Indian Herbs Specialties Pvt. Ltd., Delhi V. Addl. CIT, Special Range- 4, New Delhi

ITA 3344/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6804 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 08-05-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: PASSED
• Keywords: Depreciation; Rule 8D; Set aside
• Section: 14A; 10B; 201; 80IC

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C, NEW DELHI BEFORESHRI SUDHANSHU SRIVASTAVA, JUDICIALMEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3344/DEL/2018 ASSESSMENT YEAR: 2014-15 AND ITA NO.299/DEL/2019 ASSESSMENT YEAR: 2015-16 M/S. INDIAN HERBS SPECIALTIES PVT. LTD., D-21, SHOP NO.2, ACHARYA NIKETAN, MAYURVIHAR, PHASE- 1, NEW DELHI VS. ADDL. CIT, SPECIAL RANGE-4, NEW DELHI PAN :AADCI0033P (APPELLANT) (RESPONDENT) ORDER PERO.P. KANT, AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST TWO SEPARATE ORDERS DATED 16.02.2018 AND 17.10.2018 PAS SED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)-35, NEW DE LHI [IN SHORT THE LD. CIT(A)] FOR ASSESSMENT YEARS 2014-15 AND 20 15-16 RESPECTIVELY. AS COMMON ISSUES ARE INVOLVED IN BOTH THE APPEALS, APPELLANT BY SHRI SANJAY KUMAR, FCA; SHRI AKARSH GARG, ADV. RESPONDENT BY SHRI KANWALJIT SINGH, CIT(DR) DATE OF HEARING 29.08.2019 DATE OF PRONOUNCEMENT 18.10.2019 2 ITA NO.3344/DEL/2018 & 299/DEL/2019 WE HAVE HEARD THESE APPEALS TOGETHER AND DISPOSED O FF BY WAY OF THIS CONSOLIDATED ORDER FOR CONVENIENCE. ITA NO.3344/DEL/2018 FOR AY: 2014-15 2. FIRST WE TAKE UP THE APPEAL HAVING ITA NO. 3344/DE L/2018 FOR ASSESSMENT YEAR 2014-15. THE GROUNDS RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER: 1.1 BECAUSE IN THE IMMEDIATELY PRECEDING PREVIOUS A SSESSMENT YEAR 2013-14 IN THE CASE OF THE ASSESSEE, THE LEARNED CI T (A)-4 ALLOWED THE DEDUCTION @ 100% U/S 80IC BY FOLLOWING THE JUDG MENTS OF JURISDICTION HONBLE ITAT DELHI AND THE STAND ALONE JUDGEMENT OF THE HONBLE HIMACHAL PRADESH HIGH COURT AND THEREFORE T HE LEARNED CIT (A) HAS GROSSLY ERRED IN LAW BY NOT FOLLOWING THE J UDICIAL DISCIPLINE AND HOLDING CONTRARY TO THE FINDINGS OF THE JURISDI CTION TRIBUNAL AND THE STAND ALONEJUDGEMENT OF THE HONBLE HIGH COURT AND HOLDING THAT THE DEDUCTION IS ALLOWABLE @ 30% ONLY AGAINST 100% U/S 80IC. 1.2 BECAUSE THE ASSESSMENT ORDERS PASSED BY THE ASS ESSING OFFICERS IN AY 13-14 & 14-15 WERE WHOLLY ON IDENTICAL GROUNDS F OR RESTRICTING THE DEDUCTION TO 30% U/S 80IC AND THEREFORE THE LEA RNED CIT(A) WAS WHOLLY INCORRECT IN CONFIRMING THE DIS-ALLOWANCE ON THE GROUND THAT THE AO HAS DISCUSSED IN DETAIL VARIOUS ANGLES PERTA INING TO THE PROVISIONS OF SECTION 80IC IN AY 2014-15 (WHICH WER E NOT THERE IN AY 2013-14). 1.3 BECAUSE IN VIEW OF THE DOCUMENTARY EVIDENCES PL ACED ON RECORD, THE LEARNED CIT (APPEALS)-35, NEW DELHI HAS NOT BEEN JU STIFIED IN RESTRICTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 8IC @ 30% INSTEAD OF @ 100% KEEPING IN VIEW OF THE FACTS THAT THE APPELLANT FULFILLS ALL THE PREREQUISITE CONDITIONS FOR CLAIMI NG DEDUCTION @100% UNDER SECTION 80IC BY VIRTUE OF HAVING UNDERTAKEN S UBSTANTIAL EXPANSION DURING THE FINANCIAL YEAR 2011-12. 1.4 BECAUSE IN A SUBSEQUENT DEVELOPMENT, THE HONBL E ITAT CHANDIGARH, IN THE CASE OF THE ASSESSEE FOR THE ASS ESSMENT YEAR 2012-13, BY FOLLOWING THE JUDGMENT OF THE HONBLE H IMACHAL PRADESH HIGH COURT HAS ALLOWED THE DEDUCTION @ 100% UNDER SECTION 80IC BY VIRTUE OF HAVING UNDERTAKEN SUBSTAN TIAL EXPANSION DURING THE FINANCIAL YEAR 2011-12 AND THEREFORE THE ASSESSEE SHOULD BE ALLOWED DEDUCTION @ 100% IN THE ASSESSMENT YEAR UNDER APPEAL. 2.1 BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THE BASIC FACT THAT DISALLOWAN CE OF RS.40,31,675/- MADE UNDER SECTION 14A OF THE ACT IS WITHOUT SATISFYING THE STATUTORY PRECONDITIONS AS ENVISAGES UNDER THE ACT. 3 ITA NO.3344/DEL/2018 & 299/DEL/2019 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSE SSEE COMPANY WAS INCORPORATED ON 13/08/2012 AFTER CONVER SION OF THE PARTNERSHIP FIRM, NAMELY, M/S INDIAN HERBS SPECIALI TIES. THE PARTNERSHIP FIRM BEFORE CONVERSION HAD SET UP AN IN DUSTRIAL UNDERTAKING IN THE BADDI, HIMACHAL PRADESH ON NOTIF IED LAND AND COMMENCED BUSINESS ON 14/06/2006 AND CLAIMED DEDUCT ION UNDER SECTION 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FOR THE ASSESSMENT YEARS 2007-08 TO 2011-12 @ 100%. THE ASSESSEE CARRIED OUT SUBSTANTIAL EXPANSION DURING F INANCIAL YEAR 2011-12 RELEVANT TO ASSESSMENT YEAR 2012-13 IN TERM S OF SECTION 80IC(2)(B) READ WITH CLAUSE (IX) AND SECTION 80IC(8 ) OF THE ACT AND CLAIMED DEDUCTION UNDER SECTION 80IC OF THE ACT @ 1 00 PER CENT OF THE PROFIT AND GAINS FOR THE FIVE ASSESSMENT YEA RS, I.E., FROM ASSESSMENT AY: 2012-13 TO 2016-17, INCLUDING THE AS SESSMENT YEAR UNDER CONSIDERATION. 3.2 HOWEVER, THE ASSESSING OFFICER RESTRICTED THE DEDU CTION AT THE RATE OF 25% BY HOLDING THAT PROVISION OF SUBSTA NTIAL EXPANSION ARE NOT APPLICABLE TO THE ASSESSEE. THE LEARNED CIT (A) UPHELD THE DISALLOWANCE OBSERVING AS UNDER: 4.3.3.2. A PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE APPELLANT COMPANY FILED ITS RETURN OF INCOME ON 24. 09.2014 DECLARING TOTAL INCOME AT RS.19,09,95,080/-. THE AP PELLANT IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINES S OF MANUFACTURING AND SALE OF HERBAL PRODUCTS I.E. AYUR VEDIC MEDICINES AND ANIMAL/POULTRY SUPPLEMENTS FOR THE US E OF ANIMALS AND HERBAL EXTRACTS / HUMAN MEDICINES ETC.I N THE COMPUTATION OF INCOME, THE APPELLANT HAS CLAIMED DEDUCTION U/S 80IC AT RS.14,84,56,974/- WHICH IS @ 100% OF THE PROFIT OF THE UNDERTAKING ELIGIBLE TO CLAIM DEDUCTION U/S 80IC OF THE ACT. AS PER FORM 10CCB FILED BY THE APPELLANT, THE UNDERTAKING HAD COMMENCED ITS BUSINE SS FROM 14.06.2006 AND IT STARTED CLAIMING DEDUCTION U /S 80IC FROM AY 2007-08. THE DEDUCTION U/S 80IC WAS CLAIMED @ 100% OF THE PROFIT OF THE UNDERTAKING FOR 5 YEARS 4 ITA NO.3344/DEL/2018 & 299/DEL/2019 BEGINNING FROM AY 2007-08 AND HAS AGAIN BEEN CLAIME D @100% DEDUCTION U/S 80IC DURING THE 6 TH YEAR, 7 YEAR AND 8 YEAR. I.E. AY 2012-13, AY 2013-14 AND AY 2014-15. THE INSTANT YEAR IS THE 8TH YEAR OF CLAIM OF DEDUCTION U/S 80IC OF THE ACT. THE AO HAS OBSERVED THAT THE APPELLANT COMPANY CAME INTO EXISTENCE ON 13.08.2012 ON CONVER SION OF THE FIRM NAMELY M/S INDIAN HERBS SPECIALTIES AND IT HAS BEEN CLAIMED THAT THE INDUSTRIAL UNDERTAKING OF THE APPELLANT AT BADDI IN HIMACHAL PRADESH HAD UNDERTAK EN SUBSTANTIAL EXPANSION BY INCREASING THE VALUE OF PL ANT & MACHINERY BY MORE THAN 50% OF IT'S TOTAL BLOCK OF F IXED ASSETS AS ON 31.03.2011 BEFORE CONVERSION INTO PRIV ATE LIMITED COMPANY IN THE FINANCIAL YEAR 2011-12 AND O N THE BASIS OF SUBSTANTIAL EXPANSION THE UNDERTAKING HAD BECOME ENTITLED TO CLAIM DEDUCTION U/S 80IC AT THE RATE OF 100% OF PROFIT & GAIN OF THE UNIT FOR FURTHER FIVE ASSESSMENT YEARS I.E. FROM AY 2012-13 TO 2016-17 IN ADDITION TO FIVE ASSESSMENT YEARS AY 2007-08 TO AY 2011- 12 AS CLAIMED EARLIER. 4.3.3.3. AS PER THE PROVISIONS, SECTION 80IC APPLIE S TO NEW UNDERTAKING AS WELL AS TO EXISTING UNDERTAKING, IF THEY UNDERTAKE 'SUBSTANTIAL EXPANSION' I.E. INCREASE IN PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE WIT HOUT TAKING DEPRECIATION IN ANY YEAR. FURTHER, THE COMMENCEMENT OF PRODUCTION OR SUBSTANTIAL EXPANSION SHOULD HAVE BEEN DURING THE PERIOD 07.01.2003 TO 01.04.2012 AS FOR THE UNITS IN THE STATE OF HIMACHA L PRADESH. THE RATE OF DEDUCTION IS 100% FOR THE FIRS T FIVEDEFINES THE TERM 'INITIAL ASSESSMENT YEAR' AS O NE IN WHICH A NEW ELIGIBLE UNDERTAKING COMMENCES OPERATIO N OR AN EXISTING ONE MAKES SUBSTANTIAL EXPANSION.IN THE ASSESSMENT ORDER, THE AO HAS CORRECTLY ANALYSED THA T, NOWHERE DOES THE SECTION PROVIDE FOR CHANGE IN THE INITIAL ASSESSMENT YEAR NOR IS THERE ANY PROVISION FOR CONT INUING CLAIM AT 100% BEYOND FIVE YEARS. IT HAS BEEN RIGHTL Y OBSERVED THAT THE SCHEME OF EXEMPTION / DEDUCTION U NDER CHAPTER VI-A OF THE ACT IS VERY SPECIFIC. THE ARGUM ENT OF THE AO THAT IF IT IS ASSUMED THAT THERE IS NO BAR ON CA RRYING OUT ANY NUMBER OF SUBSTANTIAL EXPANSIONS IN THAT CASE, EVERY YEAR OF SUBSTANTIAL EXPANSION WOULD BECOME INITIAL ASSESSMENT YEAR, HOLDS TRUE. THIS LIBERAL INTERPRET ATION WILL TRIVIALISE THE PURPOSE OF THE SECTION AND LEAD TO W RONG INTERPRETATION OF THE SECTION .THE AO HAS RELIED UP ON THE RECENT DECISION OF THE HON'BLE 1TAT, CHANDIGARH IN THE CASE OF HYCRON ELECTRONICS VS ITO (ITA NO. 798/CHD/ 2012 WHEREIN THE HON'BLE ITAT HAS HELD THAT THE BENEFIT OF 'SUBSTANTIAL EXPANSION' IS APPLICABLE TO UNITS WHIC H WERE IN EXISTENCE AT THE TIME OF ANNOUNCEMENT OF THE SCH EME. 5 ITA NO.3344/DEL/2018 & 299/DEL/2019 FURTHER, IF THE VARIOUS SUB SECTIONS OF SECTION 80I C ARE READ, THERE IS CLEARLY NO DOUBT THAT THE DEDUCTION WAS MEANT ONLY FOR NEW UNITS OR IN CASE OF OLD UNITS IF SUBSTANTIAL EXPANSION WAS CARRIED OUT IN SUCH OLD UNITS.THE AO HAS DISTINGUISHED THE CASE LAW RELIED UPON BY THE APPELLANT, OF HON'BLE ITAT DELHI BENCH AND H AS STATED THAT THE FACTS OF THE INSTANT CASE ARE ENTIR ELY DIFFERENT. IN THE PRESENT CASE, SUBSTANTIAL EXPANSI ON HAS NOT BEEN INCURRED BY THE APPELLANT COMPANY IN THE Y EAR UNDER ASSESSMENT AND DEDUCTION @ 100% HAS ALSO NOT BEEN CLAIMED FOR THE FIRST TIME. RATHER, DEDUCTION @ 100% ON ACCOUNT OF SUBSTANTIAL EXPANSION WAS FIRST CLAI MED IN THE AY 2012-13 AND ALSO IN AY 2013-14 AND AS MENTIO NED EARLIER IN THIS ORDER, HAVING EXAMINED THE FACTS OF THE CASE, SUCH DEDUCTION CLAIMED @100% ON ACCOUNT OF SUBSTANT IAL EXPANSION WAS DENIED AND RESTRICTED @25%. THE ABOVE DISCUSSION FULLY CLARIFIES THAT THE APPEL LANT IS NOT ELIGIBLE FOR DEDUCTION AS A CONSEQUENCE OF SUBS TANTIAL EXPANSION AND HENCE, CANNOT CLAIM 100% DEDUCTION BY THE AO AFTER THE INITIAL YEARS. THEREFORE, IN LAW AND ON FACTS, THE AO HAS RIGHTLY RESTRICTED THE DEDUCTION UNDER SECTION 80 IC OF THE ACT TO RS.4,45,37,092/- (30% OF THE PROFITS AND GAINS OF E LIGIBLE UNDERTAKING), AS AGAINST THE DEDUCTION CLAIMED OF RS.14,84,56,974/-(100% OF PROFITS AND GAINS OF ELIG IBLE UNDERTAKING). IN VIEW OF THE ABOVE DISCUSSION AND I N ACCORDANCE WITH THE SPECIFIC PROVISION OF THE I.T. ACT, THE ASSESSMENT ORDER OF THE AO ON THE ISSUE OF THE REST RICTION OF THE DEDUCTION U/S 80IC ON THE UNDERTAKING TO 30% INSTEAD OF 100% AS CLAIMED BY THE APPELLANT IS HELD TO BE CORRECT. I FIND NO REASON TO INTERFERE WITH THE AO' S ORDER ON THIS ISSUE AND THE DEDUCTION U/S 80IC CLAIMED AT RS.14,84,56,974/- IS ALLOWED @30% AMOUNTING TO RS.4,45,37,092/-. THE DISALLOWANCE OF EXCESS DEDUCT ION BY THE AO CLAIMED AT RS.10,39,19,882/- IS UPHELD. H ENCE, THE GROUND OF APPEAL IS DISMISSED. 4. BEFORE US, THE LD. COUNSEL OF THE ASSESSEE SUBMITT ED THAT ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE ASSESS EE BY THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2012-13 AND 201 3-14 IN ITA NO.196 & 197/CHD/2017. HE ALSO SUBMITTED THAT ELIGI BILITY OF 100%DEDUCTION UNDER SECTION 80IC IN CASE OF SUBSTAN TIAL EXPANSION HAS BEEN UPHELD BY THE HONBLE SUPREME CO URT IN THE 6 ITA NO.3344/DEL/2018 & 299/DEL/2019 CASE OF PRINCIPAL CIT, SHIMLA VS M/S AARHAMSOFTRONI CS IN CIVIL APPEAL NOS. 1784 OF 2019. 5. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES BUT COULD NOT CONTROVERT THE SUBM ISSION OF THE ASSESSEE. 6. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. AS PER THE PROVISION O F SECTION 80IC(2) OF THE ACT ANY UNDERTAKING OR ENTERPRISES W HICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTIC LE OR THE THING BY SETTING UP A NEW FACTORY IN THE AREA SPECI FIED THEREIN INCLUDING THE STATE OF THE HIMACHAL PRADESH, IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IC OF THE ACT. SUB-SECTIO N (3) HAS PRESCRIBED PERIOD OF 10 YEARS COMMENCING WITH INITI AL ASSESSMENT YEAR. SUB-SECTION 3 FURTHER PRESCRIBED DEDUCTION AT THE RATE OF 100% OF SUCH PROFIT AND GAINS FROM THE UNDERTAKING OR AN ENTERPRISE FOR FIVE ASSESSMENT YEARS COMMENCING WIT H INITIAL ASSESSMENT YEAR AND THEREAFTER DEDUCTION ALLOWABLE @ 25% (OR @ 30% WHERE THE ASSESEE IS A COMPANY) OF THE PROFIT A ND GAINS. FURTHER, SUB-SECTION (6) PUTS A CAP OF 10 YEARS FOR CLAIMING DEDUCTION UNDER THE SECTION. IN THE CASE, THE ASSE SSEE HAS AVAILED 100% OF THE PROFIT AND GAINS AS DEDUCTION U NDER SECTION 80IC OF THE ACT FOR FIVE ASSESSMENT YEARS COMMENCIN G WITH THE INITIAL ASSESSMENT YEAR, I.E., 2007-08 TO 2011-12 A ND THEREAFTER THE ASSESSEE CARRIED OUT SUBSTANTIAL EXPANSION AN D AGAIN CLAIMED THAT IT SHOULD BE ALLOWED DEDUCTION FROM PR OFIT AND GAINS FOR ANOTHER FIVE YEARS @ 100%. 6.1 THE ISSUE IN DISPUTE IS WHETHER THE ASSESSEE IS EN TITLED FOR DEDUCTION UNDER SECTION 80IC @ 100% FOR 6 TH TO 10 TH ASSESSMENT 7 ITA NO.3344/DEL/2018 & 299/DEL/2019 YEARS FROM THE YEAR OF THE MANUFACTURING AS CLAIMED BY THE ASSESSEE, ON THE GROUND THAT FOR THE PURPOSE OF SUB STANTIAL EXPANSION INITIAL ASSESSMENT YEARS WOULD BE SEPAR ATE. THE CONTENTION OF THE ASSESSEE THAT THERE CAN BE MORE T HAN ONE INITIAL ASSESSMENT YEAR, FIRST WHEN THE ASSESSEE BEGINS TO MANUFACTURE OR COMMENCES OPERATION AND ANOTHER AFTE R COMPLETING SUBSTANTIAL EXPANSION . 6.2 WE FIND THAT HONBLE SUPREME COURT IN THE CASE OF AARHAM SOFTRONICS (SUPRA) HAS HELD IN CASE OF SUBSTANTIAL EXPANSION, THE SAID PREVIOUS YEAR WOULD BECOME INITIAL ASSESSMENT YEAR AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BE ENT ITLED TO HUNDRED PERCENT DEDUCTION OF THE PROFIT AND GAINS. THE RELEVANT FINDING OF THE HONBLE SUPREME COURT IS REPRODUCED AS UNDER: 24.THE AFORESAID DISCUSSION LEADS US TO THE FOLLOW ING CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BIN DING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINIT ION INITIAL 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 DEFINI TIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL T HE 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 STATE 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 ASSESSMENT 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 SECTION 80-IC BY SUCH 8 ITA NO.3344/DEL/2018 & 299/DEL/2019 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 ASSES SMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE S HALL 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 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 THE FIRST FIVE YEARS, DEDUCTION @ 25% OF THE PROFITS AND GAIN S FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8TH YEAR AS THIS YE AR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN. HOWEVER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSESSMENT YEARS. 6.3 THE TRIBUNAL (SUPRA) IN THE ASSESSMENT YEAR 2012-1 3 AND 2013-14 HAS ALSO DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE OBSERVING AS UNDER: 6. DURING THE COURSE OF HEARING BEFORE US, IT WAS BROUGHT TO OUR NOTICE THAT THE ISSUE INVOLVED IN THESE APPEALS HAS ALREADY BEEN ADJUDICATED BY THE HONBLE HIMACHAL PRADESH HIGH CO URT VIDE THEIR ORDER DT. 28 TH NOVEMBER 2017 IN THE GROUP OF CASES WITH THE LEAD CASE TITLED AS M/S STOVEKRAFT INDIA VS. COMMISSIONE R OF INCOME TAX, ITA NO.20 OF 2015, AND IT WAS POINTED OUT THAT THE HONBLE HIGH COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE, HOLDING THAT THERE IS NO BAR IN THE SAID SECTION DENYING THE BEN EFIT OF HUNDRED PERCENT DEDUCTION TO NEW UNITS UNDERTAKING SUBSTANT IAL EXPANSION. OUR ATTENTION WAS DRAWN TO THE RELEVANT CONCLUSIONS OF THE HONBLE HIGH COURT IN THIS REGARD AT PARA 55 OF THE ORDER A S UNDER: 55.THUS, IN VIEW OF THE ABOVE DISCUSSION, THESE AP PEALS ARE ALLOWED AND ORDERS PASSED BY THE ASSESSMENT OFFICER AS WELL AS THE APPELLATE AUTHORITY AND THE TRIBUNAL, IN THE CASE OF EACH ONE OF THE ASSESSES, ARE QUASHED AND SET ASIDE, HOL DING AS UNDER: (A) SUCH OF THOSE UNDERTAKINGS OR ENTERPRISES WHICH WER E ESTABLISHED, BECAME OPERATIONAL AND FUNCTIONAL PRIO R TO 7.1.2003 AND HAVE UNDERTAKEN SUBSTANTIAL EXPANSION BETWEEN 7.1.2003 UPTO 1.4.2012, SHOULD BE ENTITLED TO BENEFIT OF SECTION 80-IC OF THE ACT, FOR THE PERIOD FOR WHICH THEY WERE NOT ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECTION 80-IB. 9 ITA NO.3344/DEL/2018 & 299/DEL/2019 (B) SUCH OF THOSE UNITS WHICH HAVE COMMENCED PRODUCTION AFTER 7.1.2003 AND CARRIED OUT SUBSTANTIAL EXPANSIO N PRIOR TO 1.4.2012, WOULD ALSO BE ENTITLED TO BENEFIT OF D EDUCTION AT DIFFERENT RATES OF PERCENTAGE STIPULATED UNDER S ECTION 80-IC. (C) SUBSTANTIAL EXPANSION CANNOT BE CONFINED TO ONE EXPANSION. AS LONG AS REQUIREMENT OF SECTION 80-LC( 8)(IX) IS MET, THERE CAN BE NUMBER OF MULTIPLE SUBSTANTIAL EXPANSIONS. (D) CORRESPONDINGLY, THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEARS. (E) WITHIN THE WINDOW PERIOD OF 7.1.2013 UPTO 1.4.2012, AN UNDERTAKING OR AN ENTERPRISE CAN BE ENTITLED TO DED UCTION @ 100% FOR A PERIOD OF MORE THAN FIVE YEARS. (F) ALL THIS, OF COURSE, IS SUBJECT TO A CAP OF TEN YEA RS. [SECTION 80-IC(6)]. (G) UNITS CLAIMING DEDUCTION UNDER SECTION 80-IC SHALL NOT BE ENTITLED TO DEDUCTION UNDER ANY OTHER SECTION, CONT AINED IN CHAPTER VI-A OR SECTION 10A OR 10B OF THE ACT [SECT ION 80- 1B(5)]. 7. LD. DR FAIRLY ADMITTED THAT THE ISSUE IS SQUAREL Y COVERED BY THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HI GH COURT. IT WAS, HOWEVER, SUBMITTED THAT THE ISSUE BE RESTORED TO TH E FILE OF THE ASSESSING OFFICERS FOR VERIFICATION AS TO WHETHER T HE ASSESSEE HAS ACTUALLY CARRIED OUT THE SUBSTANTIAL EXPANSION TO B E ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE ACT. 8. WE DO NOT AGREE TO THE ABOVE CONTENTION RAISED B Y THE REVENUE AT THIS STAGE. A PERUSAL OF THE ORDERS OF T HE ASSESSING OFFICERS REVEAL THAT THE ASSESSING OFFICERS HAVE NO T DISPUTED THAT THE ASSESSEE UNIT HAS CARRIED OUT SUBSTANTIAL EXPANSION AS PROVIDED UNDER CLAUSE (B) OF SUB SECTION (2) READ WITH CLAUS E (IX) OF SUB SECTION (7) OF SECTION 80IC OF THE ACT. ALMOST SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE HON'BLE HIMACHAL PRADESH HIGH COURT IN THE CASE OF M/S STOVEKRAFT INDIA VS. COMMISSIONER OF INCOME TA X (SUPRA) IN THE FOLLOWING CONCLUDING PARA OF THE ORDER:- 58. ON FACTS, WE MAY CLARIFY THAT THE REVENUE HAS NOT DISPUTED, (A) THE UNITS HAVING CARRIED OUT SUBSTANT IAL EXPANSION WITHIN THE DEFINITION OF THE SECTION, (B) THEIR ENT ITLEMENT AND EXTENT OF DEDUCTION WOULD BE DEPENDENT UPON INTERPR ETATION OF THE RELEVANT PROVISIONS. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION AT THI S STAGE TO GIVE THE ASSESSING OFFICERS A SECOND INNINGS TO RE-EXAMINE U NDISPUTED FACTS. 9. IN VIEW OF THE ABOVE DISCUSSION, THE IMPUGNED OR DERS OF THE CIT(A) ARE SET ASIDE AND THE ASSESSING OFFICERS ARE DIRECTED TO GRANT TO THE ASSESSEE DEDUCTION AT THE RATE OF HUNDRED PE RCENT OF ITS ELIGIBLE PROFITS, AS PER THE RULING OF THE JURISDIC TIONAL HIGH COURT IN 10 ITA NO.3344/DEL/2018 & 299/DEL/2019 THIS REGARD IN THE CASE OF M/S STOVEKRAFT INDIA VS . COMMISSIONER OF INCOME TAX (SUPRA). 6.4 IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING THE B INDING PRECEDENT, THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO ALLOW THE DEDUCTION UNDER SECTION 80IC OF THE ACT TO THE ASSE SSEES. THE GROUND NO. 1 TO 1.4 OF THE APPEAL ARE ACCORDINGLY A LLOWED. 7. IN GROUND NO. 2.1 THE ASSESSEE HAS CHALLENGED DISAL LOWANCE OF 40,31,675/-MADE UNDER SECTION 14A OF THE ACT. 7.1 THE MAIN CONTENTION OF THE LD. COUNSEL OF ASSESSEE IS THAT THE DISALLOWANCE HAS BEEN MADE WITHOUT SATISFYING S TATUTORY PRECONDITION OF RECORDING DISSATISFACTION BY THE AS SESSING OFFICER AS TO THE CLAIM OF EXPENSES INCURRED FOR EARNING EX EMPT INCOME. THE LEARNED COUNSEL ALSO ARGUED THAT THE ASSESSEE H AS MADE INVESTMENT OUT OF OWN FUNDS AND NO BORROWED FUNDS H AVE BEEN UTILIZED IN INVESTMENT. THE LEARNED COUNSEL RELIED ON THE DECISIONS OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT, AH MEDABAD VS. SINTEX INDUSTRIES LTD. (2018) TAXMANN.COM 24 (SC). 7.2 THE LD. DR, ON THE OTHER HAND, SUBMITTED THAT THE ASSESSING OFFICER RECORDED DISSATISFACTION IN PARA 26 OF HIS ORDER SPECIFICALLY AFTER MAKING OBSERVATION ON THE CLAIM OF THE ASSESSEE IN PARA 24 &25 OF THE ASSESSMENT ORDER. THIS ACCORD ING TO HIM THE DISALLOWANCE UNDER SECTION 14A READ WITH RULE 8 D OF THE INCOME TAX RULES, 1962 HAS BEEN MADE AFTER RECORDIN G PROPER DISSATISFACTION ON THE CLAIM OF THE ASSESSEE. HE FU RTHER SUBMITTED THAT NO GROUND ON MERIT HAS BEEN RAISED BY THE ASSE SSEE ON THE UTILIZATION OF OWN FUNDS FOR INVESTMENT. 7.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE RELEVANT MATERIAL ON RECORD. IN THE GROUNDS RAISED, THE ASSESSEE 11 ITA NO.3344/DEL/2018 & 299/DEL/2019 HAS CHALLENGED THE DISALLOWANCE ONLY ON THE GROUND THAT STATUTORY PRECONDITION OF INVOKING RULE 8D HAS NOT BEEN SATISFIED BY THE ASSESSING OFFICER. HOWEVER, WE FIND THAT THE ASSESSING OFFICER HASPROPERLY RECORDED THE DISSATISFACTION ON THE CLAIM OF ASSESSEE OF EXPENSES OF 2000 PER MONTH INCURRED FOR EARNING DIVIDEND INCOME OF 1,00,90,882/-. THE RELEVANT PART OF THE ASSESSMENT ORDER IS REPRODUCED AS UNDER: 26. IN VIEW OF ABOVE, I AM NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT ONLY AN EXPENDITURE OF RS.2000/- PER MONTH WAS INCURRED FOR EARNING DIVIDEND INCOME OF RS.1,00,90,882/-. 7.4 IN VIEW OF THE ABOVE, WE DO NOT FIND ANY ERROR IN THE ORDER OF THE LEARNED CIT(A) IN UPHOLDING THE DISALLOWANCE UN DER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES. THE GROUND OF THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED. ITA NO. 299/DEL/2019 FOR AY: 2015-16 8. NOW, WE TAKE UP THE APPEAL OF THE ASSESSEE IN ITA NO. 299/DEL/2019 FOR ASSESSMENT YEAR 2015-16.THE GROUND S OF APPEAL ARE REPRODUCED AS UNDER: 1.1 BECAUSE IN VIEW OF THE DOCUMENTARY EVIDENCES P LACED ON RECORD AND KEEPING IN VIEW OF THE FACTS THAT THE APPELLANT FUL FILLS ALL THE PREREQUISITE CONDITIONS FOR CLAIMING DEDUCTION @100 % UNDER SECTION 80IC BY VIRTUE OF HAVING UNDERTAKEN SUBSTANTIAL EXP ANSION DURING THE FINANCIAL YEAR 2011-12 THE LEARNED CIT (APPEALS )-35, NEW DELHI WAS NOT JUSTIFIED IN CONFIRMING THE ORDER OF THE AC IT OF RESTRICTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 8IC @ 30% I NSTEAD OF @ 100%. 1.2 BECAUSE THE PLAIN READING OF SEC. 80IC GIVES A CLEAR INTERPRETATION THAT UNITS BOTH OLD AND NEW CAN UNDERTAKE SUBSTANTI AL EXPANSION FOR GETTING BENEFIT OF 100% FOR ANOTHER 5 YEARS ( BUT S UBJECT TO OVERALL LIMIT OF EXEMPTION OF 10 YEARS) AND THEREFORE THE L EARNED CIT (APPEALS) WAS NOT JUSTIFIED IN CONFIRMING THE ADDIT ION OF RS.13,00,51,922/-. 12 ITA NO.3344/DEL/2018 & 299/DEL/2019 2.1 BECAUSE THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS FAILED TO APPRECIATE THE BASIC FACT THAT DIS-ALLOWANCE OF RS. 14,63,881/- MADE UNDER SECTION 14A OF THE ACT IS WITHOUT SATISFYING THE STATUTORY PRECONDITIONS AS ENVISAGED UNDER THE ACT. 2.2 BECAUSE THE CONFIRMATION BY THE LEARNED CIT (A ) OF ADDITION OF DIS- ALLOWANCE UNDER SECTION 14A OF RS.14,63,881, WAS WI THOUT GIVING DUE CONSIDERATION OF THE FACTS AND OF LAW. 9. AS THE ISSUE INVOLVED IN THE GROUNDS RAISED ARE IDE NTICAL TO THE ISSUES RAISED IN THE APPEAL IN ITA NO.3344/DEL/ 2018 FOR ASSESSMENT YEAR 2014-15, FOLLOWING OUR DECISION IN SAID APPEAL, THE ISSUES ARE DECIDED MUTATIS MUTANDIS . ACCORDINGLY, THE GROUNDS NO. 1.1 TO 1.2 OF THE APPEAL ARE ALLOWED WH EREAS GROUND NO. 2.1 AND 2.2 ARE DISMISSED. 10. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE AR E ALLOWED PARTLY. ORDER IS PRONOUNCED IN THE OPEN COURT ON18TH OCTOBE R, 2019. SD/- SD/- (SUDHANSHU SRIVASTAVA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18 TH OCTOBER, 2019. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI