Case Law Details
CASE LAWS DETAILS
DECIDED BY: ITAT, `A’ BENCH AHMEDABAD,
IN THE CASE OF : ACIT Vs Vodafone Essar Gujarat Ltd., APPEAL NO: ITA No. 1878/Ahd/2009, DECIDED ON: January 29, 2010
RELEVANT PARAGRAPH
12. We have heard both the parties and gone through the facts of the case and the decisions cited before us. The issue before us as to whether or not the assessee is entitled to claim deduction u/s 80IA in terms of the provisions amended w.e.f 1.4.2000 even when the assessee had already started providing telecommunication services in the period relevant to the AY 1997-98. Before proceeding further, we may have a look at the provisions relevant to the AY 1997-98 and subsequent amended proviso 3. The relevant provisions of sec. 80IA so far as applicable in the case of the assessee read as under:
80- A 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 (such business being hereinafter referred to as the eligible business), to which this section applies, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to the percentage specified in sub-section (5) and for such number of assessment years as is specified in sub-section (6).
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(4C) This section applies to any undertaking which starts providing telecommunication services whether basic or cellular at any time on or after the 1st day of April, 1995 but before the 31st day of March, 2000.
(5) The amount referred to in sub-section (1) shall be – (ic) in the case of an undertaking referred in sub-section (4C), hundred per cent. of the profits and gains derived from such business for the initial five assessment years and thereafter, twenty-five per cent. of the profits and gains derived from such business: Provided that, where the assessee is a company, the provisions of this clause shall have effect as if for the words “twenty-five per cent.”, the words “thirty per cent.” had been substituted;
(6) The number of assessment years referred to in sub-section (1) shall, including the initial assessment year, be – (vi) ten in the case of an assessee, being an undertaking referred to in sub-section (4C), deriving profits and gains from telecommunication services whether basic or cellular; (12) For the purposes of this section,-
(c) “initial assessment year”,-
(4) in the case of an undertaking referred to in sub- section (4C) means the assessment year relevant to the 19 previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular
12.1 The relevant provisions of sec. 80IA amended by the Finance Act,1999 w.e.f 1.4.2000 read as under:
’80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. – (1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent. of profits and gains derived from such business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, twenty- five per cent. of the profits and gains for further five assessment years: Provided that where the assessee is a company, the provisions of this sub-
section shall have effect as if for the words “twenty-five per cent”, the words
“thirty per cent.” had been substituted.
(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or generates power or commences transmission or distribution of power:
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(4) This section applies to—
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(ii) any undertaking which has started or starts providing telecommunication
services whether basic or cellular, including radio paging, domestic satellite
service or network of trunking and electronic data interchange services at any
time on or after the 1st day of April, 1995 but before the 31st day of March,
2000.”
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12.2 Following clause (2A) was inserted in sec. 80IA w.e.1.4.2001:
(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in computing the total income of an undertaking providing previous year in which the undertaking starts to provide the telecommunication services whether basic or cellular ;
12.3 The relevant provisions of sec. 80IA amended by the Finance Act,1999 w.e.f 1.4.2000 read as under:
’80-IA. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent. of profits and gains derived from such business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, twenty- five per cent. of the profits and gains for further five assessment years: Provided that where the assessee is a company, the provisions of this sub- section shall have effect as if for the words “twenty-five per cent”, the words “thirty per cent.” had been substituted.
(2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or generates power or commences transmission or distribution of power:
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(4) This section applies to—
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(ii) any undertaking which has started or starts providing telecommunication services whether basic or cellular, including radio paging, domestic satellite service or network of trunking and electronic data interchange services at any time on or after the 1st day of April, 1995 but before the 31st day of March, 2005.”
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12.4 The legislative history of provisions of sec. 80-IA reveals that the said section was originally inserted by Finance (No.2) Act, 1991 with effect from April 1, 1991. The said section was later divided into section 80IA and 80IB by Finance Act, 1999 with effect from April 1, 2000. The section, as it existed in the period relevant to the AY 1997-98 stipulated that deduction is admissible, including the initial assessment year @ 100% of the profits and gains of the undertaking for the initial five assessment years and 30% for the balance five assessment years, beginning with the assessment year relevant to the previous year in which the undertaking starts providing telecommunications services, whether basic or cellular at any time on or after April 1, 1995 but before March 31, 2000. Section 80IA, as it stands today after the amendment provides for an option to the assessee to claim deduction for any ten consecutive assessment years out of fifteen years beginning with the year in which the undertaking starts providing telecommunication services. It is not disputed before us that the assessee started providing telecommunication services in the State of Gujarat in the period relevant to the AY 1997- 98. Since the assessee incurred loss in the AYs 1997-98,1998- 99 & 1999-2000, the assessee did not claim any deduction in terms of provisions of section 80IA of the Act. Thereafter, provisions of sec. 80iA of the Act were amended and clause (2) of the amended provisions allowed an option to the assessee to claim benefit for any 10 consecutive years out 15 years commencing from the year in which the assessee starts providing telecommunication services. Clause (4)(ii) of the said section stipulated that this section (80IA) applied to any undertaking which has started or starts providing telecommunication services. Simultaneously definition of initial year in terms of the old provisions was removed. Consequently, the assessee exercised its option of claiming the deduction u/s 80IA from the AY 2005-06. The AO and the ld. CIT(A) are of the opinion that the relevant provisions as these stood in the period relevant to AY 1996-97 would determine the deduction u/s 80IA of the Act in the year under consideration. Since the assessee did not have any option in choosing the initial year as defined in the provisions relevant for the AY 1997-98 nor the assessee could have claimed any deduction u/s 80IA of the Act in the AY 1996- 97 to 1999- 2000 or even after until the AY 2003-04 due to losses while the amended provisions provided option to the undertaking which had started providing telecommunication services on or after 1.4.1995 and the assessee fulfilled all other conditions stipulated u/s 80IA of the Act, we are of the opinion that the ld. CIT(A) was not justified in holding that the assessee having exercised option in the AY 1997-98[even when there was no such provision providing an option to the assessee] was not entitled to exercise option in terms of the amended provisions applicable in the AY 2000- 01 on wards. Undisputedly, no deduction was claimed by the assessee in the period relevant to the AY 1997- 98 to 1999-2000, The amended provisions applicable w.e.f. 1.4.2000 allowed option to even those undertakings which had already started providing telecommunication services on or after 1.4.1995. We are of the opinion that that the assessee could not be denied benefit of the amended provisions, once it fulfilled the conditions stipulated in the relevant provisions . While construing beneficial provisions, it becomes necessary to resort to a construction which is reasonable and purposive to make the provision meaningful. In CIT Vs. Straw board Manufacturing Co. Ltd. [1989] 177 ITR 431 (SC), it was held that the law providing for concession for tax purposes to encourage industrial activity should be liberally construed. If the interpretation adopted by the Revenue authorities is accepted , the words used in sec.80IA(4)( ii) `has started’ become redundant. Such can not be the intention of the legislature. Hon’ble Apex Court in Bajaj Tempo Ltd. (supra) referred to by the ld. AR observed that ordinarily a provisions in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision intended for promoting economic growth has to be interpreted liberally, the restriction on it, too, has to be construed so as to advance the objective of the section and not to frustrate it. Honourable Apex Court in another decision in the case of CIT Vs. Cellulose Products of India Ltd. 192 ITR 155(SC) observed that when there is a genuine doubt about the interpretation of a fiscal statute or two options are capable of being formed that a rule of interpretation that a provision granting relief should be construed so as to effectuate the object of thereof may be taken recourse to. Moreover circular no. 14 of 2001 issued by the CBDT in terms consequence of Finance Act,2001 while explaining the purpose of amendments to sec. 80IA of the Act mentioned as under:
48.2 The country’s telecommunication services are modernising rapidly and are critically poised. With a view to promoting communication capacity and convergence by encouraging investment levels in these segments, the two tier benefit is being extended to include internet service providers and broadband networks. The benefit is being similarly liberalised and shall uniformly cover all undertakings, set up after 1st April, 1995, but on or before 31st March, 2000, and will also include undertakings set up after 31st March, 2000.”
