Does the XI Schedule bar on deduction under Section 80IB of the Income-Tax Act, 1961 apply only to the products specifically referred to in its entries?

Paragraph 6The specific objection of the Department was that Serial Nos. 27 and 28 of the XI Schedule made reference to the term ‘Rubber’, and since the goods manufactured by the appellant were contraceptives using rubber, the bar would apply.

Paragraph 7In MRF Limited v Deputy Commissioner of Income-Tax (LTU) [^1] which was a decision rendered in the context of tyres, MRF Limited had been denied deduction under Section 80IB on the same analogy as in the present case, bringing tyres manufactured by MRF within the ambit of Serial Nos. 25 and 26 of the XI Schedule.

Paragraph 8This Court accepted the claim of the assessee noting that it was only those products/goods specifically referred to in Entries 25 and 26 that would attract the bar and not all and any goods made of rubber. The Court held as follows:- “28. The revenue would also argue that the intendment of the XI th Schedule is to restrict the benefit under Sections 80IA and 80IB and other provisions that provide for accelerated and wide benefits to an assessee. Hence, a strict interpretation has to be given to the bar in regard to the XI th Schedule. 29. We have heard the rival contentions on this score. The XI th Schedule places an embargo on the grant of relief under various provisions of the Income Tax Act including Sections 80IA and 80IB. We note that each entry under the XI th Schedule is specific to a single product that may be made, utilising different materials, or different classes of one family of products. 30. Where the entry refers to more than one product, the specific products that are intended to be covered are mentioned separately. The only such instance is entry no.4 that mentions 'tooth paste, dental cream, tooth powder and soap'. 31. Entry 27 refers to ‘Crown corks, or other fittings of cork, rubber, polyethylene or any other material’. The argument of the revenue is that entry No.27 relates to all fittings or accessories of cork, rubber, polyethylene or any other material. This interpretation is too wide of acceptance as it would expose all products made of cork, rubber, polyethylene or any other material to the restriction. 32. There is yet another reason why the argument of the revenue does not appeal. Entry No.28 refers to pilfer-proof caps for packaging or other fittings of cork, rubber polyethylene or any other material. If all other fittings of cork, rubber, polyethylene or other material were covered under the ambit of entry No.27, as the revenue would argue, there would have been no necessity to refer to those products again in entry 28. 33. That apart, we do not find that the comma placed after the phrase 'crown corks', makes any difference to the interpretation that the fittings of cork, rubber, polyethylene or other material must relate to crown corks only. This argument is hence rejected and the substantial question of law in this regard is answered in favour of the assessee. 34. The decisions referred to by the assessee, would also support our conclusion as above.”

Paragraph 9The present issue is thus covered by the above decision to which one of us is a party. We accept the claim of the assessee also for another reason. The Department has accepted the claim of the assessee on identical facts and legal position for nine out of ten years comprising the period for which deduction may be claimed. There is hence no reason whatsoever for a different stand to have been taken for the year in question.