Gujarat High Court
Commissioner Of Income Tax-Ii vs Mastek Limited on 22 July, 2026
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/1645/2009 JUDGMENT DATED: 22/07/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1645 of 2009
With
R/TAX APPEAL NO. 1647 of 2009
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
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Approved for Reporting Yes No
✓
==========================================================
COMMISSIONER OF INCOME TAX-II
Versus
MASTEK LIMITED
==========================================================
Appearance:
DEV D PATEL(8264) for the Appellant(s) No. 1
MR SN SOPARKAR SENIOR ADVOCATE WITH MR BS SOPARKAR WITH
MRS SWATI SOPARKAR(870) for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 22/07/2026
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1.Heard learned Senior Standing Counsel Mr. Dev
D. Patel for the appellant-Revenue and
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learned Senior Advocate Mr. S.N. Soparkar
with learned advocate Mr. B.S. Soparkar for
the respondent.
2.These Tax Appeals are filed by the Revenue
under section 260A of the Income Tax Act,
1961 (For short “the Act”) against the common
judgment and order dated 17.06.2008 passed by
the Income Tax Appellate Tribunal, Ahmedabad
(For short “the Tribunal”) in ITA
No.4352/Ahd/2003 for the Assessment Year 1999
-2000 and in ITA No.1688/Ahd/2003 for
Assessment Year 2000-2001.
3.The Tax Appeals are admitted for
consideration of the following substantial
question of law:
“Whether the Appellate Tribunal is
right in law and on facts in reversing
the order passed by the CIT(Appeals)
and thereby allowing the claim for
exemption under section 10A for Unit
No.106?”
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4.Brief facts of the case are that the assessee
which was engaged in the business of software
development filed return of income declaring
loss of Rs.2,64,64,304/- on 27.11.1999 for
the Assessment Year 1999-2000 and
Rs.6,57,35,050/- on 30.11.2000 for the
Assessment Year 2000-2001.
5.The case of the assessee was taken for
scrutiny and notices under section 143(2) of
the Act dated 24.09.2001 and 22.11.2001 were
issued. During the course of assessment, the
Assessing Officer found that the assessee
expanded its operation to international
market with setting up of a unit in Free
Trade Zone-SEEPZ in Mumbai in 1990.
Thereafter the assessee expanded its
operations with setting up of Unit 107 in the
same campus and generated income as under:
Sr. Division AY-1999-2000 (In AY-2000-01 (In
No. Rs.) Rs.)
1 Domestic (-)2,89,77,828/- (-)6,88,57,625/-
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2 Unit-106 in 4,66,90,952/- 11,35,57,801/-
SEEPZ
3 Uniot-107 in 10,38,30,212/- 14,80,03,198/-
Seepz
4 New Unit in – 9.83,79,109/-
SEEPZ
5 SPZ in Pune – 1,22,93,139/-
6.It is the case of the Revenue that the
assessee had only three units in the
Assessment Year 1999-2000 and claimed
deduction under section 10A of the Act in
respect of two units – 106 and 107 in
Assessment Year 1999-2000 and four units
including Unit 106 in Assessment Year 2000-
2001.
7.Thus the Revenue was aggrieved by the claim
of exemption under section 10A of the Act in
respect of profits and gains derived by the
assessee from the industrial undertaking i.e.
Unit no.106.
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8.Under the provisions of section 10A of the
Act at the relevant period, a taxpayer was
entitled to such exemption for any five
consecutive assessment years, specified by
the taxpayer at his option and failing which
within a period of eight years beginning with
the assessment year relevant to the previous
year in which the industrial undertaking
begins to manufacture or produce articles or
things.
9.For the unit 106, the assessee accordingly
claimed exemption under section 10A of the
Act for the Assessment Years 1991-1992 to
1995-1996. Thereafter for the Assessment
Years 1996-1997 to 1998-1999, the assessee
claimed exemption under section 80HHE of the
Act. The said claim for deduction under
section 80HHE has been rejected in the
Assessment Year 1996-1997 on the ground that
the details of export realisation were not
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available and receipts included amounts on
account of recruitment and training charges
and interest income and foreign fluctuation.