12.41 In the light of aforesaid decisions and the circular issued by the CBDT, at the cost of repetition, we may reiterate that the assessee could not be denied the benefit of the amended provisions, once it fulfilled the conditions stipulated in the relevant provisions of sec. 80IA of the Act . These provisions have to be construed in consonance with the avowed aim and object of the legislature in enacting these provisions and to further these and not to defeat these. The provisions of sec. 80IA have to be construed reasonably in the context of the purpose for which these provisions have been amended. As explained in the aforesaid circular no. 14 of 2001, the provisions have been liberalized in order to promote communication capacity and modernise and therefore tax benefit has been provided uniformly to all undertakings which started providing telecommunication services on or after 1.4.1995 but on or before 31st March,2005.
12.5 It has been brought to our notice on behalf of the assessee that while adjudicating a claim for deduction u/s 10A of the Act in the light of amended provisions in the case of Mastek Ltd.(supra), the ITAT allowed the claim for deduction. In that case the assessee had three units. In respect of one of the units viz. 106, the assessee claimed exemption under section 10A of the Act for the assessment years 1991- 92 to 1995- 96. Thereafter, for the assessment years 1996- 97 to 98- 99, the assessee claimed deduction under section 80HHE of the Act. The said claim for deduction u/s 80HHE is stated to have been rejected in the AY 1996-97 on the ground that the details of export realisations were not available and receipts included amounts on account of recruitment and training charges and interest income and foreign exchange fluctuation. Thereafter, section 10A of the Act was amended with effect from 01.04.1999, wherefrom the deduction under section 10A of the Act was made available for a period of ten consecutive assessment years instead of five consecutive assessment years out of eight years. Since the assessee in that case had already availed deduction under section 10A for a period of five consecutive assessment years out of eight years and in between claimed deduction under section 80HHE of the Act for the three assessment years, the AO disallowed the claim for deduction under section 10A of the Act for the assessment years 1999-2000 & 2000-01.On appeal , the ld. CIT(A) upheld the findings of the AO. On further appeal, the ITAT held that
“7.3. In the light of aforesaid decisions and after considering the relevant provisions of law as also facts of the case, especially when the Revenue has not disputed that the taxpayer fulfilled the conditions stipulated under the section 10A of the Act in the years under consideration, we are of the opinion that the ld. CIT (A) was not justified in denying the claim for exemption u/s 10A of the Act. The relevant portion of the memorandum explaining the provisions of Income-tax(Second Amendment ) Bill 1998 read as under; “Clause 3 seeks to amend section 10A of the Income-tax Act. Under the existing provisions, tax holiday is available to newly established industrial undertakings set up in free trade zones and ,to units set up in software technology parks for five years out of block of initial eight years, subject to fulfilment of certain conditions. The proposed amendment seeks to extend the period of holiday from five years to ten years in order to give added thrust to exports. Clause 4 seeks to similarly extend the five year tax holiday period to 10 years to the export oriented units under section 10B of the Income-tax Act.”
7.4 As is evident from the aforesaid memorandum, the period of tax holiday is extended for and from the AY 1999-2000 from five years to ten years in order to give added thrust to exports. The condition about the block of initial years has altogether been removed. The case of the taxpayer for the assessment years under consideration falls within the amended provisions. The finding of the ld. CIT (A) about the identity of the unit in the intervening years, when taxpayer claimed deduction u/s 80HHE of the Act, is in our opinion, irrelevant, especially when claim for exemption has to be examined in each year in accordance with the relevant provisions of law. There is nothing in the amended provisions of section 10A of the Act, debarring the taxpayer for claiming exemption under section 10A in the extended period even when it had already availed the exemption for a period of five years out of eight years, beginning with the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture or produce articles or things. In the light of decision of the ITAT Bangalore Bench `B’ in ITA No. 602/Bang/05 (supra) we have no alternative but to reverse the order of the lower authorities on this issue and the AO is directed to allow the claim for exemption under section 10A of the Act in respect of profits and gains derived by the taxpayer in its industrial undertaking i.e. unit 106, in accordance with law……………”
12.6 Our attention was also drawn to a decision in the case of Mohan Breweries and Distilleries Ltd.(supra), wherein while adjudicating a claim for deduction u/s 80IA of the Act ,Chennai Bench of the ITAT held as under:
