ITO, Ward-35(2), New Delhi V. Vijay Gupta, Delhi

ITA 4080/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7873 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Appeal Filed On: 29-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: V K TULSIYAN
• Keywords: Depreciation; Charitable institution; Set aside
• Section: 6

Judgement Text

ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 1 OF 36 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: F: NEW DELHI) BEFORE SHRI KULDIP SINGH, JUDICIAL MEMBER AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER ITA NO:- 4080/DEL/2018 ( ASSESSMENT YEAR: 2014-15) INCOME TAX OFFICER, WARD 35(2), NEW DELHI VS. SHRI VIJAY GUPTA, 19/12, GROUND FLOOR, SHAKTI NAGAR, DELHI-110007. PAN NO: AAUPG6379A APPELLANT RESPONDENT ASSESSEE BY : SHRI V.K. TULSIYAN, CA REVENUE BY : SHRI SURENDER PAL, SR. DR ORDER PER ANADEE NATH MISSHRA, AM THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE O RDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-12, [LD. CIT( A), FOR SHORT], NEW DELHI, DATED 19.02.2018 FOR ASSESSMENT YEAR 2014-15, ON TH E FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN DELE TING THE ADDITION OF RS.69,03,427/- FOR A.Y.2014-15 BY HOLDING THAT T HE ASSESSEE IS ELIGIBLE TO CLAIM FURTHER DEDUCTION @ 1 00% U/S 80IC OF THE ACT BY MAKING SUBSTANTIAL EXPANSION EVE N AFTER THE ASSESSEE HAS ALREADY AVAILED 100% DEDUCTION U/S 80I C OF THE ACT FOR THE INITIAL FIVE YEARS AFTER THE COMMENCEME NT OF MANUFACTURING OR PRODUCTION OF THE INDUSTRIAL UNDER TAKING. THE LD. CIT(A) HAS NOT APPRECIATED THE PROVISIONS OF SU B-CLAUSE (II) OF SUB-SECTION 3 OF SECTION 80IC WHICH ENUMERATES T HAT THE DEDUCTION REFERRED TO IN SUB-SECTION 1 SHALL BE RES TRICTED TO ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 2 OF 36 100% OF SUCH PROFIT AND GAINS FOR FIVE ASSESSMENT Y EARS 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 APP RECIATED THE FACT THAT SECTION 801C OF THE I.T. ACT, 1961 HA S BEEN ENACTED IN ORDER TO PROMOTE INDUSTRIAL GROWTH AND E MPLOYMENT GENERATION IN A BACKWARD AREA EITHER THROUGH COMMEN CEMENT OF MANUFACTURING OR PRODUCTION BY A NEW INDUSTRIAL UNIT OR SUBSTANTIAL EXPANSION BY A PRE-EXISTING INDUSTRIAL UNIT. THE LAW HAS BEEN ENACTED IN SUCH A WAY THAT THE PREEXIS TING UNDERTAKING OR ENTERPRISES DO NOT SUFFER FROM ANY H ANDICAP MERELY ON ACCOUNT OF THE FACT THAT THEY WERE EXISTI NG PRIOR TO THE INTRODUCTION OF SECTION 80IC. THE CONDITION OF SUBSTANTIAL EXPANSION HAS MADE A PRE-REQUISITE FOR ALLOWING DED UCTION U/S 80IC IN THE CASE OF OLD UNDERTAKING OR ENTERPRISE. IT IS HOWEVER, CLEAR THAT THERE IS NO OVERLAPPING OF THE TWO KINDS OF UNDERTAKING OR ENTERPRISES MADE ELIGIBLE FOR DEDUCT ION U/S 801C. THESE ARE TWO DISTINCT CATEGORIES WITH DISTIN CT CONDITIONS OF ELIGIBILITY LAID DOWN FOR DEDUCTION U/S 801C. SI NCE THE PRE- EXISTING UNIT CANNOT POSSIBLY CROSSOVER INTO THE ZO NE 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 STAKEHOLDERS. 3. THE LD. C1T(A) ERRED IN LAW AND ON FACT BY NO T CONSIDERING THE DECISION OF THE 1TAT, CHANDIGARH IN THE CASE OF M/S HYCRON ELECTRONICS VS. ITO, BADI AND THE CBDT C IRCULAR 1/2016 DATED 15.02.2016 WHEREIN IT HAS 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 B E ENTITLED TO CLAIM DEDUCTION FOR TEN CONSECUTIVE YEARS FROM THE YEAR IN RESPECT OF WHICH HE HAS EXERCISED SUCH OPTION SUBJE CT TO THE FULFILMENT OF THE CONDITIONS PRESCRIBED IN THE SECT ION. 4. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN INTE RPRETING SECTION 80IC OF THE I.T. ACT IN MANNER WHEREBY SUBS TANTIAL EXPANSION IN THE NEW UNITS IS INTERPRETED ON BASIS OF DEDUCTION AT THE RATE OF 100% WHICH WILL LEAD TO ABSURDITY AS THAT WOULD ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 3 OF 36 MEAN THAT DEDUCTION WOULD BECOME PERPETUAL AS LONG AS ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BUT SUCH INTERPRETATION WOULD RENDER PROVISIONS OF SUB SECTI ON 6 OF SECTION 80IC OTIOSE/MEANINGLESS/REDUNDANT AND THERE FORE SUCH INTERPRETATION CANNOT BE PERMITTED. 5. THE LD. CIT(A) ERRED IN LAW AND ON FACT IN ACCE PTING CLAIM OF DEDUCTION OF ASSESSEE U/S 80IC OF IT ACT BY ALLO WING CHANGING OF 'INITIAL ASSESSMENT YEAR, WHEREAS AS P ER CLAUSE V OF SUB SECTION 8 OF SECTION 80IC IT CAN BE EITHER ON COMMENCEMENT C OPERATION OR AT COMPLETION OF SUBSTA NTIAL EXPANSION BUT IT CANNOT BE BOTH. THE APPELLANT RESERVES HIS RIGHT TO ADD, AMEND OR A LTER THE GROUNDS OF APP ON OR BEFORE THE DATE OF APPEAL IS F INALLY HEARD FOR DISPOSAL 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURIN G OF GAS STOVE AND CLAIMS DEDUCTION U/S 80IC OF INCOME TAX ACT, 1961 [ IN SHORT ACT]. THE ASSESSEE STARTED THIS BUSINESS FROM 28.11.2016 AND CURRENT YEAR IS THE 8 TH YEAR OF THE BUSINESS. THE ASSESSEE CLAIMED 100% DEDUCTI ON, AMOUNTING TO RS.92,04,570/- DURING THE YEAR U/S 80IC OF THE ACT. ACCORDING TO THE AO, 100% DEDUCTION IS ADMISSIBLE FOR FIRST FIVE YEARS, AND THEREAFTER FOR THE SUBSEQUENT 5 YEARS, DEDUCTION U/S 80IC IS ALLOWABLE TO THE ASSESSEE @ 25% ONLY. THE ASSESSEES CLAIM FOR 100 % DEDUCTION U/S 80IC OF THE ACT DURING THE YEAR, DESPITE THE FACT THAT THIS IS THE 8 TH YEAR OF CLAIM OF DEDUCTION U/S 80IC OF THE ACT, IS BASED ON THE FACT NOT DISPUTED BY REVEN UE, THAT THE ASSESSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION OF ITS PLANT & MAC HINERY DURING THE YEAR. HOWEVER, THE AO REJECTED THE CONTENTION OF THE ASSE SSEE FOR 100% DEDUCTION U/S 80IC OF THE ACT AND ALLOWED DEDUCTION @ 25 % OF THE PROFITS FROM THE ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 4 OF 36 ELIGIBLE BUSINESS AND DISALLOWED THE REMAINING 75%, AMOUNTING TO RS.69,93,427/-. 3. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A), WH O VIDE ORDER DATED 19.02.2018 DELETED THE ADDITION AND ALLOWED THE ASS ESSEES APPEAL HOLDING AS UNDER:- 7. DECISION 7.1 THE UNDISPUTED FACTS ARE THAT ASSESSEE IS DERI VING INCOME FROM MANUFACTURING OF LPG GAS STOVE UNDER THE NAME & STY LE M/S SUPERSHINE DOMESTIC APPLIANCES. THE ASSESSEE STARTED BUSINESS FROM 28.11.2006 AND CURRENT YEAR WAS THE 8TH YEAR OF THE BUSINESS. ASSE SSEE CLAIMED DEDUCTION OF RS.92,04,570/- @ 100 % OF PROFIT ULS 801C OF THE I.T. ACT. ASSESSEE'S CONCERN IS LOCATED IN DISTT. SOLAN, HIMACHAL PRADES H. THE INITIAL ASSESSMENT YEAR IN WHICH THE DEDUCTION CLAIMED WAS AY 2007-08. THE ASSESSEE MADE SUBSTANTIAL EXPANSION OF ITS PLANT & MACHINERY ON 31.03.2012 AND AS CLAIMED, THE SUBSTANTIAL EXPANSIO N WAS RECOGNIZED W.E.F. 31.03.2012 AS PER CERTIFICATE ISSUED BY THE DEPARTMENT OF INDUSTRIES, SWCA, DISTT. SOLAN, HIMACHAL PRADESH. T HE ONLY DISPUTE IN THIS CASE IS WHETHER THERE COULD BE MORE THAN ONE INITIA L ASSESSMENT YEAR IN CASE OF SUBSTANTIAL EXPANSION AFTER CLAIMING INITIA L ASSESSMENT YEAR BY STARTING THE PRODUCTION ENVISAGED UNDER THE PROVISI ONS OF 801C OF THE ACT. MY ATTENTION HAS BEEN DRAWN TOWARDS THE DECISION OF HON'BLE HIGH COURT OF HIMACHAL PRADESH, SHIMLA IN THE CASE OF MIS STOV EKRAFT INDIA VS. CIT & ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 5 OF 36 OTHERS DECIDED ON NOVEMBER 28, 2017. THE RELEVANT P ART OF THE DECISION IS QUOTED BELOW: 12. AT THIS JUNCTURE, WE DEEM IT APPROPRIATE TO DEA L WITH THE RELEVANT STATUTORY PROVISIONS. 13. CHAPTER-VI-A PART-C OF THE ACT DEALS WITH DEDUC TIONS IN RESPECT OF CERTAIN INCOME. 14. SECTION 80-IA WAS INSERTED BY THE FINANCE (NO.2 ) ACT. 1991, WITH EFFECT FROM 01.04.1991. BY VIRTUE OF SAID SECTION, THE GROSS TOTAL INCOME (PROFITS AND GAINS) OF AN ASSESSEE DERIVED F ROM ANY BUSINESS OF AN INDUSTRIAL UNDERTAKING, SO SPECIFIED THEREIN, WAS ENTITLED TO CERTAIN DEDUCTION FOR A PERIOD COMMENCING FROM 01.0 4.1993. 15. WITH EFFECT FROM 01.04.2000, THE SAID PROVISION WAS BIFURCATED WITH THE INSERTION OF ANOTHER SECTION, I.E. 8018, D EALING WITH 'CERTAIN INDUSTRIAL UNDERTAKING OTHER THAN INFRASTRUCTURE DE VELOPMENT UNDERTAKING'. WHAT IS RELEVANT IS THAT BY VIRTUE OF SUB-SECTION (4) OF THIS NEWLY INSERTED SECTION, IN THE CASE OF AN INDU STRIAL UNDERTAKING ESTABLISHED IN AN INDUSTRIALLY BACKWARD STATE, SPEC IFIED IN THE EIGHTH SCHEDULE, WAS ENTITLED TO DEDUCTION TO THE E XTENT OF 100% OF THE PROFITS AND GAINS DERIVED FROM SUCH INDUSTRIAL UNDERTAKING FOR FIVE ASSESSMENT YEARS BEGINNING FROM THE INITIAL AS SESSMENT YEAR, AND THEREAFTER @ 25% SUBJECT TO THE TOTAL PERIOD OF DEDUCTION NOT EXCEEDING THEN CONSECUTIVE ASSESSMENT YEARS. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 6 OF 36 16. THEREAFTER, THE LEGISLATORS, IN THEIR WISDOM, E NACTED A SPECIAL PROVISION, IN RESPECT OF 'UNITS' ESTABLISHED IN CER TAIN SPECIAL CATEGORY STATES. THUS, SECTION 80-LE CAM TO BE INSERTED BY V IRTUE OF FINANCE ACT, 2003, APPLICABLE WITH EFFECT FROM 01.04.2004. AT THIS POINT, IT BE ONLY NOTICED THAT CORRESPONDINGLY CERTAIN PROVISION OF SECTION 80-18 WERE ALSO AMENDED/REPEALED. DEDUCTIONS UNDER THE SA ID SECTION WERE DISCONTINUED FOR THE ASSESSMENT YEARS COMMENCI NG FROM 01.04.2004. (SUB-SECTION (4) OF SECTION 80-18). 17. FOR THE PURPOSE OF READY REFERENCE, AND PROPER UNDERSTANDING OF THE ISSUE, WE DEEM IT APPROPRIATE TO REPRODUCE THE RELEVANT CLAUSES OF SECTION 80-LE, ITSELF, WHICH READ AS UNDER:- '80IC. SPECIAL PROVISION IN RESPECT OF CERTAIN UNDE RTAKINGS OR ENTERPRISE IN CERTAIN SPECIAL CATEGORY STATES :- (1 ) WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AN D GAINS DERIVED BY AN UNDERTAKING OR AN ENTERPRISE FROM ANY BUSINES S REFERRED TO IN SUB- SECTION (2), THERE SHALL, IN ACCORDANCE WITH A ND SUBJECT TO THE PROVISION OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFITS AND GAI NS, AS SPECIFIED IN SUB-SECTION (3). (2) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE,- (B) WHICH HAS BEGUN OR BEGINS TO MANUFACTURE OR PRO DUCE ANY ARTICLE OR THIN, SPECIFIED IN THE FOURTEENTH SCHEDULE OR CO MMENCES ANY ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 7 OF 36 OPERATION SPECIFIED IN THAT SCHEDULE, OR WHICH MANU FACTURES OR PRODUCES ANY ARTICLE OR THIN, SPECIFIED IN THE FOUR TEENTH SCHEDULE OR COMMENCES ANY OPERATION SPECIFIED IN THAT SCHEDULE AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD BEGINNING. (I) ON THE 23RD DAY OF DECEMBER, 2002 AND ENDING BE FORE THE 1 ST DAY OF APRIL, [2007], IN THE STATE OF SIKKIM: OR (II) ON THE 7TH DAY OF JANUARY, 2003 AND ENDING BEF ORE THE 1ST DAY OF APRIL, 2012, IN THE STATE OF HIMACHAL PRADESH OR THE STATE OF UTTARANCHAL; OR (III) ON THE 24TH DAY OF DECEMBER, 1997 AND ENDING BEFORE THE 1ST DAY OF APRIL, 2007, IN ANY OF THE NORTH-EASTERN STA TES. (3) THE DEDUCTION REFERRED TO I SUB-SECTION (1) SHA LL BE- (I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE RE FERRED TO IN SUB- CLAUSES (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III) OR CLAUSE (B), OR SUB-SECTION (2), ONE HUNDRED PER CENT OF SU CH PROFITS AND GAINS FOR TEN ASSESSMENT YEARS COMMENCING WITH THE INITIA L ASSESSMENT YEAR; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE R EFERRED TO IN SUB- CLAUSE (II) OR CLAUSE (A) OR SUB-CLAUSE (II) OF CLA USE (B), OF SUB-SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT YEAR AND ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 8 OF 36 THEREAFTER, TWENTY-FIVE PER CENT (OR THIRTY PER CEN T WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (4) THIS SECTION APPLIES TO ANY UNDERTAKING OR ENTE RPRISE WHICH FULFILS 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 RES PECT OF AN UNDERTAKING WHICH IS FORMED AS A RESULT OF THE RE-E STABLISHMENT, RECONSTRUCTION OR REVIVAL BY THE ASSESSEE OF THE BU SINESS OR ANY SUCH UNDERTAKING AS IS REFERRED TO IN SECTION 33B, IN TH E CIRCUMSTANCES AND WITHIN THE PERIOD SPECIFIED IN THAT SECTION; (II) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUSI NESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION: THE PROVISION OF EXPLANATIONS 1 AND 2 TO SUB-SECTION (3) OF SECTION 80-IA SHALL APPLY FOR THE PURPOSES OF CL AUSE (II) OF THIS SUB- SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (I I) OF THAT SUB- SECTION. (5) NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS ACT, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY OTHER SECTION CONTAINED IN CHAPTER VIA ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 9 OF 36 OR IN SECTION 10A OR SECTION 10B, IN RELATION TO TH E PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE. (6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO .DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE U NDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF TH E PERIOD OF DEDUCTION UNDER THIS SECTION, OR UNDER THE SECOND P ROVISO TO SUB- SECTION (4) OF SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. (7) THE PROVISIONS CONTAINED IN SUB-SECTION (5) AND SUB-SECTION (7) TO (12) OF SECTION 80-IA SHALL, SO