DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 11 (I) BANGALORE versus M/S. ACE MULTI AXES SYSTEMS LTD.

Citation: [2017] 12 S.C.R. 21 · Decided: 05-12-2017 · Supreme Court of India · Bench: RANJAN GOGOI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · cites 3 · see the full citation network in Lexace

Judgment (excerpt)

[2017) 12 S.C.R. 21 
DEPUTY COMMISSIONER OF INCOME-TAX, 
CIRCLE 11 (I) BANGALORE 
v. 
MIS. ACE MULTI AXES SYSTEMS LTD. 
A 
(Civi1Appea1No.20854of2017) 
B 
DECEMBER 05, 2017 
[RANJAN GOGOi, ADARSH KUMAR GOEL AND 
NAVIN SINHA, JJ.] 
Income Tax Act, 1961 -
s.80 18(3) - Deduction in respect of C 
profits and gai11s from certain industrial undertakings other than 
infrastructure development undertakings - Deduction 11/s. 80 IB( 3) 
- Benefit of - Eligible business of an assessee given the benefit of 
deduction 11/s. 80 18 011 the assessee satisfying the conditions 
mentioned in sub-sec. (2) of s. 80 lB - Denial of the benefit of the 
said deduction to the asses.we on the ground that during the said D 
IO consecutil'e years, it ceases to be a small scale industry - Held: 
Assessee having not retained the character of 'small scale industrial 
undertaking', is not eligible to the incentive meant for that category 
- Permitting incentive in such case will he against the object of law 
- Incentive meant for small scale industrial undertakings ca11not 
E 
be availed by industrial undertakings whic/1 do not continue as 
small scale industrial undertakings during the relevant period -
Ec1c/1 assessment year is a different assess me/If year, except for block 
assessment. 
Disposing of the appeals, the Court 
F 
HELD: 1.1 Section 80 IB of the Income Tax Act provides 
for deductions of specified percentage from the profits and gains 
of the specified industrial undertakings other than infrastructure 
development undertakings (which are separately dealt with under 
Section 80 IA). Clause 2 makes the deductions permissible i.n 
G 
respect of industrial undertakings fulfilling the conditions 
specified therein. The scheme applies to small scale industrial 
undertakings as defined in Clause 14(g) which in terms refers to 
Section 11 B of the Industries (Development and Regulation) 
Act, 1951. The extent of deduction permissible is mentioned in 
H 
21 
22 
A 
B 
c 
SUPREME COURT REPORTS 
(2017] 12 S.C.R. 
Cfause 3 which is 25% (30% in the case of a company) of the 
profits and gains derived from such industrial undertakings for 
10 consecutive assessment years beginning with the initial 
assessment. [Para 10] [34-E-H] 
1.2 The scheme of the statute does not in any manner 
indicate that the incentive provided has to continue for 10 
consecutive years irrespective of continuation of eligibility 
conditions. Applicability of incentive is directly related to the 
eligibility and not de hors the same. lf an industrial undertaking 
does not remain. small scale undertaking or if it does not earn 
profits, it cannot claim the incentive. [Para 12] [35-D] 
1.3 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 
D undertakings during the relevant period. Needless to say, each 
assessment year is a different assessment year, except for block 
assessment. [Para 13] [35-G] 
· 
E 
F 
1.4 The observations in the impugned order are that the 
object of legislature is to encourage h1dustrial 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. 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 
G 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. [Para 14] [35-H; 36-A-C] 
H 
DY. COMMNR. OF LT., CIRCLE 11 (1) v. MIS. ACE MULTI 
23 
AXES SYSTEMS LTD. 
1.5 There is no difference in the situation where the A 
assessee, is not initially eligible, or where. the assessee though 
initially eligible loses ·the qualification of eligibi

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