“Section 80-IA as enacted by Finance Act, 1999 with effect from 1-4- 2000 as stated earlier gives an option to the assessee with effect from 1-4-2000 to claim relief under this section for any 10 consecutive assessment years out of 15 years beginning from the year ending in which the undertaking or enterprise develops or begins to operate any infrastructure facility etc. It is left to the assessee at its will to claim this relief from the first assessment year, or from the second or from the third or so as it might think fit. Once the assessee has opted the first year of relief then it continues for further consecutive years. To claim this relief the undertaking is to be set up during the period 1-4-1993 to 31-3-2006. This is as per section 80-IA(4)(iv) . Section 80-IA(2) clearly states that assessee can opt for year of deduction for any 10 consecutive years out of 15 years taken from the first year in which the undertaking or enterprise develops and begins to operate any infrastructure activity. It can be seen that section 80-IA(2) does not mandate that first year of 10 consecutive assessment years should be always the first year of set up of enterprise. If the intention of the Legislature is that the first year of set up is the initial assessment year to claim deduction under section 80-IA, then there is no meaning giving option to the assessee to claim deduction for 10 consecutive assessment years out of 15th years. The meaning of the section 80-IA(2) is that the assessee can- exercise the option in any 10 consecutive years starting from the first year in which the undertaking begins to operate any infrastructure facility. If the assessee opts to exercise the claim for first year, it should continue to claim the deduction for another 9 years. If it opted the second year to claim deduction, it should continue for another 9 years till the 11th year; similarly if it opted to claim relief from the 3rd year, it will end in the 12th year; if it opted to claim from the 4th year then it will end in the 13th year; if it opted to claim from the 5th year it will end in the 14th year and if it opted to claim from the 6th year it will end in the 15th year. …………..
6. Adverting to the facts of the case the initial assessment year in this case starts from 2004-05. Since the assessee has opted to claim this deduction only in this assessment year, the initial assessment year cannot be the year in which the undertaking commenced its operations and in this case the initial assessment year is the assessment year in which assessee has chosen to claim deduction under section 80-IA…………”.
12.61 As observed by the ITAT in the aforesaid decisions, we are of the opinion that section 80-IA(2) of the Act nowhere provides that first year of 10 consecutive assessment years should be always the first year when the assessee starts providing telecommunication services. If that were so, then the words used in section 80-IA (4)(ii) `has started” become otiose. We may point out that the provisions of section 80IA of the Act are beneficial provisions and these have to be construed in such a manner so as to advance the objects of the provisions and not to frustrate it. If the intention of the Legislature was that the first year of start of telecommunication services is the initial assessment year to claim deduction under section 80-IA, then the provision of option to the undertakings which had already started providing telecommunication services, would be meaningless.
12.7 Even otherwise while ascertaining the admissibility of any deduction law as on 1st April of the relevant year is to be applied. It is a cardinal principle of the tax law that the law to be applied is that in force in the assessment year unless otherwise provided expressly or by necessary implication : CIT Vs. Isthmian Steamship Lines [1951] 20 ITR 572 (SC) and Karimtharuvi Tea Estate Ltd. v. State of Kerala [1966] 60 ITR 262 (SC), followed in Reliance Jute & Industries Ltd Vs. CIT,120 ITR 921(SC). In CIT Vs. Goslino Mario [2000] 241 ITR 314(Gauhati) , it was also held that the law to be applied is that which is in force in the relevant assessment year unless otherwise provided expressly or by necessary implication.
12.8 In view of the foregoing , we are of the opinion that the assessee was justified in exercising option in terms of the amended provisions, specially when the provisions of sec. 80IA(4)(ii) clearly stipulate that the option is available even to those undertakings which had started providing telecommunication services on or after 1.4.1995. Therefore, when the assessee fulfilled all other stipulated conditions in terms of the relevant provisions of sec. 80IA of the Act, the ld. CIT(A) was not justified in holding that the benefit of substituted provisions was available only to those undertakings which were granted a license after 1.4.1995 and could not start operations until 1.4.2002. We are of the opinion that such an restrictive interpretation does not emerge from the amended provisions. The ld. CIT(A) was also not justified in concluding that the assessee having exercised option in the period relevant to the AY 1997-98 [even though there was no such provision of exercising option and the assessee could not claim any such deduction in view of loss], provisions of sec. 80IA of the Act substituted from the AY 2002-03 would not apply.
