government has issued the notification of the backward area on 20.07.2016 and it is mentioned that the notification will come into effect from the date of publication in the official gazette. Therefore, the areas notified can be treated as backward areas from the date of notification only which is 20.07.2016 and therefore, the assessee cannot claim the deduction prior to the date of notification. I find the learned CIT (A) upheld the action of the Assessing Officer. It is the submission of the learned Counsel for the assessee that provisions of section 32AD, which were inserted by the Finance Act 2015 w.e.f. A.Y 2016-17 are applicable for a period of 5 Assessment Years from i.e. A.Y 2016-17 to 2020-21. It is also his submiss....
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.... for an additional investment allowance of an amount equal to 15% 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 areas in the State of Andhra Pradesh and the State of Telangana and (b) the new assets are acquired and installed for the purposes of the said undertaking or enterprise during the period beginning from 1st April 2015 to 31st March, 2020. This deduction shall be available over and above the existing deduction available u/s 32AC of the Act. Accordingly, if an undertaking is set up in the notified backward areas in the States of Andhra Pradesh or Telangana by a company, it shall be eligible to claim deduction under the existing provisions of section 32AC of the Act as well as under the proposed section 32AD if it fulfils the conditions (such as investment above a specified threshold) specified in the said section 32AC and conditions specified under the proposed section 32AD. The phrase "new asset" has been defined as plant or machinery but does not include- (i) any plant or machinery which ....
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....l be available over and above the existing deduction available u/s 32AC of the Income Tax Act. Accordingly, if a company sets up an undertaking in the notified backward area in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, it shall be eligible to claim deduction under the existing provisions of section 32AC of the Income Tax Act as well as under this newly inserted section 32AD of the Income Tax Act if it fulfills the conditions (such as investment above a specified threshold) provided in section 32AC as well as conditions specified in section 32AD. 14.2.3. The phrase "new asset" has been defined as plant or machinery but does not include- (i) any plant or machinery which before its installation by the assessee was used either within or outside India by any other person ; (ii) any plant or machinery installed in any office premises or any residential accommodation, including accommodation in the nature of a guest house ; (iii) any office appliances including computers or computer software; (iv) any vehicle (v) any ship or aircraft ; or (vi) any plant or machinery, the whole of the actual cost o....
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....ion, the purpose of section 32AD is to give the benefit for a period of 5 years and once the notification is issued, the benefit accrues for full 5 years. If the contention of the Revenue that the assessee is entitled to claim the benefit of section 32AD only w.e.f. the date of notification i.e. 20.07.2016 is accepted, then the condition of getting the benefit for a period 5 years from 1.4.2016 is not fulfilled and this cannot be the mandate of the legislation. Since the assessee in the instant case satisfies the eligibility criteria, the exemption notification, in my opinion, should be construed liberally. In my opinion, once the notification is issued u/s 32AD specifying the area to be a backward area. it relates back to 1.4.2015 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. 34) I find the Hon'ble Gujarat High Court in the case of Kishorbhai Harjibhai Patel vs. Income Tax Officer reported in (2019) 417 ITR 547 (Guj.) at para 29 has held as under: 35) I find the Hon'ble Supreme Court in the case of Mother Superior Adoration Convent (Supra) has held that ....
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.... in tax statutes. This being the case, a literal formalistic interpretation of the statute at hand is to be eschewed. We must first ask ourselves what is the object sought to be achieved by the provision, and construe the statute in accord with such object. And on the assumption that any ambiguity arises in such construction, such ambiguity must be in favour of that which is exempted. Consequently, for the reasons given by us, we agree with the conclusions reached by the impugned judgments of the Division Bench and the Full Bench. 25. The matter can also be seen from a slightly different angle. Where a High Court construes a local statute, ordinarily deference must be given to the High Court judgments in interpreting such a statute, particularly when they have stood the test of time (see State of Gujarat v. Zinabhai Ranchhodji Darji (1972) 1 SCC 233 at paragraph 10, Bishamber Dass Kohli v. Satya Bhalla (1993) 1 SCC 566 at paragraph 11, Duroflex Coir Industries Ltd. v. CST 1993 Supp (1) SCC 568 at paragraph 2, State of Karnataka v. G. Seenappa 1993 Supp (1) SCC 648 at paragraph 3 and Bonam Satyavathi v. AddalaRaghavulu 1994 Supp (2) SCC 556 at paragraph 4). This is all the more a....