10. Section 10A of the Act was amended from
01.04.1999 whereby the deduction under
section 10A of the Act was made available for
a period of ten consecutive assessment years
instead of five consecutive assessment years
out of eight years. Since the assessee had
already availed deduction under section 10A
of the Act for a period of five consecutive
assessment years out of eight years and in
between claimed deduction under section 80HHE
of the Act for three assessment years, the
Assessing Officer disallowed the claim for
expenditure under section 10A of the Act as
under:
“i) Since Unit-106 started
operations in Asst. Year 1991-92,
the exemption available as on that
date will be applicable in
assessee’s case. The eligibility is
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to be decided in the first year and
not to every year. If any unit
satisfies the conditions, those
conditions are to be examined and
the benefit is available for the
number of years ‘mentioned in sub-
section 10A(3). The reckoning of
number of years allowable for
exemption is also linked with first
year, therefore the provisions
specific to the first year should be
relevant to decide the period of
exemption:
ii) The assessee was eligible for
first 8 years out of which it has
already exercised option of claim of
exemption in first 5 years. Having
taken the benefit available to it,
it can not again claim the benefit
even when it is already outside the
purview of the said section.
iii) The claim for exemption u/s.
10A was not available for Asst. Year
1996-97 and in the amended provision
the exemption is for 10 consecutive
assessment years. If assessee is
eligible for the benefit in 9th and
10th year what will happen to 6th,
7th and 8th year, in those years
admittedly the assessee is not
eligible. In the new provision, the
exemption cannot be available after
a break of 3 years.
iv) Sub-section 10A(3) provides
allowance of exemption for 10 years
starting from first year and it is
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not in doubt that this provision is
applicable with effect from
1/4/1999. In the amended section the
allowance of exemption is for 10
years starting from first year of
manufacturing. Obviously in this
event, the unit starting
manufacturing during Asst. Year
1999-2000 is not there in the
assessee’s case. It need not be
specifically mentioned that new
provision will be applicable only to
the undertaking beginning
manufacturing of products from Asst.
Year 1999-2000. Unless the provision
is introduced retrospectively, how
the same can be extended to unit set
up in earlier years. Assessee’s case
is even worse where the
applicability of section 10A itself
was over.”
11. Being aggrieved, the assessee preferred
an appeal before the CIT(Appeals).
CIT(Appeals) dismissed the appeal by
upholding the order passed by the Assessing
Officer for both the years observing that
since the assessee had already exercised
option under the provisions of section 10A(3)
of the Act, the assessee cannot have the
benefit of amended provisions for the year
under consideration since for the intervening
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years, the assessee had claimed deduction
under section 80HHE of the Act. It was also
observed by the CIT(Appeals) that the
amendment was not retrospective, nor the
judgments relied upon by the assessee were
applicable to the facts of the case.
12. Being aggrieved, the assessee preferred
an appeal before the Tribunal. The Tribunal
following the decision in case of M/s. DSL
Software Ltd. of the ITAT Bangalore Bench ‘B’
in ITA No.602/Bang/05 which was rendered in
similar facts as well as decision of Hon’ble
Punjab and Haryana High Court in case of CIT
v. Mahavir Spinning Mills Ltd. reported in
(2008) 217 CTR (P&H) 125 as well as CBDT
Circular No.1 of 2025 dated 06.01.2005,
allowed the claim of the assessee under
section 10A of the Act for both the years by
observing as under:
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“7.3. In the light of aforesaid
decisions and after considering the
relevant provisions law as also
facts of the case, especially when
the Revenue has not disputed that
the taxpayer fulfilled the
conditions stipulated under the
section 10A of the Act in the years
under consideration, we are of the
opinion that the Id. CIT(A) was not
justified in denying the claim for
exemption u/s 10A of the Act. The
relevant portion memorandum of the
explaining the provisions of Income
tax (Second Amendment) Bill 1998
read as under:
“Clause 3 seeks to amend section
10A of the Income-tax Act. Under
the existing provisions, tax to
holiday is available newly
established industrial
undertakings set up in free
trade zones and, to units set up
in software technology parks for
five years out of block of
initial eight years, subject to
fulfillment of certain
conditions. The proposed
amendment seeks to extend the
period of holiday from five
years to ten years in order to
give added thrust to exports.
