Commissioner of Income Tax and Another vs Guffic Chem P. Ltd.

V.G. Sabhahit, J.—This appeal by the revenue is filed u/s 260A of the Income Tax Act, 1961, being aggrieved by the order passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, in M.A. No. 3/PANJ/2002 arising out of I.T.A. No. 8/Bang/1997 for the assessment year 1993-94 dated 21-12-2005.

The Respondent herein submitted its return for the assessment year 1993-94 and in the return, it claimed certain deduction including the deduction u/s 80HH of the Income Tax Act (hereinafter referred to as "the Act") amounting to Rs. 7,44,639 contending that the undertaking is situate in Belgaum, which is treated as a backward area under notification No. S.O.165(E) dated 19-12-1986. However, the assessing officer rejected the said contention by contending that Belgaum taluk has been excluded for the purpose of benefit u/s 80HH of the Act and accordingly, passed an order of assessment on 29-3-1996. Being aggrieved by the said assessment order, the Assessee preferred I.T.A. No. 41/BGM/96-97 on the file of the Office of the Commissioner (Appeals), Belgaum, and the appellate authority by order dated 7-10-1996 allowed the appeal in part by holding that the notification excludes Belgaum taluk of Gulbarga District and not Belgaum taluk of Belgaum District and the Appellant is entitled to deduction u/s 80HH. That being aggrieved by the said order passed by the appellate authority dated 7-10-1996, the revenue department preferred I.T.A. No. 8/Bang/1997 which was disposed of by the Income Tax Appellate Tribunal, Bangalore Bench on 14-9-2001. However, since the contention regarding the deduction claimed u/s 80HH has not been considered by the order of the Appellate Tribunal in the order dated 14-9-2001, M.A. No. 3/PANJ/2002 was filed by the revenue department before the Income Tax Appellate Tribunal, Panaji Bench, Panaji, and the same was disposed of on 21-12-2005, dismissing the miscellaneous application of the department confirming the order passed by the appellate authority holding that Belgaum is a backward area as per the notification dated 19-12-1986. That being aggrieved by the said order passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, dated 21-12-2005, this appeal is filed by the revenue.

We have heard the learned Counsel appearing for the Appellants revenue and the learned Counsel appearing for the Respondent and having regard to the contentions urged, the substantial question of law that arises for determination in this appeal is:

Whether the finding of the Income Tax Appellate Tribunal, Panaji Bench, Panaji, confirming the order passed by the Commissioner (Appeals), Belgaum, holding that Belgaum is a backward area as per the notification dated 19-12-1986, is contrary to law and perverse and arbitrary as to call for interference in this appeal?

We answer the aforesaid substantial question of law in the negative against the revenue for the following reasons.

The fact that the Assessee is having manufacturing unit in Belgaum, is not in dispute. It is also not in dispute that the Assessees of backward areas, who are entitled to claim benefit u/s 80HH of the Act have been notified by Notification No. S.O. 165(E), dated 19-12-1986, and the said notification in so far as it relates to Karnataka reads as follows ((1987) 165 ITR (St.) 294):

SI. No. Name of the State/ Union Territory Backward areas

9 Karnataka The districts of Belgaum, Bidar, Bijapur, Dharwad (excluding Ranebennur Taluk), Gulbarga (excluding Chittapur Taluk, Sedam Taluk and Belgaum Taluk), Hassan, Mysore (excluding Mysore Taluk), North Kanara (excluding Karwar Taluk), South Kanara (excluding Man-galore Taluk), Raichur (excluding Koppal Taluk), Tumkur (excluding Turuvekera Taluk and Tumkur Taluk).

It is the contention of the learned Counsel appearing for the Appellants-Revenue that in view of the above said notification, since Belgaum taluk is excluded from backward areas, the Assessee is not entitled to claim the benefit u/s 80HH of the Act. However, the contention of the learned Counsel appearing for the Respondent-Assessee is that no taluk from Belgaum District has been excluded and what is excluded is three taluks from Gulbarga District, namely, Chittapur taluk, Sedam taluk and Belgaum taluk and wherefore, the entire District of Belgaum is treated as a backward area including Belgaum taluk. The contention of the Assessee has been accepted by the appellate authority and confirmed by the Appellate Tribunal, which is impugned in this appeal.

We have given careful consideration to the contentions of the learned Counsel appearing for the parties and scrutinized the material on record.

It is clear from the notification dated 19-12-1986, declaring backward areas as referred to above that in respect of Districts of Belgaum, Bidar, Bijapur, no taluks have been excluded. However, in respect of Districts of Dharwad, Gulbarga, Mysore, North Kanara, South Kanara, Raichur, Tumkur, certain taluks of the said Districts have been excluded and in respect of Gulbarga District, taluks of Chittapur. Sedam and Belgaum have been excluded. As the notification reads "Gulbarga (excluding Chittapur taluk, Sedam taluk and Belgaum taluk)" what is excluded in the notification is Chittapur taluk, Sedam taluk and Belgaum taluk of Gulbarga District and no taluk is excluded in the District of Belgaum as per the notification.

Therefore, the concurrent finding arrived at by the Commissioner (Appeals), Belgaum, and confirmed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, is justified as the only interpretation that can be inferred having regard to the contents of the notification as culled out above is that no taluk from Belgaum District has been excluded and the said finding is justified and does not suffer from any perversity or arbitrariness as to call for interference in this appeal. Accordingly, we answer the substantial question of law against the revenue and pass the following order:

The appeal is dismissed.