FAR AS MAY BE, APPL Y TO THE ELIGIBLE UNDERTAKING OR ENTERPRISE UNDER THIS SECTION. (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 E NTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR CO MMENCES OPERATION OR COMPLETES SUBSTANTIAL EXPANSION; (VII) 'NORTH-EASTERN STATES' MEANS THE STATES OF AR UNACHAL PRADESH, ASSAM, MANIPUR, MEGHALAYA, MIZORAM, NAGALAND AND TR IPURA; (IX) 'SUBSTANTIAL EXPANSION' MEANS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST FIFTY PER CENT OF T HE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECIATION IN ANY YEAR), AS ON ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 10 OF 36 THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH THE SUB STANTIAL EXPANSION IS UNDERTAKEN;' 18. THE SECTION APPLIES TO AN UNDERTAKING OR AN ENT ERPRISES. WHAT IS AN 'UNDERTAKING OR AN 'ENTERPRISE' (ALREADY REFERRE D TO AS UNIT) IS NOT DEFINED UNDER THE SECTION/ACT AND WE NEED NOT DWELL THEREUPON, FOR IT IS NOT AN ISSUE BEFORE US. HOWEVER, WHAT IS OF I MPORTANCE IS THE STIPULATION UNDER SUB-CLAUSE (II) OF CLAUSE (B) OF SUB-SECTION 2 OF SECTION 80-IC, INSOFAR AS STATE OF HIMACHAL PRADESH IS CONCERNED. IF BETWEEN 07.01.2003 AND 01.04.2012, A 'UNIT' HAS 'BE GUN' OR 'BEGINS' TO MANUFACTURE OR PRODUCE ANY ARTICLE OR T HIN, SPECIFIED IN THE FOURTEENTH SCHEDULE OR COMMENCES ANY OPERATION 'AND UNDERTAKES SUBSTANTIAL EXPANSION' DURING THE SAID P ERIOD, THEN BY VIRTUE OF SUB-SECTION (3), IT SHALL BE ENTITLED TO DEDUCTION AT THE RATE OF 100% OF PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS , COMMENCING FROM 'INITIAL ASSESSMENT YEAR' AND THEREAFTER AT TH E RATE OF 25% OF THE PROFITS AND GAINS. THE ONLY RESTRICTION BEING T HAT SUCH SUBSTANTIAL EXPANSION IS NOT FORMED BY SPLITTING UP , OR RECONSTRUCTION, OF THE BUSINESS ALREADY IN EXISTENC E. AT THIS STAGE, WE MAY NOTE UNDER SUB- SECTION (6) OF SECTION 80-IC , THERE IS A CAP WITH REGARD TO THE TOTAL PERIOD FOR WHICH A UNIT IS ENTITLED TO SUCH DEDUCTION. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 11 OF 36 19. SUB-SECTION (1) OF SECTION 80-IC ENTITLES A UNI T FOR DEDUCTION; SUB- SECTION (2) LAYS DOWN ELIGIBILITY CRITERIA; SUB-SEC TION (3) SPECIFIES THE EXTENT OF ENTITLEMENT, SUB-SECTION (3), IN TURN, IS CONTROLLED BY SUB- SECTION (8), IN CASE OF SUBSTANTIAL EXPANSION OF A UNIT. 20. LANGUAGE OF THE STATUTE IS CLEAR, SIMPLE AND UN AMBIGUOUS. TO OUR MIND, THERE CANNOT BE ANY TWO VIEWS OR INTERPRE TATIONS ABOUT THE SAME. IF AN UNDERTAKING OR AN ENTERPRISE ('UNIT'), WHICH HAS 'BEGUN' OR 'BEGINS' TO MANUFACTURE/PRODUCE/COMMENCE OPERATI ON OF ANY ARTICLE OR THING SPECIFIED IN THE FOURTEENTH SCHEDU LE AND CARRIES OUT/UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PRE SCRIBED PERIOD, THEN IT IS ENTITLED TO THE BENEFITS OF DEDUCTION FO R SUCH PERCENTAGE, AS IS PROVIDED UNDER SUB-SECTION (3) OF SECTION 80-IC. 21. CAN THERE BE MORE THAN ONE 'INITIAL ASSESSMENT YEAR', AS THE AUTHORITIES BELOW HAVE HELD IT NOT TO BE SO? CLAUSE S (V) OF SUB-SECTION (8) OF SECTION 80-IC, DEFINES WHAT IS AN 'INITIAL A SSESSMENT YEAR'. IT IS ONLY FOR THE PURPOSE OF THIS SECTION. NOW, 'INIT IAL ASSESSMENT YEAR' HAS BEEN HELD TO MEAN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE 'UNIT' BEGINS TO MANUFACTURE OR P RODUCE ARTICLE OR THIN OR COMMENCES OPERATION OR COMPLETES SUBSTANTIA L EXPANSION. SIGNIFICANTLY, THE ACT DOES NOT STIPULATE THAT ONLY UNITS ESTABLISHED PRIOR TO 07.01.2003 SHALL BE ENTITLED TO THE BENEFI TS UNDER SECTION 80-IC. THE DEFINITION OF 'INITIAL ASSESSMENT YEAR' IS DISJUNCTIVE AND ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 12 OF 36 NOT CONJUNCTIVE. THE INITIAL ASSESSMENT YEAR HAS TO BE SUBSEQUENT TO THE YEAR IN WHICH THE 'UNIT' COMPLETES SUBSTANTIAL EXPANSION OR COMMENCES MANUFACTURING ETC., AS THE CASE MAY BE. 22. A BARE LOOK AT EXPLANATION (B) OF SECTION 80-18 (11C) AND SECTION 80-IB(14)(C) WOULD REFLECT THAT, EARLIER [TILL SECT ION 80-IC WAS INSERTED W.E.F. 01.04.2004J 'SUBSTANTIAL EXPANSION WAS NOT I NCLUDED IN THE DEFINITION OF INITIAL ASSESSMENT YEAR. EARLIER DEFI NITION HAD USED WORDS 'STARTS FUNCTIONING', 'COMPANY IS APPROVED', 'COMMENCES PRODUCTION', 'BEGINS BUSINESS', 'STARTS OPERATING', 'BEGINS TO PROVIDE SERVICES'. BUT SECTION 80-IC (8)(V) CHANGED WORDING S [OF 'INITIAL ASSESSMENT YEAR'] TO 'BEGINS TO MANUFACTURE', 'COMM ENCES OPERATION', OR 'COMPLETES SUBSTANTIAL EXPANSION'. T HUS, LEGISLATURE CONSCIOUSLY EXTENDED THE BENEFIT OF 'INITIAL ASSESS MENT YEAR' TO A UNIT THAT COMPLETED SUBSTANTIAL EXPANSION. 23. THIS IS ABSOLUTELY IN CONJUNCTION AND HARMONY W ITH CLAUSE (B) OF SUB-SECTION (2) OF SECTION 80-IC, WHICH POSTULATES TWO THINGS - (A) AN UNDERTAKING OR AN ENTERPRISE HAS 'BEGUN', IT IS IN THE PAST TENSE OR (B)'BEGINS', WHICH IS IN PRESENTI. SIGNIFICANTLY, W HAT IS IMPORTANT IS THE WORD 'AND' PREFIXED TO THE WORDS 'UNDERTAKES SU BSTANTIAL EXPANSION' DURING THE PERIOD 07.01.2003 TO 01.04.20 12. 24. WORDS 'COMMENCING WITH THE INITIAL ASSESSMENT Y EAR' ARE RELEVANT. IT IS THE TRIGGER POINT FOR ENTITLING THE UNITS, SUBJECT TO THE ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 13 OF 36 FULFILLMENT OF ITS ELIGIBILITY FOR DEDUCTION @ 100% , FOR HAD IT NOT BEEN SO, THERE WAS NO PURPOSE OR OBJECT OF HAVING INSERT ED THE SAID WORDS IN THE SECTION. IF THE INTENT WAS ONLY TO GIVE 100% DEDUCTION FOR THE FIRST FIVE YEARS AND THEREAFTER AT THE RATE OF 25% FOR NEXT FIVE YEARS, THE LEGISLATURES WOULD NOT HAVE INSERTED THE SAID W ORDS. THEY WOULD HAVE PLAINLY SAID, 'FOR THE FIRST INITIAL FIV E YEARS A UNIT WOULD BE ENTITLED TO DEDUCTION AT THE RATE OF 100% AND FO R THE REMAINING FIVE YEAR AT THE RATE OF 25%'. 25. THUS, THE QUESTION, WHICH FURTHER ARISES FOR CO NSIDERATION, IS AS TO WHETHER, IT IS OPEN FOR A 'UNIT' TO CLAIM DEDUCT ION FOR A PERIOD OF TEN YEARS @ 100% OR NOT. TO OUR MIND, IT IS LEGALLY PERMISSIBLE. THE STATUTE PROVIDES FOR THE SAME. 26. SIGNIFICANTLY, SECTION DOES NOT RESTRICT GRANT OF DEDUCTION @ 100% ONLY FOR PERIOD OF FIVE YEARS. IT DOES NOT PROVIDE THAT DEDUCTION(S) HAVE TO BE IN ONE STRETCH OR IN CONTINUITY, ENDING OR SUCCEEDING WITH EACH FINANCIAL YEAR/INITIAL FINANCIAL YEAR. IT DOES NOT STAT THAT TEN ASSESSMENT YEARS HAVE TO BE IN CONTINUITY. ALL THAT IT PROVIDES FOR IS THAT NO DEDUCTION SHALL BE ALLOWED TO A 'UNIT', EIT HER UNDER SECTION 80-IC OR 80-IB OR 10-C, FOR A PERIOD EXCEEDING THEN ASSESSMENT YEARS. THIS SECTION DOES NOT CURTAIL THE PERCENTAGE OF EXEMPTION, TO WHICH A 'UNIT' MAY BE ENTITLED FOR A PERIOD OF TEN ASSESSMENT YEARS. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 14 OF 36 27. ALSO, IN OUR CONSIDERED VIEW, 'SUBSTANTIAL EXPA NSION' CAN BE ONE MORE THAN ONE OCCASION. MEANING OF EXPRESSION 'SUBS TANTIAL EXPANSION' IS DEFINED IN CLAUSE [8(IX)J OF SECTION 80-IC AND WITH EACH SUCH ENDEAVOUR, IF THE ASSESSEE FULFILLS THE CRITER IA THEN THERE CANNOT BE ANY PROHIBITION WITH REGARD THERETO. FOR WHAT IS IMPORTANT, IN OUR CONSIDERED VIEW, IS NOT THE NUMBER OF EXPANSIONS, B UT THE PERIOD WITHIN WHICH SUCH EXPANSIONS CAN BE CARRIED OUT WIT HIN THE WINDOW PERIOD [07.01.2003 TO 01.04.2012] AND IT IS HERE WE FIND THE WORDS 'BEGUN' OR 'BEGINS' AND 'UNDERTAKES SUBSTANTIAL EXP ANSION' DURING THE SAID PERIOD, AS STIPULATED UNDER CLAUSE (B) SUB -SECTION 2 OF SECTION 80-IC, TO BE OF SIGNIFICANCE. THE ONLY RIDE R IMPOSED IS BY VIRTUE OF SUB-SECTION (6) OF SECTION 80-1A, WHICH C APS THE DEDUCTION WITH RESPECT TO ASSESSMENT YEARS TO WHICH A UNIT IS ENTITLED TO. 28. OF COURSE, ONE THING IS CERTAIN. ALSO, WE ARE C LEAR THAT UNDER NO CIRCUMSTANCES, AN ASSESSEE CAN CLAIM DEDUCTIONS, BE IT UNDER SECTION 80-IC, 80-IB OR 10-C OF THE ACT, FOR A PERI OD EXCEEDING TEN YEARS, AS IS SOUGHT TO BE URGED BY SOME OF THE ASSE SSEES. 29. WHAT WAS THE INTENT AND THE OBJECT SOUGHT TO BE ACHIEVED BY THE LEGISLATURE BY INSERTING THE NEW SECTION. TO OUR MI ND, IT WAS TO PROMOTE AND ENHANCE ACTIVITIES ENVISAGED UNDER THE FOURTEENTH SCHEDULE, WHICH COULD ALSO BE BY CARRYING OUT SUBST ANTIAL EXPANSION ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 15 OF 36 OF THE 'UNIT'. IT IS TO GIVE INCENTIVES TO 'UNITS' FOR SETTING UP OR EXPANDING IN SPECIAL CATEGORY STATES. 30. IT IS A SETTLED PRINCIPLE OF LAW THAT EXIGIBILI TY TO TAX IS DIFFERENT FROM THE CONCEPT OF EXEMPTION/CONCESSION. [PADINJAR EKKARA AGENCIES LTD. VS. STATE OF KERALA, (2008) 3 SCC 597 (TWO JUD GES)] 31. IT IS ALSO A SETTLED PRINCIPLE OF LAW THAT DOUBT, IF ANY, IN THE CONSTRUCTION OF PROVISION OF A TAXING STATUTE MUST BE RESOLVED I N FAVOUR OF THE ASSESSEE. [THE INDIAN ALUMINIUM CO. LTD. VS. THE C. I. T., WEST BENGAL, CALCUTTA, (1972) 2 SCC 150 (FIVE JUDGES): S TAR INDUSTRIES VS. COMMISSIONER OF CUSTOMS (IMPORTS), RAIGAD, (201 6) 2 SCC 362 (TWO JUDGES); AND EVEREADY INDUSTRIES INDIA LIMITED VS. STATE OF KARANATAKA, (2016) 12 SCC 551 (TWO JUDGES)]. 32. IT IS ALSO A SETTLED PRINCIPLE OF LAW THAT EXEM PTION BEING AN EXCEPTION HAS TO BE RESPECTED REGARD BEING HAD TO I TS NATURE AND PURPOSE. [STATE OF HARYANA AND OTHERS VS. BHARTI TE LETECH LIMITED, (2014) 3 SCC 556 (THREE JUDGES)]. 33. WHILE ARGUING THAT FISCAL STATUTE HAS TO BE INT ERPRETED ON THE BASIS OF THE LANGUAGE USED THEREIN, MR. KUTHIALA, L EARNED SENIOR COUNSEL, INVITES OUR ATTENTION TO THE DECISION REND ERED BY THE APEX COURT IN ORISSA STATE WAREHOUSING CORPORATION V. CO MMISSIONER OF INCOME TAX, (1999) 4 SCC 197. THERE CANNOT BE ANY D ISPUTE WITH REGARD TO SUCH PROPOSITION, BUT HOWEVER, WITH PROFI T, WE MAY ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 16 OF 36 REPRODUCE THE OBSERVATIONS MADE BY THE APEX COURT O N THE ISSUE, AS UNDER:- '40. IN FINE THUS, A FISCAL STATUTE SHALL HAVE TO B E INTERPRETED ON THE BASIS OF THE LANGUAGE USED THEREIN AND NOT DE HORS THE SAME. NO WORDS OUGHT TO BE ADDED AND ONLY THE LANGUAGE USED OUGHT TO BE CONSIDERED SO AS TO ASCERTAIN THE PROPER MEANING AN D INTENT OF THE LEGISLATION. THE COURT IS TO ASCRIBE NATURAL AND OR DINARY MEANING TO THE WORDS USED BY THE LEGISLATURE AND THE COURT OUG HT NOT, UNDER ANY CIRCUMSTANCES, TO SUBSTITUTE ITS OWN IMPRESSION AND IDEAS IN PLACE OF THE LEGISLATIVE INTENT AS IS AVAILABLE FRO M A PLAIN READING OF THE STATUTORY PROVISIONS.' 34. MR. KUTHIALA FURTHER INVITES OUR ATTENTION TO T HE PRINCIPLE OF LAW LAID DOWN BY THE APEX COURT IN DLF QUTAB ENCLAVE CO MPLEX EDUCATIONAL CHARITABLE TRUST V. STATE OF HARYANA AN D OTHERS, (2003) 5 SCC 622. WE NOTICE THE COURT TO HAVE OBSERVED AS UNDER:- '50. BASIC RULE OF INTERPRETATION OF STATUTE IS THA T THE COURT SHALL NOT GO BEYOND THE STATUTE UNLESS IT IS ABSOLUTELY NECES SARY SO TO DO. RULE OF 'PURPOSIVE CONSTRUCTION' WOULD BE RESORTED TO ONLY WHEN THE STATUTE TO OBSERVE OR WHEN READ LITERALLY IT LEADS TO MANIFEST INJUSTICE OR ABSURDITY.' 35. THE COURT WAS DEALING WITH THE PROVISIONS OF LA WS RELATING TO URBAN DEVELOPMENT, UNLIKE THE TAXING STATUTE, IN RE LATING TO WHICH ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 17 OF 36 THE APEX COURT, IN ANOTHER REPORT, HAS HELD THAT EQ UITY AND TAXATION ARE OFTEN STRANGERS AND IF CONSTRUCTION RESULTS IN EQUITY RATHER THAN INJUSTICE, THEN SUCH CONSTRUCTION SHOULD BE PREFERR ED TO THE LITERAL CONSTRUCTION. (COMMISSIONER OF INCOME TAX V. J.H. G OT/A, (1985) 4 SCC 343). 36. FURTHER, MR. KUTHIALA INVITES OUR ATTENTION TO ANOTHER REPORT, WHICH WE FIND PROFITABLE TO REPRODUCE THE FOLLOWING OBSERVATIONS MADE BY THE APEX COURT IN STATE OF W.B. V. KESORAM INDJUSTRIES LTD. AND OTHERS, (2004) 10 SCC 201: '138. IT IS WELL SETTLED THAT IT IS FOR THE LEGISLA TURE TO DRAFT A PIECE OF LEGISLATION BY MAKING THE CHOICEST SELECTION OF WOR DS SO AS TO GIVE EXPRESSION TO ITS INTENTION. THE ORDINARY RULE OF I NTERPRETATION IS THAT THE WORDS USED BY THE LEGISLATURE SHALL BE GIVEN SU CH MEANING AS THE LEGISLATURE HAS CHOSEN TO IN ABSENCE THEREOF TH E WORDS WOULD BE GIVEN SUCH MEANING AS THEY ARE SUSCEPTIBLE OF IN OR DINARY PARLANCE, MAYBE, BY HIVING RECOURSE TO DICTIONARIES. HOWEVER, STILL, THE INTERPRETATION IS THE EXCLUSIVE PRIVILEGE OF THE LE GISLATION AVOIDING ABSURDITY, UNREASONABLENESS, INCONGRUITY AND CONFLI CT. AS IS WITH THE WORDS USED SO IS WITH THE LANGUAGE EMPLOYED IN DRAF TING A PIECE OF LEGISLATION ..... ' ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 18 OF 36 37. IN BAJAJ TEMPO LTD., BOMBAY V. COMMISSIONER OF INCOME TAX, BOMBAY CITY-III, BOMBAY, (1992) 3 SCC 78, THE APEX COURT OBSERVED THAT: ' A PROVISION IN A TAXING STATUTE GRANTING INCENTIV ES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALL Y. SINCE A PROVISION INTENDED FOR PROMOTING ECONOMIC GROWTH HA S TO BE INTERPRETED LIBERALLY, THE RESTRICTION ON IT, TOO, HAS TO BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE SECTION AND NOT TO FRUSTRATE IT. IT IS NECESSARY TO RESORT TO A CONSTRUCTION WHICH IS REAS ONABLE AND PURPOSIVE TO MADE THE PROVISION MEANINGFUL.' 38. IN BHIM SINGH, MAHARAO OF KOTA V. COMMISSIONER OF INCOME TAX, RAJASTHAN-II, JAIPUR (2017) 1 SCC 554, THE APEX COU RT OBSERVED: 'IT IS A SETTLED RULE OF INTERPRETATION THAT IF TWO STATUTES DEALING WITH THE SAME SUBJECT USE DIFFERENT LANGUAGE THEN IT IS NOT PERMISSIBLE TO APPLY THE LANGUAGE OF ONE STATUTE TO OTHER WHILE IN TERPRETING SUCH STATUTES. SIMILARLY, ONCE THE ASSESSEE IS ABLE TO F ULFIL THE CONDITIONS SPECIFIED IN THE SECTION FOR CLAIMING EXEMPTION UND ER THE ACT THEN PROVISIONS DEALING WITH GRANT OF EXEMPTION SHOULD B E CONSTRUED LIBERALLY BECAUSE THE EXEMPTIONS ARE FOR THE BENEFI T OF ASSESSEE.' 39. IN SOUTHERN MOTORS V. STATE OF KARNATAKA AND OT HERS, (2017) 3 SCC 467, THE APEX COURT OBSERVED: ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 19 OF 36 'FURTHER, IF THE TAXPAYER IS WITHIN THE PLAIN TERMS OF THE EXEMPTION IT CANNOT BE DENIED ITS BENEFIT BY CALLING IN AID ANY SUPPOSED INTENTION OF THE EXEMPTING AUTHORITY. IF SUCH INTENTION CAN B E GATHERED FROM THE CONSTRUCTION OF THE WORDS OF THE NOTIFICATION O R BY NECESSARY IMPLICATION THEREFROM, THE MATTER IS DIFFERENT BUT THAT IS NOT THE CASE HERE.' 31. THE TASK OF INTERPRETATION OF A STATUTORY ENACT MENT IS NOT A MECHANICAL TASK. IT IS MORE THAN A MERE READING OF MATHEMATICAL FORMULAE BECAUSE FEW WORDS POSSESS THE PRECISION OF MATHEMATICAL SYMBOLS. IT IS AN ATTEMPT TO DISCOVER THE INTENT OF THE LEGISLATURE FROM THE LANGUAGE USED BY IT AND IT MUST ALWAYS BE REMEM BERED THAT LANGUAGE IS AT BEST AN IMPERFECT INSTRUMENT FOR THE EXPRESSION OF HUMAN THOUGHT AND AS POINTED OUT BY LORD DENNING, I T WOULD BE IDLE TO EXPECT EVERY STATUTORY PROVISION TO BE 'DRAFTED WITH DIVINE PRESCIENCE AND PERFECT CLARITY.' WE CAN DO NO BETTE R THAN REPEAT THE FAMOUS WORDS OF JUDGE LEARNED HAND WHEN HE LAID: 'IT IS TRUE THAT THE WORDS USED, EVEN IN THEIR LITE RAL SENSE, ARE THE PRIMARY AND ORDINARILY THE MOST RELIABLE, SOURCE OF INTERPRETING THE MEANING OF ANY WRITING: BE IT A STATUTE, A CONTRACT OF ANYTHING ELSE. BUT IT IS ONE OF THE SUREST INDEXES OF A MATURE AND DEVELOPED JURISPRUDENCE NOT TO MAKE A FORTRESS OUT OF THE DIC TIONARY; BUT TO REMEMBER THAT STATUTES ALWAYS HAVE SOME PURPOSE OR OBJECT OT ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 20 OF 36 ACCOMPLISH, WHOSE SYMPATHETIC AND IMAGINATIVE DISCO VERY IS THE SUREST GUIDE TO THEIR MEANING.' 40. IN OUR CONSIDERED VIEW, CIRCULARS ARE NO MORE T HAN EXTERNAL AIDS IN INTERPRETATION OF A STATUTE. INSOFAR AS INTERPRE TING THE STATUTE IS CONCERNED, WE ARE NOT OBLIGED TO EVEN LOOK INTO THE SAME, FOR LANGUAGE OF THE SECTION IS SIMPLE, CLEAR AND UNAMBI GUOUS. 41. WE MAY NOTICE THAT THE ACT DOES NOT CREATE DIST INCTION BETWEEN THE OLD UNITS, L.E. THE UNITS WHICH STAND ESTABLISH ED PRIOR TO 07.01.2003 (THE CUTOFF DATE), AND THE NEW UNITS EST ABLISHED THEREAFTER. 42. ARTIFICIAL DISTINCTION SOUGHT TO BE INSERTED BY THE REVENUE, IN OUR CONSIDERED VIEW, ONLY RESULTS INTO DISCRIMINATION. THE OBJECT, INTENT AND PURPOSE OF ENACTMENT OF THE SECTION IN QUESTION IS ONLY TO PROVIDE INCENTIVE FOR ECONOMIC DEVELOPMENT, INDUSTR IALIZATION AND ENHANCED EMPLOYMENT OPPORTUNITIES. THE CONTINUED BE NEFIT OF DEDUCTION AT HIGHER RATES IS AVAILABLE ONLY TO SUCH OF THOSE UNITS, WHICH FULFILL SUCH OBJECT BY CARRYING OUT 'SUBSTANT IAL EXPANSION'. 43. WHILE SUPPORTING THE VIEW TAKEN BY THE AUTHORIT IES BELOW, REVENUE SEEKS RELIANCE UPON THE PROVISIONS OF SUB-C LAUSES (I) & (III) OF CLAUSE (B) OF SUB- SECTION (2) OF SECTION 8O-IC, WHICH PROVIDE FOR BENEFIT OF DEDUCTION @ 100% FOR TEN ASSESSMENT YEAR S. WE DO NOT COMPREHEND AS TO HOW WOULD THAT MAKE ANY DIFFERENCE . THIS ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 21 OF 36 PROVISION DEALS WITH THE ESTABLISHMENTS ESTABLISHED WITHIN THE STATE OF SIKKIM OR NORTH EASTERN STATES OF INDIA. 46. THE MOMENT 'SUBSTANTIAL EXPANSION' IS COMPLETED AS PER SECTION 80-IC (8)(IX), THE STATUTORY DEFINITION OF 'INITIAL ASSESSMENT YEAR' (SECTION 80-1C(8)(V)] COMES INTO PLAY. AND CONSEQUE NTLY, SECTION 80- IC(3)(II) ENTITLES THE UNIT TO 100% DEDUCTION FOR F IVE YEARS COMMENCING WITH COMPLETION OF 'SUBSTANTIAL EXPANSION', SUBJECT TO MAXIMUM OF TEN YEARS AS PER SECTION 80-IC(6). 47. A UNIT THAT STARTED OPERATING/EXISTED BEFORE 07 .01.2003 WAS ENTITLED TO 100% DEDUCTION FOR FIRST FIVE YEARS UND ER SECTION 80-IB(4). IF THIS UNIT COMPLETES SUBSTANTIAL EXPANSION DURING THE WINDOW PERIOD (7.1.2003) TO 31.3.2012), IT WOULD BE ELIGIB LE FOR 100% DEDUCTION AGAIN FOR ANOTHER FIVE YEARS UNDER SECTIO N 80-1C(3)(II), SUBJECT TO CEILING OF TEN YEARS AS STIPULATED UNDER SECTION 80-1C(6). 44. IN OUR CONSIDERED VIEW, THOUGH SECTION 80-IC DE ALS WITH CERTAIN SPECIAL CATEGORY STATES, BUT HOWEVER, THE LEGISLATO RS IN THEIR WISDOM DREW DISTINCTION AND CLASSIFIED THE STATE OF SIKKIM AND OTHER NORTH EASTERN STATES IN ONE AND STATE LIKE HIMACHAL PRADE SH IN ANOTHER CATEGORY. TAKING INTO CONSIDERATION THE PECULIAR AT TENDING CIRCUMSTANCES OF THE STATE OF SIKKIM AND OTHER NORT H EASTERN STATES, THESE STATES WOULD CONSTITUTE A CLASS IN ITSELF, WH ICH CLASSIFICATION IS BASE ON INTELLIGIBLE DIFFERENTIA AND CANNOT BE COMP ARED WITH OTHER ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 22 OF 36 STATES, LIKE THE STATE OF HIMACHAL PRADESH. THUS, A UNIT ESTABLISHED IN THE NORTH EASTERN STATES AFTER 07.01.2003, REGAR DLESS WHETHER IT CARRIES OUT SUBSTANTIAL EXPANSION OR NOT, IS ENTITL ED TO DEDUCTION @ 100% FOR TEN ASSESSMENT YEARS, UNLIKE THE STATE OF HIMACHAL PRADESH, WHEREIN A 'UNIT' ESTABLISHED AFTER 07.01.2 003 WILL HAVE TO UNDERTAKE SUBSTANTIAL EXPANSION BEFORE 01.04.2012, FOR FURTHER CLAIMING DEDUCTION @ 100% FOR NEXT FIVE YEARS, SUBJ ECT TO OVER ALL CAP OF TEN YEARS. 45. SECTION 80-IC(3)(II) [FOR HIMACHAL PRADESH] STI PULATES THAT DEDUCTION SHALL BE @ 100% FOR FIVE YEARS COMMENCING WITH 'INITIAL ASSESSMENT YEAR' AND THEREAFTER @ 25%. 'INITIAL ASS ESSMENT YEAR', AS PER SECTION 80-IC (8)(V) MEANS, YEAR IN WHICH TH E UNIT BEGINS/COMMENCES TO MANUFACTURE/PRODUCE OR COMPLETE S 'SUBSTANTIAL EXPANSION' [AS PER SECTION 80-IC(8)(IX )). 48. APPLYING THE AFORESAID INTERPRETATION, WE FIND THERE CAN BE DIFFERENT FACT SITUATIONS, SOME OF WHICH, WE HAVE T RIED TO ILLUSTRATE; (IO A 'UNIT' ESTABLISHED PRIOR TO 7.1.2003, CLAIMIN G DEDUCTION UNDER SECTION 80-IB, POST INSERTION OF SECTION 80-IC CARR IES OUT SUBSTANTIAL EXPANSION, WOULD BE ENTITLED TO DEDUCTION ONLY UNDE R SECTION 80-IC, AT THE ADMISSIBLE PERCENTAGE, FOR THE REMAINING PER IOD, WHICH IN ANY CASE WHEN COMBINED, CANNOT EXCEED THEN YEARS, (II) JUST AS IN THE CASE OF THE PRESENT ASSESSEE, A UNIT ESTABLISHED AF TER 7.1.2003. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 23 OF 36 CARRIES OUT SUBSTANTIAL EXPANSION ONLY IN THE 8TH Y EAR OF ITS ESTABLISHMENT, FOR THE FIRST FIVE YEARS WOULD HAVE ALREADY CLAIMED DEDUCTION @ 100%; FOR THE 6TH AND 7TH YEARS @ 25% A ND THEN FOR THE PERIOD POST SUBSTANTIAL EXPANSION, IN OUR CONSIDERE D VIEW, THE INITIAL YEAR OF ASSESSMENT BEING IN THE 8TH YEAR, WOULD BE ENTITLED FOR DEDUCTION @ 100% SUBJECT TO THE CAP OF TEN ASSESSME NT YEARS, (III) THE ASSESSEE ESTABLISHES A UNIT AFTER JANUARY 2003, SAY IN THE YEAR 2005-06 AND CLAIMS DEDUCTION UNDER SECTION 80-IC FO R THE FIRST TIME IN THE ASSESSMENT YEAR 2006-2007 @ 100% OF ITS PROF ITS. THEREAFTER, SUBSTANTIALLY EXPANDS THE UNIT IN THE YEAR 2009-10, RELEVANT TO ASSESSMENT YEAR 2010-11 CAN CLAIM DEDUCTION @ 100% FOR NEXT FIVE YEARS SUBJECT TO THE CAP OF TEN ASSESSMENT YEARS, ( IV) AN EXISTING UNIT NOT CLAIMING ANY DEDUCTION UNDER SECTION 80-IA , 80-IB OR 80-IC SUBSTANTIALLY EXPANDS IN THE YEAR 2003 AND CLAIMS D EDUCTION UNDER SECTION 80-IC FIRST TIME IN ASSESSMENT YEAR 2004-20 05 AND THEN SUBSTANTIALLY EXPANDS IN THE YEAR 2007-2008, CAN CL AIM DEDUCTION @ 100% W.E.F. ASSESSMENT YEAR 2008-2009 FOR NEXT FIVE YEARS, (V) THE ASSESSEE SETS UP ITS UNIT IN THE YEAR 2000-2001, CL AIMING DEDUCTION UNDER SECTION 80-IB STILL THE ASSESSMENT YEAR 2003- 2004 AND THEREAFTER UNDER SECTION 80-IC AS PER LAW. CARRYING OUT SUBSTANTIAL EXPANSION IN THE ASSESSMENT YEAR 2004-2005, NOW CLA IMS DEDUCTION @ 100% W.E.F. ASSESSMENT YEAR 2004- 05 AG AIN SUBSTANTIALLY EXPANDS IN THE ASSESSMENT YEAR 2008-2 009, (VI) THE ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 24 OF 36 ASSESSEE SETS UP A UNIT IN THE YEAR 2005-2006 AND D OES NOT UNDERGO SUBSTANTIAL EXPANSION AT ALL CAN CLAIM DEDU CTION UNDER SECTION 80-IC. 49. IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND THE IMPUGNED ORDERS TO BE SUSTAINABLE IN LAW. 50. FACTS ARE NOT IN DISPUTE. THE ASSESSEE ESTABLIS HED ITS 'UNIT' AFTER 7.1.2003. IN FACT, IT WAS ESTABLISHED IN THE FINANCIAL YEAR 2005-2006, AND SINCE THEN, IN TERMS OF SECTION 80-I C, CLAIMED AND WAS ALLOWED DEDUCTION @ 100% FOR FIVE YEARS AND THE REAFTER AT THE RATE OF 25%. 51. SOMETIME IN THE YEAR 2008, ASSESSEE CARRIED OUT CERTAIN EXPANSIONS, WHICH IT TERMED TO BE 'SUBSTANTIAL EXPA NSION'. THE FACT THAT SUCH EXPANSION IS IN FACT 'SUBSTANTIAL EXPANSI ON', IN TERMS OF CLAUSE (IX) OF SUB-SECTION (8) OF SECTION 80-IC, CA NNOT BE DISPUTED, FOR THERE IS INCREASE IN THE INVESTMENT IN THE PLANT AN D MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHIN ERY THAN THE FIRST DAY OF THE PREVIOUS YEAR IN WHICH SUCH INVEST MENT WAS MADE. ELIGIBILITY OF BENEFITS TO THE UNIT UNDER SECTION 8 0-IC IS NOT IN DISPUTE. 52. BOTH THE ASSESSING OFFICER AS WELL AS THE APPEL LATE AUTHORITY(S)/TRIBUNAL ERRED IN NOT APPRECIATING AS TO WHAT WAS THE INTENT AND PURPOSE OF INSERTION OF SECTION 80 IC. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 25 OF 36 53. IN FACT, WE FIND THAT THE CONCLUSIONS ARRIVED A T BY THE ASSESSING OFFICER AS WELL AS THE APPELLATE AUTHORITY/TRIBUNAL ARE NOT BASE ON CORRECT APPRECIATION AND INTERPRETATION OF THE STAT UTORY PROVISIONS. WHILE ARRIVING AT THEIR RESPECTIVE CONCLUSIONS, IN INTERPRETING SECTION 80- IC, THEY HAVE RELIED UPON NOTIFICATIONS UNDER T HE CENTRAL EXCISE LAWS AS WELL AS MINISTRY OF COMMERCE AND INDUSTRY ( DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION), GOVERNMENT OF IND IA AND DEPARTMENT OF INCOME TAX. WHILE DOING SO, THE SAID AUTHORITIES ERRED IN NOT APPRECIATING THAT SECTION 80 IC OF THE ACT I S A SELF CONTAINED AND A COMPLETE CODE IN ITSELF, WHICH, FOR THE PURPO SE OF ITS INTERPRETATION, DID NOT REQUIRE ASSISTANCE OF ANY N OTIFICATION(S), MUCH LESS THAT OF OTHER DEPARTMENT. 54. IN FACT, WE FIND THE SAID AUTHORITIES TO HAVE E RRED IN CREATING AN ARTIFICIAL DISTINCTION BETWEEN THE 'UNITS' SET UP B EFORE 7.1.2003 AND AFTER 7.1.2003 WHILE HOLDING THAT SUCH OF THE 'UNIT S', WHICH WERE SET UP AFTER 7.1.2003. WERE NOT ENTITLED TO DEDUCTION @ 100% EVEN IF THEY UNDERTOOK SUBSTANTIAL EXPANSION BETWEEN THE PE RIOD 7.1.2003 AND 1.04.2012. THE DISTINCTION CREATED BY THE SAID AUTHORITIES IS NOT BORNE OUT FROM THE PROVISIONS OF SECTION 80 IC. IN OTHER WORDS, THERE IS NO PROHIBITION THAT A UNIT SET UP AFTER 7.1.2003 , HAVING CLAIMED DEDUCTION FOR FIRST FIVE YEARS, CANNOT AGAIN CLAIM DEDUCTION AT SUCH PERCENTAGE WITHIN THE PRESCRIBED PERIOD AFTER UNDER TAKING SUBSTANTIAL EXPANSION. THIS WE SAY SO WITH A SENSE OF CONVICTION. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 26 OF 36 PLAIN READING OF THE STATUTE DEMONSTRATES THAT THER E IS NO SUCH BAR IN THE STATUTE AS STANDS HELD BY THE AUTHORITIES BE LOW. WE FATHER FIND THAT IN FACT BOTH THE AUTHORITIES HAVE MISCONS TRUED THE DEFINITION OF 'INITIAL ASSESSMENT YEAR'. THE ASSESSMENT OFFICE R AS WELL AS THE APPELLATE AUTHORITY HAVE HELD THAT THERE CANNOT BE TWO 'INITIAL ASSESSMENT YEARS' BETWEEN 07.01.2003 AND 01.02.2012 , WHICH CONCLUSION, IN OUR CONSIDERED VIEW, IS TOTALLY PERV ERSE. WE REITERATE THAT SUB CLAUSE (V) OF SUB SECTION (8) OF SECTION 8 0 IC ITSELF CONTEMPLATES MORE THAN ONE 'INITIAL ASSESSMENT YEAR S'. THE SAID CLAUSE ENVISAGES THAT FOR A 'UNIT', WHICH BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THINGS OR COMMENCES OPERATIO N, THE INITIAL ASSESSMENT YEAR MEANS ASSESSMENT YEAR RELEVANT TO T HE PREVIOUS YEAR, IN WHICH, IT BEGINS TO MANUFACTURE AND PRODUC E ARTICLE OR THING OR COMMENCES OPERATION AND FOR A 'UNIT' , WHICH COM PLETES SUBSTANTIAL EXPANSION, INITIAL ASSESSMENT YEAR MEAN S ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR, IN WHICH IT COM PLETES SUBSTANTIAL EXPANSION. THIS VERY IMPORTANT ASPECT OF THE MATTER HAS BEEN COMPLETELY OVERLOOKED BY THE ASSESSMENT OFFICER AS WELL AS THE APPELLATE AUTHORITY. THEREFORE, THE CONCLUSION ARRI VED AT BY ALL THE AUTHORITIES BELOW, THAT NEW INDUSTRIAL UNITS CANNOT CARRY OUT SUBSTANTIAL EXPANSION TO CLAIM BENEFITS ENVISAGES U NDER SECTION 80 IC IS PERVERSE AND NOT SUSTAINABLE IN LAW. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 27 OF 36 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 O F EACH ONE OF THE ASSESSEES, ARE QUASHED AND SET ASIDE, HOLDING AS UN DER: (A) SUCH OF THOSE UNDERTAKINGS OR ENTERPRISES WHICH 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 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. (B) SUCH OF THOSE UNITS WHICH HAVE COMMENCED PRODUC TION AFTER 7.1.2003 AND CARRIED OUT SUBSTANTIAL EXPANSION PRIO R TO 1.4.2012, WOULD ALSO BE ENTITLED TO BENEFIT OF DEDUCTION AT D IFFERENT RATED OF PERCENTAGE STIPULATED UNDER SECTION 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 OR MULTIPLE SUBSTANTIAL EXPANSIONS. (D) CORRESPONDINGLY, THERE CAN BE MORE THAN ONE INI TIAL ASSESSMENT YEARS. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 28 OF 36 (E) WITHIN THE WINDOW PERIOD OF 7.1.20013 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 YEAR, [SECTION 80- 1C(6)]. (G) UNITS CLAIMING DEDUCTION UNDER SECTION 80-IC SH ALL NOT BE ENTITLED TO DEDUCTION UNDER ANY OTHER SECTION, CONTAINED IN CHAPTER VI-A OR SECTION 10A OR 108 OF THE ACT [SECTION 80-18(5)]. 56. SUBSTANTIAL QUESTIONS OF LAW ARE ANSWERED ACCOR DINGLY.' 7.2 THE RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE ITAT, DELHI BENCH 'H' IN THE CASE OF TIRUPATI LPG INDUSTRIES LTD. VS. DCIT IN ITA NO. 991/DEL/2013 (AY 2009-10) CIRCIE-2, DEHRADUN. THE R ELEVANT PART OF THIS DECISION IS QUOTED BELOW: 'THE ONLY DISPUTE THAT ARISES FOR OUR CONSIDERATION IS THE INTERPRETATION OF THE TERM 'INITIAL ASSESSMENT YEAR 'AND WHETHER THE SAME COMES WITH ANY RESTRICTION. THE REVENUE SEEKS TO TAKE THE COLOR FROM THE OBJECT OF INTRODUCING SECTION 801C. THE AS SESSING OFFICER REFERRED TO POLICY OF THE GOVERNMENT FOR GIVING INC ENTIVES TO THE STATE OF UTTARANCHAL AND HIMACHAL PRADESH. IT IS WELL SET TLED THAT EXTERNAL AIDS SHOULD NOT BE TAKEN FOR THE PURPOSE OF INTERPR ETING THE STATUTE, WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMB IGUOUS. A PLAIN ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 29 OF 36 READING OF THE SECTION 80-1C(8)(V) WHICH DEFINES TH E TERM 'INITIAL ASSESSMENT YEAR' READ WITH SECTION 80-IC(8)(IX) WHI CH DEFINES THE TERM 'SUBSTANTIAL EXPANSION' MAKES IT CLEAR THAT TH ERE IS NO RESTRICTION OR BAR ON MORE THAN ONE SUBSTANTIAL EXP ANSIONS, BEING UNDERTAKEN BY AN ASSESSEE. IN OUR VIEW, A UNIT CAN UNDERTAKE ANY NUMBER OF SUBSTANTIAL EXPANSIONS, IN ABSENCE OF ANY SPECIFIC RESTRICTION IN THE SECTION. THERE IS NO SUGGESTION IN THE LANGUAGE OF THE SECTION THAT INCENTIVE U/S.80IC IS NOT AVAILABL E IF THE ASSESSEE SUBSTANTIALLY EXPANDS FOR A SECOND OR THIRD TIME. S UBSTANTIAL EXPANSION REQUIRES ADDITIONAL INVESTMENT AND RESULT S IN HIGHER PRODUCTION, EMPLOYMENT ETC. INDUSTRIALISTS HAVE TO BE ENCOURAGED TO UNDERTAKE SUBSTANTIAL EXPANSION. THE SECTION RECOGN IZES THIS FACT AND PROVIDE FOR AN INCENTIVE, IF ASSESSEE UNDERTAKE S 'SUBSTANTIAL EXPANSION' 'THE SUBSTANTIAL EXPANSION AS PER 80-1C (8) (IX) ME ANS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY AT LEAST 50% OF THE BOOK VALUE OF PLANT AND MACHINERY (BEFORE TAKING DEPRECI ATION IN ANY YEAR), AS ON 1ST DAY OF PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. IF SUCH SUBSTANTIAL EXPANS ION IS COMPLETED, THEN, FOR THE PURPOSE OF THIS SECTION TH E ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS COMPLETED BECOMES THE INITIAL ASSESSMENT YEAR. ONCE IT BECOMES INITIAL ASSESSMENT YEAR CONSEQUENTLY UNDER SUB SECT ION (3) THE ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 30 OF 36 ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION OF PRO FITS AND GAINS FOR A PERIOD OF 5 YEAR COMMENCING FROM SUCH INITIAL ASSESSMENT YEAR. THE TERM INITIAL YEAR HAS BEEN DEFINED A YEAR IN WHICH SUBSTANTIAL EXPANSION IS COMPLETED. HOWEVER ASSESSE E CANNOT CLAIM THE DEDUCTION UNDER SECTION 80LC FOR A TOTAL PERIOD EXCEEDING 10 YEARS. 7.3. SINCE, THE CASE OF THE APPELLANT IS COVERED BY THE ABOVE TWO DECISIONS AND THE DECISION OF ANY OTHER HIGH COURT ON THIS MATTER IS NOT IN THE KNOWLEDGE, THE APPEAL OF THE APPELLANT I S ALLOWED IN VIEW OF JUDICIAL DISCIPLINE. 4. THE PRESENT APPEAL BEFORE US IS FILED BY THE RE VENUE AGAINST THE AFORESAID IMPUGNED ORDER DATED 19.02.2108 OF THE LD .CIT(A). AT THE TIME OF HEARING BEFORE US, LD. DR SUBMITTED THAT THE ISSUE IN DISPUTE IS COVERED IN FAVOUR OF THE REVENUE BY ORDER OF HONBLE SUPREME C OURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES IN CIVIL APPEAL NO. 7208 OF 2018. LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND CONTENDED THAT THE MANUFACTURING UNIT OF THE ASSESSEE IS LOCATED IN HIMACHAL PRADESH WHICH FALL S UNDER THE JURISDICTION OF HONBLE HIGH COURT OF HIMACHAL PRADESH. HE HAS FUR THER SUBMITTED THAT THE ISSUE IN DISPUTE IS ALSO COVERED IN FAVOUR OF THE A SSESSEE VIDE ORDER DATED 28.11.2017 OF THE HONBLE HIGH COURT OF HIMACHAL PR ADESH IN THE CASE OF FOLLOWING SIX ORDERS:- ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 31 OF 36 1. ITA NO.20/2015 M/S. STOVEKRAFT INDIA APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 2. ITA NO.21/2015 M/S. STOVEKRAFT INDIA APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 3. ITA NO.22/2015 CUTTING EDGE TECHNOLOGIES APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 4. ITA NO.23/2015 M/S. CUTTING EDGE TECHNOLOGIES APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 5. ITA NO.24/2015 M/S. HYCRON ELECTRONICS APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 6. ITA NO.31/2015 M/S. SUPER LPS APPLIANCES APPELLANT VERSUS COMMISSIONER OF INCOME TAX ..RESPONDENT 4.1. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT TH E ISSUE IN DISPUTE IS FURTHER COVERED IN FAVOUR OF THE ASSESSEE BY ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS VIDE ORDER DATED 20.02.2019 IN CIVIL APPEAL NO.1784 OF 2019. IN THE REJOINDER, TH E LD. DR CONTENDED THAT LAW LAID DOWN BY HONBLE SUPREME COURT IN THE CASE OF P R. CIT VS M/S. AARHAM SOFTRONICS (SUPRA) DOES NOT LAY DOWN CORRECT LAW, A ND PLACED RELIANCE ON THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA). 4.1.1. WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED MATERIAL ON RECORD CAREFULLY. WE FIND THAT THE ORDER OF HONBLE SUPRE ME COURT IN THE CASE OF PR. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 32 OF 36 CIT VS M/S. AARHAM SOFTRONICS (SUPRA) DATED 20.02.2 109 HAS BEEN PASSED AFTER THE ORDER PASSED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA). WE FURTHER FIND THAT T HE ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRON ICS (SUPRA) IS PASSED BY A LARGER BENCH OF THREE HONBLE JUDGES OF THE HONBLE SUPREME COURT WHEREAS THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF C IT VS CLASSIC BINDING INDUSTRIES (SUPRA) WAS PASSED BY TWO HONBLE JUDGES OF HONBLE SUPREME COURT. WE FURTHER FIND THAT THE HONBLE SUPREME CO URT IN AFORESAID ORDER IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPR A) HAS ALREADY CONSIDERED THE DECISION OF THE CIT VS CLASSIC BINDING INDUSTRI ES (SUPRA) AND HAS OVER-RULED THE DECISION IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA) IN THE FOLLOWING WORD:- 22. IT WOULD BE PERTINENT TO POINT OUT THAT IN PAR A 20 OF THE JUDGMENT IN CLASSIC BINDING INDUSTRIES, THIS COURT OBSERVED THA T IF DEDUCTION @ 100% FOR THE ENTIRE PERIOD OF 10 YEARS, IT WOULD BE DOIN G VIOLENCE TO THE LANGUAGE OF SUB-SECTION (6) OF SECTION 80-IC. HOWEVER, THIS OBSERVATION CAME WITHOUT NOTICING THE DEFINITION OF INITIAL ASSESSMENT YEAR CONTAINED IN THE SAME VERY PROVISION. 23. HAVING EXAMINED THE MATTER IN THE AFORESAID PE RSPECTIVE, JUDGMENT IN THE CASE OF MAHABIR INDUSTRIES V. PRINCIPAL COMMISS IONER OF INCOME TAX WOULD, IN FACT, HELP THE ASSESSEE. THE FINE DISTINC TION POINTED OUT IN CLASSIC BINDING INDUSTRIES ELOPES THEREBY. TO RECAPITULATE, IN MAHABIR INDUSTRIES, IT WAS HELD THAT IF AN ASSESSEE GET 100% EXEMPTION UND ER SECTION 80-IB OF THE ACT FOR FIVE YEARS AND THEREAFTER CARRIES OUT T HE SUBSTANTIAL EXPANSION BECAUSE OF WHICH SAID ASSESSEE BECOMES ENTITLED TO EXEMPTION UNDER THE NEW PROVISION I.E. SECTION 80-IC OF THE ACT, THE AS SESSEE WOULD BE ENTITLED ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 33 OF 36 TO DEDUCTION @ 100% EVEN AFTER FIVE YEARS. THIS RUL ING 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 IND USTRIES. 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 INITIA L ASSESSMENT YEAR CONTAINED IN SECTION 80-IC ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTAINED IN SECTION 80-IB, WHICH DO ES NOT APPLY IN THESE CASES. THE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIA LLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTI ON 80-IC HAS MADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPINIO N THAT THE 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 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 ASSESSMEN T 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 PER IOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANTIAL EXP ANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMENT YEAR, AND FROM THAT ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 34 OF 36 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 IS 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, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASSESSEE SUCH AN ASSESSEE WO ULD BE ENTITLED TO 100% DEDUCTION FOR THE FIRST FIVE YEARS, DEDUCTI ON @ 25% OF THE PROFITS AND 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% DEDUCTION WOULD BE FOR REMAINING THREE YEARS, I.E. 8 TH , 9 TH AND 10 TH ASSESSMENT YEARS. 4.2. IN VIEW OF THE FOREGOING, WE FIND THAT THE ORD ER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (S UPRA) BEING PASSED BY A LARGER BENCH OF THE HONBLE SUPREME COURT HAS STRON GER FORCE AS A PRECEDENT AS COMPARED TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA). MOREOVER, H ONBLE SUPREME COURT HAS, IN ORDER IN THE CASE PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA) ALREADY CONSIDERED ORDER IN THE CASE OF CIT VS CLASSIC BIND ING INDUSTRIES (SUPRA) AND HAS OVER-RULED THE ORDER IN THE CASE OF CIT VS CLAS SIC BINDING INDUSTRIES (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE ORD ER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (S UPRA), WE DISMISS THE GROUNDS OF APPEAL; AND DECIDE THE ISSUES IN DISPUTE IN THE PRESENT APPEAL BEFORE US IN FAVOUR OF THE ASSESSEE. WE REJECT THE CONTENTION OF THE LD.DR THAT ORDER OF HONBLE SUPREME COURT DOES NOT LAY DOWN CO RRECT LAW IN THE CASE OF PR. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 35 OF 36 CIT VS M/S. AARHAM SOFTRONICS (SUPRA). FOR THIS PU RPOSE, WE TAKE GUIDANCE FROM ARTICLE 141 OF CONSTITUTION OF INDIA, UNDER WH ICH THE LAW DECLARED BY THE HONBLE SUPREME COURT SHALL BE BINDING ON ALL COUR TS WITHIN THE TERRITORY OF INDIA. FURTHER, WE RELY ON JUDICIAL PRECEDENTS IN THE CASES OF UNION OF INDIA VS KANTILAL HEMANTRAM PANDYA AIR 1995 HON'BLE SUPREME COURT 1349 [IN WHICH IT WAS HELD THAT LAW LAID DOWN BY THE HONBLE SUPRE ME COURT IS BINDING ON ALL COURTS AND TRIBUNALS]; STATE OF ORISSA VS DHANIRAM LOHAR AIR 2004 HON'BLE SUPREME COURT 1794 [IN WHICH IT WAS HELD THAT JUDIC IAL DISCIPLINE TO ABIDE BY THE HONBLE SUPREME COURT CANNOT BE FORSAKEN, UNDER ANY PRETEXT BY ANY AUTHORITY OR COURT]; DIRECTOR OF SETTLEMENTS, A.P. V/S M.R.APPARAO AIR 2002 HON'BLE SUPREME COURT 1598 [IN WHICH IT WAS HELD TH AT THE DECISION OF THE HONBLE SUPREME COURT CANNOT BE ASSAILED ON THE GRO UND THAT CERTAIN ASPECTS WERE NOT CONSIDERED OR THE RELEVANT PROVISIONS WERE NOT BROUGHT TO THE NOTICE OF THE COURT]; PALITANA SUGAR MILLS (P.) LTD. VS STATE OF GUJARAT (2004) 12 SCC 645 [IN WHICH IT WAS HELD THAT THE JUDGEMENTS OF THE SU PREME COURT ARE BINDING ON ALL AUTHORITIES UNDER ARTICLE 142 OF THE CONSTITUTI ON AND IT IS NOT OPEN TO ANY AUTHORITY TO IGNORE A BINDING JUDGEMENT OF THE SUPR EME COURT ON THE GROUND THAT THE FULL FACTS HAD NOT BEEN PLACED BEFORE IT] AND STATE OF PUNJAB VS DEVANS MODERN BREWERIES LTD. (2004) 11 SCC 26 [IN WHICH IT WAS HELD THAT BINDING PRECEDENTS, WHICH ARE AUTHORITATIVE IN NATURE AND A RE MEANT TO BE APPLIED, SHOULD NOT BE IGNORED ON APPLICATION OF THE DOCTRIN E OF SUB SILENTIO OR PER INCURIAN WITHOUT ASSIGNING SPECIFIC REASONS THEREFO R]. ACCORDINGLY, THE ORDER OF CIT(A) IS UPHELD AND THE PRESENT APPEAL FILED BY TH E REVENUE IS DISMISSED. ITA NO.- 4080/DEL/2018. SH. VIJAY GUPTA. PAGE 36 OF 36 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DAY OF JULY, 2019. SD/- SD/- (KULDIP SINGH) (ANADEE NATH MISSH RA) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED: 18.07.2019 * POOJA & AMIT* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P S/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER