THE COMMISSIONER OF INCOME TAX RAIPUR vs. MANILAL DAYALJI AND COMPANY

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TAXC/65/2019HC ChhattisgarhCGHC01025626201919 January 2020Author: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PARTH PRATEEM SAHU4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the submission made by the Revenue regarding the nature of the certificate, its adequacy, and other relevant aspects are primarily questions of fact, not substantial questions of law. Therefore, the appeal under Section 260A of the Income Tax Act, 1961, does not involve a substantial question of law. The Court found that the Apex Court's decision in Ace Multi Axes Systems Limited, relied upon by the Revenue, did not assist the Revenue in establishing that the matter constituted a substantial question of law. Since the ITAT's decision was based on facts, the High Court found it difficult to entertain the appeal. The appeal was accordingly dismissed. No issue was expressly left undecided.

What were the facts?

The Revenue (Commissioner of Income Tax, Raipur) has appealed against an order of the Income Tax Appellate Tribunal (ITAT), Raipur Bench. The ITAT had allowed an appeal filed by the assessee, Manilal Dayalji and Company Gola Bidi Works. The assessment for the relevant year(s) was finalized under Section 143(3) of the Income Tax Act, 1961. Subsequently, an audit objection was raised regarding a deduction claimed by the assessee under Section 80IB for not furnishing a necessary certificate for claiming the benefit as a 'Small Scale Industry'. The Assessing Officer, acting on directions, disallowed the claim for want of the certificate. The assessee appealed this disallowance to the ITAT, which ruled in favour of the assessee.

What were the issues?

1. Whether the appeal preferred by the Revenue under Section 260A of the Income Tax Act, 1961, involves a substantial question of law, thereby warranting admission by the High Court? Revenue's Contention: The Revenue argued that the issue is squarely covered by the Apex Court's verdict in Deputy Commissioner of Income Tax, Circle 11(1), Bangalore v. Ace Multi Axes Systems Limited, which held that production of a certificate was essential for claiming the benefit. They emphasized that the certificate produced by the assessee was not in the proper form and was submitted much later. Assessee's Contention: The judgment does not record any specific contentions made by the assessee before the High Court. However, the ITAT's decision, which was in favour of the assessee, implies that the assessee likely argued that the certificate requirement was either met, or that the facts of the case did not warrant disallowance based on the certificate issue.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(3),Section 80IB,Section 263

AI-generated summary — verify with the full judgment below

1 NAFR HIGH COURT OF CHHATTISGARH, BILASPUR TAXC No. 65 of 2019 The Commissioner Of Income Tax Raipur, Chhattisgarh. ---- Appellant Versus Manilal Dayalji and Company Gola Bidi Works, Sadar Bazar, Dhamtari, Chhattisgarh. ---- Respondent ________________________________________________________________ For Appellant : Shri Amit Chaudhari and Ms. Naushina Ali, Advocates _________________________________________________________________ Hon'ble Shri P. R. Ramachandra Menon, Chief Justice Hon'ble Shri Parth Prateem Sahu, Judge Judgment on Board P.R. Ramachandra Menon, Chief Justice 20.01.2020

1.

The present appeal preferred by the Revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') raises challenge against the verdict dated 09.03.2018 passed by the Income Tax Appellate Tribunal, Raipur Bench, Raipur in ITA No.32/RPR/2014, contending that it involves substantial questions of law.

2.

The facts and events show that the assessment was finalized in terms of Section 143(3) of the Act, but later, the audit party raised an objection as to the deduction claimed by the Assessee in terms of Section 80IB of the Act without furnishing necessary certificate for claiming the benefit as a 'Small Scale Industry'. With reference to the audit objection, the Assessing Officer sought to pursue appropriate action in terms of Section 263 of the Act and based on the directions given by the competent authority, fresh

2 assessment was effected after hearing the Assessee. The Assessing Officer disallowed the claim for want of necessary certificate as envisaged under the relevant provisions of the law, which was taken up by the Assessee before the Tribunal. The matter was analysed by the Tribunal and after appreciating the facts and figures, Annexure A/1 verdict was rendered, virtually allowing the appeal, which is sought to be interdicted in this appeal preferred by the Revenue.

3.

When the matter is taken up for consideration, the learned standing counsel for the Revenue submits that the issue is squarely covered by the verdict passed by the Apex Court in Deputy Commissioner of Income Tax, Circle 11(1), Bangalore v. Ace Multi Axes Systems Limited reported in (2018) 2 SCC 158, pointing out that the production of certificate was essential to have the benefit granted. Paragraphs-13, 14 and 16 are reproduced below for ready reference :

“13. On examination of the scheme of the provision, there is no manner of doubt that incentive meant for small scale industrial undertakings cannot be availed by industrial undertakings which do not continue as small scale industrial undertakings during the relevant period. Needless to say, each assessment year is a different assessment year, except for block assessment.

14.

The observations in the impugned order are that the object of legislature is to encourage industrial expansion which implies that incentive should remain applicable even where on account of industrial expansion small scale industrial undertakings ceases to be small scale industrial undertakings. We are unable to appreciate the logic for these observations.

3 Incentive is given to a particular category of industry for a specified purpose. An incentive meant for small scale industrial undertaking cannot be availed by an assessee which is not such an undertaking. It does not, in any manner, mean that the object of permitting industrial expansion is defeated, if benefit is not allowed to other undertakings. On this logic, incentive must be given irrespective of any condition as the incentive certainly helps further expansion by reducing the tax burden. The concept of vertical equity is well known under which all the assessees need not be uniformally taxed. Progressive taxation is a well known element of tax policy. Higher slabs of tax or higher tax burden on an assessee having higher income or higher capacity cannot in any manner, be considered unreasonable.

16.

The principle of law considered in Bajaj Tempo (supra) is certainly a valid principle of interpretation where there is ambiguity or absurdity or where conditions of eligibility are substantially complied. In the present case, the scheme of the statute is clear that the incentive is applicable to a small scale industrial undertaking. The intention of legislature is in no manner defeated by not allowing the said incentive if the assessee ceases to be the class of industrial undertaking for which the incentive is provided even if it was eligible in the initial year. Each assessment year is a separate unit.” In the instant case, no such certificate in the proper from was stated as produced by the Assessee and that the certificate produced by the Assessee, much later, was not acceptable, not being in conformity with the prescription.

4

4.

After hearing the learned standing counsel for the Department, we are of the view that the said submission, that is, with reference to the nature of the certificate, adequacy of proof and the relevant aspects are more related to 'question of fact' and not any question of law. The verdict passed by the Apex Court does not come to the rescue of the Appellant insofar as this matter is concerned, i.e. to consider whether it is a matter to be considered in terms of Section 260A of the Act, as involving any substantial question of law.

5.

The decision rendered by the Tribunal being one on the basis of facts, this Court finds it difficult to entertain the appeal. It is dismissed accordingly. (P.R. Ramachandra Menon) (Parth Prateem Sahu)

Chief Justice Judge Anu

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