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TaxTMI 
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TaxTMI 
2025 (7) TMI 1655
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....sposing off the remaining appeals. The Revenue has assailed the impugned order on the following grounds of appeal before us: "1. The order of the Ld. CIT(A) is erroneous both on facts and in law. 2. The Ld. CIT(A) erred in directing to allow the deduction U/s. 80IA r.w.s 33B though there was no reconstructed or revived of business units as per the provisions of section 33B of the IT Act, 1961. 3. The Ld. CIT(A) ought to have appreciated the fact that the word 'extensive' damage as mentioned in section 33B means 'large in amount of scale' but as per the insurance claim received damage was to the extent of 5 to 6% of assets and stock. 4. The Ld. CIT(A) ought to have appreciated the fact that there was no discontinuation of business activities of the company instead there was increase in production during the year. 5. Any other ground that may be craved to be added, amended during the course of hearing." 3. Succinctly stated, the assessee company which is engaged in the business of manufacturing ceramic tiles had filed its original return of income for A.Y 1998-99, declaring an income of Rs. 5,26,22,429/- under the normal provisions (after claiming set off of brought forwar....
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....e A.O. framed the set-aside assessment vide his order passed under Section 143(3) r.w.s 254 of the Act, dated 26/12/2008, determining the total income of the assessee company at Rs. 5,23,21,014/- and "book profit" at Rs. 5,77,42,084/- under Section 115JA of the Act. The A.O. while framing the set-aside assessment, did not allow the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act. 7. Aggrieved, the assessee company carried the matter in appeal before the CIT(A), who dismissed the same. 8. On further appeal, it was the claim of the assessee company before the Tribunal (in the second round of litigation) that it had obtained a confirmation from the authorities of Customs and Central Excise Department, wherein they had categorically certified that the assessee company had stopped production during the period 07/11/1996 to 21/12/1996. The assessee company had filed the aforesaid "confirmation" as additional evidence with the Tribunal vide its petition dated 23/01/2021. After necessary deliberations, the Tribunal once again set-aside the order of the CIT(A), and restored the matter to his file for fresh adjudication of the claim of the assessee compa....
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....on 22.12.1996. On the other hand, there was no production in Kiln III till the end of the year and the same had recommenced only on 15/04/1997. Considering the aforesaid facts, the CIT(A) observed that there was a complete stoppage of production in the assessee's unit from the evening of 06.11.1996 to 20.12.1996 i.e. for 15 days. 10. Apropos the quantitative details of production during the relevant period, the CIT(A) observed that the production of ceramic tiles in the month of November 1997 of 50,834 Sq. Mtrs. was only for the period of six days i.e., from 01.11.1996 till the evening of 06.11.1996 in all three kilns. Further, the quantity of production of 53,669 Sq. Mtrs. for the month of December 1996 was the production that was achieved from Kiln 1 and Kiln II from 20.12.1996 & 22.12.1996 to 31.12.1996, while there was no production in Kiln III since it was restarted only on 15.04.1997. 11. The CIT(A) further observed that the surveyors of the Insurance company had assessed the damages to the building, plant & machinery and quantified the total cost of repairs for restructuring at Rs. 4,39,75,689/-. Also, it was observed by him that the Statutory Auditors of the assessee comp....
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....643 & 644/H/2003 and 883/H/2005, dated 21/09/2007, inter alia, remitted the matter to the file of the A.O for verifying the claim of the assessee company for deduction under Section 80IA r.w.s 33B of the Act while computing its "book profit" under Section 115JA of the Act. Consequent to declining by the A.O in the course of the set-aside proceedings of the assessee's claim for deduction under Section 80IA r.w.s 33B of the Act, which thereafter was upheld by the CIT(A), the assessee company carried the matter before the Tribunal (in second round of litigation). On appeal, the assessee company had in the second round of litigation before the Tribunal, filed a Certificate no. 235/2014, dated 11.07.2014 issued by the Office of Superintendent of Customs and Central Excise, Yanam Range, wherein it was stated that the assessee company had stopped its production during the period 07th November 1996 to 21st November 1996. The Tribunal after necessary deliberations set-aside the order of the CIT(A), and restored the matter to his file for fresh adjudication of the assessee's claim for deduction under Section 80IA r.w.s 33B of the Act. The Tribunal while restoring the matter to the file of th....
