DCIT, Circle- 36(1), New Delhi V. MNC HERS, New Delhi

ITA 3650/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9725 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2013-2014
• Appeal Filed On: 15-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Tax effect
• Section: 80IA; 80IC; 80IC; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: E NEW DELHI BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER [THROUGH VIDEO CONFERENCING] ITA NO.3650 & 3651/DEL/2018 ASSESSMENT YEAR: 2013-14 & 2014-15 DCIT CIRCLE 36 (1) NEW DELHI VS. MNC HERS E-3/6, MODEL TOWN, NEW DELHI -110009 PAN NO. AANFM1617J (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THESE TWO APPEALS BY THE REVENUE ARE DIRECTED AGAIN ST A COMMON ORDER DATED 13/12/2017 PASSED BY THE LD. CIT (APPEALS)- 12, NEW DELHI [IN SHORT THE LD. CIT(A)] FOR ASSESSM ENT YEAR 2013-14 APPELLANT BY SH. RUPESH AGARWAL, SR. DR RESPONDENT BY MS. GUNJAN JAIN, CA DATE OF HEARING 15.07.2021 DATE OF PRONOUNCEMENT 15 .07.2021 AND 2014-15. AS COMMON ISSUES ARE INVOLVED, BOTH TH ESE APPEALS WERE HARD TOGETHER AND DISPOSED OFF BY WAY OF THIS CONSOLIDATED ORDER FOR CONVENIENCE. 2. THE GROUNDS OF THE APPEAL RAISED BY THE REVENUE ARE REPRODUCED AS UNDER: MNC HERS (A.Y. 2013-14) 1. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN DELE TING THE ADDITION OF RS. 1,34,77,105/- FOR A.Y. 2013-14 & RS. 55,00,478/- FOR A.Y. 2014-15 BY HOLDING THAT THE ASSESSEE IS ELIGIBLE TO CLAIM FURTHER DEDUCTION @ 100% U/S 80IC OF THE ACT BY MAKING SUBSTANTIAL EXPANSION EVEN AFTER THE ASSESSEE HAS ALREADY AVAIL ED 100% DEDUCTION U/S 80IC OF THE ACT FOR THE INITIAL FIVE YEARS AFTER THE COMMENCEME NT OF MANUFACTURING OR PRODUCTION OF THE INDUSTRIAL UNDERTAKING. THE LD. CIT(A) HAS NOT APPRECIATED THE PROVISIONS OF SUB- CLAUSE (II) OF SUB-SECTION 3 OF SECTION 80IC WHICH ENUMERATES THAT THE DEDUCTION REFERRED TO IN SUB-SECTION 1 SHALL BE RESTRICTED TO 100% OF SUCH PROFIT AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCES WITH THE INITIAL ASSESSM ENT YEAR AND THEREAFTER 25% OF THE PROFIT AND GAINS. 2. THE LD. CIT(A) ERRED IN LAW AND FACT BY NOT APP RECIATED THE FACT THAT SECTION 80IC OF THE I.T. ACT, 1961 HAS BEEN ENACTED IN ORDER TO PRO MOTE INDUSTRIAL GROWTH AND EMPLOYMENT GENERATION IN A BACKWARD AREA EITHER THR OUGH COMMENCEMENT OF MANUFACTURING OR PRODUCTION BY A NEW INDUSTRIAL UNI T OR SUBSTANTIAL EXPANSION BY A PRE- EXISTING INDUSTRIAL UNIT. THE LAW HAS BEEN ENACTED IN SUCH A WAY THAT THE PRE-EXISTING UNDERTAKING OR ENTERPRISES DO NOT SUFFER FROM ANY H ANDICAP MERELY ON ACCOUNT OF THE FACT THAT THEY WERE EXISTING PRIOR TO THE INTRODUCT ION OF SECTION 801C. THE CONDITION OF SUBSTANTIAL EXPANSION HAS MADE A PRE-REQUISITE FOR ALLOWING DEDUCTION U/S 80IC IN THE CASE OF OLD UNDERTAKING OR ENTERPRISE. IT IS HOWEVE R, CLEAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UNDERTAKING OR ENTERPRISES MADE EL IGIBLE FOR DEDUCTION U/S 80IC. THESE ARE TWO DISTINCT CATEGORIES WITH DISTINCT CONDITION S OF ELIGIBILITY LAID DOWN FOR DEDUCTION U/S 80IC. SINCE THE PRE-EXISTING UNITS CANNOT POSSI BLY CROSSOVER INTO THE ZONE OF NEW UNDERTAKINGS OR ENTERPRISES, THE NEW UNDERTAKINGS A LSO OBVIOUSLY CANNOT BE ALLOWED TO CROSS OVER INTO THE ZONE MEANT FOR OLD, PRE-EXISTIN G UNDERTAKINGS. THE RULES HAVE TO BE SAME FOR ALL THE PARTICIPANTS OR STAKEHOLDERS. 3. THE LD. CIT(A) ERRED IN LAW AND ON FACT BY NOT C ONSIDERING THE DECISION OF THE ITAT, CHANDIGARH IN THE CASE OF M/S HYCRON ELECTRONICS VS . ITO, BADDI AND THE CBDT CIRCULAR 1/2016 DATED 15.02.2016 WHEREIN IT HAS BEEN HELD TH AT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80IA HAS THE OPTION TO CHOOSE T HE INITIAL/FIRST YEAR, HE SHALL BE ENTITLED TO CLAIM DEDUCTION FOR TEN CONSECUTIVE YEA RS FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMEN T OF THE CONDITIONS PRESCRIBED IN THE SECTION. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN INTER PRETING SECTION 80IC OF THE IT ACT IN MANNER WHEREBY SUBSTANTIAL EXPANSION IN THE NEW UNI TS IS INTERPRETED ON BASIS OF DEDUCTION AT THE RATE OF 100% WHICH WILL LEAD TO AB SURDITY AS THAT WOULD MEAN THAT DEDUCTION WOULD BECOME PERPETUAL AS LONG AS ASSESSE E HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT SUCH INTERPRETATION WOULD RENDER PROV ISIONS OF SUB SECTION 6 OF SECTION 80IC OTIOSE/MEANINGLESS/REDUNDANT AND THEREFORE SUC H INTERPRETATION CANNOT BE PERMITTED. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN ACCEP TING CLAIM OF DEDUCTION OF ASSESSEE U/S 80IC OF IT ACT BY ALLOWING CHANGING OF INITIAL ASS ESSMENT YEAR, WHEREAS AS PER CLAUSE V OF SUB SECTION 8 OF SECTION 80IC IT CAN BE EITHER O N COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBSTANTIAL EXPANSION BUT IT CANNOT B E BOTH. 6. NOTWITHSTANDING, THE TAX EFFECT IS ALSO ABOVE TH E MONETARY LIMIT AS PRESCRIBED BY THE CBDT CIRCULAR NO. 21/2015 DATED 10.12.2015, THEREFO RE, FURTHER APPEAL IS RECOMMENDED IN THIS CASE. MNC HERS (A.Y. 2014-15) 1. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN DELE TING THE ADDITION OF RS. 1,34,77,105/- FOR A.Y. 2013-14 & RS. 55,00,478/- FO R A.Y. 2014-15 BY HOLDING THAT THE ASSESSEE IS ELIGIBLE TO CLAIM FURTHER DEDU CTION @ 100% U/S 80IC OF THE ACT BY MAKING SUBSTANTIAL EXPANSION EVEN AFTER THE ASSE SSEE HAS ALREADY AVAILED 100% DEDUCTION U/S 80IC OF THE ACT FOR THE INITIAL FIVE YEARS AFTER THE COMMENCEMENT OF MANUFACTURING OR PRODUCTION OF THE INDUSTRIAL UNDERTAKING. THE LD. CIT(A) HAS NOT APPRECIATED THE PROVISIONS OF SU B-CLAUSE (II) OF SUB-SECTION 3 OF SECTION 80IC WHICH ENUMERATES THAT THE DEDUCTION RE FERRED TO IN SUB-SECTION 1 SHALL BE RESTRICTED TO 100% OF SUCH PROFIT AND GAIN S FOR FIVE ASSESSMENT YEARS COMMENCES WITH THE INITIAL ASSESSMENT YEAR AND THER EAFTER 25% OF THE PROFIT AND GAINS. 2. THE LD. CIT(A) ERRED IN LAW AND FACT BY NOT APPR ECIATED THE FACT THAT SECTION 80IC OF THE I.T. ACT, 1961 HAS BEEN ENACTED IN ORDE R TO PROMOTE INDUSTRIAL GROWTH AND EMPLOYMENT GENERATION IN A BACKWARD AREA EITHER THROUGH COMMENCEMENT OF MANUFACTURING OR PRODUCTION BY A NEW INDUSTRIAL UNI T OR SUBSTANTIAL EXPANSION BY A PRE-EXISTING INDUSTRIAL UNIT. THE LAW HAS BEEN EN ACTED IN SUCH A WAY THAT THE PRE-EXISTING UNDERTAKING OR ENTERPRISES DO NOT SUFF ER FROM ANY HANDICAP MERELY ON ACCOUNT OF THE FACT THAT THEY WERE EXISTING PRIO R TO THE INTRODUCTION OF SECTION 80IC. THE CONDITION OF SUBSTANTIAL EXPANSION HAS MA DE A PRE-REQUISITE FOR ALLOWING DEDUCTION U/S 80IC IN THE CASE OF OLD UNDE RTAKING OR ENTERPRISE. IT IS HOWEVER, CLEAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UNDERTAKING OR ENTERPRISES MADE ELIGIBLE FOR DEDUCTION U/S 80IC. T HESE ARE TWO DISTINCT CATEGORIES WITH DISTINCT CONDITIONS OF ELIGIBILITY LAID DOWN FOR DEDUCTION U/S 80IC. SINCE THE PRE-EXISTING UNITS CANNOT POSSIBLY CROSSO VER INTO THE ZONE OF NEW UNDERTAKINGS OR ENTERPRISES, THE NEW UNDERTAKINGS A LSO OBVIOUSLY CANNOT BE ALLOWED TO CROSS OVER INTO THE ZONE MEANT FOR OLD, PRE-EXISTING UNDERTAKINGS. THE RULES HAVE TO BE SAME FOR ALL THE PARTICIPANTS OR S TAKEHOLDERS. 3. THE LD. CIT(A) ERRED IN LAW AND ON FACT BY NOT C ONSIDERING THE DECISION OF THE ITAT, CHANDIGARH IN THE CASE OF M/S HYCRON ELECTRON ICS VS. ITO, BADDI AND THE CBDT CIRCULAR 1/2016 DATED 15.02.2016 WHEREIN IT HA S BEEN HELD THAT AN ASSESSEE WHO IS ELIGIBLE TO CLAIM DEDUCTION U/S 80I A HAS THE OPTION TO CHOOSE THE INITIAL/FIRST YEAR, HE SHALL BE ENTITLED TO CLAIM D EDUCTION FOR TEN CONSECUTIVE YEARS FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJECT TO THE FULFILLMENT OF THE CONDITIONS PRESCRIBED IN THE SEC TION. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN INTER PRETING SECTION 80IC OF THE IT ACT IN MANNER WHEREBY SUBSTANTIAL EXPANSION IN THE NEW UNITS IS INTERPRETED ON BASIS OF DEDUCTION AT THE RATE OF 100% WHICH WILL L EAD TO ABSURDITY AS THAT WOULD MEAN THAT DEDUCTION WOULD BECOME PERPETUAL AS LONG AS ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT SUCH INTERPRETATION W OULD RENDER PROVISIONS OF SUB SECTION 6 OF SECTION 80IC OTIOSE/MEANINGLESS/REDUND ANT AND THEREFORE SUCH INTERPRETATION CANNOT BE PERMITTED. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN ACCEP TING CLAIM OF DEDUCTION OF ASSESSEE U/ S 80IC OF IT ACT BY ALLOWING CHANGING O F INITIAL ASSESSMENT YEAR, WHEREAS AS PER CLAUSE V OF SUB SECTION 8 OF SECTION 80IC IT CAN BE EITHER ON COMMENCEMENT OF OPERATION OR AT COMPLETION OF SUBST ANTIAL EXPANSION BUT IT CANNOT BE BOTH. 6. NOTWITHSTANDING, THE TAX EFFECT IS ALSO ABOVE TH E MONETARY LIMIT AS PRESCRIBED BY THE CBDT CIRCULAR NO. 21/2015 DATED 10.12.2015, THEREFORE, FURTHER APPEAL IS RECOMMENDED IN THIS CASE. 3. AT THE OUTSET, THE LD. DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE DEDUCTION DISALLOWED IN ASSESSMENT YEAR 2 013-14 IS OF RS.1,34,77,105/- AND FOR ASSESSMENT AT 2014-15 IS O F RS.55,00,478/-. HE SUBMITTED THAT TAX EFFECT INVOLV ED IN THESE TWO APPEALS IS LESS THAN THE TAX EFFECT PRESCRIBED FOR FILING APPEAL BEFORE THE TRIBUNAL AS COMMUNICATED BY THE CENTRAL BOARD O F DIRECT TAXES IN CIRCULAR NO.17/2019 DATED 08.08.2019. 4. IN VIEW OF TAX EFFECT LOWER THAN THE LIMIT PRESC RIBED FOR FILING APPEAL BY THE REVENUE, THESE APPEALS ARE DEEMED TO BE WITHDRAWN BY THE REVENUE AND HENCE DISMISSED AS INFRUCTUOUS. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUN ORDER PRONOUN ORDER PRONOUN ORDER PRONOUNCED IN THE OPEN COURT. CED IN THE OPEN COURT. CED IN THE OPEN COURT. CED IN THE OPEN COURT. SD/- SD/- (KUL BHARAT) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH JULY, 2021. NEHA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI SL. NO. PARTICULARS DATE 1. DATE OF DICTATION : 26.07.2021 2. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFOR E THE DICTATING MEMBER: 26.07.2021 3. DATE ON WHICH THE DRAFT OF ORDER IS PLACED BEFOR E THE OTHER MEMBER: 26.07.2021 4. DATE ON WHICH THE APPROVED DRAFT OF ORDER COMES TO THE SR. PS/PS: 26.07.2021 5. DATE OF WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 26.07.2021 6. DATE ON WHICH THE FINAL ORDER RECEIVED AFTER HAV ING BEEN SINGED/PRONOUNCED BY THE MEMBERS: 26.07.2021 7. DATE ON WHICH THE FINAL ORDER IS UPLOADED ON TH E WEBSITE OF ITAT: 26.07.2021 8. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 9. DATE ON WHICH FILES GOES TO THE HEAD CLERK: 10. DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER: 11. DATE OF DISPATCH OF ORDER: