M/s Micropet Industries, V. Deputy Commissioner Of Income Tax, Shimla

ITA 1458/CHANDI/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4374 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 27-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Set aside
• Section: 80IC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , ! ' , $ % & ' ( , ' BEFORE: SMT.DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, A M . / ITA NOS.1457 & 1458/CHD/2016 / ASSESSMENT YEARS :2012-13 & 2013-14 ) M/S MICROPET INDUSTRIES, VILLAGE OGLI, NAHAN ROAD, KALA AMB, TEHSIL NAHAN, DISTT. SIRMOUR, HIMACHAL PRADESH. THE D.C.I.T., CIRCLE SHIMLA, H.P. ./ PAN: AAMFM5828L /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI ATUL GOYAL, CA ! / REVENUE BY : SHRI MANJIT SINGH, SR. DR ' # $ /DATE OF HEARING : 22.02.2019 %&'( $ /DATE OF PRONOUNCEMENT:14.03.2019 /ORDER PER BENCH : THE IMPUGNED APPEALS WERE EARLIER DISMISSED EXPARTE AND THEREAFTER RECALLED VIDE ORDER OF EVEN DATE IN MA NOS.84 & 85/CHD/2017 . 2. THE SOLE ISSUE INVOLVED IN BOTH THE APPEALS RELA TES TO ALLOWANCE OF CLAIM OF DEDUCTION U/S 80IC OF THE ACT @ 100% OF PROFITS FROM THE ELIGIBLE BUSINESS OF THE ASSESS EE, ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN, AFTER AVAILING 100% DEDUCTION OF THE PROFITS FOR THE FIRST FIVE YE ARS. SINCE THE ISSUE INVOLVED IN BOTH THE APPEALS IS IDENTICAL , THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS C OMMON CONSOLIDATED ORDER. 2 WE SHALL BE DEALING WITH THE FACTS IN ITA NO.1457/CHD/2016 AND OUR DECISION RENDERED THEREIN WILL APPLY MUTATIS MUTANDIS TO OTHER APPEAL. 3. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE STARTED ITS MANUFACTURING ACTIVITY/OPERATION ON 06. 06.2006 AND INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) WA S ASSESSMENT YEAR 2007-08. THE ASSESSEE HAD ALREADY C LAIMED DEDUCTION U/S 80IC OF THE ACT TO THE EXTENT OF 100% OF THE ELIGIBLE PROFIT FOR FIVE YEARS PERIOD STARTING FROM ASSESSMENT YEAR 2007-08 TO ASSESSMENT YEAR 2011-12. IT WAS NOT ICED BY THE ASSESSING OFFICER(A.O)THAT THE ASSESSEE FIRM HA D AGAIN CLAIMED 100% DEDUCTION AGAINST ELIGIBLE PROFITS IN THE IMPUGNED ASSESSMENT YEAR, I.E. A.Y 2012-13, WHICH W AS THE 6 TH YEAR OF PRODUCTION OF THE FIRM, BY CLAIMING TO HAV E CARRIED OUT SUBSTANTIAL EXPANSION IN FINANCIAL YEAR 2010-11 RELEVANT TO ASSESSMENT YEAR 2011-12. THE A.O. FOR T HE DETAILED REASONS MENTIONED IN THE ASSESSMENT ORDER HELD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80 IC ONLY @ 25% AS AGAINST THE CLAIM OF 100% MADE BY THE ASSESS EE. 4. THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A) WH O DISMISSED THE ASSESSEES APPEAL FOLLOWING THE DECIS ION OF THE ITAT CHANDIGARH BENCH IN THE CASE OF M/S HYCRON ELECTRONICS VS. ITO IN ITA NO.798/CHD/2012. 5. AGGRIEVED BY THE SAME, THE ASSESSEE HAS COME UP IN APPEAL BEFORE US, RAISING FOLLOWING GROUNDS OF APPE AL: 3 1. THAT THE ORDER OF THE WORTHY CIT(A) IS BEING CHALLEN GED ON THE GROUND OF IT BEING ILLEGAL, ARBITRARY & HAVI NG BEEN PASSED IN HASTE WITHOUT CONSIDERING THE JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT DURING THE COURSE OF THE APPELLANT PROCEEDINGS. 2. THAT THE WORTHY CIT(A) ERRED IN FACTS & IN LAW IN UPHOLDING THE DISALLOWANCE OF DEDUCTION CLAIMED BY TH E APPELLANT U/S 80IC OF THE INCOME TAX ACT, 1961 & THER EFORE THE SAID ORDER DESERVES TO BE SET ASIDE. 3. THAT THE APPELLANT ASSESSEE CRAVES LEAVE TO ADD/ALTER ANY OF THE GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING. 6. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET ITSELF POINTED OUT THAT THE HON'BLE APEX COURT HAS DECIDED THIS ISSUE IN FAVOU R 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- 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: 4 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. 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. 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, WITH THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN BECOMING THE INITIAL ASSESSMENT YEAR. TH AT IN ANY CASE THE PERIOD OF DEDUCTION U/S 80IC OF THE AC T WOULD 5 NOT EXCEED 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 OU T 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 ASSESSMEN T 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 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 6 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 A.Y 2011-12 IS NOT DISPUTED, THE ASSESSEE, WE HOLD, IS ENTITLED TO CLA IM DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS EVEN IF IT HAS ALREADY CLAIMED DEDUCTION OF ITS PROFITS AT THE SAID RATE F OR 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) WE, THEREFORE, SET ASIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE APPEAL OF THE ASSESSEE. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- $ % & ' ( (DIVA SINGH) (ANNAPURNA GUPTA) , ' / JUDICIAL MEMBER * ' / ACCOUNTANT MEMBER $ /DATED: 14 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 7