Ita/441/2016 Of Saint Gobain Crystals & Detectors (I) Limited v. Deputy Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 1/ DAY OF NOVEMBER 2070. PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD BETWEEN: LT.A.§ NOC.441 OF 201 SAINT GOBAIN CRYSTALS &DETECTORS (J) LIMITED|DETECTORS (J) LIMITED| SY. NO.171/2, MARUTHI INDUSTRIAL ESTATE HOOD! RAJAPALYA WHITEFIELD MAIN ROADBANGALORE 560048REP. HEREIN BY ITS.MANAGER-FINANCE & TAXATIONMR, MANJIUNATHASWAMY K.R.BANGALORE 560048REP. HEREIN BY ITS.MANAGER-FINANCE & TAXATIONMR, MANJIUNATHASWAMY K.R. (BY SRI. T. SURYANARAYANA, ADV.,) ... APPELLAN| AND* 1.|DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-6(1)(1).. (FORMERLY DEPUTY COMMISSIONER|OF INCOME TAX, CIRCLE-12(3).BMTC BUILDING, II FLOORROOM NO.237, 80 FI. ROAD.KORAMANGALA, BANGALORE-560095.OF INCOME TAX, CIRCLE-12(3).BMTC BUILDING, II FLOORROOM NO.237, 80 FI. ROAD.KORAMANGALA, BANGALORE-560095. 2.|THE COMMISSIONER OF INCOME TAX-LBANGALORE.BANGALORE. BMTC BUILDING, II FLOOR80 FIT. ROAD, KORAMANGALABANGALORE-560095. (BY SRI. K.V. ARAVIND, ADV.) .., RESPONDENTS| THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,1961 ARISING OUT OF ORDER DATED 11.05.2016 PASSED IN ITA.NO.708/BANG/2013 FOR THE ASSESSMENT YEAR 2008-09,PRAYING TQ: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE. (11) ALLOW THE APPEAL AND SET ASIDE THE ORDER OF.THETRIBUNAL|DATED11-05-7016PASSEDIN|ITANO. 708/BANG/2013 (ANNEXURE-C), TO THE EXTENT QUESTIONEDHEREIN.(III) PASS SUCH OTHER OR SUITABLE ORDERS AS THIS_HON BLE COURT DEEMS FIT TO PASS ON THE FACTS AND IN THE.CIRCUMSTANCES OF THE CASE AND IN THE INTERES! OF.JUSTICE AND EQUITY. THIS|ITACOMING|ONFOR.HEARING,|THISALOK ARADHE J.,DELIVERED THE FOLLOWING: | DAY, | JUDGMENT This appeal under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short)has been preferred by the assessee. The subject matterof the appeal pertains to the Assessment year 2008-09.The appeal was admitted by a bench of this Court videorder dated 06.12.2017 on the following substantialquestion of law: Whether on the facts and In thecircumstances of the case the Tribunal was|right in holding that the Appellant's Unit 1.was not entitled to deduction under Section10B for the assessment year 2008-09, on|thebasis|thatthetenconsecutiveassessment years for the purposes of the|SaidDrovisionwouldbeginfromtheassessment.Year1997-98,whentheAppellant commenced manufacture, and|not from the assessment year 1999-00|when|theAppellant.actuallyStartedclaiming the relief under Section 10B of the.Act. 2.|Facts leading to filing of this appeal brieflystated are that the assessee is a public limited company,which is engaged in the manufacture and sale of.radiation detectors and radiation measuring equipment.The assessee has been exporting its product exclusively|to United States of America and France. The assessee|has two export oriented units situated in Bangalore viz.,Unit No.1 and Unit No.2. The assessee filed its revised. return of income on 22.02.2010 declaring an income of Rs./7,5/7,2/4/after.claiming|deduction|ofRs.1,44,11,1999/- for Unit No.1 and Rs.3,29,87,814/-|for Unit No.2 under Section 10B of the Act. The return|of income was taken up for scrutiny assessment under.Section 143(3) of the Act. The Assessing Officer by an|orderdated15.17.7011|disallowedtheclaimofdeduction under Section 10B of the Act inter alia on the|ground that in respect of Unit Nos.1 and 2 the assesseewas not engaged in the activity of manufacture Dut was|merely engaged in the activity of processing and|assembling. In respect of unit No.1, it was also held that|time limit for claiming deduction under Section 10B of.the Act has expired as the assessee was given tomanufacture tne articles in tne Assessment Year 199/798 itself and therefore, ten year tax holiday period was_not available in the Assessment Year in question. TheAssessing Officer assessed the total income of theassessee at RS.4,81,56,287/-. 3The assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who.by an order dated 28.02.2013 inter alia held thatnecessary declaration about opting out of Section 10B|for the Assessment Year 1998-99 had been filed for unit|No.1 and therefore, upheld the claim of the assesseeand held that the assessee was entitled to benefit of deduction under Section 10B of the Act for a period often Assessment Years from 1999-00 onwards. Tne!appeal preferred by the assessee was allowed. Therevenue approached the Income Tax Appellate Tribunal(hereinafter referred to as the tribunal for short) byfiling|anappeal.Thetribunal videorder|dated11.05.2016 inter alia held that activity of the assessee|amounts to manufacture, nowever, with regard to claim.of the assessee for deduction under Section 10B of the|Act to unit No.1, the tribunal set aside the order passedby the Commissioner of Income Tax (Appeals) and.upheld the order of the Assessing Officer on the ground that the time limit for claiming the deduction under|Section 10B of the Act has expired. In the aforesaidfactual background, this appeal has been filed by the|aSSesSsSsee 4Learned counsel for the assessee submittedthat the tribunal erred in holding that the period of 10|consecutive Assessment Years has to be reckoned fromAssessment Year, in which production or manufacture of.an article or thing was commenced and the period