ACIT, C-3(1), Chandigarh V. Sh. Vijay Kumar Batra, Chandigarh

ITA 1169/CHANDI/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4039 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-03-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 06-09-2018
• Court: TRIBUNAL

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' # $ % &' , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO.1169/CHD/2018 / ASSESSMENT YEAR : 2011-12 THE A.C.I.T., CIRCLE-3(1), CHANDIGARH. SH.VIJAY KUMAR BATRA, SCO-915, SECOND FLOOR, NAC, MANIMAJRA. ./ PAN NO. AEJPB0879B / APPELLANT / RESPONDENT /ASSESSEE BY : SHRI MANJIT SINGH, SR.DR ! / REVENUE BY : NONE ' # $ /DATE OF HEARING : 06.03.2019 %&'( $ /DATE OF PRONOUNCEMENT: 08.03.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHANDIGARH (IN SHORT CIT(A) DATED 25 .6.2018 PASSED U/S 250(6) OF THE INCOME TAX AT, 1961 (HEREI NAFTER REFERRED TO AS ACT). 2. BRIEF FACTS RELATING TO THE CASE ARE THAT THE AS SESSEE HAD CLAIMED 100% DEDUCTION OF THE PROFITS OF HIS EL IGIBLE UNDERTAKING U/S 80IC OF THE ACT FOR FIVE YEARS, BEG INNING FROM ASSESSMENT YEAR 2006-07. THEREAFTER THE ASSES SEE HAD MADE EXPANSION IN FINANCIAL YEAR 2010-11 RELATING T O ASSESSMENT YEAR 2011-12 I.E. THE IMPUGNED ASSESSMEN T YEAR AND HAD AGAIN CLAIMED 100% DEDUCTION OF ITS ELIGIBL E PROFITS ITA NO.1169/CHD/2018 A.Y.2011-12 2 U/S 80IC OF THE ACT. THE ASSESSING OFFICER(A.O). RE STRICTED THE SAME TO 25% OF THE ELIGIBLE PROFITS HOLDING THA T THERE WAS NO PROVISION UNDER LAW FOR ALLOWING MULTIPLE INITIA L ASSESSMENT YEARS. 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.C IT(A). DURING THE COURSE OF HEARING BEFORE HIM IT WAS BROU GHT TO HIS NOTICE THAT THE HON'BLE JURISDICTIONAL HIGH COU RT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF STOVECRAFT INDIA VS. CIT, REPORTED IN 160 DTR 378 H OLDING THAT THE BENEFIT OF DEDUCTION U/S 80IC @ 100% OF TH E ELIGIBLE PROFITS WAS ALLOWABLE EVEN IN THE CASE A NEW UNDERT AKING GOING FOR SUBSTANTIAL EXPANSION AFTER FIVE YEARS OF COMMENCEMENT OF PRODUCTION. THE LD.CIT(A) FOLLOWING THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONAL HI GH COURT ALLOWED THE ASSESSEES APPEAL. 4. AGGRIEVED BY THE SAME, THE REVENUE HAS COME UP I N APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A)HAS ERRED IN ALLOWING APPEAL OF THE ASSESSE E WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,82,48,759/-(MADE ON ACCOUNT OF RESTRICTING THE CLAIM OF DEDUCTION U/S 80IC OF INCOME TAX ACT, 1961 @ 25%) WITHOUT DISCUSSING THE MERITS OF THE ISSUE INVOLVE D AND BY RELYING ON THE DECISION OF HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF M/S STOVEKRAFT INDIA. HOWEVER, IN A RECENT JUDGEMENT DATED 20.08.2018, HONBLE SUPREME COURT OF INDIA HAS DECIDED THE MATTER OF DEDUCTION U/S 80IC IN THE FAVOUR OF REVENUE IN THE C IVIL APPEAL NO 7229 OF 2018 OF M/S STOVEKRAFT INDIA BUNCH ED IN THE LEAD CASE OF CIT VS. M/S CLASSIC BINDING INDU STRIES VIDE APPEAL NO. 7208/ OF 2018 & OTHERS. IN THE ORDE R, IT IS STATED THAT AFTER AVAILING DEDUCTION AT 100% FOR FIRST 5 YEARS FROM THE INITIAL ASSESSMENT YEAR, THE ITA NO.1169/CHD/2018 A.Y.2011-12 3 ASSESSEE WOULD BE ENTITLED TO DEDUCTION FOR REMAINI NG 5 ASSESSMENT YEARS @ 25% AND NOT @ 