Clause 4 seeks to similarly
extend the five year tax holiday
period to 10 years to the export
oriented units under section 10B
of the Income-tax Act.”
7.4 As is aforesaid the from evident
memorandum, the period of tax
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holiday is extended for and from the
AY 1999-2000 from five years to ten
years in order to give added thrust
to exports. The condition about the
block of initial years has
altogether been removed. The case of
the taxpayer for the assessment
years under consideration falls
within the amended provisions. The
finding of the Id. CIT(A) about the
identity of the unit in the
intervening years, when taxpayer
claimed deduction u/s 80HHE of the
Act, is in our opinion, irrelevant,
especially when claim for exemption
has to be examined in each year in
accordance with the relevant
provisions of law. There is nothing
in the amended provisions of section
10A of the Act, debarring the
taxpayer for claiming exemption
under section 10A in the extended
period even when it had already
availed the exemption for a period
of five years out of eight years,
beginning with the assessment year
relevant to the previous year in
which the industrial undertaking
begins to manufacture or produce
articles or things In the light of
decision of the ITAT Bangalore Bench
‘B’ in ITA No. 602/Bang/05 (supra),
we have no alternative but to
reverse the order of the lower
authorities on this issue and the AO
is directed to allow the claim for
exemption under section 10A of the
Act in respect of profits and gains
derived by the taxpayer in its
industrial undertaking i.e. unit
106, in accordance with law. Since
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the complete working of profits and
gains derived by the taxpayer from
the industrial undertaking i.e.
unit-106 for these two assessment
years is not available before us
while the Id. CIT(A) allowed
deduction u/s 80HHE of the Act on
such profits, matter is restored to
the file of the AO for the limited
purpose of re-computing exemption u/
s 10A of the Act and deduction u/s
80HHE of the Act after allowing
sufficient opportunity to the
taxpayer. Subject to these
directions, ground no. 1 in the
appeals of the taxpayer for the AYs
1999-2000 & 2000-01 is allowed.”
13. Learned Senior Standing Counsel Mr. Dev
D. Patel appearing for the appellant
submitted that the Tribunal has committed an
error in setting aside the order of the
CIT(Appeals) inasmuch as admittedly the
assessee has not availed the exemption under
section 10A of the Act for the intervening
two periods after expiry of five consecutive
assessment years and as such, once the
assessee has availed the scheme of section
10A prior to amendment and on the amendment
coming into force for extending the period of
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benefit, would not entitle the assessee to
get the benefit for the extended period.
14. In support of his submission, reliance
was placed on the decision of this Court in
case of Expo Packaging v. Assistant
commissioner of Income Tax reported in (2012)
26 taxmann.com 230 (Guj) and submitted that
this Court in the facts of the said case has
held that sub-section (3) of section 10A
provides exemption for five consecutive
assessment years either before amendment of
sub-section(3) or thereafter, would be
available to the assessee to claim exemption
under section 10A of the Act for the
assessment year relatable to the previous
year when the manufacturing commenced and
four immediately succeeding assessment year
prior to amendment of sub-section (3) and
after amendment of sub-section(3), five
consecutive years within a period of eight
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years beginning with assessment year relevant
to the previous years in which the
manufacture or production commenced. The only
difference the amendment has made by
substitution of sub-section(3) with effect
from 01.04.1987 was before or after
substitution it does not contemplate any
break in period of five assessment years as
consecutive five years and therefore, relying
upon such findings, it was submitted that
when five consecutive years block is over in
case of the assessee, the assessee would not
get benefit of section 10A for the remaining
years in block of 10 consecutive years after
the amendment.
15. It was therefore, submitted that both
the Assessing Officer as well as CIT(Appeals)
has rightly rejected the claim of the
assessee under section 10A of the Act.
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16. Learned Senior Standing Counsel Mr.
Patel also referred to and relied upon the
decision of Hon’ble Supreme Court in case of
Principal Commissioner of Income Tax v. Wipro
Ltd. reported in (2022) 446 ITR 1 (SC) to
submit that exemption granting provision has
to be read strictly and for claiming
exemption under section 10, conditions
prescribed therein for furnishing relevant
documents or declaration in writing are
required to be fulfilled mandatorily.
