ITO, Haridwar V. M/s Amco Industries, Haridwar

ITA 2627/DEL/2016

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4151 (ITAT-DEHRADUN)
• Duration Of Justice: 5 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2012-2013
• Appeal Filed On: 09-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THAKUR SINGH MAPWAL J
• Keywords: Depreciation
• Section: 80IC; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DEHRADUN CIRCUIT BENCH: DEHRADUN BEFORE, SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO.2627/DEL/2016 (ASSESSMENT YEAR 2012-13) INCOME TAX OFFICER, WARD-1(3)(1), HARIDWAR. VS. M/S AMCO INDUSTRES, C/O SH. BALESH BHARGAVA (ADVOCATE), 56, NIRANJANI AKHARA, MAYAPUR, HARIDWAR. PAN AAFFA 5343R (APPELLANT) (RESPONDENT) APPELLANT BY SH. THAKUR SINGH MAPWAL, JCIT-DR RESPONDENT BY NONE DATE OF HEARING 05.03.2021 DATE OF PRONOUNCEMENT 31.05.2021 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL IS PREFERRED BY THE DEPARTMEN T AGAINST ORDER DATED 02.02.2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), DEHRADUN {CIT(A)} FOR ASSESSMENT YE AR 2012-13. 2 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE IS A FIRM ENGAGED IN THE BUSINESS OF MANUFACTURING AND S ALE OF MACHINE SPARES FOR STEAM AND GAS TURBINES, GENERATORS ETC. THE RETURN OF INCOME WAS FILED DECLARING INCOME AT RS. NIL AFTER C LAIMING DEDUCTION OF RS.4,57,19,546/- U/S 80IC OF THE INCO ME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT). THE CASE WAS S ELECTED FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEE DINGS, IT WAS NOTICED THAT THIS WAS THE 6 TH YEAR OF CLAIMING DEDUCTION U/S 80IC OF THE ACT. IT WAS THE CLAIM OF THE ASSESSEE THAT IT HA D UNDERTAKEN SUBSTANTIAL EXPANSION OF THE INDUSTRIAL UNIT DURING THE YEAR UNDER CONSIDERATION AND, THEREFORE, IT WAS ELIGIBLE FOR D EDUCTION @ 100%. THE ASSESSING OFFICER, HOWEVER, WAS OF THE VIEW THAT THE DEDUCTION U/S 80IC OF THE ACT WAS ALLOWABLE @ 100% ONLY FOR THE INITIAL FIVE ASSESSMENT YEARS AND NOT FOR UNDERTAKING SUBSTANTIA L EXPANSION. ACCORDINGLY, THE ASSESSING OFFICER PROCEEDED TO RES TRICT THE ASSESSEES CLAIM OF DEDUCTION TO 25% OF THE PROFIT AND GAINS FROM THE ELIGIBLE BUSINESS. THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS.3,43,34,000/-. 3 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES 3.0 THE ASSESSEES APPEAL BEFORE THE LD. CIT(A) WAS, HOWEVER, ALLOWED AND, NOW THE DEPARTMENT HAS APPROAC HED THIS TRIBUNAL CHALLENGING THE ACTION OF THE LD. CIT(A) I N ALLOWING THE CLAIM OF THE DEDUCTION @ 100%. 4.0 THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS REGARD. 