DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-5, AMRITSAR V. SHRIMATI INDU MAHAJAN, AMRITSAR

ITA 179/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3342 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUDHIR MEHRA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 179/ASR/2018 ASS ESSMENT YEAR: 2013-14 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-5, AMRITSAR VS. INDU MAHAJAN, 22A, GALI NO. 2, VIJAY NAGAR, AMRITSAR [PAN: AASPM 8327Q] (APPELLANT) (RESPONDENT) APPELLANT BY : SH. CHARAN DASS (D .R.) RESPONDENT BY: SH. SUDHIR MEHRA (ADV.) DATE OF HEARING: 18.03.2019 DATE OF PRONOUNCEMENT: 29.05.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE REVENUE DIRECTED AGAINST T HE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS)-2, AMRITSAR ( CIT(A) FOR SHORT) DATED 11.01.2018, ALLOWING THE ASSESSEES APPEAL CONTESTI NG HER ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 28.12.2015 FOR ASSESSMENT YEAR (AY) 2013-14. 2. THE CONTROVERSY INVOLVED IN THE INSTANT CASE, AN D FOR WHICH ONE MAY REFER TO THE TWO GROUNDS RAISED BY THE REVENUE, IS THE RATE AT WHICH THE DEDUCTION U/S. 80- IC OF THE ACT IS EXIGIBLE TO THE ASSESSEES INCOME FROM ITS ELIGIBLE UNDERTAKING (AT MEHATPUR INDUSTRIAL AREA, DISTT. UNA, HIMACHAL PRAD ESH), MANUFACTURING EMBROIDERED FABRICS AND LACES, THEREUNDER, FOR THE RELEVANT YEAR, BEING THE SIXTH ITA NO. 179/ASR/2018 (AY 2013-14) DY. CIT V. INDU MAHAJAN 2 YEAR OF ITS PRODUCTION, WHICH COMMENCED DURING F.Y. 2007-08, I.E., THE PREVIOUS YEAR RELEVANT TO AY 2008-09. THE ASSESSEE HAD, ACCO RDINGLY, ALREADY CLAIMED AND BEEN ALLOWED DEDUCTION U/S. 80-IC AT ONE HUNDRED PE R CENT (100%) OF THE PROFIT DERIVED BY THE SAID UNDERTAKING FOR AYS. 2008-09 TO 2012-13. THE ASSESSEE HAVING UNDERTAKEN SUBSTANTIAL EXPANSION, I.E., IN TERMS OF SECTION 80-IC(8)(IX) DURING F.Y. 2011-12 (AY 2012-13), CLAIMED DEDUCTION U/S. 80-IC AT 100% FOR THE CURRENT YEAR. THE ASSESSING OFFICER (AO) DENIED THE SAME ON THE G ROUND THAT THERE COULD NOT BE MULTIPLE INITIAL ASSESSMENT YEARS, WHICH STANDS CRY STALLIZED AT AY 2008-09, SO THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S. 80-IC F OR AYS. 2013-14 TO 2017-18, I.E., THE LAST FIVE YEARS (OUT OF THE TEN FOR WHICH THE D EDUCTION, BEGINNING WITH THE INITIAL ASSESSMENT YEAR), COULD BE ALLOWED U/S. 80-IC(1). T HIS IS IN VIEW OF SECTION 80- IC(2) WHEREBY, THE UNITS LOCATED IN THE NOTIFIED IN DUSTRIAL AREAS IN THE STATES OF HIMACHAL PRADESH AND UTTRANCHAL UNDERTAKE SUBSTANTI AL EXPANSION BETWEEN JANUARY 7, 2003 TO MARCH 31, 2012 WOULD BE, SUBJECT TO THE SATISFACTION OF THE OTHER CONDITIONS SPECIFIED IN THE SAID SECTION, ELI GIBLE FOR TAX HOLIDAY, BEGINNING WITH THE INITIAL ASSESSMENT YEAR, AT 100% OF THE PR OFIT DERIVED THEREBY FOR THE FIRST FIVE YEARS, AND AT THE RATE OF 25% THEREOF FOR THE NEXT FIVE YEARS. THE TOTAL PERIOD OF DEDUCTION COULD NOT, IN ANY CASE, EXCEED TEN YEARS. RELIANCE WAS PLACED ON THE BOARD CIRCULAR NO. 7/2003 DATED 05.9.2003. THE FIRS T APPELLATE AUTHORITY ALLOWED THE ASSESSEES APPEAL FOLLOWING THE DECISION BY THE HONBLE HIGH COURT OF HIMACHAL PRADESH IN STOVEKRAFT INDIA V. CIT (IN ITA NO. 20 OF 2015, DATED, 28.11.2017), DISCUSSING THE SAME IN DETAIL. 3. BEFORE US, IT WAS, AT THE OUTSET, SUBMITTED BY T HE LD. COUNSEL FOR THE ASSESSEE, SH. MEHRA, THAT THE DECISION BY THE HONBLE HIGH CO URT HAS SINCE BEEN UPHELD BY THE APEX COURT IN PR. CIT V. AARHAM SOFTRONICS & ORS. (IN CIVIL APPEAL NO. 1784 OF 2019, DATED 20.02,2019), ADDUCING A COPY THEREOF . THE LD. SR. DEPARTMENTAL ITA NO. 179/ASR/2018 (AY 2013-14) DY. CIT V. INDU MAHAJAN 3 REPRESENTATIVE (SR. DR), AFTER GOING THROUGH THE SA ID DECISION, ACCEPTED THE ISSUE UNDER REFERENCE AS SQUARELY COVERED BY THE SAID DEC ISION. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD, INCLUDING THE DECISION IN AARHAM SOFTRONICS & ORS . (SUPRA). THE PRIMARY FACTS ARE NOT IN DISPUTE, SO THAT THE ASSESSEE HAS INDEED UNDERTAKEN SUBSTANT IAL EXPANSION DURING F.Y. 2011- 12, I.E., PRIOR TO 01.4.2012. ACCORDINGLY, AS PER T HE SAID DECISION, AY 2012-13 WILL BE, APART FROM AY 2008-09, AN INITIAL ASSESSMENT Y EAR U/S. 80-IC(8)(V), AND THE ASSESSEE ALLOWED DEDUCTION, COMMENCING WITH THE SAI D YEAR, AT 100% OF THE PROFIT FOR FIVE YEARS. THIS STANDS AMPLY CLARIFIED BY THE APEX COURT PER ITS SAID DECISION, THE RELEVANT PART OF WHICH IS EXTRACTED, FOR READY REFERENCE, AS UNDER: 24. THE AFORESAID DISCUSSION LEADS US TO THE FOLLO WING CONCLUSIONS: (A) JUDGMENT DATED 20 TH AUGUST, 2018 IN CLASSIC BINDING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL ASSESSMENT YEAR CO NTAINED 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 DEFINITIONS OF 'INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80- IB AND 80-IC ARE MATERIALLY DIFFERENT. THE DEFINITI ON OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL THE DIFFERENCE. THEREFOR E, WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT DOES NOT LAY DOWN THE CORRECT LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET U P A NEW UNIT BETWEEN 7 TH JANUARY, 2003 AND 1 ST APRIL, 2012 IN STATE OF HIMACHAL PRADESH OF THE NA TURE MENTIONED IN CLAUSE (II) OF SUB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTIT LED TO DEDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENC ING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTION W OULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY ) OF THE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARR IED OUT AS DEFINED IN CLAUSE (IX) OF SUB- SECTION (8) OF SECTION 80-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SU BSTANTIAL EXPANSION IS UNDERTAKEN WOULD ITA NO. 179/ASR/2018 (AY 2013-14) DY. CIT V. INDU MAHAJAN 4 BECOME INITIAL ASSESSMENT YEAR, AND FROM THAT ASS ESSMENT YEAR THE ASSESSEE SHALL 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 CARRI ED OUT IMMEDIATELY, ON THE COMPLETION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION AGAIN FOR THE NEXT FIVE YEARS. ON THE OTHER HAND, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8 TH YEAR 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 NE XT 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., 8 TH , 9 TH AND 10 TH ASSESSMENT YEARS. 5. WE, ACCORDINGLY, HAVE NO HESITATION IN, ACCEPTIN G THE ASSESSEES CLAIM UPHOLDING THE DIRECTION FOR THE ASSESSEE BEING ALLO WED DEDUCTION U/S. 80-IC AT 100% FOR THE RELEVANT YEAR, I.E., PER THE IMPUGNED ORDER. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON MAY 29, 2019 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29.05.2019 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: DEPUTY COMMISSIONER OF INCOM E TAX, CIRCLE-5, AMRITSAR (2) THE RESPONDENT: INDU MAHAJAN, 22A, GALI NO. 2, VIJAY NAGAR, AMRITSAR (3) THE CIT(APPEALS)-2, AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER