M/s Health Biotech Ltd., Chandigarh V. DCIT, Chandigarh

ITA 378/CHANDI/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5211 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 28-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GULSHASN RAJ
• Keywords: Business income; Depreciation
• Section: 10B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 378/CHD/2017 ASSESSMENT YEAR: 2012-13 M/S HEALTH BIOTECH LTD., VS. THE DCIT, CIRCLE 4(1) , SCO 162-164, SECTOR 34, CHANDIGARH CHANDIGARH PAN NO. AABCH1876K (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SUDHIR SEHGAL PROXY FOR SH. TEJ MOHAN SINGH RESPONDENT BY : SH. GULSHASN RAJ, CIT DR DATE OF HEARING : 21.12.2017 DATE OF PRONOUNCEMENT : 12.02.2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S), [HEREINAFTER REFERRED TO AS CIT(A)]-2, DATED 5.10.2016. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAS THEREBY ERRED IN SUSTAINING DISALLOWANCE OF DEPRECIATION ON R&D EQUIPMENTS @ 10% INSTEAD OF 25% AS CLAIMED. 2. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAS THEREBY ERRED 2 IN ALLOWING DEDUCTION U/S 80IC OF INCOME TAX ACT, 1 961 @ 30% AS AGAINST 100% ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN IN EARLIER YEARS. 3. THAT THE LD. CIT(A)II HAS FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAS THEREB Y ERRED IN NOT ALLOWING DEDUCTION U/S 80IC OF INCOME ACT ACT, 1961 ON INTEREST INCOME AND OTHER INCOME EVEN THOUGH THE SAME FORMS PART OF THE BUSINESS INCOME. THE ACTION OF THE LD. CIT(A)-II IS UNWARRANTED, UNJUSTIFIED AND AGAINST THE PRINCIPLES OF LAW AND N ATURAL JUSTICE. IT IS THEREFORE, PRAYED THAT ORDER MAY KIN DLY BE CANCELLED ON SUCH OTHER RELIEF BE GRANTED AS IS DEE MED FIT. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ISS UE RAISED VIDE GROUND NO.2 WHICH RELATES TO THE ACTION OF THE CIT(A) IN DISALLOWING THE CLAIM OF DEDUCTION @ 100% U/S 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') ON ACCOUNT OF SUBSTA NTIAL EXPANSION OF THE UNIT IS SQUARELY COVERED BY THE DECISION OF THE HON 'BLE HIMACHAL PRADESH HIGH COURT VIDE THEIR ORDER DT. 28 NOVEMBER 2017 IN THE GROUP OF CASES WITH THE LEAD CASE TITLED AS M/S STOVEKRAFT INDIA V S. COMMISSIONER 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 ASSESSEE, HOLDING THAT THERE IS NO BAR IN THE SAID SECTION DENYING THE BENEFIT OF HUNDRED PERCENT DEDUCTION TO NEW UNITS UNDERTAKING SUBSTANTIAL EXPANSION. OUR ATTENTION HAS BEEN DRAWN TO THE RELE VANT CONCLUSIONS OF THE HONBLE HIGH COURT IN THIS REGARD AT PARA 55 OF THE ORDER AS UNDER: 55.THUS, IN VIEW OF THE ABOVE DISCUSSION, THESE A PPEALS ARE ALLOWED AND ORDERS PASSED BY THE ASSESSMENT OFF ICER AS WELL AS THE APPELLATE AUTHORITY AND THE TRIBUNAL, I N THE CASE OF EACH ONE OF THE ASSESSES, ARE QUASHED AND SET AS IDE, HOLDING AS UNDER: 3 (A) SUCH OF THOSE UNDERTAKINGS OR ENTERPRISES WHIC H WERE 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 BENEF IT OF SECTION 80-IC OF THE ACT, FOR THE PERIOD FOR WHICH THEY WERE NOT ENTITLED TO THE BENEFIT OF DEDUCTION UNDER SECT ION 80-IB. (B) SUCH OF THOSE UNITS WHICH HAVE COMMENCED PRODU CTION 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 SECT ION 80-IC. (C) SUBSTANTIAL EXPANSION CANNOT BE CONFINED TO ONE EXPANSION. AS LONG AS REQUIREMENT OF SECTION 80-IC( 8)(IX) IS MET, THERE CAN BE NUMBER OF MULTIPLE SUBSTANTIAL EX PANSIONS. (D) CORRESPONDINGLY, THERE CAN BE MORE THAN ONE INI TIAL ASSESSMENT YEARS. (E) WITHIN THE WINDOW PERIOD OF 7.1.2013 UPTO 1.4.2 012, 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 YEARS. [SECTION 80-IC(6)]. (G) UNITS CLAIMING DEDUCTION UNDER SECTION 80-IC SH ALL NOT BE ENTITLED TO DEDUCTION UNDER ANY OTHER SECTION, C ONTAINED IN CHAPTER VI-A OR SECTION 10A OR 10B OF THE ACT [S ECTION 80- IB(5)]. 5. LD. DR FAIRLY ADMITTED THAT THE ISSUE IS SQUAREL Y COVERED BY THE ABOVE DECISION OF THE HON'BLE JURISDICTIONAL HIGH C OURT. IT WAS, HOWEVER, SUBMITTED THAT THE ISSUE BE RESTORED TO T HE FILE OF THE ASSESSING OFFICER FOR VERIFICATION AS TO WHETHER TH E ASSESSEE HAS ACTUALLY CARRIED OUT THE SUBSTANTIAL EXPANSION TO B E ENTITLED TO CLAIM DEDUCTION U/S 80IC OF THE ACT. 6. WE DO NOT AGREE TO THE ABOVE CONTENTION RAISED B Y THE REVENUE AT THIS STAGE. A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER REVEALS THAT THE ASSESSING OFFICER HAS NOT DISPUTED THAT THE ASS ESSEE UNIT HAS CARRIED OUT SUBSTANTIAL EXPANSION AS PROVIDED UNDER CLAUSE (B) OF SUB SECTION 4 (2) READ WITH CLAUSE (IX) OF SUB SECTION (7) OF SEC TION 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 I NDIA VS. COMMISSIONER OF INCOME TAX (SUPRA) IN THE FOLLOWIN G 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 ENTITLEMENT AND EXTENT OF DEDUCTION WOULD BE DEPEND ENT UPON INTERPRETATION OF THE RELEVANT PROVISIONS. WE, THEREFORE, DO NOT FIND ANY JUSTIFICATION AT THI S STAGE TO GIVE THE ASSESSING OFFICER A SECOND INNINGS TO RE-EXAMINE UN DISPUTED FACTS. 7. IN VIEW OF THE ABOVE DISCUSSION, THE IMPUGNED OR DER OF THE LD. CIT(A) ON THIS ISSUE IS SET ASIDE, AND THE AO IS D IRECTED TO GRANT TO THE ASSESSEES DEDUCTION AT THE RATE OF HUNDRED PERCENT OF ITS ELIGIBLE PROFITS, AS PER THE RULING OF THE JURISDICTIONAL H IGH COURT IN THIS REGARD IN THE CASE OF M/S STOVEKRAFT INDIA VS. COMMISSION ER OF INCOME TAX (SUPRA). IN VIEW OF THE ABOVE, GROUND NO.2 OF THE APPEALS IS AL LOWED. 8. AT THIS STAGE, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUE RELATING TO GROUND NO.1 IS RELATING TO THE DI SALLOWANCE OF DEPRECIATION ON R&D EQUIPMENTS @ 10% AS AGAINST T HE CLAIM OF 25%. THE LD. COUNSEL FOR THE ASSESSEE HAS BEEN FAIR ENOU GH TO ADMIT THAT THIS DISALLOWANCE OF DEPRECIATION HAS RESULTED INTO INCO ME OF THE ASSESSEES UNIT WHICH OTHERWISE IS EXEMPT U/S 80IC OF THE ACT. HENCE THE ABOVE DISALLOWANCE OF DEPRECIATION IS TAX NEUTRAL TO TH E ASSESSEE. IN VIEW OF THE 5 ABOVE, WITHOUT GOING INTO MERITS OF THE CASE, THIS GROUND IS DISMISSED BEING TAX NEUTRAL AND RENDERED ACADEMIC IN NATURE . 9. VIDE GROUND NO.3 OF THE APPEAL, THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF INTEREST INCOME AND OTHER INCOME OUT OF DEDUCTION CLAIMED U/S 80IC OF THE ACT. THE LD. COUNSEL FOR TH E ASSESSEE COULD NOT DEMONSTRATE WITH CONVINCING EVIDENCE ON THE FILE AS TO HOW THE INTEREST INCOME ON THE FDRS AND THE OTHER INCOME RELATES TO MANUFACTURING ACTIVITY OF THE ASSESSEE. IN VIEW OF THIS, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LOWER AUTHORITIES IN NOT ALLOWING DEDUCTION U/S 80IC ON THE INTEREST INCOME AND OTHER INCOME. THIS ISSUE IS DECIDED AGAI NST THE ASSESSEE. 10. IN VIEW OF THE FINDINGS GIVEN ABOVE, THE APPEA L OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.02.2018 SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 12.02.2018 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR