(Prayer: Tax Case Appeals filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras ‘C’ Bench, Chennai, dated 11.04.2008 made in I.T.A.Nos.1733/Mds/2006, 1734/Mds/2007 and 1735/Mds/2006.)
C.V. Karthikeyan, J.
1. T.C.A.Nos.2029, 2031 and 2033 of 2008 have been filed by the Assessee, challenging the order of the Tribunal dated 11.04.2008, negativing the claim for deduction under Section 80 HH of the Income Tax Act, 1961, in respect of the Assessment Years 1995-1996, 1996-1997 and 1997-1998 respectively.
2. T.C.A.Nos.2030, 2032 and 2034 of 2008 have been filed by the Assessee, challenging the order of the Tribunal dated 11.04.2008, in respect of the Assessment Years 1995-1996, 1996-1997 and 1997-1998 respectively, in dismissing the applications filed to condone the delay of 496 days in filing cross objections.
3. The Tax Case Appeals in T.C.A.Nos.2029, 2031 and 2033 of 2008 were admitted on 23.01.2009 on the following substantial questions of law:
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the appellant is not eligible for deduction under section 80HH of the act since the backward area got subsequently denotified ignoring the circular No.484 dated 15.05.1987 issued by the CBDT?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in not appreciating that the asessee has merely shifted the undertaking to new premises and hence will continue to entitle to claim the relief under section 80HH of the Act?
3. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not considering the alternate plea that if the undertaking was not found eligible for deduction under section 80HH of the Act, then it ought to be considered to be a new industrial undertaking for the purpose of deduction under section 80IA of the Act?”
4. The Tax Case Appeals in T.C.A.Nos.2030, 2032 and 2034 of 2008 are admitted on 23.01.2009 on the following substantial questions of law:
“1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in dismissing the cross objections filed by the assessee as time barred by 496 days?
2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in not considering the alternate plea that if the undertaking was not found eligible for deduction under section 80HH of the Act, then it ought to be considered to be a new industrial undertaking for the purpose of deduction under section 80IA of the Act?”
3. The Assessee had set up an Industrial unit a leased land during the Assessment Year 1987-1988 at Sholinghur in Wallajah Taluk in the erstwhile North Arcot District, now in Vellore District, Wallajah Taluk, was notified as backward area and it was specified as such in the 8th Schedule of the Income Tax Act. The Assessee therefore claimed deduction under Section 80 HH of the Act. The Deduction under Section 80HH was also granted from the Assessment Year 1988-1989 which was the first year of commencement of production. Subsequently Walaja Taluk was removed from the list of backward area by Taxation Amendment Act, 1987 and by Notification No.7056 dated 19.12.1986. However, the Central Board of Direct Taxes had issued Circular No.484 dated 15.05.1987 to the effect that an undertaking which had already been set up in a Backward area will continue to get the benefit under Section 80-HH of the Act, for the remaining number of years. Normally, the deduction under Section 80 HH is granted for a period of ten years which implied that the Assessee was eligible for deduction under Section 80 HH till the Assessment Year 1997-1998. In the meanwhile, the Assessee shifted its factory from Sholingur to Pulivalam after acquiring its own lands. Both Sholingur and Pulivalam were in Walajah Taluk. Since, Walajah Taluk had originally been notified as a Backward area and since the Assessee had continued to avail the benefit under Section 80 HH, the Assessee also claimed extension of the benefit even after shifting the factory from Sholingur to Pulivalam. The Assessment Officer, rejected this claim. Before the CIT (Appeals), the Assessee raised an alternate ground seeking benefit under Section 80 IA of the Act. The CIT (Appeals) who dealt with the Appeal preferred by the Revenue, rejected the claim for deduction under Section 80 HH, but did not give any finding in relation to the claim for alternate relief sought with respect to Section 80-IA of the Act. The Assessee then filed an Appeal before the Tribunal challenging the rejection of benefit under Section 80HH of the Act. The Assessee did not challenge that part of the order of the CIT (Appeals), wherein there was no discussion about the alternate claim for deduction under Section 80 IA. They realised this after a delay of 496 days and therefore filed cross objections with delay of 496 days. An affidavit by the Director of the Assessee was filed listing out the reason for not preferring the Cross objections, within the stipulated time. The Tribunal dealt with this aspect as under:
“10. As far as cross objections are concerned, there was a delay of 496 days Sri S.Ravindran Director of Assessee Company filed an affidavit stating the following reasons for the delay of filing the cross objections.
“1. I state that the Departmental Grounds of appeal was received by the company on 17.07.2006 and the cross objection ought to have been filed on or before 16.08.2006. However, the cross objection was actually filed on 24.12.2007 resulting in a delay of 495 days.
2. I state that the Respondent had claimed relief under Section 80HH in respect of an undertaking which had been shifted. The Respondent has also raised a ground that in case the undertaking on shifting is considered as formation of a new undertaking the relief under section 80IA should be granted for that undertaking. Thus either way the appellant would be entitled to relief on the profits of the undertaking.
3. I state that the CIT (A) has allowed the appeal directing grant of relief under Section 80HH but has omitted to consider the alternate issue viz., availability of relief under Section 80IA. The Assessee was under the impression that this issue can be raised before the Tribunal as it should be considered as having rejected by the CIT(A). However, the Respondent has now been advised that they should file a Cross Objection raising this specific issue.
4. I State that the delay in filing the cross objection is due to the bonafide belief of the Assessee that this issue can be raised in the appeal by the Department. This goes to the very root of the matter and the facts are already on record. Therefore, it is prayed that in the interest of justice the delay in filing cross objection may be condoned and grounds of cross objection may be admitted and decided on merits and thus render justice”
6. We have heard both the parties. We have thoroughly gone through the averment made by Shri.S.Ravindran, Director of Assessee Company in the affidavit for condonation of delay. We are of the considered opinion that the Assessee has not explained elaborately the reasons for delay occurred in filing the present appeal. We are not satisfied with the reasons given by the Assessee in the Affidavit and there is no reasonable cause in filing the present appeal belatedly. Accordingly, we dismiss the Assessee’s cross objections as time barred.”
4. From the reading of the order extracted above, it is clear that the Tribunal had not given any reason for not remitting the matter back to CIT(A), which had not given any finding with respect to alternate prayer seeking relief under Section 80 IA. In the order of the CIT (Appeals), though it had been recorded that an alternate argument was put forth with respect to the claim under Section 80 IA, no specific finding had been given on that issue. The order of CIT (Appeals) is quoted below for ready reference:
“5. The district of North Arcot, Wallajah Taluk was excluded from the list of backward area as per Taxation Amendment Act, 1987 vide notification no.7056 of 19.12.86. CBDT by way of Circular no.484 dt.1.05.87 clarified in respect of undertakings set up before 10.09.86 in a backward area will continue to get the benefits of deduction u/s 80HH for the remaining number of years despite the denotification of the area done subsequently. In other words the deduction being availed by the appellant continued to be available to it. Alternatively it was also argued that if the claim of its continued eligibility u/s 80HH was to be rejected then it ought to be considered to be a new industrial undertaking for the purposes of and within the meaning of provisions u/s 80IA of the Act and in this case it was not hit by the restrictions placed in clause II to section 80IA and would continue to enjoy fresh benefits for a period of 10 years from the A.Y 1992-1993 onwards. Instead what it was pleading for is the deduction u/s 80HH in respect of the relocated unit for the remaining period that is from A.Y 1992-93 to the A.Y 1997-98.”
5. The learned counsel for the Respondent/Revenue relied upon the Judgment of the Hon’ble Supreme Court in State of Gujarat & Ors Vs. Saurashtra Cement & Chemical Industries reported in 2003 260 ITR 0181 wherein an unit had been expanded from an existing undertaking and owning to such expansion claim for exemption from electricity duty was sought and on the facts of that case, the Hon’ble Supreme Court held that exemption cannot be granted.
6. The learned counsel for the Revenue also relied upon the Judgment of Hon’ble Supreme Court in Deputy Commissioner of Income Tax Vs. ACE Multi Axes Systems Ltd. reported in 400 ITR 41 SC, wherein the Hon’ble Supreme Court held that if an Assessee did not retain a character of small scale industrial undertaking, then the incentive meant for such category cannot be continued under Section 80 IB of the Act.
7. Drawing a parallel analogy, Mr.T.Ravikumar, the learned standing counsel for the Revenue argued that in the present case on the shifting of the Industrial Unit to Pulivalam from Sholingur, on that particular date, Walajah Taluk had been denotified from the classification of a backward area and consequently the benefit claimed under Section 80 HHC cannot be granted.
8. However, we find that the claim of the Appellant for deduction under Section 80 IA had not been properly considered and consequently, we hold that it would only be just and proper that the matter is remitted back to the Tribunal for fresh consideration on that aspect alone.
9. We are keeping the issue of grant or otherwise of benefit u
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nder Section 80 HH open. It will be permissible for any of the parties to approach the High Court again to raise the issue of claim for benefit under Section 80 HH if deemed necessary, on order being passed by the Tribunal on this remand order and on the claim under Section 80 IA. Consequently, keeping the issue relating to Claim of benefit under Section 80 HH open,the matter is remitted back to the Tribunal to decide the claim for benefit under Section 80IA of the Act. 10. In the result, Tax Case Appeals Nos. 2029,2031 and 2033 of 2008 are disposed of, keeping open the questions of law framed. T.C.A.Nos. 2030, 2032 and 2034 of 2008 are allowed and the Questions of Law framed are answered in respect to in favour of the Assessee and as against the Revenue and the order of Tribunal is set aside and the matter is remitted back to the Tribunal for fresh disposal only with respect to the claim for benefit under Section 80 IA of the Act in accordance with law. The Tribunal shall dispose of the same, within a period of six months from the date of receipt of a copy of this order. It is reiterated that the Questions of law framed in T.C.A.Nos. 2029, 2031 and 2033 are kept open. No order as to costs.