for|claiming the benefit of deduction under Section10B of the Act had expired in the Assessment Year 2006-07. Itis also contended that the tribunal ought to haveappreciated that unit No.1 of the assessee nad availed.off the benefit under the unamended Section 10B of the|Act and therefore, in view of proviso to Section 10B(1).of the Act, the assessee was eligible for deduction under|Section 10B for the unexpired period by virtue of.amendment to Section 10B of tne Act for Assessment|Year 1999-00. It is furtner submitted tnat tne tribunal| ought to have appreciated that the assessee had not!claimed the relief of deduction under Section 10B of the|Act in respect of unit No.1 for the Assessment Year.1998-99 and had opted out of Section 10B for the|Assessment.Year|1998-99byfilingappropriatedeclaration in terms of Section 1OB(7) of the Act, which.was in existence at the relevant time. In Support of.aforesaid submissions, reliance has been placed on the.decisions in)‘COMMISSIONER OF INCOME-TAX VS.|DSL SOFTWARE LTD.', (2012) 18 TAXMANN.COM151 (KARANTAKA)and'THE COMMISSIONER OF.INCOME TAX AND ANOTHER VS. M/S CYPRESSSEMT|CONDUCTOR,|ITANO.1016/2018ANDCONNECTED MATTERS DECIDED ON 07.11.2014.5.|On the other hand, learned counsel for theassessee submitted that the period of eight years|Commences from tne date of manufacture and tne!assessee nas opted 5 years out of 8 years. It is also.urged that amendment to Section 10B for years is from. the date of manufacture and not from first year of claim.of five years out of eight years as per amendedprovisions. It is also contended that if the contention ofthe assessee is accepted, period of ten years would be.more than 10 years from the date of manufacture and in.the decision rendered in the case of DSL Software Ltd.|Supra it has been held that the period of ten years.commences from the date of manufacturing. It is also|urged that period of ten years start from 1997-98 i.e.,.the first year of manufacture. 6.|We have considered the submissions made.by learned counsel for the parties and nave perused therecord. Section 10B of the Act prior to amendment by.Income Tax (second Amendment) Act, 1998 with effectfrom 01.04.1999 granted tax holiday for a period of five|years falling within a period of eight years beginning|with the Assessment Year in which the manufacture /.production of article or things has begun. Once anassessee began manufacture, it could cnoose the year 6.|We have considered the submissions made.by learned counsel for the parties and nave perused therecord. Section 10B of the Act prior to amendment by.Income Tax (second Amendment) Act, 1998 with effectfrom 01.04.1999 granted tax holiday for a period of five|years falling within a period of eight years beginning|with the Assessment Year in which the manufacture /.production of article or things has begun. Once anassessee began manufacture, it could cnoose the year from which it would start claiming deduction and from|that year, it would be entitled for deduction for fiveconsecutive years within a period of eight years. The|relevant extract of Section 10B(3) of the Act prior to itsamendment reads as under: 10B(3) The profits and gains referred toin sub-Section (1) shall not be included in the total income of the assessee in respect of any|five consecutive Assessment Years, falling|within a period of eight years beginning with)the Assessment Year relevant to the previous year in which the undertaking begins to|manufacture or produce articles or things,|specified by the assessee at nis option. After the amendment with effect from 01.04.1999,|the period of tax holiday was extended for a period often years. The amended Section 10B(3) reads as under: 10B(3) The profits and gains referred to in sub-Section (1) shall not be included in tne|total income of the assessee in respect of any.ten consecutive Assessment Years beginning» with the Assessment Year relevant to the'Previous Year in which the undertaking beginsto manufacture or produce articles or things. J.|The assessee started manufacture In the.Assessment Year 1997-98 but did not claim deduction|under Section 10B of the Act, for that year as well as.subsequent Assessment Year viz., 1998-99. For the first.time, the claim for deduction under Section 10B of the.Act was made for the Assessment Year 1999-2000. This|court InCYPRESS SEMI CONDUCTOR supra.has held|that ten year period would begin from the year in whichassessee first claimed the deduction. In the aforesaid|decision, the decision of this court in DSL Software Ltd.has also been considered. It is also pertinent to mention.here thatCYPRESS SEMI CONDUCTOR supra, this.COUrThas relied on DSL Software Ltd supra and the.decision rendered in/CYPRESS SEMI CONDUCTORhasbeen upheld by the Supreme Court as SLP preferredagainst the decision in the case ofCYPRESS SEMI CONDUCTORhas been dismissed vide order dated01.11.2017 passed in SLP (C) No.21341/2012. | In view of preceding analysis, the substantialquestion of law framed by a bench of this court is.answered in favor of the assessee and against the|revenue in the result, the order of the tribunal insofar as|it holds that unit No.1 of the assessee is not entitled to.deduction under Section 10B of the Act is herebyquashed. In the result, the appeal is allowed. Sd/-JUDGE. SS| Sd/-JUDGE.