M/s Valco Industries Ltd., Chandigarh V. ACIT, CC-1, Chandigarh

ITA 122/CHANDI/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 1500 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 04-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , . . , $%& BEFORE SHRI N.K. SAINI, VICE RPESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NOS.122 & 123/CHD/2019 / ASSESSMENT YEARS : 2010-11 & 2013-14 M/S VALCO INDUSTRIES LTD., SCO 37, SECTOR 26, CHANDIGARH. THE A.C.I.T., CENTRAL CIRCLE-1, CHANDIGARH. ./PAN NO: AAACV5195J /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI TEJ MOHAN SINGH, ADV. ! / REVENUE BY : SHRI MANOJ MISHRA, CIT(DR) ' # $ /DATE OF HEARING : 14.06.2019 %&'( $ /DATE OF PRONOUNCEMENT : 14 .06.2019 /ORDER PER BENCH: THE PRESENT APPEALS HAVE BEEN PREFERRED BY THE SAME ASSESSEE AGAINST THE CONSOLIDATED ORDER OF THE COMM ISSIONER OF INCOME TAX (APPEALS)-3, GURGAON [(IN SHORT CIT( A)] DATED 30.11.2018 PERTAINING TO ASSESSMENT YEARS 2010-11 A ND 2013-14. ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 2 SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE APPEA LS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF F BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. IDENTICAL GROUNDS HAVE BEEN TAKEN IN BOTH THE AP PEALS. GROUND NOS.1 TO 4 RAISED BY THE ASSESSEE IN BOTH TH E APPEALS RELATE TO THE VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 READ WITH SECTION 148 OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT). 3. AT THE OUTSET, THE LD.COUNSEL FOR THE ASSSESSEE HAS SUBMITTED THAT AS PER THE INSTRUCTIONS OF HIS CLIEN T, HE DOES NOT WANT TO PRESS THE LEGAL GROUNDS RELATING TO THE VALIDITY OF REOPENING OF THE ASSESSMENT U/S 147 READ WITH SE CTION 148 OF THE ACT. IN VIEW OF THE STATEMENT OF THE LD. COUNSEL FOR THE ASSSESSEE, GROUND NOS.1 TO 4 RAISED BY THE LD.COUNSEL FOR THE ASSSESSEE IN BOTH THE APPEALS AR E HEREBY DISMISSED AS NOT PRESSED. 4. VIDE GROUND NOS.5 AND 6 IN BOTH THE APPEALS OF T HE ASSESSEE, THE ASSESSEE HAS AGITATED THE ACTION OF T HE LOWER AUTHORITIES IN RESTRICTING THE DEDUCTION ASSESSEE U /S 80IC OF ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 3 THE ACT TO 30% AS AGAINST 100% CLAIMED BY THE ASSES SEE ON ACCOUNT OF SUBSTANTIAL EXPANSION. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE STARTED ITS MANUFACTURING ACTIVITIES IN FINANCIAL Y EAR 2004- 05 RELEVANT TO ASSESSMENT YEAR 2005-06 AND WAS ELI GIBLE TO CLAIM DEDUCTION U/S 80IC OF THE ACT) W.E.F ASSESSM ENT YEAR 2005-06. THE ASSESSEE HAD ALREADY CLAIMED DEDUCTION U/S 80IC OF THE ACT TO THE EXTENT OF 100% OF THE ELIGIB LE PROFIT FOR FIVE YEARS PERIOD I.E. FROM ASSESSMENT YEAR 200 5-06 TO ASSESSMENT YEAR 2009-10. IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE FIRM HAD AGAIN CLAIMED 100% DEDUCTION AGAINST ELIGIBLE PROFITS FROM THE IMPUGNED ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2010-11 ONWARDS RE-SHIFTING THE INI TIAL ASSESSMENT YEAR FROM 2005-06 TO 2009-10. BY DOING S O, THE ASSESSEE ENHANCED THE TIME PERIOD FOR 100% DEDUCTIO N UPTO ASSESSMENT YEAR 2013-14 BY CLAIMING TO HAVE CARRIE D OUT SUBSTANTIAL EXPANSION DURING THE YEAR UNDER CONSIDE RATION. THE A.O. FOR THE DETAILED REASONS MENTIONED IN THE ASSESSMENT ORDER AND FOLLOWING THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELECTRON ICS VS. ITO IN ITA NO.798/CHD/2012, HELD THAT THE ASSESSEE WAS ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 4 ELIGIBLE FOR DEDUCTION U/S 80IC ONLY @ 30% AS AGAIN ST THE CLAIM OF 100% MADE BY THE ASSESSEE. 4. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WH O DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 6. DURING THE COURSE OF HEARING BEFORE US, THE LD.C OUNSEL FOR THE ASSESSEE, AT THE OUTSET ITSELF, POINTED OUT THAT THE HON'BLE APEX COURT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN BUNCH OF CASES WITH THE LEAD CASE BEIN G PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONICS IN CIVIL NO.1784 OF 2019 DATED 20.2.2019. 7. LD.DR FAIRLY CONCEDED THAT THE ISSUE WAS SETTLED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE APEX COURT. 8. 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 DEALT WITH THE ENTIRE S CHEME OF THE ACT RELATING TO THE RELEVANT SECTION I.E. SECTI ON 80IC OF THE ACT, AND ARRIVED AT THE CONCLUSION THAT THE DEF INITION OF THE INITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB- ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 5 SECTION(8) OF SECTION 80IC OF THE ACT CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE INITIAL ASSESSMEN T YEAR WITHIN THE SAID PERIOD OF TEN YEARS. THE RELEVANT F INDING OF THE HON'BLE APEX COURT AT PARA 19 OF ITS ORDER IS A S UNDER: 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF INITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SEC TION (8) OF SECTION 80-IC CAN LEAD TO A SITUATION WHERE THERE C AN BE MORE THAN ONE INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIOD OF 10 YEARS. AS PER SUB-SECTION (6), CAP IS ON THE 10 ASSESSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP I N MIND THE PURPOSE FOR WHICH SECTION 80-IC WAS ENACTED. THE PU RPOSE WAS TO ESTABLISH THE BUSINESS OF THE NATURE SPECIFI ED IN THE SAID PROVISION IN THE SPECIFIED STATES. THIS PROVIS ION WAS, THUS, AIMED AT ENCOURAGING THE UNDERTAKINGS OR ENTE RPRISES TO ESTABLISH AND SET UP SUCH UNITS IN THE AFORESAID ST ATES TO MAKE THEM INDUSTRIALLY ADVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT STATES AS MOST OF THESE STATES FALL IN HILLY AREAS. THEREFORE, COST OF PROD UCTION AND TRANSPORTATION MAY ALSO GO UP. 20. WHEN WE KEEP IN MIND THESE OBJECTIVES FOR WHICH SECTION 80-IC WAS ENACTED, AN IRRESISTIBLE CONCLUSI ON WOULD BE TO GRANT 100% DEDUCTION OF THE PROFITS AND GAINS EVEN FROM THE YEAR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXISTING UNIT. AFTER ALL, THIS SUBSTANTIAL EXPANSION INVOLVE S 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 GENERATION OF MORE EMPLOYMENT AS WELL, WHICH WOULD BENEFIT THE LOCAL POPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBST ANTIAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSME NT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUBSTANTIAL EXPANSION, SUCH A UNIT ALSO BECOMES ENT ITLED TO AVAIL THE BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEGISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCT ION OF THE PROFITS AND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT AND ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 6 HAVE NOW INVESTED HUGE AMOUNT WITH SUBSTANTIAL EXPA NSION OF THOSE UNITS. 9. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT A NEWLY SET UP UNDERTAKING OR ENTERPRISE IN THE STATE OF HIMACHAL PRADESH WOULD BE ENTITLED TO DEDUCTION @ 1 00% OF THE ACT ITS PROFITS FOR THE FIRST FIVE YEARS AND EV EN THEREAFTER IN THE CASE OF SUBSTANTIAL EXPANSION IS CARRIED OUT BY IT, THEN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS Y EAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN BECOMING THE INITIAL ASSESSMENT YEAR. THAT IN ANY CASE, THE PERI OD OF DEDUCTION U/S 80IC OF THE ACT WOULD NOT EXCEED 10 Y EARS. 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 FOLLO WING 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-I C ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONT AINED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. THE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTI ON 80-IC HAS MADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE O PINION THAT THE AFORESAID JUDGMENT DOES NOT LAY DOWN THE CORREC T LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET U P A NEW UNIT BETWEEN 7TH JANUARY, 2003 AND 1ST APRIL, 2012 IN STATE OF HIMACHALPRADESH OF THE NATURE MENTIONED IN CLAU SE (II) OF SUB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FI VE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSES SMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDU CTION WOULD ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 7 BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRI ED OUT AS DEFINED IN CLAUSE (IX) OF SUB-SECTION (8) OF SECTIO N 80-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORE SAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SU BSTANTIAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSES SMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE S HALL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFITS AND GAIN S. (D) SUCH DEDUCTION, HOWEVER, WOULD BE FOR A TOTAL P ERIOD OF 10 YEARS, AS PROVIDED IN SUB-SECTION (6). FOR EXAMPLE, IF THE EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLE TION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION AGAIN FOR THE NEXT FIVEYEARS. ON THE OTHE R HAND, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YE AR BY AN ASSESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR 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 YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN HOWEVER, THIS 100% DEDUCTION WOULD BE FO R REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSE SSMENT YEARS. 25. IN VIEW OF THE AFORESAID, WE AFFIRM THE JUDGMEN T OF THE HIGH COURT ON THIS ISSUE AND DISMISS ALL THESE APPE ALS OF THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES A RE HEREBY 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. 11. SINCE IN THE PRESENT CASE THE FACT THAT THE ASS ESSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN THE IMPUGNE D YEAR IS NOT DISPUTED, THE ASSESSEE, WE HOLD, IS ENTITLED TO CLAIM ITA NOS.122 & 123/CHD/2019 A. YS.2010-11 & 2013-14 8 DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS EVEN IF IT HAS ALREADY CLAIMED DEDUCTION OF ITS PROFITS AT THE SAID RATE F OR FIRST FIVE YEARS, IN VIEW OF THE LAW LAID DOWN BY THE APEX COU RT IN THIS REGARD IN ITS DECISION IN THE CASE OF M/S AARHAM SOFTRONICS(SUPRA). 12. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND ALLOW THE APPEALS OF THE ASSESSEE. 13. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.06.2019. SD/- SD/- . . (N.K. SAINI) (SANJAY GARG) $%& VICE PRESIDENT / JUDICIAL MEMBER ( /DATED: 14 TH JUNE, 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. /35# / GUARD FILE &) ' / BY ORDER, / ASSISTANT REGISTRAR