Sh. Sudhish Soni, Parwanoo V. ITO, Ward, Parwanoo

ITA 14/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6001 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 07-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation
• Section: 80IC; 80IC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, SMC, CHANDIGARH , BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 14/CHD/2019 / ASSESSMENT YEAR : 2015-16 SHRI SUDISH SONI, PROP M/S SUNRISE PACKAGING, VALLEY VIEW, SECTOR 1, PARWANOO (H.P.) VS. THE ITO, PARWANOO ./PAN NO: AUAPS3289F / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI SURINDER BABBAR, CA ' ! / REVENUE BY : SH. MANJIT SINGH, CIT DR # $ % /DATE OF HEARING : 24.07.2019 &'() % / DATE OF PRONOUNCEMENT : 01.08.2019 / ORDER THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 12.09.2018 OF THE COMMISSIONER OF INCO ME TAX (APPEALS), SHIMLA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. IN THIS APPEAL, THE ASSESSEE HAS AGITATED THE AC TION OF THE LOWER AUTHORITIES IN RESTRICTING THE DEDUCTION U/S 80IC O F THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') TO 30% AS AGAINST 100% C LAIMED BY THE ASSESSEE ON ACCOUNT OF SUBSTANTIAL EXPANSION OF TH E UNIT. ITA NO. 14-CHD-2019- SHRI SUDISH SONI, PARWANOO 2 3. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET ITSELF, POINTED OUT THAT TH E HON'BLE APEX COURT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN BUNCH OF CASES WITH THE LEAD CASE BEING PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONICS IN CIVIL NO.1784 OF 2019 DATED 20.2.2019. 4. LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS SETTLE D IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE APEX COUR T. 5. 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 SCHEME OF THE ACT RELATING TO THE RELEVANT SECTION I.E. SECTION 80IC OF THE ACT, AND ARRIVED AT THE CONCLUSION THAT THE DEFINITION OF THE INITIAL ASSES SMENT 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 INITIAL ASSESSMENT 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 AS UN DER: 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF IN ITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTION (8) OF SECTION 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THA N 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 IN MIND THE PURPOSE F OR WHICH SECTION 80-IC WAS ENACTED. THE PURPOSE WAS TO ESTAB LISH THE BUSINESS OF THE NATURE SPECIFIED IN THE SAID PROVIS ION IN THE SPECIFIED STATES. THIS PROVISION WAS, THUS, AIMED A T ENCOURAGING THE UNDERTAKINGS OR ENTERPRISES TO ESTABLISH AND SE T UP SUCH UNITS IN THE AFORESAID STATES TO MAKE THEM INDUSTRIALLY A DVANCED STATES ITA NO. 14-CHD-2019- SHRI SUDISH SONI, PARWANOO 3 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 CONCLUSION WOULD BE TO GRANT 100% DEDUCTION OF THE PROFITS AND GAINS EVEN FROM T HE YEAR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXISTING UNIT . AFTER ALL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVEST MENT WHICH HAS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE THEREOF BEFORE TAKING DEPRECIATION IN ANY YEAR. WIT H AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE I N PRODUCTION BUT GENERATION OF MORE EMPLOYMENT AS WELL, WHICH WO ULD BENEFIT THE LOCAL POPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANTIAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSME NT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUB STANTIAL EXPANSION, SUCH A UNIT ALSO BECOMES ENTITLED TO AVA IL THE BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEG ISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCTION OF THE PROFITS A ND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THI S DEDUCTION ON SETTING UP OF A NEW UNIT AND HAVE NOW INVESTED HUG E AMOUNT WITH SUBSTANTIAL EXPANSION OF THOSE UNITS. 6. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT A NEWLY SET UP UNDERTAKING OR ENTERPRISE IN THE STATE OF HIMACH AL PRADESH WOULD BE ENTITLED TO DEDUCTION @ 100% OF THE ACT ITS PROF ITS FOR THE FIRST FIVE YEARS AND EVEN THEREAFTER IN THE CASE OF SUBST ANTIAL EXPANSION IS CARRIED OUT BY IT, THEN THE ASSESSMENT YEAR RELEVAN T TO THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN B ECOMING THE INITIAL ASSESSMENT YEAR. THAT IN ANY CASE, THE PERIOD OF DE DUCTION U/S 80IC OF THE ACT WOULD NOT EXCEED 10 YEARS. THE CONCLUSION O F 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: ITA NO. 14-CHD-2019- SHRI SUDISH SONI, PARWANOO 4 (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BINDING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIA L ASSESSMENT YEAR CONTAINED IN SECTION 80-IC ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTAINED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. THE DEFINITION S OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80- IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INI TIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL THE DIFFEREN CE. THEREFORE, WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT D OES NOT LAY DOWN THE CORRECT LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET U P A NEW UNIT BETWEEN 7TH JANUARY, 2003 AND 1ST APRIL, 2012 IN ST ATE OF HIMACHAL PRADESH OF THE NATURE MENTIONED IN CLAUSE (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 FIVE ASSE SSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTION WOULD 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 AFORESAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANT IAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMENT YEAR , AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITL ED TO 100% DEDUCTIONS OF THE PROFITS AND GAINS. (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 FIVE YEARS. ON THE OTHER HAND, I F SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASS ESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR TH E 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 FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSESSMENT 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. ITA NO. 14-CHD-2019- SHRI SUDISH SONI, PARWANOO 5 7. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW THA T EVEN A NEW UNDERTAKING, WHICH HAS CLAIMED DEDUCTION OF ITS ELI GIBLE PROFITS @ 100% THEREOF FOR THE FIRST FIVE YEARS, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTA NTIAL EXPANSION UNDERTAKEN BY IT. HOWEVER, SUCH DEDUCTION WOULD BE FOR A TOTAL PERIOD OF 10 YEARS AS PROVIDED IN SUB-SECTION (6) TO SECTI ON 80IC OF THE ACT. 8. SINCE IN THE PRESENT CASE THE FACT THAT THE ASSE SSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IS NOT DISPUTED, T HE ASSESSEE, WE HOLD, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS FOR FIVE YEARS FROM THE INITIAL YEAR OF SUBSTANTIAL E XPANSION EVEN THOUGH THE ASSESSEE HAS ALREADY CLAIMED DEDUCTION OF THE P ROFITS AT THE RATE OF 100% FOR FIRST FIVE YEARS SUBJECT TO THE CONDITION THAT THE TOTAL PERIOD OF DEDUCTION U/S 80IC WILL NOT EXCEED 10 YEARS FROM THE INITIAL YEAR OF COMMENCEMENT OF UNIT, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN THIS REGARD IN ITS DECISION IN THE CASE OF M/S AARHAM SOFTRONICS(SUPRA). THUS, THIS ISSUE IS DECIDED IN F AVOUR OF THE ASSESSEE. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 01.08.2019. SD/- ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 01.08.2019 .. ITA NO. 14-CHD-2019- SHRI SUDISH SONI, PARWANOO 6 '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR