Tejpal Chaudhary, Panchkula V. The Income Tax Officer, W-4, Panchkula

ITA 287/CHANDI/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7152 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 13-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Keywords: Depreciation; Set aside
• Section: 143(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, SMC, CHANDIGARH .. , BEFORE SHRI N.K.SAINI, VICE PRESIDENT ./ ITA NO. 287/CHD/2019 / ASSESSMENT YEAR : 2013-14 SHRI TEJPAL CHOUDHARY, H.NO. 671,SECTOR 4, PANCHKULA VS. THE INCOME TAX OFFICER, WARD-4,PANCHKULA ./ PAN NO:AANPC5039Q / APPELLANT / RESPONDENT ! / ASSESSEE BY : SH. JASPAL SHARMA, ADVOCATE ' ! / REVENUE BY : SMT. CHANDRAKANTA, SR. DR # $ % / DATE OF HEARING : 15.07.2019 &'() % / DATE OF PRONOUNCEMENT : 26.07.2019 !' / ORDER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 21.01.2019 OF THE COMMISSIONER OF INCOME TAX (APPE ALS), PANCHKULA. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEA L:- 1. THAT ORDER PASSED U/S 250(6) OF INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), PANCHKULA IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO ARBITRARILY UPHOLD THE DISALLOWANCE OF RS.763453/- AND RESTRICTING THE CLAIM U/S 80IC OF INCOME TAX ACT, 1961 TO @ 25% ONLY, INSTEAD OF ASSESSEE'S CLAI M @100% OF PROFITS, ON THE ASSUMPTION THAT THE UNITS WHICH HAVE DONE SUBSTANTIAL EXPANSION WERE NOT ALLOWED TO CLAIM DED UCTION U/S 80IC OF INCOME TAX ACT @ 100%. THE ISSUE IS SQUARELY COVERED BY THE JUDGEMENT OF HON'BLE SUPREM E COURT ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 2 OF INDIA IN CASE OF PR. COMMISSIONER OF INCOME TAX , SHIMLA VS M/S AARHAM SOFTRONICS (CIVIL APPEAL NO.1784 OF 2019 ) WHICH CONFIRMED THE JUDGEMENT OF HON'BLE HIGH COURT OF HI MACHAL PRADESH, SHIMLA. 2. THE ASSESSEE CRAVES LEAVE TO ADD, ALTER OR AMEND THE ABOVE GROUNDS OF APPEAL BEFORE THE SAME IS HEARD OR DISPO SED OFF. 3. FROM THE ABOVE GROUNDS IT IS GATHERED THAT THE O NLY GRIEVANCE OF THE ASSESSEE RELATES TO THE DENIAL OF DEDUCTION U/S 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') CLAIMED BY THE A SSESSEE ON ACCOUNT OF SUBSTANTIAL EXPANSION. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE E-FILED HIS RETURN OF INCOME ON 19.8.2013 DECLARING AN INCOME O F RS. 4,69,650/- PLUS AGRICULTURAL INCOME OF RS. 75,000/- WHICH WAS PROCESSED U/S 143(1) OF THE ACT ON THE RETURNED INCOME. LATER ON, THE CASE WAS SELECTED FOR SECURITY. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICED THAT THE ASSESSEE I S A PROP. OF M/S ASIAN PACKAGES WHICH IS A MANUFACTURING UNIT OF COR RUGATED BOXES AND STARTED ITS COMMERCIAL PRODUCTION W.E.F. 5.6.2004 A ND HAD UNDERTAKEN THE SUBSTANTIAL EXPANSION ON 24.3.2010. THE ASSESSI NG OFFICER ALSO NOTICED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IC OF THE ACT AMOUNTING TO RS. 9.96,903/- @ 100%, WHEREAS THE S AME IS TO BE ALLOWED @ 25% AT RS. 2,29,150/- BEING 9 TH YEAR OF COMMENCEMENT OF UNIT. THE ASSESSING OFFICER ASKED THE ASSESSEE TO J USTIFY THE CLAIM OF ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 3 DEDUCTION U/S 80IC OF THE ACT AMOUNTING TO RS. 9, 96,903/-. IN RESPONSE THE ASSESSEE SUBMITTED AS UNDER:- THE UNIT ASIAN PACKAGES PROP. TEJPAL CHAUDHARY WAS INSTALLED AT NOTIFIED AREA IN BADDI AND COMMENCED ITS COMMERCIAL PRODUCTION ON 5.6.2003. THE UNIT WAS ELIGIBLE FOR DEDUCTION @ 100% UNDER PROVISIONS OF SECTION 80IC OF INCOME TAX ACT FOR INITIAL A.Y.2005-06 AND WAS DULY CLAIME D FOR FIRST 5 YEARS AND APPROVED