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....of the Act had rightly been allowed by the CIT(A) vide his order passed in the course of the third round of proceedings before him. 18. Ostensibly, the entitlement of the assessee company for the claim of deduction under Section 80IA r.w.s 33B of the Act hinges around the solitary aspect i.e., as to whether or not the business of the industrial undertaking of the assessee company on being hit by the cyclone which had struct Yanam on 06/11/1996 evening, had due to extensive damage to or destruction of its building, machinery, plant or furniture that were used for purpose of its business was discontinued?. The aforesaid aspect is material, for the reason, that though Section 80IA(2)((i) of the Act, for entitling an assessee to claim deduction under the said statutory provision, inter alia, contemplates a pre-condition that the industrial undertaking is not formed by splitting up, or the reconstruction, of a business already in existence, but by way of a "Proviso" it carves out an exception, whereby the said pre-condition is dispensed with and shall not apply where the industrial undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assesse....
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....lant and machinery in the Appellant's factory were damaged extensively. The devastating cyclone which struck Yanam on 6-11-1996 evening and continued till the early hours of 07-11-1996 caused extensive damage to buildings, plant and machinery of the Appellant's factory. The entire asbestos roof sheets of the main factory building admeasuring 8640 square mtrs. and the asbestos roof sheets of all the non-factory buildings admeasuring 13325 square mtrs. in all were blown off/broken to pieces. The machinery installed in the main factory and auxiliary buildings were open to sky on the onset of cyclone. The entire plant and machinery of the factory were exposed to the Fury of the heavy and incessant rain that followed the cyclone. All electrical motors and electrical equipments were submerged in flood waters. The factory was working at the time of the occurrence with all the three kilns in operation and hot condition. The heavy downpour suddenly quenched the hot furnace resulting in cracking up of refractory, breakage of ceramic rollers and damaging insulation. As could be seen from the above that the entire buildings, plant and machinery, electrical equipment, motors etc., i....
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....benefits to businesses that operate in infrastructure, power, telecommunication, and other specified sectors. This provision offers tax deductions and exemptions to encourage businesses to invest in the mentioned sectors. Section 80IA of the Act as it stood applicable for the AY 1998-99 is reproduced here for ready reference as under: '80IA. Deduction in respect of profits and gains from industrial undertakings, etc., in certain cases.- (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or a hotel or operation of a ship or developing, maintaining and operating any infrastructure facility or scientific and industrial research and development or providing telecommunication services whether basic or cellular including radio paging, domestic satellite service or network of trunking and electronic data interchange services or construction and development of housing projects or operating an industrial park or commercial production or refining of mineral oil in the North Eastern Region or in any part of India on or after the 1st day of April, 1997 (such business being hereinafter referred to as the elig....
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....machinery, plant or furniture owned by the assessee and used for the purposes of such business as a direct result of - (i) flood, typhoon, hurricane, cyclone, earthquake or other convulsion of nature: or (ii) riot or civil disturbance: or (in) accidental fire or explosion: or 1. action by an enemy or action taken in combating an enemy (whether with or without a declaration of war), and, thereafter, at any time before the expiry of three years from the end of such previous year, the business is re-established, reconstructed or revived by the assessee, he shall, in respect of the previous year in which the business is so re-established, reconstructed or revived, be allowed a deduction of a sum by way of rehabilitation allowance equivalent to sixty percent of the amount of the deduction allowable to him under clause (iii) of sub-section (1) of section 32 in respect of the building, machinery, plant or furniture so damaged destroyed:" 5.3. As could be seen from sub-section (2) of section 80IA, for the purpose of claiming deduction under this section, the first condition to be satisfied is that the industrial undertaking shall not be formed by splitting up, or the reconstructi....
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....certificate issued from the office of the Superintendent of Customs and Central Excise, Yanam Range dt. 11-07-2014 regarding its above stated unit(s) having stopped production. The same was perused and found to be in order. In this case it is proved that the assessee company was damaged due to cyclone and its production was stopped. Subsequently, the same business units were reconstructed or revived as per provisions of section 33B of the Act and hence it is held that the assessee company was eligible to claim deduction us/ 80IA read with section 33B of the Act. In view of the facts discussed above & documentary evidences furnished by the assessee, the contention of the assessee company is accepted and hence the AO is directed to allow the deduction claimed u/s 80IA read with section 33B of the Act. Accordingly, all the grounds of appeal are allowed. 5.5. For the other assessment years 1999-2000, 2000-01, 2001-02 & 2002-03, the issue of disallowance of deduction u/s 80IA of the Act are identical and hence the AO is directed to give effect to other assessment years 1999-2000, 2000-01, 2001-02 & 2002-03 in a similar way as for the AY 1998-99 as discussed in above paragraphs. ....
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....ilns in operation and in hot condition, the heavy downpour had suddenly quenched the hot furnace resulting in the cracking up of refractory, breakage of ceramic rollers and damaging the insulation. It was further observed by him that the entire buildings, plant and machinery, electrical equipment, motors etc. in the factory of the assessee company were extensively damaged and there was a complete stoppage of production from the date of the cyclone i.e., 06.11.1996 to 20.12.1996 when production was recommenced in Kiln II. The production in Kiln I recommenced on 22.12.1996. On the other hand, there was no production in Kiln III till the end of the year and the same had recommenced only on 15/04/1997. Considering the aforesaid facts, the CIT(A) observed that there was a complete stoppage of the production from the evening of 06.11.1996 to 20.12.199 i.e. for a period of 15 days. 22. Apart from that, the CIT(A) to dispel all doubts about his observation regarding the stoppage of production and discontinuance of the business of the assessee company, had drawn support from the quantitative details of production during the relevant period. It was observed by him that the production of cer....
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....80IA r.w.s 33B of the Act. 23. Considering the aforesaid exhaustive deliberations of the CIT(A) in his impugned order, and also the observation of the Tribunal in its order passed while disposing off the appeals filed by the assessee company, viz. ITA Nos. 1304 to 1308/Hyd/16, dated 16.02.2021, wherein it had on a perusal of the certificate issued by the Superintendent of Customs and Central Excise, Yanam range dt.11-07-2014, had observed that a clinching fact regarding the stoppage of production by the assessee company has surfaced, we find no infirmity in the view taken by the CIT(A) that as the buildings, plant & machinery of the factory of the assessee company were extensively damaged due to the cyclone on 06.11.1996 and its production was stopped, therefore, on the reconstruction or revival of its business unit it was eligible for deduction under Section 80IA r.w.s 33B of the Act. 24. We shall now deal with the Ld. DR's contention, that though the fact that the production in the assessee's unit due to the aforesaid natural calamity was temporarily stopped is not disputed, but, such temporary stoppage or disruption of production cannot suffice to bring the case of the assesse....
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....her states that as the assessee company during the period when its production was temporarily stopped i.e. 06/11/1996 to 20/11/2016 was undertaking steps to revive its business, therefore, the question that its business was discontinued during the said period does not arise at all. 26. We have given thoughtful consideration to the aforesaid contentions of the ld. D.R. and are unable to persuade ourselves to subscribe to the same. As the term "discontinuance" of business had not been defined in the Act, therefore, we construe the same by borrowing its dictionary meaning. As per the dictionary meaning, the term "discontinue" means an interruption (temporary or permanent). The Ld. DR's claim that "discontinuance of business" is to be construed in a manner that the said business was permanently disrupted with there being no intention to carry on the same in the coming tomes, we are afraid not only militates against the dictionary meaning which takes within its sweep also a "temporary interruption", but the said interpretation, if subscribed, will defeat the very purpose of the concession provided in Section 80IA r.w.s 33B of the Act. Although Section 80IA(2)(i) of the Act, for entitli....