The Deputy Commissioner Of Income Tax ... vs M/S Ace Multi Axes Systems Ltd.

2. The High Court answered the question in the negative and in favour of the assessee. The revenue has questioned the said view.

3. The respondent assessee is engaged in manufacture and sale of components/parts of CNC lathes and similar machines. Its income was assessed for the assessment year 2005-2006 at Rs.1,79,82,653/-. However, the Commissioner of Income Tax, interfered with the assessment under Section 263 to the extent it allowed deduction under Section 80 IB(3) of the Income Tax Act, 1961 (the Act) and directed fresh decision on the said issue vide order dated 16th January, 2009. Thereafter, the Assessing authority on 14th December, 2009 disallowed the claim of Rs.75,81,910/- towards deduction under Section 80 (B(3). The same was upheld by the Commissioner in appeal and the Income Tax Appellate Tribunal in second appeal. However, the High Court has reversed the said orders and upheld the claim.

(a) "built-up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;

(b) "hilly area" means any area located at a height of one thousand metres or more above the sea level;

(vii) in the case of an undertaking engaged in operating and maintaining a hospital in a rural area, means the assessment year relevant to the previous year in which the undertaking begins to provide medical services;

(i) an area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee or by any other name) or a cantonment board and which has a population of not less than ten thousand according to the preceding census of which relevant figures have been published before the first day of the previous year; or 8

18. In view of the above, addition/disallowance is upheld. Appeal is dismissed.”

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. 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 17 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.

The appeal is accordingly disposed of in the above terms.

(@ Special Leave Petition(Civil) No.8331 of 2016) Civil Appeal No. 20857 of 2017 (@ Special Leave Petition(Civil) No.3323 of 2016) Civil Appeal No. 20855 of 2017 (@ Special Leave Petition(Civil) No.148 of 2016)

24. Leave granted. In view of the judgment in the main matter, these appeals are disposed of in the same terms.

25. The assessing authority may pass an order of compliance by applying the above principle to the facts of individual cases.

5TH DECEMBER, 2017.