100%. THUS, THE ISSUE IS NOW SETTLED IN THE FAVOUR OF REVENUE BY TH E APEX COURT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE & IN LAW, THE LD.CIT(A)(BY RELYING ON THE JUDGMENTS DISCUSSED ABOVE) HAS ERRED IN HOLDING THAT THOSE UNDERTAKINGS OR ENTERPRISES WHICH COMMENCED PRODUCTION AFTER 07/01/2003 CAN CARRY OUT MULTIPLE 'SUBSTANTIA L EXPANSION' PRIOR TO 01/04/2012 AND THERE WILL BE INITIAL YEAR FOR EACH SUBSTANTIAL EXPANSION' AS LONG AS PROVISION OF SECTION 80IC(8)(IX) ARE MET WITHOUT APPRE CIATING THAT AS PER PROVISION OF SECTION 80IC OF THE INCOME TAX ACT AND AS EXPLAINED IN CBDT CIRCULAR NO. 7/2003, SUCH ENTERPRISE OR UNDERTAKING CANNOT CARRY OUT ANY 'SUBSTANTIAL EXPANSION'. 4. IT IS PRAYED THAT THE ORDER OF THE LD.CIT(A)BE CANC ELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 5. THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROU NDS OF APPEAL BEFORE THE APPEAL IS HEARD OR IS DISPOSED OFF. 5. A BARE PERUSAL OF THE ABOVE GROUNDS REVEALS THAT THE REVENUE HAS CHALLENGED THE ORDER OF THE LD.CIT(A) R ELYING UPON THE DECISION OF THE HON'BLE APEX COURT IN BUNC H OF CASES WITH THE LEAD CASE BEING CIT VS. M/S CLASSIC BINDING INDUSTRIES IN CIVIL APPEAL NO.7208 OF 2018 & OTHERS . THE SAID ORDER WAS DATED 20 TH AUGUST, 2018. 6. DURING THE COURSE OF HEARING BEFORE US THE LD. D R AT THE OUTSET ITSELF POINTED OUT THAT THE HON'BLE APEX COURT HAD THEREAFTER DECIDED THIS ISSUE AGAIN IN BUNCH OF CAS ES WITH THE LEAD CASE BEING PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONICS IN CIVIL NO.1784 OF 2019 DATED 20.2.2019 DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE AND FURTHER HOL DING THAT THE DECISION IN THE CASE OF M/S CLASSIC BINDING IND USTRIES (SUPRA) DO NOT LAY DOWN THE CORRECT LAW. ITA NO.1169/CHD/2018 A.Y.2011-12 4 7. WE HAVE GONE THROUGH THE ORDER OF THE HON'BLE AP EX COURT IN THE CASE OF M/S AARHAM SOFTRONICS (SUPRA) AND FIND THAT THE HON'BLE APEX COURT HAD NOTED THAT THESE AP PEALS WERE EARLIER HEARD AND DECIDED BY ITS JUDGMENT DATE D 20.8.2018 REVERSING THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT ON THE ISSUE, BUT IN SOME OF THE APPEALS, THE ASSESSEES WHO WERE RESPONDENTS WERE NO T SERVED WITH NOTICES AND THEY REMAINED UNREPRESENTED AND ON THEIR MISCELLANEOUS APPLICATION FILED FOR RECALL OF THE ORDER WHICH WAS ALLOWED BY THE HON'BLE APEX COURT THE APP EALS WERE RESTORED AND WERE BEING HEARD AFRESH. THAT THE REAFTER THE HON'BLE APEX COURT DEALT WITH THE ENTIRE SCHEME OF THE ACT RELATING TO RELEVANT SECTION I.E. SECTION 80IC OF THE ACT AND ARRIVED AT THE CONCLUSION THAT THE DEFINITION O F THE INITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB- SECTION(8) OF SECTION 80IC OF THE ACT CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE ASSESSMENT YEAR WI THIN THE SAID PERIOD OF TEN YEARS. THE RELEVANT FINDING OF THE HON'BLE APEX COURT AT PARA 19 OF ITS ORDER IS AS UN DER: 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF I NITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTIO N (8) OF SECTION 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIO D OF 10 YEARS. AS PER SUB-SECTION (6), CAP IS ON THE 10 ASSE SSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP IN MI ND THE PURPOSE FOR WHICH SECTION 80-IC WAS ENACTED. THE PUR POSE WAS TO ESTABLISH THE BUSINESS OF THE NATURE SPECIFI ED IN THE SAID PROVISION IN THE SPECIFIED STATES. THIS PROVISI ON WAS, THUS, AIMED AT ENCOURAGING THE UNDERTAKINGS OR ENTERPR ISES TO ESTABLISH AND SET UP SUCH UNITS IN THE AFORESAID STA TES TO MAKE THEM INDUSTRIALLY ADVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT STATES AS MOST OF T HESE STATES FALL IN HILLY AREAS. THEREFORE, COST OF PRODUCTION AND TRANSPORTATION MAY ALSO GO UP. ITA NO.1169/CHD/2018 A.Y.2011-12 5 20. WHEN WE KEEP IN MIND THESE OBJECTIVES FOR WHICH SECTION 80-IC WAS ENACTED, AN IRRESISTIBLE CONCLUSION WOULD BE TO GRANT 100% DEDUCTION OF THE PROFITS AND GAINS EV EN FROM THE YEAR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXIS TING UNIT. AFTER ALL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVESTMENT WHICH HAS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE THEREOF BEFORE TAKING DEPRECIATION IN ANY YEAR. WITH AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE IN PRODUCTION BUT G ENERATION OF MORE EMPLOYMENT AS WELL, WHICH WOULD BENEFIT THE LOCA L POPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANT IAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSMENT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUBSTA NTIAL EXPANSION, SUCH A UNIT ALSO BECOMES ENTITLED TO AVAIL TH E BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEGISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCTIO N OF THE PROFITS AND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT A ND HAVE NOW INVESTED HUGE AMOUNT WITH SUBSTANTIAL EXPANSION O F THOSE UNITS. 8. THE HON'BLE APEX COURT THEREAFTER NOTED THAT IN ITS JUDGMENT IN THE CASE OF M/S CLASSIC BINDING INDUSTR IES (SUPRA) THE OBSERVATION OF THE HON'BLE COURT THAT A LLOWING DEDUCTION @ 100% FOR THE ENTIRE PERIOD OF TEN YEARS WOULD BE DOING VIOLENCE TO THE LANGUAGE OF SEC 80IC OF THE A CT, WAS MADE WITHOUT NOTICING THE DEFINITION OF INITIAL ASS ESSMENT YEAR CONTAINED IN SECTION 80IC OF THE ACT. THE FIND ING OF THE HON'BLE APEX COURT AT PARA 22 OF ITS ORDER IS AS UN DER: 22. IT WOULD BE PERTINENT TO POINT OUT THAT IN PARA 20 OF THE JUDGMENT IN CLASSIC BINDING INDUSTRIES , THIS COURT OBSERVED THAT IF DEDUCTION @ 100% FOR THE ENTIRE PERIOD OF 1 0 YEARS, IT WOULD BE DOING VIOLENCE TO THE LANGUAGE OF SUB-SECTION (6) OF SECTION 80-IC. HOWEVER, THIS OBSERVATION CAME WITHOUT NOTICING THE DEFINITION OF INITIAL ASSESSMENT YEAR CONT AINED IN THE SAME VERY PROVISION. 9. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT THIS DECISION IN THE CASE OF M/S CLASSIC BINDING INDUSTR IES (SUPRA) DID NOT LAY DOWN THE CORRECT LAW AND THAT A NEWLY SET UP UNDERTAKING OR ENTERPRISE IN THE STATE OF HIMACH AL PRADESH WOULD BE ENTITLED TO DEDUCTION @ 100% OF TH E ACT ITS ITA NO.1169/CHD/2018 A.Y.2011-12 6 PROFITS FOR THE FIRST FIVE YEARS AND EVEN THEREAFTE R IN THE CASE OF SUBSTANTIAL EXPANSION IS CARRIED OUT BY IT, WITH THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UND ERTAKEN BECOMING THE INITIAL ASSESSMENT YEAR. THAT IN ANY C ASE THE PERIOD OF DEDUCTION U/S 80IC OF THE ACT WOULD NOT E XCEED 10 YEARS. THE CONCLUSION OF THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS AS UNDER: 24. THE AFORESAID DISCUSSION LEADS US TO THE FOLLOWIN G CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BINDINGINDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL ASSESSMENT YEAR CONTAINED IN SECTION 80-IC IT SELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTA INED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. T HE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SE CTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. TH E DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80 -IC HAS MADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPIN ION THAT THE AFORESAID JUDGMENT DOES NOT LAY DOWN THE CORRECT LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET UP A NEW UNIT BETWEEN 7TH JANUARY, 2003 AND 1ST APRIL, 2012 IN STATE OF HIMACHALPRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF SUB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO D EDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FI VE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMEN T YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTIO N WOULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF T HE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRIED O UT AS DEFINED IN CLAUSE (IX) OF SUB-SECTION (8) OF SECTION 8 0-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESA ID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBS TANTIAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSME NT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHA LL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFITS AND GAINS. (D) SUCH DEDUCTION, HOWEVER, WOULD BE FOR A TOTAL PERIOD OF 10 YEARS, AS PROVIDED IN SUB-SECTION (6). FOR EXAMPLE, IF T HE EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDU CTION AGAIN FOR THE NEXT FIVEYEARS. ON THE OTHER HAND, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASS ESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION F OR THE FIRST FIVE YEARS, DEDUCTION @ 25% OF THE PROFITS AND GAINS FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8 TH YEAR AS THIS ITA NO.1169/CHD/2018 A.Y.2011-12 7 YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN HOWE VER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEAR S, I.E., 8TH, 9TH AND 10TH ASSESSMENT YEARS. 25. IN VIEW OF THE AFORESAID, WE AFFIRM THE JUDGMENT OF THE HIGH COURT ON THIS ISSUE AND DISMISS ALL THESE APPEALS OF THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES ARE H EREBY ALLOWED. 10. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW TH AT EVEN A NEW UNDERTAKING WHICH HAS CLAIMED DEDUCTION OF ITS ELIGIBLE PROFITS @ 100% THEREOF FOR THE FIRST FIVE YEARS IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN BY IT. WE, THER EFORE, SEE NO REASON TO INTERFERE IN THE ORDER OF THE LD.CIT(A ) AND THE APPEAL OF THE REVENUE IS, THEREFORE, DISMISSED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % &' (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER ( / ACCOUNTANT MEMBER *# /DATED: 8 TH MARCH, 2019 * ' * &) *+ ,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ' - / CIT 4. ' - ( )/ THE CIT(A) 5. +./ 0 , $ 0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 5# / GUARD FILE &) ' / BY ORDER, ! / ASSISTANT REGISTRAR