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Commissioner Of Income Tax Vs. M/s International Tractor Ltd.
December, 07th 2017

                                      Date of Decision: 30.11.2017

+     ITA 497/2004

      COMMISSIONER OF INCOME TAX         ..... Appellant
                  Through: Mr. Ashok K. Manchanda &
                  Mr. Raghvendra Singh, Advs.


      M/S INTERNATIONAL TRACTOR LTD. ..... Respondent
                    Through: Mr. Ashish Gupta & Mr. Aniket
                    D. Agrawal, Advs.



      1.     The following two questions of law were framed on

             (i)    Whether the Tribunal was correct in holding that
                    for purposes of deduction U/s 80 (1A) of the
                    Income Tax Act, 1961, the assessee should be a
                    small scale undertaking on the last day of the
                    previous year relevant to the initial/first
                    assessment year and that the said requirement
                    need not be satisfied in the subsequent

             (ii)   Whether the impugned order dated 1.3.2004 could
                    be validly made having regard to the fact that one

ITA No.497/2004                                                 Page 1
                   of the members of the Tribunal who was a party to
                   the said order had retired before the said date?"

      2.     As far as the substantive question i.e. with respect to
      permissibility of the deduction under Section 80-1A of the
      Income Tax Act, 1961 (hereafter referred to as `the Act'), the
      ITAT's decision for other years, i.e. A.Y. 2000-01, 2001-02 and
      2002-03 were subject matter of other orders made by the ITAT
      (20.06.2008 for two years, 17.08.2007, 28.03.2005 and
      05.09.2008 respectively). Those became the subject matter of
      appeals before this Court i.e. ITA Nos.1082/2005, 690/2008,
      225/2009, 1189/2009 and 251/2010. All those appeals by the
      Revenue,    urging     common    questions    with   respect   to
      admissibility of the benefit/deduction under Section 80-1A of
      the Act, were dismissed; the questions of law were answered
      against the Revenue.

      3.     The lone question which survives for the decision by this
      Court is as to the character of the determination made by the
      ITAT in this case. The order of 04.05.2017 somewhat deals and
      crystallizes the issue.   In short, it is whether the signature
      appended to the order of one of the members i.e. Shri R.M.
      Mehta, who retired on 27.12.2003 can be said to bestow it the
      character of an order. The other member Shri Ram Bahadur
      signed the order on 01.03.2004. It was in the light of these facts
      that the Court framed the second question of law in these
      appeals. The order of 04.05.2017 noticed that the requirement

ITA No.497/2004                                                   Page 2
      of pronouncing the judgment in open court as it were, did not
      exist before the judgment in Commissioner of Income Tax v.
      Sudhir Choudhrie (2005) 278 ITR 490 (Del). As a result of that
      judgment, Rule 34 was inserted in the ITAT Rules to facilitate
      that procedure. The Court, in its order of 04.05.2017 noticed
      and held that since the change of Rule was prospective, there
      was no illegality ­ to an order on account of signature of       Shri
      Ram Bahadur on 01.03.2004 even though its author had signed
      it earlier.

      4.      In the opinion of this Court, the merits of the issue is
      covered by the common judgment of 20.07.2017 in the other
      appeals (Commissioner of Income Tax v. M/s International
      Tractors Ltd., ITA No.1082/2005 and connected appeals
      noticed earlier).

      5.      Learned counsel for the Revenue/appellant urged that on
      the merits the Court has to resolve whether in fact the
      Commissioner could be faulted for issuing the order under
      Section 263 of the Act because for the first year i.e. A.Y. 1997-
      98, the deduction under Section 80-1A of the Act had not been
      claimed by the assessee.          It was contended that for the
      subsequent years too the assessee could not claim such status
      given the nature of its investment.

      6.      It is pointed out on behalf of the assessee, on the other
      hand,       that   the   common   judgment   of   this   Court     in

ITA No.497/2004                                                    Page 3
      M/s International Tractors Ltd. (supra), dated 20.07.2017 has in
      fact dealt with all issues including the permissibility of the
      benefit under Section 80-1A of the Act for subsequent years,
      when in the eventuality of the assessee not being granted that
      benefit for the first year.

      7.     This Court has considered the common judgment of
      20.07.2017 for the other years, discusses the issue elaborately
      and notices it as follows:-

             "43. The ITAT in the said order agreed with the
             Assessee that Section 80-IA did not contemplate
             the carrying out of a yearly review to ensure that
             on the last date of other previous year, of the ten
             AYs for which the deduction was allowed, the
             eligibility condition stood fulfilled. As rightly
             pointed out by Mr. Vohra in the initial AY 1997-
             98, the Assessee was facing a loss and, therefore,
             did not make a claim. Nevertheless that continued
             to remain the initial AY. The Assessee claimed
             deduction only in regard to the remaining years.
             The ten years would begin to be counted from the
             AY 1997-98 itself although the deduction was not
             claimed for that AY. It could not have been
             claimed for AY 1997-98 because under Section 80-
             IA, the aggregate deduction claimed of the
             Assessee could not have exceeded its gross total
             44. The question is whether on the last day of
             the previous relevant to AY 1997-98 the Assessee
             fulfilled the eligibility condition? It was repeatedly
             urged by Mr. Manchanda that the investment in
             P&M on the last date of previous year was above
             Rs. 60 lacs. He referred to an order dated 11th

ITA No.497/2004                                                       Page 4
             July, 2003 passed by the CIT under Section 263 of
             the Act for AY 1999-00. However, relevant to AY
             1998-99, the factual determination by the CIT(A)
             and the ITAT is that the Assessee did fulfil the
             eligibility condition. The total investment in P&M
             was worked out to be Rs. 41.19 lacs. This fact has
             not been controverted by the Revenue.
                  *****              *****               *****
             63. In view of the authoritative pronouncements
             of the Courts as discussed hereinbefore, the Court
             is unable to accept the plea of the Revenue in the
             present case that:
             (i)    The Assessee here did not fulfil the
             eligibility condition for the initial AY i.e., 1997-98;
             (ii) That notwithstanding that it may have
             fulfilled the eligibility conditions in the initial AY,
             it nevertheless had to fulfil the such eligibility
             condition for every one of the ten consecutive AYs
             inclusive of the initial AY in order to be eligible for
             the deduction."
      8.     It is thus apparent that on the merits of the treatment or
      rather the claim to the deduction under Section 80-1A of the Act
      ­ in the Revenue's appeals for subsequent and later years, this
      Court had ruled against the Revenue. The present case concerns
      A.Y. 1999-2000. The immediately preceding year i.e. 1998-99
      and the succeeding year 2000-01, have been considered by this
      Court on identical issues. The facts in those appeals were that
      the claim in 80-1A of the Act was sought to be re-opened under
      Section 147/148 and under Section 263 (for A.Y. 2000-01) of
      the Act. The Court also had the occasion to exercise power

ITA No.497/2004                                                        Page 5
      under Section 263 for A.Y. 2001-02 in circumstances similar or
      rather identical to the present one.

      9.     Given these facts, the ruling of this Court in its judgment
      of 20.07.2017 covers the merits of the appeal i.e. question No.1
      framed for its merits for A.Y. 1999-00 in this appeal. In these
      circumstances, this Court is of the opinion that as to the
      character of the order, even if the Revenue were to succeed,
      upon remission which would be the best order it can claim, the
      ultimate result would be the same i.e. since the ITAT would be
      bound by the judgment of 20.07.2017.

      10.    Having regard to the above facts, the question No.1
      framed for this appeal is answered against the Revenue and in
      favour of the assessee. In the peculiar circumstances of the
      case, question No.2 is kept open for the parties to contend.

      11.    The appeal is consequently dismissed.

                                        S. RAVINDRA BHAT, J

                                        SANJEEV SACHDEVA, J

      NOVEMBER 30, 2017

ITA No.497/2004                                                      Page 6
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