BY THE INCOME TAX DEPARTMENT IN SCRUTINY CASES OF VARIOUS YEARS. SUBSTANTIAL EXPANSION WAS UNDERTAKEN AS PER THE PROVISIONS U/S 80IC(2)(B)(II) BY MAKING FURTHER INVESTMENT IN THE PLANT AND MACHINERY OF MORE THAN 50% VALUE OF GROSS BLOCK OF PLANT AND MACHINERY AT THE COMMENCEMENT OF THE UNIT ON DATED 24.3.2010 AND DEDUCTION @ 100% WAS CLAIMED AS PER THE PROVISIONS. IT MAY BE RESPECTFULLY SUBMITTED THAT THE ASSESSEE TEJPAL CHAUDHARY PROP. ASIAN PACKAGES HAS SATISFIED ALL THE CONDITIONS U/S 80IC AND IN TH E 9 TH YEAR OF PRODUCTION I.E. 4 TH YEAR OF SUBSTANTIAL EXPANSION (A.Y.2013-14), THE ASSESSEE HAS CORRECTLY CLAIMED THE DEDUCTION @100% OF U/S 80IC. THE ASSESSING OFFICER HOWEVER, DID NOT FIND MERIT I N THE SUBMISSIONS OF THE ASSESSEE AND ALLOWED THE DEDUCTION U/S 80IC OF THE ACT TO THE EXTENT OF 25% ONLY. 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO UPHELD THE ACTION OF THE ASSESSING OFFICER AND CONFIRMED THE VIEW TAKEN BY HIM. NOW THE ASSESSEE IS IN APPEAL. ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 4 6. THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUT SET STATED THAT THIS ISSUE IS NOW SQUARELY COVERED BY THE JUDGEMENT OF T HE HON'BLE APEX COURT IN FAVOUR OF THE ASSESSEE IN BUNCH OF CASES W ITH THE LEAD CASE BEING PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONICS IN CIVIL NO.1784 OF 2019 DATED 20.2.2019 / [2019] 102 TAXMANN.COM 343 ( SC), COPY OF THE SAID ORDER WAS FURNISHED, WHICH IS PLACED ON RECORD . 7. IN HER RIVAL SUBMISSIONS, THE LD. SR. DR ALTHOUG H SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTR OVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 8. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT C ASE, IT IS AN ADMITTED FACT THAT THE ASSESSEE STARTED ITS BUSINESS OPERATI ON ON 5.6.2004 AND INITIAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC OF THE ACT WAS ASSESSMENT YEAR 2005-06. THEREAFTER, THE ASSESSEES UNDERTAKING HAD A SUBSTANTIAL EXPANSION DURING THE FINANCIAL YEAR 200 9-10 BY WAY OF ADDITION OF THE PLANT AND MACHINERY OF MORE THAN 50 %. THE ASSESSING OFFICER DID NOT ALLOW THE CLAIM @ 100% U/S 80IC OF THE ACT FOR THE REASONS THAT THE ASSESSEE HAD ALREADY CLAIMED THE DEDUCTION @ 100% OF ELIGIBLE PROFITS FOR FIVE YEARS PERIOD I.E. ASSESS MENT YEAR 2005-06 TO 2009-10. THIS CONTROVERSY IS NOW SETTLED BY THE HON 'BLE APEX COURT IN THE CASE OF PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONI CS (SUPRA). THE ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 5 RELEVANT FINDINGS OF THE HON'BLE APEX COURT AT PARA 19 & 20 OF ITS ORDER ARE AS UNDER:- 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF INITIAL A SSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTION (8) OF SECTI ON 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIOD OF 10 YEARS. AS PER SUB-SECT ION (6), CAP IS ON THE 10 ASSESSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP IN MIND THE PURPOSE FOR WHICH SECTION 80-IC WAS ENACTE D. THE PURPOSE WAS TO ESTABLISH THE BUSINESS OF THE NATURE SPECIFI ED IN THE SAID PROVISION IN THE SPECIFIED STATES. THIS PROVISION W AS, THUS, AIMED AT ENCOURAGING THE UNDERTAKINGS OR ENTERPRISES TO ESTA BLISH AND SET UP SUCH UNITS IN THE AFORESAID STATES TO MAKE THEM IND USTRIALLY ADVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT ST ATES 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 THE YE AR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXISTING UNIT. AFTER A LL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVESTMENT WHICH H AS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE T HEREOF BEFORE TAKING DEPRECIATION IN ANY YEAR. WITH AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE IN PRODUCTION BUT GENERATIO N OF MORE EMPLOYMENT AS WELL, WHICH WOULD BENEFIT THE LOCAL P OPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANTIAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSMENT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUBSTANTIAL EXPANSION, SUCH A UNIT ALSO B ECOMES ENTITLED 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 HA D AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT AND HAVE NOW INVESTED HUGE AMOUNT WITH SUBSTANTIAL EXPANSION OF THOSE UNITS. 9. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT A NEWLY SET UP UNDERTAKING OR ENTERPRISE WOULD BE ENTITLED TO DEDU CTION @ 100% OF ITS PROFITS FOR THE FIVE YEARS IF THE SUBSTANTIAL E XPANSION IS CARRIED OUT BY IT, WITH THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 6 UNDERTAKEN BECOMING THE INITIAL ASSESSMENT YEAR. TH E CONCLUSION OF THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS A S 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 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 N OT APPLY IN THESE CASES. THE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFER ENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS M ADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPINION THAT T HE AFORESAID JUDGMENT DOES 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 HIMACHALPRADESH OF THE NATURE MENTIONED IN CLAUSE ( II) OF SUB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTIO N AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTION WOULD BE 25% (OR 30% WHERE THE ASSESSEE I S 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 SECTION 80-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PERIOD OF 10 YEARS , THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAK EN WOULD BECOME INITIAL ASSESSMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFI TS 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 EX PANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION AGAIN FOR THE NEXT FI VEYEARS. ON THE OTHER HAND, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASSESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR THE FIRST FIVE YEARS, DEDUCTION @ 25% OF THE PROFITS AN D 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% DEDU CTION 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 APPEALS O F THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES ARE HEREBY ALLOWED. ITA NO.287-C-2019 SHRI TEJPAL CHOUDHARY, PANCHKULA 7 10. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW TH AT EVEN A NEW UNDERTAKING, WHICH HAS CLAIMED DEDUCTION OF ITS ELI GIBLE PROFITS @ 100% FOR THE FIRST FIVE YEARS, IS ENTITLED TO CLAIM THE DEDUCTION @ 100% OF ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTA NTIAL EXPANSION UNDERTAKEN BY IT. I, THEREFORE, BY KEEPING IN VIE W THE RATIO LAID DOWN BY THE HON'BLE APEX COURT IN THE AFORESAID REFERRED TO CASE, SET ASIDE THE IMPUGNED ORDER AND DIRECT THE ASSESSING OFFICER T O ALLOW THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 80IC OF THE ACT @ 1 00% OF THE ELIGIBLE PROFIT. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. (ORDER PRONOUNCED IN THE OPEN COURT ON 26/07/2019) SD/- ( . . / N.K. SAINI) / VICE PRESIDENT DATED : 26.07.2019 .. '+ ,- .- / 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