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

ITA 409/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6861 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 15-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 271(1)(c); 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NOS.7491,409/DEL/2018 ASSTT. YEARS: 2013-14, 2013-14 O R D E R PER AMIT SHUKLA, J.M: THE AFORESAID APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED SEPARATE ORDERS DATED 27.11.2018, PASSED BY THE LD. CIT(APPEALS) 12 NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2013-14; AND ORDER DATED 20.8.2018 IN RELATION TO THE PENALTY PROCEEDINGS U/S 271(1)(C). 2. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ONLY ISSUE INVOLVED IS WITH REGARD TO DISALLOWANCE OF DEDUCTION U/S 80IC WHICH HAS BEEN RESTRICTED TO 25% INSTEAD OF 100% CLAIMED BY THE ASSESSEE. HE FURTHER POINTED OUT THAT THIS PRECISE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN SUBSEQUENT VIJAY GUPTA, 19/12, GROUND FLOOR, SHAKTI NAGAR, DELHI 110 007 PAN AAUPG6379A VS. ITO, WARD 35(2) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI V.K. TULSIAN, CA DEPARTMENT BY : SHRI SURENDER PAL, SR. DR DATE OF HEARING 29/07 /201 9 DATE OF PRONOUNCEMENT 29/07/2 019 2 ASSESSMENT YEAR 2014-15 IN ITA NO. 4080/DEL/2018, ORDER DATED 18.7.2019, WHEREIN THE TRIBUNAL HAS FOLLOWED THE LATEST DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS IN CIVIL APPEAL NO. 1784 OF 2019 . ON THE OTHER HAND LD. DR STRONGLY RELIED UPON THE ORDER OF THE AO AND LD. CIT (A). 3. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER IN THE QUANTUM PROCEEDINGS, IT IS SEEN THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING PRODUCTION OF LPG GAS STOVE AND HAS CLAIMED DEDUCTION OF RS. 49,95,673/- U/S 80IC AS ASSESSEES UNDERTAKING WAS LOCATED IN PARWANOO DISTT. SOLAN (HIMACHAL PRADESH), WHICH IS AN AREA NOTIFIED FOR THE PURPOSE OF 80IC DEDUCTION. THE INITIAL ASSESSMENT YEAR IN WHICH DEDUCTION CLAIMED WAS ASSTT. YEAR 2007-08 AND THIS WAS 7 TH YEAR OF THE CLAIM. ASSESSEE HAS MADE SUBSTANTIAL EXPANSION OF ITS PLANT AND MACHINERY ON 31.3.2012 AND BECAUSE OF THIS SUBSTANTIAL EXPANSION; ASSESSEE HAS CLAIMED 100% DEDUCTION. AO HAS RESTRICTED THE CLAIM TO 25% TO HOLD THAT THE INITIAL ASSESSMENT YEAR SHOULD BE TAKEN FROM ASSTT. YEAR 2007-08 AND FOR THE PURPOSE OF DEDUCTION U/S 80IC AND IT IS AVAILABLE FOR THE PRE EXISTING UNDERTAKING. AFTER DETAILED DISCUSSION HE HAS REDUCED THE DEDUCTION AT 25%. THIS HAS BEEN CONFIRMED BY THE LD. CIT(A) IN HIS EX PARTE ORDER. 4. WE FIND THAT THIS TRIBUNAL IN SUBSEQUENT YEAR I.E., ASSESSMENT YEAR 2014-15 AFTER NOTING DOWN FOLLOWING FACTS:- 2. THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING 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 8TH YEAR OF THE BUSINESS. THE ASSESSEE CLAIMED 100% DEDUCTION, AMOUNTING TO RS.92,04,570/- DURING THE YEAR U/S 80IC OF THE ACT. ACCORDING TO THE AO, 100% DEDUCTION IS 3 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 8TH YEAR OF CLAIM OF DEDUCTION U/S 80IC OF THE ACT, IS BASED ON THE FACT NOT DISPUTED BY REVENUE, THAT THE ASSESSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION OF ITS PLANT & MACHINERY DURING THE YEAR. HOWEVER, THE AO REJECTED THE CONTENTION OF THE ASSESSEE 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/-. 2. THEREAFTER THE TRIBUNAL HAD OBSERVED AS UNDER :- 4.1.1. WE HAVE HEARD BOTH SIDES. WE HAVE PERUSED MATERIAL ON RECORD CAREFULLY. WE FIND THAT THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA) DATED 20.02.2109 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 THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (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 CIT VS CLASSIC BINDING INDUSTRIES (SUPRA) WAS PASSED BY TWO HONBLE JUDGES OF HONBLE SUPREME COURT. WE FURTHER FIND THAT THE HONBLE SUPREME COURT IN AFORESAID ORDER IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA) HAS ALREADY CONSIDERED THE DECISION OF THE CIT VS CLASSIC BINDING INDUSTRIES (SUPRA) AND HAS OVER-RULED THE DECISION IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA) IN THE FOLLOWING WORD:- 4 22. IT WOULD BE PERTINENT TO POINT OUT THAT IN PARA 20 OF THE JUDGMENT IN CLASSIC BINDING INDUSTRIES, THIS COURT OBSERVED THAT IF DEDUCTION @ 100% FOR THE ENTIRE PERIOD OF 10 YEARS, IT WOULD BE DOING 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 PERSPECTIVE, JUDGMENT IN THE CASE OF MAHABIR INDUSTRIES V. PRINCIPAL COMMISSIONER OF INCOME TAX WOULD, IN FACT, HELP THE ASSESSEE. THE FINE DISTINCTION POINTED OUT IN CLASSIC BINDING INDUSTRIES ELOPES THEREBY. TO RECAPITULATE, IN MAHABIR INDUSTRIES, IT WAS HELD THAT IF AN ASSESSEE GET 100% EXEMPTION UNDER SECTION 80-IB OF THE ACT FOR FIVE YEARS AND THEREAFTER CARRIES OUT THE SUBSTANTIAL EXPANSION BECAUSE OF WHICH 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 ASSESSMENT 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 FOLLOWING CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BINDING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL 5 ASSESSMENT YEAR CONTAINED IN SECTION 80-IC ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTAINED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. THE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT DOES NOT LAY DOWN THE CORRECT LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET UP A NEW UNIT BETWEEN 7TH JANUARY, 2003 AND 1ST APRIL, 2012 IN STATE OF HIMACHAL PRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF SUBSECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTION WOULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRIED 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 ASSESSMENT 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 PERIOD OF 10 YEARS, AS PROVIDED IN SUB-SECTION (6). FOR EXAMPLE, IF THE EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF 6 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 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 YEAR 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. 4.2. IN VIEW OF THE FOREGOING, WE FIND THAT THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA) BEING PASSED BY A LARGER BENCH OF THE HONBLE SUPREME COURT HAS STRONGER FORCE AS A PRECEDENT AS COMPARED TO DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA). MOREOVER, HONBLE 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 BINDING INDUSTRIES (SUPRA) AND HAS OVER-RULED THE ORDER IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE ORDER OF HONBLE SUPREME COURT IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA), 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 CORRECT LAW IN THE CASE OF PR. CIT VS M/S. AARHAM SOFTRONICS (SUPRA). FOR THIS PURPOSE, WE TAKE GUIDANCE FROM ARTICLE 141 OF CONSTITUTION OF INDIA, UNDER WHICH THE LAW DECLARED BY THE HONBLE 7 SUPREME COURT SHALL BE BINDING ON ALL COURTS 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 SUPREME 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 JUDICIAL 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 THAT THE DECISION OF THE HONBLE SUPREME COURT CANNOT BE ASSAILED ON THE GROUND 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 SUPREME COURT ARE BINDING ON ALL AUTHORITIES UNDER ARTICLE 142 OF THE CONSTITUTION AND IT IS NOT OPEN TO ANY AUTHORITY TO IGNORE A BINDING JUDGEMENT OF THE SUPREME 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 ARE MEANT TO BE APPLIED, SHOULD NOT BE IGNORED ON APPLICATION OF THE DOCTRINE OF SUB SILENTIO OR PER INCURIAN WITHOUT ASSIGNING SPECIFIC REASONS THEREFOR]. ACCORDINGLY, THE ORDER OF CIT(A) IS UPHELD AND THE PRESENT APPEAL FILED BY THE REVENUE IS DISMISSED. 5. SINCE THE TRIBUNAL HAS FOLLOWED THE RATIO PRINCIPLE LAID DOWN BY HONBLE APEX COURT IN THE CASE OF PR. CIT VS. M/S. AARHAM 8 SOFTRONICS (SUPRA), THEREFORE, FOLLOWING THE SAME PRECEDENT, WE ALLOW THE CLAIM OF THE ASSESSEE U/S 80IC @ 100%. 6. SINCE WE HAVE ALLOWED THE QUANTUM APPEAL AND DECIDED THE ISSUE OF CLAIM OF DEDUCTION U/S 80IC IN FAVOUR OF THE ASSESSEE, THEREFORE, PENALTY LEVIED U/S 271(1)(C) ON SUCH DISALLOWANCE HAS NO LEGS TO STAND AND THE SAME IS DIRECTED TO BE DELETED. 7. IN THE RESULT BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY, 2019. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/07/2019 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI