Assam Roofing Limited, Guwahati V. Income Tax Officer, Ward-3(1), Guwahati

ITA 352/GTY/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5482 (ITAT-GUWAHATI)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 10-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K BHARDWAJ SHRI SANDIP SENG
• Assessee Lawyers: S JHAJHARIA
• Keywords: Assessment record; Benefit of exemption; Set aside
• Section: 143(3); 80IB; 80IA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL GUWAHATI BENCH, GUWAHATI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER ITA NO. 352 / GAU / 2018 ASSESSMENT YEAR :2014-15 ASSAM ROOFING LTD. BONDA NARANGI, GUWAHATI- 781026 [ PAN NO.AABCA 7734 K ] V/S . IN RESPECT TO TAX OFFICER, WARD-3(1), AYAKAR BHAAN, CHRISTIAN BASTI, G.S. ROAD, GUWAHATI- 781005 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S. JHAJHARIA, FCA /BY RESPONDENT SHRI A.K.BHARDWAJ, ADDL-CIT-DR SHRI SANDIP SENGUPTA, JCIT-DR /DATE OF HEARING 10-07-2019 /DATE OF PRONOUNCEMENT 21-08-2019 / O R D E R PER BENCH:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2014-15 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-2 GUWAHATIS O RDER DATED 28.09.2018 PASSED IN ACKNOWLEDGEMENT NO.551092081031216/, INVO LVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT T HE ACT. 2. THE ASSESSEE PLEADS THE FOLLOWING SUBSTANTIVE GR OUNDS AS FOLLOWS:- 1. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF TH E CASE, THE ORDER PASSED BY THE LEARNED CIT(A) IS BAD IN LAW, ILLEGAL, AB INITIO VO ID AND HAD BEEN PASSED WITHOUT OR IN EXCESS OF JURISDICTION CONFERRED UPON HIM BY THE ST ATUTE, ON A MISCONCEPTION OF LAW, WITHOUT PROPER APPLICATION OF MIND TO THE FACTS AND TO THE CIRCUMSTANCES OF THE CASE, ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 2 SHOWING TOTAL VIOLATION OF JUDICIAL DISCIPLINE AND DISOWNING / DISREGARDING THE FINDINGS OF THE JURISDICTIONAL HON'BLE INCOME TAX APPELLATE TRIBUNAL, GUWAHATI, IN THE APPELLANT'S OWN CASE FOR THE IMMEDIATELY TWO PRECED ING ASSESSMENT YEARS. ACCORDINGLY, IT IS PRAYED THAT THE ORDER MAY KINDLY BE QUASHED / CANCELLED / SET ASIDE. 2. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD GROSSLY ERRED IN TREATING THE ASSESSMENT YEAR UNDER APPEAL - THAT IS ASSESSMENT YEAR 2014- 15 TO BE THE 13TH YEAR FOR CLAIMING THE DEDUCTION U NDER SECTION 80LE OF THE ACT IN RESPECT OF THE ASBESTOS UNIT; 3. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD FURTHER ERRED IN HOLDING THE ASSESSMENT YEAR 2002-03 TO BE THE INITIAL ASSESSMENT YEAR, FOR CLAIMING THE DEDUCTION UNDER SECTION 801E OF THE AC T IN RESPECT OF THE ASBESTOS UNIT; 4. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD GROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSI NG OFFICERS, HIS PREDECESSOR CIT(A)'S IN THE APPELLANT'S OWN CASE, HAD GIVEN A C ATEGORICAL FINDING THAT THE INITIAL ASSESSMENT YEAR FOR CLAIMING THE DEDUCTION UNDER SE CTION 80-IE IN RESPECT OF THE ASBESTOS UNIT, SHOULD BE THE ASSESSMENT YEAR 2008-0 9 AND ACCORDINGLY, 5. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAD GROSSLY ERRED AND HAVE ACTED IN EXCESS OR WITHOUT JURISDICT ION, CONFERRED UPON HIM BY THE STATUTE, IN NOT FOLLOWING THE SPECIFIC DIRECTIONS O F THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, GUWAHATI, BENCH, DECIDED IN THE APPELLANT 'S OWN CASE, FOR THE IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS - 2011-12 AND 2012-1 3, THAT THE INITIAL ASSESSMENT YEAR FOR CLAIMING THE DEDUCTION UNDER SECTION 80-IE IN RESPECT OF THE ASBESTOS UNIT, SHOULD BE THE ASSESSMENT YEAR 2008-09 6. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAD GROSSLY ERRED AND HAVE ACTED IN EXCESS OR WITHOUT J URISDICTION, CONFERRED UPON HIM BY THE STATUTE, IN NOT FOLLOWING THE SPECIFIC DIRECTIO NS OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, GUWAHATI, BENCH, DECIDED IN THE APPELLANT'S OWN CASE, FOR THE IMMEDIATELY TWO PRECEDING ASSESSMENT YEARS - 2011-1 2 AND 2012-13, AND ERRED IN NOT HOLDING THE ASSESSMENT YEAR UNDER APPEAL AS THE RH. CONSECUTIVE ASSESSMENT YEAR FOR CLAIMING SUCH DEDUCTION UNDER SECTION80LE OF THE ACT, IN RESPECT OF THE ASBESTOS UNIT. 7. WITHOUT PREJUDICE TO THE VALIDITY AND THE LEGALI TY OF THE ORDER AS CHALLENGED ABOVE, THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A) HAD GROSSLY ERRED IN GIVING DIRECTIONS TO THE AD TO EXA MINE THE CLAIMS OF THE APPELLANT IN RESPECT OF DEDUCTION U/S. 80-IE IN RESPECT OF THE A SBESTOS UNIT, CLAIMED FOR ASSESSMENT YEARS 2015-16, 2016-17 2017-18 AND 2018- 19 AND IT IS SUBMITTED THAT SUCH ACTION OF THE LEARNED CIT(A) IS WITHOUT OR IN EXCESS OF JURISDICTION CONFERRED UPON BY HIM BY THE STATUTE AND IS ILLEGAL, BAD IN L AW AND AB INITIO VOID. 8.WITHOUT PREJUDICE TO GROUNDS ABOVE AND WITH DUE R ESPECT TO THE DECISION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, GUWAHATI, RE NDERED IN THE CASE OF APPELLANT FOR THE ASSESSMENT YEARS 2012-13 AND 2013-14, SINCE THE DEPARTMENT HAD FILED AN APPEAL BEFORE THE HON'BLE HIGH COURT AT GUWAHATI, A ND THE APPELLANT IS FILING CROSS APPEAL AND ALSO TO KEEP THE ISSUE ALIVE, THE FOLLOW ING FURTHER GROUND IS PREFERRED - ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 3 (I) THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF T HE CASE, THE AO AND THE CIT(A) HAD GROSSLY ERRED IN NOT APPRECIATING THE FA CT THAT SINCE THE APPELLANT HAD GONE IN FOR A SUBSTANTIAL EXPANSION IN RESPECT OF BOTH ITS UNITS - INCLUDING THAT OF THE ASBESTOS UNIT ALSO, DURING THE PREVIOUS YEAR ENDED 31'T MARCH 2011, RELEVANT TO THE ASSESSMENT YEAR 2011-12; (II) THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE AO AND THE CIT(A) HAD GROSSLY ERRED IN NOT APPRECIATING THE FA CT THAT SINCE THE COMMERCIAL PRODUCTION, PURSUANT TO SUCH SUBSTANTIAL EXPANSION, STARTED ON 28TH FEBRUARY, 2011 - A FACT WHICH HAS NOT DISPUTED BY THE AO AND THE CIT(A) - THE APPELLANT IS FULLY ELIGIBLE TO ITS BONA FIDE AND LEGITIMATE CLAIM FOR DEDUCTION UNDER SECTION 80LE OF THE ACT, IN THE 4TH . YEAR OF SUCH ' SUBSTANTIAL EXPANSION ' FOR THE PREVIOUS YEAR ENDED 31ST MARCH 2014, RELE VANT TO THE ASSESSMENT YEAR 2014-15, WHICH IS UNDER APPEAL, AS UNDER THE PROVISIONS OF SECTION 80LE, THERE IS NO RESTRICTION, WHATSOEVER, THAT THE BENEFIT OF EXEMPTION WILL BE ALLOWED ONLY FOR ONE ' SUBSTANTIAL EXPANSION ' OR ONLY ONCE, IGNORING FURTHER ' SUBSTANTIAL EXPANSION ' WITHIN THE PRESCRIBED PERIOD AS ENVISAGED UNDER SECTION 801 E OF THE ACT. 9. THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CLT(A) HAD GROSSLY ERRED AND ACTED BEYOND OR IN EXCESS OF JURI SDICTION CONFERRED UPON HIM BY THE STATUTE IN NOT APPRECIATING AND HOLDING THE FACT TH AT ON EXACTLY SIMILAR FACTS AND CIRCUMSTANCES OF THE CASE THE HON'BLE INCOME TAX AP PELLATE TRIBUNAL, GUWAHATI BENCH HAD FOR THE ASSESSMENT YEARS 2011-12 HAD ALLO WED SUCH CLAIM OF THE APPELLANT AND ACCORDINGLY SUCH ACTION OF THE CIT(A) IS BAD IN LAW, ILLEGAL, HAD ACTED WITHOUT OR IN EXCESS OF JURISDICTION CONFERRED UPON HIM BY THE STATUTE, ON A MISCONCEPTION OF LAW, WITHOUT PROPER APPLICATION OF MIND TO THE FACTS AND TO THE CIRCUMSTANCES OF THE CASE, SHOWING TOTAL VIOLATION OF JUDICIAL DISCIPLINE AND DISOWNING / DISREGARDING THE FINDINGS OF THE JURISDICTIONAL H ON'BLE INCOME TAX APPELLATE TRIBUNAL, GUWAHATI, IN THE APPELLANT'S OWN CASE FOR THE IMMED IATELY TWO PRECEDING ASSESSMENT YEARS. 10.THAT ON THE FACTS AND ON THE CIRCUMSTANCES OF TH E CASE, THE LEARNED CIT(A) HAD GROSSLY ERRED IN CONFIRMING THE ACTION OF THE AO BY ARBITRARILY DISALLOWING THE CLAIM OF DEDUCTION OF THE INTEREST OF RS. 6,59,205/- EARNED FROM BANKS WHILE U/S 80LE OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE SAME WA S EARNED DURING THE ORDINARY COURSE OF THE BUSINESS OF THE NEW INDUSTRIAL UNDERT AKINGS; 11. WITHOUT PREJUDICE TO GROUNDS ABOVE, THE CLT HAD GROSSLY ERRED IN ARBITRARILY CONFIRMING THE ACTION OF THE AD WHILE DISALLOWING T HE CLAIM OF DEDUCTION OF THE INTEREST OF RS. 6,59,205/- EARNED FROM BANKS CREDITED TO P&L A/C UNDER THE HEAD 'OTHER INCOME' U/S 80LE OF THE ACT WHILE ASSESSING THE TOT AL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT DESPITE THE FACT THAT INTERES T INCOME CONSTITUTES A PART OF THE PROFITS AND GAINS DERIVED FROM THE SAID BUSINESS OF MANUFACTURING & PRODUCTION OF ARTICLES AND SUCH REMISSION HAS BEEN JUDICIOUSLY HE LD AS AN ALLOWABLE DEDUCTION U/S 801E. SUCH ACTION OF THE A.O AS CONFIRMED BY THE LE ARNED CIT(A) WAS WHOLLY UNREASONABLE, UNCALLED FOR AND BAD IN LAW. 12. FOR THAT YOUR PETITIONER CRAVES THE RIGHT TO PU T ADDITIONAL GROUNDS AND/OR TO ALTER/AMEND/MODIFY THE PRESENT GROUNDS BEFORE OR AT THE TIME OF HEARING. ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 4 3. BOTH THE LEARNED REPRESENTATIVES STATE DURING TH E COURSE OF HEARING THAT THE SUM AND SUBSTANCE OF THE ASSESSEES FOREGOING P LEADINGS RAISES THE SOLE ISSUE OF ITS DEDUCTION CLAIM RAISED U/S 80IE OF THE ACT INVOLVING TOTAL SUM OF 9,56,84,571/-. THIS DEDUCTION CLAIMS INVOLVED ASSES SEES TWO UNITS I.E. STEEL AND ASBESTORS. THERE IS HARDLY ANY DISPUTE THAT THE LATTER UNIT FORMS SUBJECT- MATTER OF THE INSTANT LIS. THE ASSESSEES PLEADING AND DETAILED PAPER BOOK RUNNING INTO 37 PAGES MADE IT CLEAR THAT THE VERY I SSUE OF SEC. 80IE DEDUCTION PERTAINING TO ASBESTORS UNITS ITSELF HAD COME UP BE FORE THE TRIBUNAL IN PRECEDING TWO ASSESSMENT YEAR(S) 2012-13 & 2013-14. LEARNED CO-ORDINATE BENCH ORDER DATED 07.06.2017 CONCLUDED THAT THE INITIAL ASSESSMENT YEAR IN ITS CASE QUA THIS UNIT INVOLVING SEC. 80IE DEDUCTION HAD TO BE TAKEN AS ASSESSMENT YEAR 2008-09 AS UNDER:- 2. THE ONLY ISSUE TO BE DECIDED IN THESE APPEALS IS AS TO WHETHER THE LD CITA WAS JUSTIFIED IN TREATING THE ASST YEAR 2011-12 AS INIT IAL ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IE OF THE ACT, IN THE FACTS AND CIR CUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF ASBESTOS CEMENT CORRUGATED AND PLAIN SHEETS AND MOULDS AND GALVANIZED, PLAIN & GALVANISED CORRUGATED SHEETS AN D ACCESSORIES. THE ASSESSEE COMPANY HAS TWO UNITS NAMELY ASBESTOS UNIT AND STEE L UNIT. THE DATE OF COMMENCEMENT OF OPERATION WAS 1.1.1978 FOR ASBESTOS UNIT AND DATE OF COMMENCEMENT FOR STEEL UNIT WAS 25.3.1995. ON EX AMINATION OF THE OLD ASSESSMENT RECORDS I.E AY 2005-06, THE LD AO FOUND THAT THERE WAS SUBSTANTIAL EXPANSION OF THE ASBESTOS UNIT DURING THE FY 2001-02 AND THE ASBESTO S UNIT BECAME ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IC OF THE ACT SINCE ASST Y EAR 2002-03. HOWEVER, IN THE INITIAL YEARS, THE ASSESSEE COMPANY SUFFERED LOSS A ND THE ASSESSEE COMPANY WAS CLAIMING DEDUCTION U/S 80IC OF THE ACT SINCE ASST Y EAR 2004-05. THE LD AO OBSERVED THAT INITIAL ASSESSMENT YEAR IS DEFINED IN SECTION 80IC(8)(V) AS UNDER:- (8) FOR THE PURPOSES OF THIS SECTION, (V) 'INITIAL ASSESSMENT YEAR' MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR THE ENTER PRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMME NCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION; ACCORDINGLY HE HELD THAT THE INITIAL ASSESSMENT YEA R FOR THE ASSESSEE FOR ITS ASBESTOS UNIT EXPANSION WOULD BE ASST YEAR 2002-03 AND 10 YE ARS PERIOD HAD ALREADY EXPIRED IN ASST YEAR 2011-12 . 3.1. HOWEVER, ON EXAMINATION OF VARIOUS DETAILS SUB MITTED BY THE ASSESSEE COMPANY, HE OBSERVED THAT THE ASSESSEE COMPANY WAS CLAIMING DEDUCTION U/S 80IE OF THE ACT FOR ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 5 ITS ASBESTOS UNIT SINCE ASST YEAR 2011-12 DUE TO SU BSTANTIAL INVESTMENT IN PLANT AND MACHINERY WHEREIN INSTALLED CAPACITY WAS MORE THAN 25% OF EXISTING CAPACITY. THE ASSESSEE HAD ALSO PRODUCED THE CHARTERED ACCOUNTANT S CERTIFICATE TO SUPPORT THESE FACTS. IT WAS PLEADED THAT AS FAR AS THE PROVISIONS CONTAINED IN SECTION 80IE OF THE ACT, SUCH BENEFIT OF EXEMPTION U/S 80IE WAS AVAILABLE FO R 10 CONSECUTIVE ASSESSMENT YEARS COMMENCING FROM ASST YEAR 2011-12 BEING THE INITIAL ASSESSMENT YEAR AND HENCE DEDUCTION U/S 80IE OF THE ACT IS VERY MUCH AVAILABL E FOR ASST YEARS 2012-13 AND 2013-14 BEING THE SECOND AND THIRD YEAR OF CLAIM OF DEDUCTION. 3.2. THE LD AO APPLIED THE PROVISIONS OF SECTION 80 IE(5) OF THE ACT, WHICH READ AS UNDER:- (5) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING UNDER THIS SECTION, WHER E THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDE R THIS SECTION, OR UNDER SECTION 80IC OR UNDER THE SECOND PROVISO TO SUB-SEC TION (4) OF SECTION 80IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. BASED ON THIS PROVISION, THE LD AO CONCLUDED THAT T HE TOTAL PERIOD OF 10 ASSESSMENT YEARS COMMENCING FROM ASST YEAR 2002-03 WAS ALREADY OVER IN ASST YEAR 2011-12 IN RESPECT OF THE ASBESTOS UNIT, THE ASSESSEE WAS NOT ENTITLED FOR ANY DEDUCTION U/S 80IE OF THE ACT IN RESPECT OF ASBESTOS UNIT AND ACCORDIN GLY DISALLOWED THE SAME. 3.3. THE LD AO HOWEVER, IN THE CASE OF STEEL UNIT, OBSERVED THAT THE SAID UNIT HAD FULFILLED ALL THE PRESCRIBED CONDITIONS AS LAID DOW N IN SECTION 80IE(2) & (3) OF THE ACT AND ASST YEAR 2012-13 BEING THE SECOND YEAR OF CLAI M FOR STEEL UNIT, HE GRANTED DEDUCTION U/S 80IE OF THE ACT FOR THE SAME FOR ASST YEARS 2012-13 AND 2013-14, BEING THE SECOND AND THIRD YEAR OF CLAIM OF DEDUCTION. 4. THE LD CITA OBSERVED THAT THE MAIN ASSERTIONS OF THE LD AO IN DISALLOWING THE CLAIM OF DEDUCTION ARE AS UNDER:- A) THE INITIAL YEAR FOR CLAIMING SUCH DEDUCTION U/S 80IE WOULD HAVE BEEN THE YEAR WHEN THE SUBSTANTIAL EXPANSION FIRST TOOK PL ACE AND NOT ASSESSMENT YEAR WHEN SUCH CLAIM WAS FIRST MADE. B) THE CASE OF THE ASSESSEE HAS BEEN HIT BY THE PRO VISIONS OF SECTION 80IE(5) OF THE ACT. 4.1. IT WAS STATED BY THE ASSESSEE BEFORE THE LD CI TA THAT THE LD AO WHILE FRAMING THE ASSESSMENT FOR THE ASST YEAR 2011-12 , WHICH INCIDE NTALLY WAS THE FIRST YEAR FOR CLAIMING THE DEDUCTION U/S 80IE OF THE ACT, HAD ALL OWED THE DEDUCTION U/S 80IE OF THE ACT FOR BOTH THE UNITS I. E STEEL AS WELL AS ASBE STOS UNIT, CONSIDERING THE SAID ASSESSMENT YEAR TO BE INITIAL ASSESSMENT YEAR. T HE RELEVANT OBSERVATIONS OF THE LD AO IN THE SCRUTINY ASSESSMENT ORDER FOR ASST YEAR 2 011-12 U/S 143(3) DATED 20.2.2014 ARE REPRODUCED BELOW FOR THE SAKE OF CONV ENIENCE :- 4. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF STEEL AND ASBESTOS. DATE OF COMMENCEMENT OF OPERATION WA S 1.1.1978 FOR ASBESTOS UNIT AND DATE OF COMMENCEMENT FOR STEEL UNIT WAS 25 .3.1995. THE ASSESSEE ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 6 COMPANY WAS CLAIMING DEDUCTION UNDER SECTION 80IC O F THE INCOME TAX ACT, 1961 SINCE THE ASSESSMENT YEAR 2004-05 BUT ALLOWED FOR THE FIRST TIME IN THE A.Y. 2008-09. THE ASSESSEE COMPANY CLAIMED DEDUCTI ON U/S 80IE FOR THE FIRST TIME IN A.Y. 2011-12. FROM VARIOUS DETAILS FILED/ P RODUCED BEFORE ME DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON EXAMINA TION OF AUDIT REPORT AS WELL AS OTHER RELEVANT DOCUMENTS, IT IS EVIDENT THA T THE INDUSTRIAL UNDERTAKING WAS NOT FORMED BY THE TRANSFER OF MACHINERY OR PLAN T PREVIOUSLY USED FOR ANY PURPOSES AND ALSO NOT FORMED BY SPLITTING UP OR THE RECONSTRUCTION OF A BUSINESS ALREADY IN EXISTENCE. AS EVIDENT FROM THE FORM NO. 10CCB [SL.25(D)] , THE ASSESSEE COMPANY UNDERTOOK SUBSTAN TIAL EXPANSION IN BOTH THE UNITS OF STEEL & ASBESTOS. THE SAME WAS ALSO EXAMI NED AND FOUND TO BE CORRECT DURING THE COURSE OF HEARING. HOWEVER IN F ORM NO.3CD AS WELL AS IN THE RETURN OF INCOME IT WAS NOTICED THAT THE ASSESS EE COMPANY CLAIMED DEDUCTION U/S 80IC. THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN. THE ASSESSEE COMPANY VIDE ITS REPLY DATED 28.10.2013 ST ATED THAT 80IC WAS MENTIONED DUE TO OVERSIGHT AND THE APPLICABLE SECTI ON WAS 80IE, WHICH WAS CORRECTLY MENTIONED IN FORM NO. 10CCB. THE SUBMISS ION OF THE ASSESSEE COMPANY IS CONSIDERED AND ACCEPTED. IT IS FOUND TH AT THE ASSESSEE COMPANY FULFILLED ALL THE PRESCRIBED CONDITIONS AS LAID DOW N IN SUB-SECTION (2) & (3) OF THE SECTION 80IE TO BECOME ELIGIBLE FOR DEDUCTION U NDER THIS SECTION FOR THE 1 ST YEAR. 4.2. THE LD CITA OBSERVED THAT IT IS AN UNDISPUTED FACT THAT SUBSTANTIAL EXPANSION OF BOTH THE ASBESTOS AS WELL AS THE STEEL UNIT TOOK PL ACE, WHICH HAS BEEN ADMITTED AND ACCEPTED BY THE LD AO. THE LD AO WHILE FRAMING THE ASSESSMENT FOR THE ASST YEAR 2011-12 U/S 143(3) AFTER EXAMINING, THE VARIOUS APP ROVALS FROM VARIOUS AUTHORITIES, BOOKS OF ACCOUNTS, AUDIT REPORT IN FORM 10CCB AND O THER RELEVANT DETAILS HAD CONSIDERED AND ACCEPTED THE CLAIM FOR DEDUCTION U/S 80IE OF THE ACT FOR BOTH THE UNITS STEEL UNIT AS WELL AS ASBESTOS UNIT. IT IS CLEAR THAT THE LD AO WAS SATISFIED THAT THE PROVISIONS OF SECTION 80IE(5) OF THE ACT WAS NOT AP PLICABLE IN THE CASE OF THE ASSESSEE FOR BOTH THE UNITS WHILE FRAMING THE ASSESSMENT FOR THE ASST YEAR 2011-12, OTHERWISE HE WOULD NOT HAVE ALLOWED SUCH CLAIM MADE BEFORE HI M AND WOULD NOT HAVE CONSIDERED THE SAME TO BE THE INITIAL ASSESSMENT Y EAR FOR BOTH THE UNITS. HE OBSERVED THAT THE LD AO HAD HIMSELF WHILE PASSING THE ASSESS MENT ORDER FOR ASSESSMENT YEAR 2011-12 HAD CONSIDERED THE ASSESSMENT YEAR 2011-12 TO BE THE INITIAL ASSESSMENT YEAR AS ENVISAGED IN SUB-SECTION (7) TO SECTION 80 IE OF THE ACT. ACCORDINGLY BY APPLYING THE PRINCIPLES LAID DOWN BY THE HONBLE SU PREME COURT IN THE CASE OF RADHASOAMI SATSANG VS CIT REPORTED IN 193 ITR 321 ( SC) WHEREIN IT WAS HELD THAT ALTHOUGH RES JUDICATA IS NOT APPLICABLE TO IT PROCE EDINGS, IN THE ABSENCE OF ANY MATERIAL CHANGE, A DIFFERENT VIEW THAN THAT TAKEN I N EARLIER YEARS, COULD NOT BE TAKEN. THE LD CIT(A) ACCORDINGLY DIRECTED THE LD AO TO ALL OW DEDUCTION U/S 80IE OF THE ACT FOR BOTH ASBESTOS AS WELL AS STEEL UNIT CONSIDERING THE SAME TO BE THE 2 ND AND 3 RD CONSECUTIVE ASSESSMENT YEAR COMMENCING FROM THE INITIAL ASSESSMENT YEAR OF AY 2011-12 AND ALLOWED THE GROUNDS OF THE ASSESSEE. A GGRIEVED, THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING COMMON GROUND:- A) FOR THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN LAW AS WELL AS IN FACTS IN ALLOWING THE ASSESSMENT YEAR 2011-12 AS INITIAL ASS ESSMENT FOR CLAIM OF DEDUCTION U/S 80IE OF THE INCOME TAX ACT, 1961 IN R ESPECT OF THE ASBESTOS UNIT ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 7 OF ASSESSEE UNDERTAKING WITHOUT CONSIDERING THE PRO VISIONS OF SECTION 80IE(5) OF THE INCOME TAX ACT, 1961. B) ANY OTHER GROUND OR GROUNDS THAT MAY BE RAISED A T THE TIME OF HEARING. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. AT THE OU TSET, WE WOULD LIKE TO POINT OUT THAT THE ASSESSEE IS AN ELIGIBLE UNDERTAKING ENGAGED IN THE BUSINESS OF MANUFACTURE OF ELIGIBLE ARTICLES AS PRESCRIBED IN SECTION 80IE OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD FULFILLED THE CONDITIONS PRESCRIBED IN SUB-SECTION (2) & (3) OF SECTION 80IE OF THE ACT. IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAD INDEED CARRIED OUT SUBSTANTIAL EXPANSION BY WAY OF INCREASE IN INSTALLED CAPACITY BEYOND 25%. AS PER THE PROVISIONS OF THE ACT, THE DEDUCTION IS ELIGIBLE FOR 10 ASSESS MENT YEARS COMMENCING FROM THE INITIAL ASSESSMENT YEAR. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IE OF THE ACT FOR ASST YEARS 2012-13 AND 2013 -14 BEING THE SECOND AND THIRD YEAR OF CLAIM OF DEDUCTION IN RESPECT OF ITS STEEL UNIT AS DEDUCTION WAS FIRST ALLOWED TO THE ASSESSEE FROM ASST YEAR 2011-12, WHICH HAS B EEN ACCEPTED BY THE LD AO. THE ONLY SHORT DISPUTE THAT ARISES FOR OUR CONSIDERATIO N IS DETERMINATION OF INITIAL ASSESSMENT YEAR FOR THE CLAIM OF DEDUCTION SO AS T O RECKON THE ELIGIBILITY IN THE YEARS UNDER APPEAL, IN RESPECT OF ASBESTOS UNIT . WE FIND THAT THE LD CIT(A) BY PLACING RELIANCE ON THE ORDER OF THE LD AO U/S 143(3) OF TH E ACT DATED 20.2.2014 FRAMED FOR THE ASST YEAR 2011-12 , HAD HELD THAT ASST YEAR 201 1-12 WOULD BE THE INITIAL ASSESSMENT YEAR FOR THE ASBESTOS UNIT AND ACCORDINGLY THE YEARS U NDER APPEAL WOULD ONLY BE 2 ND AND 3 RD YEAR OF CLAIM BY THE ASSESSEE AND ACCORDINGLY THE LD AO ERRED IN DENYING DEDUCTION TO THE ASSESSEE. BUT W E FIND THAT THE FINDING GIVEN BY THE LD AO IN AY 2011-12 SECTION 143(3) ORDER IS ONLY IN RESPECT OF SUBSTANTIAL EXPANSION CARRIED OUT ON 28.2.2011 RELEVANT TO ASST YEAR 2011 -12 IN ASBESTOS UNIT. THIS FACT IS EVIDENT FROM THE AUDIT REPORT GIVEN IN FORM NO, 10C CB WHICH IS PLACED ON RECORD BEFORE US, WHERE IN RESPONSE TO REPLY TO QUESTION N O. 25, THE CHARTERED ACCOUNTANT HAD MENTIONED THE DATE OF SUBSTANTIAL EXPANSION IN ASBE STOS UNIT AS 28.2.2011 BY ALSO MENTIONING THE VALUE OF INCREASE IN PLANT AND MACHI NERY IN THE YEAR OF SUBSTANTIAL EXPANSION TO THE TUNE OF RS.7,55,44,483/-. HENCE IT WOULD BE INCORRECT TO PLACE RELIANCE ONLY ON THE ASSESSMENT ORDER FOR AY 2011-1 2 FOR DECIDING THE INITIAL ASSESSMENT YEAR FOR THE ENTIRE ASBESTOS UNIT. WE FIND LOT OF FOR CE IN THE ARGUMENT OF THE LD AR THAT SUBSTANTIAL EXPANSION WAS ALSO CA RRIED OUT EARLIER IN ASBESTOS UNIT FOR WHICH DEDUCTION WAS FIRST ALLOWED TO THE ASSESS EE BY THE LD AO IN ASST YEAR 2008- 09. HENCE ASST YEAR 2008-09 SHALL BECOME THE INITIAL ASSESSMENT YEAR . EVEN THOUGH SUBSTANTIAL EXPANSION WAS FURTHER MADE IN AS ST YEAR 2011-12 AS STATED SUPRA IN ASBESTOS UNIT, THE TOTAL DEDUCTION U/S 80IE OF THE ACT COULD BE GIVEN ONLY FOR 10 CONSECUTIVE ASSESSMENT YEARS COMMENCING FROM INITI AL ASSESSMENT YEAR IN TERMS OF SPECIFIC RESTRICTION PROVIDED IN SECTION 80IE(5) OF THE ACT. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PROVISIONS OF SECTION 80I E(5) OF THE ACT ARE REPRODUCED BELOW:- (5) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING UNDER THIS SECTION , WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, OR UNDE R SECTION 80-IC OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C , AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 8 5.1. WE ALSO DEEM IT NECESSARY TO REPRODUCE THE REL EVANT PROVISIONS OF SECTION 80IE OF THE ACT AS BELOW:- SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKIN GS IN NORTH-EASTERN STATES. 80-IE. (1) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INC LUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERTAKING, TO WHICH THIS SECTION APPLIES, FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHAL L BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION OF AN AMOUNT EQUAL TO HUNDRED PER CENT OF THE PROFITS AND GAINS DERIVED FROM SUCH BUSINESS FOR TEN CONSECUTIVE ASSESSMENT YEARS COMMENCING WITH THE IN ITIAL ASSESSMENT YEAR. (2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH H AS, DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 2007 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2017, BEGUN OR BEGINS, IN ANY OF THE NORTH-EASTERN STATES, (I) TO MANUFACTURE OR PRODUCE ANY ELIGIBLE ARTICLE OR THING; (II) TO UNDERTAKE SUBSTANTIAL EXPANSION TO MANUFACT URE OR PRODUCE ANY ELIGIBLE ARTICLE OR THING; (III) TO CARRY ON ANY ELIGIBLE BUSINESS. (3) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH F ULFILS ALL THE FOLLOWING CONDITIONS, NAMELY : (I) IT IS NOT FORMED BY SPLITTING UP, OR THE RECONS TRUCTION, OF A BUSINESS ALREADY IN EXISTENCE : PROVIDED THAT THIS CONDITION SHALL NOT APPLY IN RESPECT OF A N UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-ESTABLISHMENT, RECO NSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BUSINESS OF ANY SUCH UNDERTAKING AS REFERRED TO IN SECTION 33B , IN THE CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIE D IN THE SAID SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION - (4) . (5) (6) (7) FOR THE PURPOSES OF THIS SECTION, (I) 'INITIAL ASSESSMENT YEAR' MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMPLETES SUBSTANTIAL EXPANSION ; 5.1.1. FROM THE BARE READING OF THE AFORESAID PROVI SIONS, IT COULD BE CONCLUDED THAT DEDUCTION U/S 80IE OF THE ACT WOULD BE ELIGIBLE TO AN UNDERTAKING AS AND WHEN SUBSTANTIAL EXPANSION IS CARRIED OUT BY THE ASSESSE E BY MAKING HUGE INVESTMENT IN PLANT AND MACHINERY RESULTING IN INSTALLED CAPACITY INCREASING BY MORE THAN 25% AS COMPARED TO THE EARLIER YEAR. ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 9 FOR EXAMPLE, IF AN ASSESSEE HAD COMMENCED THE MANUF ACTURING OF ELIGIBLE ARTICLES SAY IN ASST YEAR 2009-10 , DEDUCTION U/S 80IE OF THE AC T IS ALSO ALLOWED TO HIM IN THAT YEAR TREATING ASST YEAR 2009-10 AS THE INITIAL ASS ESSMENT YEAR. THEREAFTER IN ASST YEAR 2013-14, THE UNDERTAKING CARRIES OUT SUBSTANTI AL EXPANSION, THEN MORE LIBERAL INTERPRETATION OF THE MEANING OF INITIAL ASSESSMENT YEAR IN SECTION 80IE OF THE ACT WOULD CONFER FRESH LEASE OF 10 YEARS FOR THE UNDERT AKING FOR CLAIMING DEDUCTION U/S 80IE OF THE ACT IN VIEW OF SUBSTANTIAL EXPANSION CA RRIED OUT IN ASST YEAR 2013-14 TREATING ASST YEAR 2013-14 AS THE INITIAL ASSESSME NT YEAR FOR THE EXPANDED PORTION ALONE. 5.1.2. THE PROVISIONS ALSO MAKE IT CLEAR THAT THE D EDUCTION SHALL BE ALLOWED TO THE ELIGIBLE UNDERTAKING BY TREATING THE SAID UNDERTAKI NG AS THE ONLY SOURCE AND AS IF THAT IS THE ONLY UNDERTAKING OF THE ASSESSEE. BUT , IN OUR CONSIDERED OPINION, IT WOULD RESULT IN ACCOUNTING CONFUSION , IN AS MUCH AS, IT WOULD BE VERY DIFFICULT TO ASCERTAIN THE PROFITS DERIVED BY THE UNDERTAKING OUT OF EXPAN DED ACTIVITIES ALONE SO AS TO WARRANT DEDUCTION FOR THE SAME COMMENCING FROM ASST YEAR 20 13-14. IN OTHER WORDS, THE ASSESSEE SHOULD DIVIDE THE ACCOUNTS OF THE ELIGIBLE UNDERTAKING FOR THE REGULAR PRODUCTION UNIT (FOR EXAMPLE UNIT A) AND EXPANDED P RODUCTION UNIT (FOR EXAMPLE UNIT B) AND APPORTION THE EXPENSES ACCORDINGLY EITHER ON THE BASIS OF PRODUCTION OR BY SOME RATIONAL METHOD. THIS WOULD ENABLE THE ASSESSE E TO ARRIVE AT THE PROFITS DERIVED FROM UNIT A FOR CLAIMING DEDUCTION U/S 80IE OF THE ACT FROM ASST YEAR 2009-10 ONWARDS FOR 10 CONSECUTIVE ASSESSMENT YEARS. THIS WOULD ALSO ENABLE THE ASSESSEE TO ARRIVE AT THE PROFITS DERIVED FROM UNIT B FOR CLAIM ING DEDUCTION U/S 80IE OF THE ACT FROM ASST YEAR 2013-14 ONWARDS FOR 10 CONSECUTIVE A SSESSMENT YEARS. HOWEVER, THIS PROBLEM WOULD ARISE ONLY IN THE EVENT OF SUBSTANTIA L EXPANSION CARRIED OUT DURING THE YEARS IN WHICH SECTION 80IE DEDUCTION IS OTHERWISE ALLOWED (I.E OVERLAPPING YEARS). 5.1.3. THE PROVISIONS OF SECTION 80IE OF THE ACT AR E BENEFICIAL PROVISIONS AND HAD TO BE INTERPRETED LIBERALLY AND ARE MEANT TO PROMOTE I NDUSTRIAL GROWTH IN NORTH EASTERN STATES BY FREQUENT INVESTMENTS IN CAPITAL EXPENDITU RE. IF THE AFORESAID LIBERAL INTERPRETATION IS NOT GIVEN, THEN THE UNDERTAKING W OULD NOT ENGAGE ITSELF IN FURTHER INVESTMENTS BEYOND THE SECTION 80IE PERIOD (I.E AFT ER 10 ASST YEARS) THEREBY TAMPERING INDUSTRIAL GROWTH IN NORTH EASTERN STATES. THIS WO ULD BRING THE INDUSTRIAL GROWTH IN NORTH EASTERN STATES, THROUGH THE ASSISTANCE OF IND USTRIAL UNDERTAKINGS, TO A GRINDING HALT. THAT IS WHY THE LEGISLATURE HAD PROVIDED DEDU CTION TO THE ASSESSEE BY DEFINING INITIAL ASSESSMENT YEAR TO INCLUDE THE EXPRESSION OR COMPLETES SUBSTANTIAL EXPANSION . HENCE THE UNDERTAKING EVEN IF IT INVOLVES IN SU BSTANTIAL EXPANSION AFTER 20 YEARS FROM THE DATE OF ITS COMMENCEMENT AND EVEN IF IT HAD ALREADY ENJOYED DEDUCTION U/S 80IE OF THE ACT FOR 10 YEARS, THAT WO ULD NOT DISTURB THE FRESH CLAIM AND ALLOWABILITY OF DEDUCTION U/S 80IE FOR FUTURE 10 YE ARS I.E FROM THE YEAR IN WHICH SUBSTANTIAL EXPANSION HAS BEEN UNDERTAKEN. THIS IN OUR CONSIDERED OPINION, WOULD BE THE CORRECT UNDERSTANDING OF THE PROVISIONS OF SECT ION 80IE OF THE ACT FROM ITS PLAIN READING. 5.2. LOOKING AT THE ISSUE BEFORE US IN THE LIGHT OF THE AFORESAID PROVISIONS AND EXAMPLE STATED THEREIN, THE DEDUCTION U/S 80IE OF THE ACT O VERLAPS TO THE ASSESSEE FROM ASST YEAR 2011-12 ONWARDS FOR THE SUBSTANTIAL EXPANSION CARRIED OUT IN ASBESTOS UNIT ON 28.2.2011. IT IS NOT IN DISPUTE THAT THE ASSESSEE H AS ALREADY BEEN ALLOWED DEDUCTION U/S 80IE OF THE ACT FROM ASST YEAR 2008-09 ONWARDS TREA TING THE SAME AS INITIAL ASSESSMENT YEAR FOR ITS ASBESTOS UNIT. THE SUBSTANTIAL EXPANSIO N CARRIED OUT IN ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 10 ASBESTOS UNIT IN ASST YEAR 2011-12 MAKES THE ASSESS EE ELIGIBLE FOR FRESH CLAIM OF 10 YEARS TREATING AY 2011-12 AS INITIAL ASSESSMENT YEAR , BUT IN THE ABSENCE OF BREAK- UP OF PROFITS OF THE ORIGINAL UNIT AND EXPANDED UNI T SEPARATELY, THE SAME WOULD NOT BE ELIGIBLE FOR THE ASSESSEE HEREIN. IT IS ALSO NOT T HE CLAIM OF THE ASSESSEE EITHER BEFORE THE LOWER AUTHORITIES OR BEFORE US. 5.3. HENCE BY APPLYING THE PROVISIONS OF SECTION 80 IE(5) OF THE ACT AND TAKING INTO ACCOUNT THE OVERLAPPING YEARS, WE HOLD THAT FOR ASB ESTOS UNIT, THE INITIAL ASSESSMENT YEAR WOULD BE ASST YEAR 2008-09 AND WOULD BE ELIGI BLE FOR DEDUCTION U/S 80IE OF THE ACT 10 CONSECUTIVE ASSESSMENT YEARS THEREON. A CCORDINGLY, THE ASST YEARS 2012- 13 AND 2013-14 WOULD BE THE 5 TH AND 6 TH YEAR OF DEDUCTION U/S 80IE OF THE ACT FOR THE ASBESTOS UNIT. IT IS NOT IN DISPUTE THAT THE ASSE SSEE HAD COMPLIED WITH ALL THE PROVISIONS OF SECTION 80IC / 80IE OF THE ACT IN ORD ER TO MAKE ITSELF ELIGIBLE FOR THE DEDUCTION THEREON. 5.4. WE ALSO FIND THAT THE RELIANCE PLACED BY THE L D AR ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS DEFREE ENGINEER ING (P) LTD REPORTED IN (2017) 244 TAXMAN 217 (SC) , WHEREIN THE SPECIAL LEAVE PETITION FILED BY THE R EVENUE WAS DISMISSED, IN THE SAID CASE, THE ASSESSEE INTERPRET ED THE INITIAL ASSESSMENT YEAR IN SECTION 80IA(5) OF THE ACT TO BE THE YEAR OF CLAIM OF DEDUCTION U/S 80IA AND NOT YEAR OF COMMENCEMENT OF ELIGIBLE BUSINESS. THIS INTERP RETATION WAS ALLOWED IN FAVOUR OF THE ASSESSEE BY THE HONBLE MADRAS HIGH COURT AND S LP OF THE REVENUE AGAINST THE SAME WAS DISMISSED BY THE HONBLE APEX COURT. THE LD AR ALSO PLACED RELIANCE ON THE CIRCULAR ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES (CBDT) VIDE CIRCULAR NO. 1/2016 DATED 15.2.2016 EXPLAINING THE MEANING OF INITIAL ASSESSMENT YEAR . FOR THE SAKE OF CONVENIENCE, THE SAID CIRCULAR IS REPRO DUCED HEREINBELOW:- SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTI ONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS - CLARIFICATION OF TERM 'INITIAL ASSESSMENT YEAR' IN SECTION 80-IA(5) CIRCULAR NO.1/2016 [F.NO.200/31/2015-ITA-I], DATED 15-2-2016 SECTION 80-IA OF THE INCOME-TAX ACT, 1961 ('ACT'), AS SUBSTITUTED BY THE FINANCE ACT, 1999 WITH EFFECT FROM 1-4-2000, PROVIDES FOR D EDUCTION OF AN AMOUNT EQUAL TO 100 % OF THE PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR ENTERPRISE FROM AN ELIGIBLE BUSINESS (AS REFERRED TO IN SUB-SECTION (4 ) OF THAT SECTION) IN ACCORDANCE WITH THE PRESCRIBED PROVISIONS. SUB-SECTION (2) OF SECTION 80-IA FURTHER PROVIDES THAT THE AFORESAID DEDUCTION CAN BE CLAIMED BY THE ASSESSEE, AT HIS OPTION, FOR ANY TEN CONSECUTIVE ASSESSMENT YEARS OUT OF FIFTEEN YEA RS (TWENTY YEARS IN CERTAIN CASES) BEGINNING FROM THE YEAR IN WHICH THE UNDERTA KING COMMENCES OPERATION, BEGINS DEVELOPMENT OR STARTS PROVIDING SERVICES ETC . AS STIPULATED THEREIN. SUB- SECTION (5) OF SECTION 80-IA FURTHER PROVIDES AS UN DER 'NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PR OVISION OF THIS ACT, THE PROFITS AND GAINS OF AN ELIGIBLE BUSINESS TO WHICH THE PROV ISIONS OF SUB-SECTION (1) APPLY SHALL, FOR THE PURPOSES OF DETERMINING THE QUANTUM OF DEDUCTION UNDER THAT SUB- SECTION FOR THE ASSESSMENT YEAR IMMEDIATELY SUCCEED ING THE INITIAL ASSESSMENT YEAR OR ANY SUBSEQUENT ASSESSMENT YEAR, BE COMPUTED AS IF S UCH ELIGIBLE BUSINESS WERE THE ONLY SOURCE OF INCOME OF THE ASSESSEE DURING THE PR EVIOUS YEAR RELEVANT TO THE INITIAL ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 11 ASSESSMENT YEAR AND TO EVERY SUBSEQUENT ASSESSMENT YEAR UP TO AND INCLUDING THE ASSESSMENT YEAR FOR WHICH THE DETERMINATION IS TO B E MADE'. IN THE ABOVE SUB-SECTION, WHICH PRESCRIBES THE MANN ER OF DETERMINING THE QUANTUM OF DEDUCTION, A REFERENCE HAS BEEN MADE TO THE TERM ' INITIAL ASSESSMENT YEAR '. IT HAS BEEN REPRESENTED THAT SOME ASSESSING OFFI CERS ARE INTERPRETING THE TERM 'INITIAL ASSESSMENT YEAR' AS THE YEAR IN WHICH THE ELIGIBLE BUSINESS/ MANUFACTURING ACTIVITY HAD COMMENCED AND ARE CONSID ERING SUCH FIRST YEAR OF COMMENCEMENT/OPERATION ETC. ITSELF AS THE FIRST YEA R FOR GRANTING DEDUCTION, IGNORING THE CLEAR MANDATE PROVIDED UNDER SUB-SECTI ON (2) WHICH ALLOWS A CHOICE TO THE ASSESSEE FOR DECIDING THE YEAR FROM WHICH IT DESIRES TO CLAIM DEDUCTION OUT OF THE APPLICABLE SLAB OF FIFTEEN (OR TWENTY) YEARS . THE MATTER HAS BEEN EXAMINED BY THE BOARD. IT IS AB UNDANTLY CLEAR FROM SUB- SECTION (2) THAT AN ASSESSEE WHO IS ELIGIBLE TO CLA IM DEDUCTION U/S 80-IA HAS THE OPTION TO CHOOSE THE INITIAL/ FIRST YEAR FROM WHICH IT MAY DESIRE THE CLAIM OF DEDUCTION FOR TEN CONSECUTIVE YEARS, OUT OF A SLAB OF FIFTEEN ( OR TWENTY) YEARS, AS PRESCRIBED UNDER THAT SUB-SECTION. IT IS HEREBY CLA RIFIED THAT ONCE SUCH INITIAL ASSESSMENT YEAR HAS BEEN OPTED FOR BY THE ASSESSEE, HE SHALL BE ENTITLED TO CLAIM DEDUCTION U/S 80-IA FOR TEN CONSECUTIVE YEARS BEGIN NING FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO TH E FULFILMENT OF CONDITIONS PRESCRIBED IN THE SECTION. HENCE, THE TERM ' INITIAL ASSESSMENT YEAR ' WOULD MEAN THE FIRST YEAR OPTED FOR BY THE ASSESSEE FOR CLAIMI NG DEDUCTION U/S 80-IA. HOWEVER, THE TOTAL NUMBER OF YEARS FOR CLAIMING DEDUCTION SH OULD NOT TRANSGRESS THE PRESCRIBED SLAB OF FIFTEEN OR TWENTY YEARS, AS THE CASE MAY BE AND THE PERIOD OF CLAIM SHOULD BE AVAILED IN CONTINUITY. THE ASSESSING OFFICERS ARE, THEREFORE, DIRECTED TO ALLOW DEDUCTION U/S 80-IA IN ACCORDANCE WITH THIS CLARIFICATION AND AFTER BEING SATISFIED THAT ALL THE PRESCRIBED CONDITIONS APPLICABLE IN A PARTICULAR CASE ARE DULY SATISFIED. PENDING LITIGATION ON ALLOWABILITY OF DEDUCTION U/S 80 IA SHALL ALSO NOT BE PURSUED TO THE EXTENT IT RELATES TO INTERPRETING 'INITIAL ASSESSMENT YEAR' AS MENTIO NED IN SUB-SECTION (5) OF THAT SECTION FOR WHICH THE STANDING COUNSELS/D.R.S BE SU ITABLY INSTRUCTED. THE ABOVE BE BROUGHT TO THE NOTICE OF ALL ASSESSING OFFICERS CONCERNED 5.5. THE LD DR WAS GIVEN TIME TO FILE A WRITTEN SUB MISSION AFTER GOING THROUGH THIS CIRCULAR AND THE CASE LAWS RELIED UPON BY THE LD AR . THE LD DR VIDE HIS SUBMISSIONS DATED NIL FILED BEFORE US ON 4.5.2017 HAD STATED IN PARA 3) AS UNDER:- THE CBDT CIRCULAR DATED 15/02/2016 IS PERUSED. IT I S SUBMITTED THAT THE HONBLE ITAT MAY CONSIDER THE ABOVE CASES AND THE CIRCULAR BY ALSO CONSIDERING THE AVERMENTS OF REVENUE IN THE AFOREMENTIONED CASE LAW S FOR THE PRESENT APPEAL AS WELL. 5.6. IN VIEW OF OUR AFORESAID FINDINGS AND RESPECTF ULLY FOLLOWING THE AFORESAID CIRCULAR ISSUED BY THE CBDT AND THE DECISION OF THE HONBLE APEX COURT SUPRA, WE DECIDE THE ISSUE BEFORE US IN FAVOUR OF THE ASSE SSEE. TO SUMMARISE, WE HOLD THAT THE DEDUCTION U/S 80IE OF THE ACT WOULD BE ELI GIBLE TO THE ASSESSEE AS FOLLOWS:- FOR ASBESTOS UNIT ASST YEAR 2012-13 5 TH YEAR OF CLAIM ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 12 ASST YEAR 2013-14 6 TH YEAR OF CLAIM FOR STEEL UNIT ASST YEAR 2012-13 2 ND YEAR OF CLAIM ASST YEAR 2013-14 3 RD YEAR OF CLAIM ACCORDINGLY THE GROUNDS RAISED BY THE REVENUE FOR B OTH THE YEARS ARE DISMISSED. 4. MR. SENGUPTA AT THIS STAGE SEEKS TO CRAVE OUT AN EXCEPTION IN FACTS OF THE INSTANT CASE. HE SUBMITS THAT THE ASSESSEES AS BESTORS UNIT STARTED ITS BUSINESS OPERATION ON 01.01.1978 FOLLOWED BY FIRST, SECOND AND THIRD EXPANSIONS IN ASSESSMENT YEAR 2002-03, 2008-09 AND 2011-12; RESPECTIVELY. HE THEN QUOTES HON'BLE APEX COURTS DECISION IN PCIT VS. AARHAM SOFTRONICS (2019) 102 TAXMANN.COM 343 (SC) SETTLING THE LAW AS UNDER:- 3.HAVING EXAMINED THE MATTER IN THE AFORESAID PERS PECTIVE, JUDGMENT IN THE CASE OF MAHABIR INDUSTRIES V. PRINCIPAL COMMISSIONER OF INC OME TAX2 WOULD, IN FACT, HELP THE ASSESSEE. THE FINE DISTINCTION POINTED OUT IN CLASSIC BINDING INDUSTRIES ELOPES THEREBY. TO RECAPITULATE, IN MAHABIR INDUSTR IES, IT WAS HELD THAT IF AN ASSESSEE GET 100% 2 CIVIL APPEAL NOS. 4765-4766 OF 2018 DECIDED ON MAY 18, 2018 EXEMPTION UNDER SECTION 80-IB OF THE ACT FOR FIVE YEARS AND THEREAFTER CARRIES OUT THE SUBSTANTIAL EXPANSION BECAUSE OF WH ICH SAID ASSESSEE BECOMES ENTITLED TO EXEMPTION UNDER THE NEW PROVISION I.E. SECTION 80-IC OF THE ACT, THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION @ 100% EVEN AFTER FIVE YEARS. THIS RULING WAS PREDICATED ON THE GROUND THAT THERE CAN BE TWO INITIAL ASSESSMENT YEARS, ONE FOR THE PURPOSE OF SECTION 80-IB AND OTHER FOR THE PURPOSES OF SECTION 80-IC OF THE ACT. ONCE WE FIND THAT THERE CAN BE TWO INITIAL ASS ESSMENT YEARS, EVEN AS PER THE DEFINITION THEREOF IN SECTION 80-IC ITSELF, THE LEGAL POSITION COMES AT PAR WITH THE ONE WHICH WAS DISCUSSED IN MAHABIR INDUSTRIES. 24.THE AFORESAID DISCUSSION LEADS US TO THE FOLLOWI NG CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BIN DING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL ASSESSMENT YEAR CONTAINED IN SECTION 80-IC ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFI NITION CONTAINED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. THE DEFINITION S 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 SECTI ON 80-IC HAS MADE 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 STATE OF HIMAC HAL PRADESH OF THE NATURE ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 13 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 GA INS 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 AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSES SMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFITS 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 EXPANSION I S CARRIED 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, I F 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 AND GAINS FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8TH YE AR AS THIS YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN. HOWEVER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSESSMENT YEARS. 5. MR. BHARDWAJ AS WELL AS MR. SENGUPTA HAVE TAKEN A LOT OF PAINS TO REFER TO SEC. 80IE(5) OF THE ACT IN THE NATURE OF A NON OBSTANTE CLAUSE THAT NOTWITHSTANDING THE CORRESPONDING DEDUCTION PROVISI ON, AN ASSESSEE IS NOT ENTITLED FOR THE IMPUGNED RELIEF BEYOND TEN YEARS A ND THEREFORE, THE LOWER AUTHORITIES HAVE RIGHTLY CONCLUDED THAT INITIAL ASS ESSMENT YEAR IN FACTS OF THE INSTANT CASE HAS TO BE TAKEN AS ASSESSMENT YEAR 20 02-03. THEIR FURTHER ARGUMENT IS THAT THE IMPUGNED ASSESSMENT YEAR 2014- 15; IF TAKES FROM ASSESSMENT YEAR 2002-03, FALLS VERY WELL BEYOND TEN YEARS DEDUCTION PERIOD. THEY FURTHER INFORM US THAT REVENUE HAS FILED ITS T AX APPEAL BEFORE HON'BLE JURISDICTIONAL HIGH COURT AGAINST THE TRIBUNALS EA RLIER DECISION TAKING AN ERRONEOUS VIEW IN ASSESSEES FAVOUR. 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RI VAL PLEADINGS AS WELL AS JUDICIAL PRECEDENT(S) QUOTED HEREINABOVE. WE MAKE I T CLEAR THAT THE ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 14 ASSESSEES VERY UNITS PRODUCTION OF ASBESTOS SHEET HAS BEEN HELD TO BE ENTITLED FOR SEC. 80IE DEDUCTION ITSELF WHEREIN INI TIAL ASSESSMENT YEAR STAND TAKEN AS ASSESSMENT YEAR 2008-09. WE ARE IN ASSESSM ENT YEAR 2014-15 WHEREIN THE ASSESSEE HAS ALREADY SUCCEEDED ON THE I SSUE IN ASSESSMENT YEARS 2012-13 AND 2013-14. THIS CLINCHING FINDING O F THE INITIAL ASSESSMENT YEAR INVOLVED HEREIN FOR THE PURPOSE OF 80IE DEDUCTION TO BE ASSESSMENT YEAR 2008-09 HAS ATTAINED FINALITY SO FAR THE TRIBU NAL IS CONCERNED. WE THEREFORE ADOPT JUDICIAL CONSISTENCY IN THESE PECUL IAR FACTS AND CIRCUMSTANCE. THE REVENUE ARGUMENT SEEKING TO CARVE OUT AN EXCEP TION FAILS ACCORDINGLY. WE MAKE IT CLEAR THAT OUR AGREEMENT WITH THE REVENU ES ARGUMENT REGARDING INITIAL ASSESSMENT YEAR 2002-03 IN FACTS OF INSTANT CASE, WOULD LEAD TO AN ANOMALY WHEREIN THE ASBESTOS UNITS INITIAL ASSESSM ENT YEAR HAS BEEN TAKEN AS 2008-09 IN ASSESSMENT YEARS 2012-13 AND 2014-15 WHEREAS THE REVENUE SEEKS TO ADOPT ASSESSMENT YEAR 2002-03. WE GO BY CO NSISTENCY PRINCIPLE AS PER HON'BLE APEX COURTS LANDMARK DECISION IN UNION OF INDIA VS. AZADI BACHAO ANDOLAN & ANR. (2003) 263 ITR 706 (SC) AND DIRECT THE ASSESSING O FFICER TO TREAT THE ASSESSEE AS ENTITLED FOR SEC. 80IE DEDUCT ION IN ISSUE. WE MAKE IT CLEAR BEFORE PARTING THAT THE REVENUES RELIANCE ON SEC. 80IE(5) OF THE ACT IN SEEKING TO RESTORE THE ASSESSEES DEDUCTION CLAIM C ARRIES NO SUBSTANCE SINCE THE LATTERS RELIEF NOWHERE EXCEEDS TEN ASSESSMENT YEARS TIME SPAN SINCE INITIAL ASSESSMENT YEAR TAKEN IS 2008-09 ONLY. THE REVENUES ARGUMENTS TO THIS EFFECT ARE DECLINED. 7. IT IS NEXT POINTED OUT DURING THE COURSE OF HEAR ING IS THAT CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO TREAT ASSESSEE AS NOT ENTITLED FOR THE IMPUGNED DEDUCTION IN CORRESPONDING SUBSEQUENT ASSE SSMENT YEARS AS WELL. WE FEEL THAT NO FURTHER ADJUDICATION IS REQUIRED ON THIS ISSUE ONCE WE HAVE HELD THE ASSESSEE AS ENTITLED FOR SEC.80IE IN THE I MPUGNED ASSESSMENT YEAR. THE ASSESSEES CORRESPONDING GROUND IS ALLOWED IN F OREGOING TERMS THEREFORE. ITA NO.352/GAU/2018 A.Y. 2014- 15 ASAM ROOFING LTD. VS. ITO WD-3(1), GAU PAGE 15 8. LASTLY COMES THE ASSESSEES GRIEVANCE THAT LOWER AUTHORITIES HAVE ERRED IN TREATING ITS INTEREST INCOME OF 6,59,205/- FROM BANK FIXED DEPOSITS. WE FIND THAT THIS VERY ISSUE REGARDING INTEREST INCOME DERI VED FROM FIXED DEPOSIT ACCOUNT AS A PRE-CONDITION FOR LETTER OF CREDIT ALS O STANDS DECIDED IN EARLIER CO ORDINATE BENCHS ORDER (SUPRA) ACCEPTING THE TAXPAY ERS GRIEVANCE HAVING REGARD TO HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. UNIVERSAL PIPES PVT. LTD . (2012) 79 DDTR 175 (GAU). WE THEREFORE DELETE THE IMPUGNED DISALLOWANCE BY ADOPTING JUDICIAL CONSISTENCY HEREI N AS WELL. 9. THIS ASSESSEES APPEAL IS ALLOWED IN ABOVE TERMS . ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(3) OF T HE ITAT RULES BY PUTTING ON NOTICE BOARD 21/08/2019 SD/- SD/- ( #) (%& #) ( A.L.SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) GUWAHATI, *DKP '- 21 / 08 /201 9 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ASSAM ROOFING LTD. BONDA, NARANGI, GUWAH ATI-781026 2. /RESPONDENT-ITOWARD-3(1), AYAKAR BHAWAN, CHRISTIAN BASTI, G.S. ROAD, GUWAHATI-781005 3. 2 3 8 / CONCERNED CIT GUWAHATI 4. 3- / CIT (A) GUWAHATI 5. ; &&2, 2, 8 / DR, ITAT, GUWAHATI 6. A / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY (ON TOUR) 2,