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THE INITIAL ASSESSMENT YEAR SECOND TIME AFT ER SUBSTANTIAL EXPANSION TAKEN BY THE ASSESSEE IN THE F.Y.2011-12 WHILE AS PER FORM NO.10CCB SUBMITTED BY THE ASSESSEE, THE INITIAL ASSESSMENT YEAR IS 2007-0 8. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS ALLOWING 100% DEDUCTION U/S 80IC WITHOUT APPRECIATING THE FA CT THAT AS PER FORM NO.10CCB, THE A.Y.2012-13 IS THE S IXTH YEAR OF CLAIM OF DEDUCTION U/S 80IC AND BEING A NON COMPANY ONLY 25% OF DEDUCTION IS ALLOWABLE TO THE ASSESSEE AFTER 5 TH ASSESSMENT YEAR FROM THE INITIAL ASSESSMENT YEAR OF CLAIM. 3. SINCE THE LAW PROVIDES FOR ONLY ONE INITIAL ASSESSMENT YEAR, THEREFORE THERE IS NO SCOPE OF HAVING A SECON D INITIAL ASSESSMENT YEAR, HENCE THE ORDER OF THE CIT(A) BE S ET-A- SIDE AND THE ORDER OF THE AO BE RESTORED. 4 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES 5.0 NONE WAS PRESENT ON BEHALF OF THE ASSESSEE RESPONDENT WHEN THE APPEAL WAS CALLED OUT FOR HEARING. HOWEVER, LOOKING INTO THE FACTS OF THE CASE, WE ARE PROCEEDING TO HEAR TH E APPEAL EX-PARTE QUA THE ASSESSEE RESPONDENT. 6.0 THE LD. SR. DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT THE LD. CIT(A) HAD ERRED IN ALLOWING THE ASSESSEES CLAIM OF DEDUCTION TO THE FULL AS AGAINST THE LEGAL LY PERMISSIBLE DEDUCTION OF 25% BECAUSE THE LAW WAS VERY CLEAR ON T HE ISSUE THAT FOR PERSONS OTHER THAN COMPANIES, THE DEDUCTION WAS ALLOWABLE ONLY @ 25% AFTER EXPIRY OF THE INITIAL FIVE YEARS. IT WAS SUBMITTED BY THE LD. SR. DR THAT THE ASSESSEE DOES NOT HAVE AN OPTIO N TO RE-FIX THE INITIAL ASSESSMENT YEAR, AND THEREFORE, THE CLAIM O F DEDUCTION @ 100% FOR THE 6 TH ASSESSMENT YEAR FROM THE INITIAL ASSESSMENT YEAR WAS NOT VALID IN THE EYES OF LAW. 7.0 HAVING HEARD THE SUBMISSIONS OF TH E SR. DEPARTMENTAL REPRESENTATIVE (DR) AND AFTER PERUSING THE IMPUGNED ORDER, IT IS SEEN THAT THIS IS THE 6 TH ASSESSMENT YEAR FROM THE YEAR ASSESSEE 5 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES HAVING SET UP A NEW UNIT FOR THE CLAIM OF DEDUCTION U/S 80IC OF THE ACT. THE ASSESSEE HAS ALREADY CLAIMED DEDUCTION @ 1 00% FOR FIVE ASSESSMENT YEARS. DURING THE CAPTIONED ASSESSMENT Y EAR, WHICH IS THE 6 TH ASSESSMENT YEAR FROM THE INITIAL ASSESSMENT YEAR, THE ASSESSEE HAS UNDERTAKEN SUBSTANTIAL EXPANSION OF TH E NEW UNIT AND HAS AGAIN CLAIMED DEDUCTION @ 100%. IT IS BEYOND DI SPUTE THAT THE ASSESSEES CLAIM @ 100% WAS NOT QUESTIONED FOR NON- FULFILLMENT OF STATUTORY CONDITIONS. IT IS ALSO NOT IN DISPUTE THA T SUBSTANTIAL EXPANSION HAS BEEN UNDERTAKEN BY THE ASSESSEE. THE ONLY QUESTION BEFORE US IS WHETHER THE INITIAL ASSESSMENT YEAR CAN BE RE-FIXED IN THE CASE OF SUBSTANTIAL EXPANSION. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT THE LD. CIT(A) HAS ALLOWED THE ASSESSEES CLAIM BY FOLLOWING THE ORDER OF ITAT DELHI BENCH IN THE CASE OF TIRUPATI LPG INDUSTRIES LIMITED VS. DCIT RANGE-2, DEHRADUN IN IT A NO.991/DEL/2013 VIDE ORDER DATED 29.01.2014. IN TH IS CASE, THE CO-ORDINATE BENCH OF ITAT HAD HELD THAT IN CASE OF SUBSTANTIAL EXPANSION, THE DEDUCTION WILL BE ALLOWABLE @ 100% SU BJECT TO A MAXIMUM OF 10 YEARS. THUS, IT HAS BEEN HELD THAT TH E ASSESSEE CAN RE-FIX THE INITIAL ASSESSMENT YEAR IN THE CASE OF S UBSTANTIAL 6 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES EXPANSION FROM THE YEAR IN WHICH THE SUBSTANTIAL EXP ANSION HAS TAKEN PLACE FOR THE PURPOSE OF CLAIMING DEDUCTION A T FULL RATE SUBJECT TO OVER ALL LIMIT OF 10 YEARS. ALTHOUGH, TH E DEPARTMENT HAS VEHEMENTLY OPPOSED THE ORDER OF THE LD. CIT(A) GRAN TING DEDUCTION @ 100%, WE FIND NO ERROR EITHER IN LAW OR FACTS HAVI NG BEEN COMMITTED BY LD. CIT(A) AS THE LD. CIT(A) HAS ONLY FOLLOWED THE INTERPRETATION AS LAID DOWN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL. FURTHER, THE LD. SR. DR ALSO COULD NOT BR ING TO OUR NOTICE ANY ORDER CONTRARY TO THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF TIRUPATI LPG INDUSTRIES (SU PRA). IT WILL ALSO BE RELEVANT HERE TO REPRODUCE THE RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL IN ITA NO.991/DEL/2013 AS UNDER: '10.4. THE ONLY DISPUTE THAT ARISES FOR OUR CONSID ERATION IS THE INTERPRETATION OF THE TERM 'INITIAL ASSESSMENT YEAR ' AND WHETHER THE SAME COMES WITH ANY RESTRICTION. THE REVENUE SE EKS TO TAKE THE COLOR FROM THE OBJECT OF INTRODUCING SECTION 80 -IC. THE A.O. REFERRED TO POLICY OF THE GOVERNMENT FOR GIVING INC ENTIVES TO THE STATE OF UTTARANCHAL AND HIMACHAL PRADESH. IT IS WE LL SETTLED THAT EXTERNAL AIDS SHOULD NOT BE TAKEN FOR THE PURP OSE OF INTERPRETING THE STATUTE, WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS. A PLAIN READING OF SEC.80-IC (8)(V) WHICH 7 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES DEFINES THE TERM 'INITIAL ASSESSMENT YEAR' READ WIT H SEC.80- IC(8)(IX) WHICH DEFINES THE TERM 'SUBSTANTIAL EXPAN SION' MAKES IT CLEAR THAT THERE IS NO RESTRICTION OR BAR ON MORE T HAN ONE SUBSTANTIAL EXPANSION BEING UNDERTAKEN BY AN ASSESS EE. IN OUR VIEW, A UNIT CAN UNDERTAKE ANY NUMBER OF SUBSTANTIA L EXPANSIONS, IN THE ABSENCE OF ANY SPECIFIC RESTRICT ION IN THE SECTION. THERE IS NO SUGGESTION IN THE LANGUAGE OF THE SECTION THAT INCENTIVE U/S 80 1C IS NOT AVAILABLE IF THE AS SESSEE SUBSTANTIALLY EXPANDS FOR A SECOND OR THIRD TIME. S UBSTANTIAL EXPANSION REQUIRES ADDITIONAL INVESTMENT AND RESULT S IN HIGHER PRODUCTION, ITA N0.2786/DEL/2013 8 EMPLOYMENT ETC. INDUSTRIALISTS HAVE TO BE ENCOURAGED TO UNDERTAKE S UBSTANTIAL EXPANSION. THE SECTION RECOGNIZES THIS FACT AND PRO VIDES FOR AN INCENTIVE, IF AN ASSESSEE UNDERTAKES 'SUBSTANTIAL E XPANSION'. 10.5 THE TERM SUBSTANTIAL EXPANSION IS STATED I N S.80-IC(8)(IX) REQUIRES INVESTMENT IN PLANT & MACHINERY EXCEEDING AT LEAST 50% OF THE BOOK VALUE OF PLANT AND MACHINERY I.E. G ROSS VALUE BEFORE TAKING DEPRECIATION INTO ACCOUNT. IF SUCH SU BSTANTIAL EXPANSION IS COMPLETED, THEN, FOR THE PURPOSE OF TH IS SECTION, THE ASSESSMENT YEAR RELEVANT TO THE P.Y. IN WHICH SUCH SUBSTANTIAL EXPANSION IS COMPLETED BECOMES THE INITIAL ASSESSME NT YEAR. ONCE IT BECOMES THE INITIAL ASSESSMENT YEAR CONSEQU ENTLY UNDER SUB SECTION (3) THE ASSESSEE WOULD BE ENTITLED TO 1 00% DEDUCTION OF PROFITS AND GAINS FOR A PERIOD OF 5 YE ARS 8 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES COMMENCING FROM SUCH INITIAL ASSESSMENT YEAR, AND T HEREAFTER THE % OF DEDUCTION FROM PROFITS COME DOWN. THE TERM 'INITIAL YEAR' HAS BEEN DEFINED, AS A YEAR IN WHICH SUBSTANT IAL EXPANSION IS COMPLETED. THERE IS NOTHING TO SUGGEST THAT THERE CANNOT BE A SECOND INITIAL YEAR IF A SECOND SUBSTAN TIAL EXPANSION IS COMPLETED. EVEN IF AN EXISTING UNIT WH ICH IS CLAIMING 80-IC, UNDERTAKES FIRST SUBSTANTIAL EXPANS ION THEN ALSO THE YEAR OF COMPLETION OF THE SUBSTANTIAL EXPANSION WILL BE THE 'INITIAL YEAR'. IF THE LITERAL MEANING OF THE TERM 'INITIAL ASSESSMENT YEAR' IS TO BE TAKEN, THEN THERE IS NO R EQUIREMENT OF DEFINING THIS TERM IN THE SECTION. WE HAVE TO GO BY THE LANGUAGE OF THE SECTION. 10.6. THE CIT(A) DENIES THE DEDUCTION ON THE GRO UND THAT IT WOULD AMOUNT TO EVERGREENING OF AN INCENTIVE PROVIS ION. SUB SECTION (6) OF S.80-IC READS AS FOLLOWS. ITA N0.278 6/DEL/2013 9'6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE U NDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUS IVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, OR UNDER TH E SECOND PROVISO TO SUBSECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS.' THIS SECTION IMPOSES A RESTRICTION FOR A TOTAL PERIOD OF 10 YEARS FOR CLAIMING THE DEDUCTION IN QUESTION, IRRESPECTIVE OF THE FACT 9 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES WHETHER THE DEDUCTION IS CLAIMED U/S 80-IC OR U/S 8 0-IB OR U/S 10 C AS THE CASE MAY BE. THUS THERE IS NO EVERGREEN ING OF THE PROVISIONS. THE ASSESSEE CANNOT CLAIM THE SAID DEDU CTION FOR A TOTAL PERIOD EXCEEDING 10 YEARS. THE DEDUCTION COUL D BE ALLOWABLE ONLY FOR THE BALANCE PERIOD OF 5 YEARS IN CLUDING THIS ASSESSMENT YEAR 2009-10. ONLY THE RATE OF DEDUCTION GOES UP. 10.7. THE CHANDIGARH 'B' BENCH OF THE TRIBUNAL IN THE CASE OF M/S S. R. PARYAVARAN ENGINEERS P. LTD. (SUPRA) WAS CONSIDERING A CASE WHERE THE ASSESSEE ORIGINALLY CLAIMING DEDUC TION U/S 80 IB(IV) OF THE ACT FROM THE A. Y. 1999-2000. FOR THE FIRST 5 YEARS IT HAD CLAIMED EXEMPTION OF 100%. THEREAFTER IT UNDERT OOK SUBSTANTIAL EXPANSION AND CLAIMED DEDUCTION U/S 80 IB(IV). THE AO REJECTED THE SAME AND OBSERVED THAT BENEFIT COUL D BE AVAILED U/S 80 1C AND AS THE SUBSTANTIAL EXPANSION WAS LESS THAN 50% OF THE VALUE OF PLANT ITA N0.2786/DEL/2013 10 AND MACHINERY THE CLAIM IS TO BE REJECTED. THE TRIBUNAL OBSERVED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80-I C. IT HELD THAT MERE MENTION OF A WRONG SECTION WOULD NOT DISENTITL E THE ASSESSEE TO CLAIM THE ABOVE SAID DEDUCTION. TO OUR MIND THIS CASE LAW IS NOT DIRECTLY ON THE POINT. 11. IN VIEW OF THE ABOVE DISCUSSION, AS ON A PLAI N READING OF THE SECTION AND INTERPRETATION OF THE TERM INITIAL ASSESSMENT YEAR, WE CONCLUDE THAT THE CLAIM OF THE ASSESSEE IS ADMISSIBLE. EVEN IF A VIEW IS TAKEN THAT THERE IS SOME AMBIGUIT Y IN THE LANGUAGE OF THE SECTION, THEN, BEING AN INCENTIVE P ROVISIONS, THE 10 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES RATIO OF THE DECISIONS OF THE HONBLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO (SUPRA), GWALIAR RAYAN SILKS MFG. CO . LTD. (SUPRA) HAVE TO BE FOLLOWED AND BENEFIT GIVEN TO TH E ASSESSEE. WE ALSO MAKE IT CLEAR THAT THE DEDUCTION CANNOT BE EXTENDED BEYOND THE PERIOD OF 10 YEARS FROM THE A.Y.2004-05. 7.1 FURTHER, THE ISSUE NOW STANDS SQUARELY CO VERED BY THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX VS. AARHAM SOFTRONICS IN CIVIL APPEAL NO.1784 OF 2009 AND RELATED CASES WHEREIN THE HONBLE APEX COURT HAS LAID DOWN THAT IN CASE SUBSTANTIAL EXPANSION IS CARRIED OUT A S DEFINED IN CLAUSE (IX) OF SUB-SECTION-8 OF SECTION 80IC BY SU CH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PERI OD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPA NSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMENT YEAR A ND FROM THAT ASSESSMENT YEAR, THE ASSESSEE SHALL BE ENTITLED TO 100% DEDUCTION OF PROFITS AND GAINS. IT WAS ALSO LAID DOWN BY THE H ONBLE APEX COURT THAT DEDUCTION WOULD BE FOR A TOTAL PERIOD OF 10 YEARS. 11 ITA NO.2627/DEL/2016 ITO VS. M/S AMCO IN DUSTRIES 7.2 THEREFORE, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE APEX COURT AS AFORESAID, WE FIND NO REASON T O INTERFERE WITH THE FINDINGS AND OBSERVATIONS OF THE LD. CIT(A). 8.0 IN THE FINAL RESULT, THE APPEAL FILED BY THE DEPARTMENT STANDS DISMISSED. ORDER PRONOUNCED ON 31/05/2021. SD/- SD/- (PRASHANT MAHARISHI) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 31/05/2021 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI (DEHRADUN CIRCUIT BENCH, DEHRADUN)