17. It was submitted that once the assessee
has availed the exemption benefit for five
consecutive years, section 10A would cease to
operate and the assessee has thereafter
claimed benefit under section 80HHE. It was
therefore, submitted that once the amendment
is brought on statute for granting the
benefit of 10 consecutive assessment years,
would not help assessee to claim the benefit
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for remaining period in the ten consecutive
assessment years from the date of
manufacture.
18. On the other hand, learned Senior
Counsel Mr. S.N. Soparkar with learned
advocate Mr. B.S. Soparkar submitted that the
issue is no more res integra in view of
decision of Hon’ble Karnataka High Court in
case of Commissioner of Income-tax v. DSL
Software Ltd. reported in (2013) 351 IR 385
(Karnataka) which has confirmed the decision
of ITAT Bangalore Bench in case of DSL
Software Ltd. followed by the Tribunal. It
was submitted that facts in case of DSL
Software Ltd.(supra), are similar to the
facts of the case of the assessee as in the
facts of the said case also, the assessee
claimed benefit of section 10B which is pari
materia to section 10A of the Act after the
period of exemption of five years was over in
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view of the amendment extending the period to
10 years from the date the eligible unit
started manufacture or production as the case
may be. It was submitted that Hon’ble
Karnataka High Court has held that though the
benefits of the unamended provision and five
years period have expired on the date the
amended provision came into force, benefits
cannot be denied to the assessee with block
of 10 consecutive assessment years still
subsisting from the date of manufacture.
19. With regard to the reliance placed on
the decision in case of Export Packaging v.
Assistant commissioner of Income Tax(supra),
it was submitted that same would on the
contrary be applicable in the favour of the
assessee as this Court has held that period
of five consecutive years is required to be
adhered to whether from the initial date of
manufacture or any five years within the
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block of eight years after the amendment of
sub-section(3) of section 10A of the Act.
20. It was further submitted that Hon’ble
Supreme Court upheld the decision of Hon’ble
Karnataka High Court by observing that there
is no infirmity in the same and dismissed the
SLP in case of Commissioner of Income-tax v.
Deutsche Software Ltd. reported in (2017) 399
ITR 570 (SC). It was therefore submitted that
the decision of Hon’ble Karnataka High Court
would cover the issue in favour of the
assessee.
21. It was further submitted that the
decision of Karnataka High Court in case of
Commissioner of Income-tax v. DSL Software
Ltd.(supra), was further followed by
Karnataka High Court in case of Saint Gobain
Crystals & Directors (I) Ltd. v. Deputy
Commissioner of Income Tax, Circle-6(1)(1),
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Bangalore reported in (2021) 123 taxmann.com
206 (Karnataka) while considering pari
materia provision under section 10B of the
Act as well as in case of Commissioner of
Income Tax, Central Circle, Bangalore v.
ITTI(P) Ltd. reported in (2012) 22
taxmann.com 252 (Karnataka).
22. It was further submitted that reliance
placed by the Revenue on the decision in case
of Principal Commissioner of Income Tax v.
Wipro Ltd.(supra) would not be applicable in
facts of the case as the Hon’ble Supreme
Court in the said case has considered the
mandatory condition prescribed for availing
exemption under section 10B(8) of the Act
regarding filing of declaration under the
said section being mandatory observing that
the exemption provisions are to be strictly
and literally complied with and the same
cannot be construed as procedural
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requirement. In the facts of the case, the
issue is different than complying with the
mandatory procedural requirement.
23. It was therefore, submitted that no
interference may be made in the impugned
order of the Tribunal.
24. Before deciding the issue on hand, it
would be germane to refer to the relevant
provisions and various amendments carried out
in the said provision.
25. Section 10A of the Act as it stood at
the relevant time prior to its amendment in
1986 reads as under:
“10A(1) Subject to the provisions of
this section, any profits and gains
derived by an assessee from an
industrial undertaking to which this
section applies shall not be
included in the total income of the
assessee.
(2) This section applies to any
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all the following conditions,
namely:-
(i) it has begun or begins to
manufacture or produce articles or
things during the previous year
relevant to the assessment year
commencing on or after the 1st day of
April, 1981, in any free trade zone;
(ii) it is not formed by the
splitting up, or the reconstruction,
of a business already in existence:
Provided that this condition shall
not apply in respect of any
industrial undertaking which is
formed as a result of the re-
establishment, reconstruction or
revival by the assessee of the
business of any such industrial
undertaking as is referred to in
section 33B, in the circumstances
and within the period specified in
that section;
(iii) it is not formed by the
transfer to a new business of
machinery or plant previously used
for any purpose.
Explanation: The provisions of
Explanation 1 and Explanation 2 to
sub-section (2) of section 80-I
shall apply for the purposes of
clause (iii) of this sub-section as
they apply for the purposes of
clause (ii) of that sub-section.
(3) The profits and gains referred
to in sub-section (1) shall not be
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included in the total income of the
assessee in respect of the
assessment year relevant to the
previous year in which the
industrial undertaking begins to
manufacture or produce articles or
things (such assessment year being
hereafter in this section referred
to as the initial assessment year)
and each of the four assessment
years immediately succeeding the
initial assessment year.
(4) Notwithstanding anything
contained in any other provision of
this Act, in computing the total
income of the assessee of the
previous year relevant to the
assessment year immediately
succeeding the last of the relevant
assessment years, or of any previous
year, relevant to any subsequent
assessment year,-
(i) section 32, section 32A, section
33, section 35 and clause (ix) of
sub-section (1) of section 36 shall
apply as if every allowance or
deduction referred to therein and
relating to or allowable for any of
the relevant assessment years, in
relation to any building, machinery,
plant or furniture used for the
purposes of the business of the
industrial undertaking in the
previous year relevant to such
assessment year or any expenditure
incurred for the purposes of such
business in such previous year had
been given full effect to for that
assessment year itself and
accordingly sub-section (2) of
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section 32, clause (ii) of sub-
section (3) of section 32A, clause
(ii) of sub-section (2) of section
33, sub-section (4) of section 35 or
the second proviso to clause (ix) of
sub-section (1) of section 36, as
the case may be, shall not apply in
relation to any such allowance or
deduction:
(ii) no loss referred to in sub-
section (1) of section 72 or sub-
section (1) or sub-section (3)] of
section 74 and no deficiency
referred to in sub-section (3) of
section 80J, in so far as such loss
or deficiency relates to the
business of the industrial
undertaking, shall be carried
forward or set off where such loss,
or, as the case may be, deficiency
relates to any of the relevant
assessment years;
(iii) no deduction shall be allowed
under section 80HH or section 80HHA
or section 80-I or section 80J in
relation to the profits and gains of
the industrial undertaking; and
(iv) in computing the depreciation
allowance under section 32, the
written down value of any asset used
for the purposes of the business of
the industrial undertaking shall be
computed as if the assessee had
claimed and been actually allowed
the deduction in respect of
depreciation for each of the
relevant assessment years.
(5) xxx xxx xxx
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(6) xxx xxx xxx
(7) Notwithstanding anything
contained in the foregoing
provisions of this section, where
the assessee, before the expiry of
the time allowed under sub-section
(1) or sub-section (2) of section
139, whether fixed originally or on
extension, for furnishing the return
of income furnishes to the Income-
tax Officer a declaration in writing
that the provisions of this section
shall not apply to him for any of
the relevant assessment years.
Explanation: For the purposes of
this section,-
(i) “free trade zone” means the
Kandla Free Trade Zone and the
Santacruz Electronics Export
Processing Zone and includes any
other free trade zone which the
Central Government may, by
notification in the Official
Gazette, specify for the purposes of
this section;
ii. “relevant assessment years”
means the five consecutive
assessment years specified by the
assessee at his option under sub-
section (3).
[iii. “manufacture” includes any –
(a) process, or
(b) assembling, or
(c) recording of programmes on any
disc, tape, perforated media or
other information storage device.”
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26. By the Taxation Laws (Amendment &
Miscellaneous Provisions) Act, 1986, with
effect from 1st April, 1987, sub-section (3)
of section 10A came to be substituted as
under:
“(3) The profits and gains referred
to in sub-section (1) shall not be
included in the total income of the
assessee in respect of any five
consecutive assessment years,
falling within a period of eight
years beginning with the assessment
year relevant to the previous year
in which the industrial undertaking
begins to manufacture or produce
articles or things, specified by the
assessee at his option.”
27. Section 10A after Income-tax (Second
Amendment) Act, 1998, w.e.f. 1-4-1999, reads
as under:
“SECTION 10A : Special provision in
respect of newly established
undertakings in free trade zone,
etc.(1) Subject to the provisions of
this section, a deduction of
such profits and gains as are
derived by an undertaking fromPage 25 of 34
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the export of articles or things
or computer software for a
period of ten consecutive
assessment years beginning with
the assessment year relevant to
the previous year in which the
undertaking begins to
manufacture or produce such
articles or things or computer
software, as the case may be,
shall be allowed from the total
income of the assessee:
xxxx
28. Having heard the learned advocates for
the respective parties and on perusal of the
impugned order of the Tribunal as well as
settled legal position and the relevant
provisions, we are of the opinion that the
question raised in this appeal regarding
benefit under section 10A for the remaining
period of 10 consecutive years from the date
of manufacture as per the amendment brought
on statute for the year under consideration
is no more res integra in view of decision of
Hon’ble Karnataka High Court in case of DSL
Software Ltd.(supra) wherein similar facts
are recorded in para no.2 of the decision as
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the assessee claimed the benefit of the tax
holiday under section 10B of the Act in
accordance with unamended provision of
section 10B for a period of five years which
ended in the Assessment Year 1997-1999 as the
production commenced from 1993-1994.
Thereafter, the assessee claimed deduction in
view of the Income Tax (Second Amendment)
Act, 1998 which amended section 10A and
section 10B extending the tax holiday period
to 10 years to be reckoned from the date, the
eligible unit started to manufacture and
therefore, the assessee in the said case
claimed the benefit from payment of tax for
the years 1999-2000, 2000-2001 and 2001-2002
as the amended provision came into force from
01.04.1999. So far as Assessment Year 2001-
2002, the assessee was denied exemption under
section 10B of the Act on the ground that the
assessee had already exhausted its claim
under section 10B prior to amendment and
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therefore, the question of allowing the claim
for the remaining part of the 10 years of
period or the extension of the claim does not
apply.
29. In facts of the present case also, the
assessee has availed deduction under section
10A for five consecutive years in respect of
its two units i.e. 106 and 107 from 1991-1992
to 1995-1996 and therefore, 10 consecutive
years would be over in the Assessment Year
2000-2001. Therefore, the assessee in the
facts of the case claimed the benefit of
section 10A for two years left out from 10
consecutive years i.e. Assessment Years 1999-
2000 and 2000-2001. Thus, the facts of the
present case are similar to the facts of the
case before the Hon’ble Karnataka High Court.
The Hon’ble Karnataka High Court after
considering the provisions of section 10B of
the Act held as under:
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“7. As it is clear from the aforesaid
provision, the tax benefit or tax holiday
is now extended for a period of ten
consecutive assessment years beginning
with the assessment year relevant to the
previous year in which the said
undertaking begins to manufacture or
produce articles or things or computer
software, as the case may be. The object
behind this amendment, which is extracted
in the order of the Appellate Tribunal
reads as under:-
“Clause 3 seeks to amend section 10A of
the Income Tax Act. Under the existing
provisions, tax holiday is available to
newly established industrial
undertaking set up in free trade zones
and to units set up in software
technology parks for five years out of
the block of initial eight years,
subject to fulfilment of certain
conditions. The proposed amendment
seeks to extend the period of tax
holiday from five years to ten years in
order to give added thrust to exports.
Clause 4 seeks to similarly extend the
five year tax holiday period to ten
years to the export oriented units
under section 10B of the Income Tax
Act.”
8. From the aforesaid object behind the
amendment, it is clear that the period of
5 years is extended to 10 years in order
to give added thrust to exports. It is
because, the Parliament felt that the tax
holiday of 5 years is not having the
desired result and therefore, they
extended the benefit of tax holiday from
5 years to 10 years. If it is a case of
extension from 5 years to 10 years, the
unit, which had the benefit of 5 years
automatically, should get the benefit of
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10 years if other conditions are
fulfilled. The other condition to be
fulfilled is ten consecutive assessment
years beginning with the assessment year
relevant to the previous year in which
the undertaking begins to manufacture.
Therefore, the object with which this
amendment was introduced is to extend the
benefit of tax holiday for a period of 10
consecutive years from the date of
commencement of manufacture or
production. Before an assessee can claim
the benefit of tax holiday, the said law
governing the tax holiday should be in
force on the first day of the relevant
year. Then only he would be entitled to
the said benefit. On 01.04.1999 when the
amended provision came into force by
virtue of said provision the assessee
would be entitled to the benefit of tax
holiday for 10 consecutive years from the
date of production. If the assessee
already availed the benefit under the
unamended provision and the 10
consecutive years would fall prior to
01.04.1999, then the assessee would not
be entitled to the said benefit. If the
said 10 consecutive years from the date
of production has not expired, prior to
01.04.1999, for the remaining unexpired
period, he would be entitled to the
benefit. On the ground that he had the
benefit of unamended provision and the 5
years-period has expired on the day
amended provision came into force, he
cannot be denied the benefit. If that is
done, it would run counter to the
intention with which the amended
provision was brought on the statute
book. It would negate the amended
provision.
9. In the instant case, the assessee has
commenced production in the year 1993-94.
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He enjoyed the benefit of 5 years from
1993-94 to 1997-98. The amended provision
came into force on 01.04.1999. He is
entitled to the tax holiday under the
amended provision ie. from 1993-94 to
2002-03. He claimed benefit from 1999-
2000, 2000-01 and 2001-02. It is for the
period 2001-02, the benefit is denied.
The said denial of the benefit runs
counter to the spirit of Section 10B and
it would negate the object with which the
amended provision was brought in. The
assessee is entitled to the benefit of
extension from 5 years to 10 years tax
holiday as provided under the amended
provision for 10 consecutive years from
the date of commencement of production.
In that view of the matter, the order
passed by the Tribunal as well as the
First Appellate Authority is strictly in
accordance with law and do not suffer
from any legal infirmity, which calls for
interference. No substantial question of
law arises for consideration in this
appeal.”
30. The decision of Hon’ble Karnataka Court
is already upheld by dismissing SLP in case
of Commissioner of Income-tax v. Deutsche
Software Ltd.(supra). Moreover, Hon’ble
Karnataka High Court has already followed its
decision further in case of Saint Gobain
Crystals & Directors (I) Ltd.(supra).
31. Applying the above dictum of law, we are
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of the opinion that the assessee cannot be
denied the benefit of the of exemption and if
that is not done, it would run counter to the
intention with which the amended provision
was brought on the statute book and it would
negate the benefits extended by the amended
provision for 10 consecutive years.
32. The contention raised on behalf of the
Revenue that the assessee has already availed
the benefits under section 10A of the Act for
five consecutive years from the Assessment
Year 1991-1992 onwards and thereafter, has
also availed the benefits under section 80HHE
of the Act and therefore, the assessee cannot
be granted the benefit as there is a break in
consecutive years of availing the benefit
after completion of availing the benefit of
consecutive five years, is not tenable in law
as by amendment of section 10A, the tax
holiday period is extended to 10 consecutive
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years, cannot be considered that once five
years in the block of 10 consecutive years
has expired, the assessee would get further
five years from the date of amendment.
33. It is very clear on perusal of the
amended section 10A of the Act that a
deduction of profits and gains as derived by
an undertaking from the export of articles or
things or computer software for a period of
ten consecutive assessment years beginning
with the assessment year relevant to the
previous year in which the undertaking begins
to manufacture or produce is available.
Therefore, during period of ten consecutive
years if the assessee does not avail the
exemption for any year, treating the same as
break in ten consecutive years, it would not
disentitle the assessee to claim the
exemption for remaining period.
34. In facts of the case, the assessee has
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therefore rightly claimed the benefit of tax
holiday under section 10A for the remaining
two years out of block of 10 consecutive
years from the date of manufacture.
35. In view of foregoing reasons, the
question of law is answered in favour of the
assessee and against the Revenue. The appeals
are accordingly dismissed.
(BHARGAV D. KARIA, J)
(PRANAV TRIVEDI,J)
RAGHUNATH R NAIR
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