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Case Law Details

Case Name : CIT Vs ITC Limited (Calcutta High Court)
Appeal Number : ITAT No. 150 of 2014
Date of Judgement/Order : 14/06/2022
Related Assessment Year : 2007-08
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CIT Vs ITC Limited (Calcutta High Court)

Whether on the facts and in the circumstances of the case the Ld. Tribunal has erred in law in allowing the claim of the assessee for deduction under Section 80IC of the I.T. Act, 1961, amounting to Rs.72,21,948/- by disregarding that the captive undertaking is not entitled to deduction under the said provision for the notional profit since the products have only been supplied to the Food Business Division (FBD) of the assessee and not to outsider ?

CITA reversed the order passed by the assessing officer having found that the assessee was an eligible undertaking and entitled to the benefit of Section 80IC which is a special provision in respect of certain undertakings or industries in certain special category states. It is not in dispute that the said eligible undertaking was not manufacturing any of the goods as listed in 13th schedule to the Act. The principle which was laid down in the assessee’s own case in the issue relating to Section 80IA as reported in [2015] 64 taxmann.com 214 (Calcutta) will equally apply to the claim of deduction under Section 80AC of the Act. The CITA rightly took note of the fact that Section 80AC (7) specifically provides that the provisions of sub-Section 5 and sub-Section 7 to 12 of Section 80IA will equally apply to Section 80IC, and therefore, the eligibility for claiming deduction under Section 80IA in respect of captive undertaking will, therefore, also apply to Section 80IC.

That apart we should take note of the fact that the provision is a special provision conferring certain benefits on undertakings in certain special category states. In the assessee’s case as reported in [2015] 64 taxmann.com 214(Calcutta) the Hon’ble Division Bench while considering the scope of Section 80IA pointed out that Statute grating incentives for promoting growth and development should be considered liberally so as to advance the objective of the provision and not to frustrate it. Further we note the decision of the Hon’ble Supreme Court in Bajaj Tempo Ltd. V. CIT [1992] 196 ITR 188/62 Taxman 480 (SC) wherein the Hon’ble Supreme while considering the claim for exemption under Section 15C of the Act pointed out that the section, read as a whole, was a provision directing towards encouraging industrialisation by promoting an assessee setting up a new undertaking to claim of not paying tax to the extent of 6% in a year on the capital employed. Further it was pointed out that 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. Therefore, the decision arrived at by the CITA was wholly justified. The Tribunal decided the correctness of the said finding and in paragraph 5.1 of the impugned order took note of the Section 80IA (8) and held that the said provision is applicable to Section 80IC and accordingly approved the finding recorded by the CITA.

In the light of the above, we find there is no error in the approach of the CITA or the Tribunal for us to interfere. Accordingly substantial question of law No. 4 is answered against the revenue.

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