Meetu Jain, Kashipur V. JCIT, Kashipur

ITA 5130/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81653 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-08-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 09-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUNIL KR SHARMA
• Assessee Lawyers: RAKESH GUPTA CA SOMIL AGARWAL
• Keywords: Depreciation
• Section: 80C

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E : NEW DELHI BEFORE SHRI B.C.MEENA , ACCOUNTANT MEMBER AND SHRI A. T. VARKEY, JUDICIAL MEMBER ITA NO. 5130 /DEL/ 2013 (ASSESSMENT YEAR: 2010 - 11 ) MEETU JAIN PROP MAHAVEER PACKAGING INDUSTRY,A - 7, INDL ESTATE, BAZPUR ROAD, KASHHIPUR PAN:AAATV0507B VS. JCIT KASHIPUR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAKESH GUPTA, CA , SOMIL AGARWAL, CA RESPONDENT BY : SH. SUNIL KR. SHARMA, SR. DR O R D E R PER A. T. VARKEY , JUDICIAL MEMBER THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD CIT(A), II, DEHRADUN DATED 17.06.2013 RELEVANT TO THE ASSESSMENT YEAR 2010 - 11 . 2. THE SOLITARY ISSUE IS REGARDING DISALLOWANCE OF DEDUCTION OF RS.18,35,410/ - U/S 80IC OF THE INCOME TAX ACT, 1961 (HEREIN AFTER THE ACT) . 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTED THAT ASSESSEE ESTABLISHED A NEW UNIT DURING THE ASSESSMENT YEAR 2004 - 05 AND ACCORDINGLY CLAIMED DEDUCTION U/S 80IC. HOWEVER DURING THE ASSESSMENT YEAR UNDER CONSIDERATION IT HAS CLAIMED THAT IT HAS UNDERTAKEN SUBSTANTIAL EXPANSION AND THEREFORE CLAIMED 100% DEDUCTION U/S 80IC. THE AO DENIED THE CLAIM BY HOLDING THAT LD CIT(A), DEHRADUN HAS UPHELD THE DISALLOWANCE IN THE CASE OF M/S. TIRUPATI LPG INDUST RIES LTD. THEREFORE ASSESSEE PREFERRED AN APPEAL BY THE BEFORE THE LD. CIT(A) WHO WAS PLEASE D TO CONFIRM THE DISALLOWANCE AND AS SUCH THE ASSESSEE IS IN APPEAL. THE LD COUNSEL BRO UGHT TO OUR NOTICE THAT THE DISALLOWANCE UPHELD BY THE LD CIT(A) IN THE 2 CASE OF M/S. TIRUPATI LPG INDUSTRIES LTD. HAS BEEN ALLOWED AND THE CLAIM U/S 80IC HAS BEEN ALLOWED BY THE CO - ORDINATE BENCH IN FAVOR OF THE ASSESSE . THE LD DR SUPPORTED THE ORDER OF TH E AUTHORITIES BELOW. 4. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFULLY PERUSED THE RECORDS OF THE CASE. IN THE CASE OF M/S. TIRUPATI LPG INDUSTRIES LTD. IN WHICH ONE OF US WAS PARTY TO THE SAID DECISION WE HAVE HELD AS UNDER: - 10.1 AS PER SUB - SECTION (2) OF SECTION 80 IC DEDUCTION UNDER THIS SECTION IS AVAILABLE TO ANY UNDERTAKING OR ENTERPRISES IN THE FOLLOWING TWO CATEGORIES: - I. THE UNDERTAKING OR ENTERPRISES HAS BEGUN OR BEGINS TO MANUFACTURE OR PRODUCE ANY ARTICLE OR THING DURI NG THE PERIOD 7.1.2003 TO 1.4.2012; II. THE UNDERTAKING WHICH MANUFACTURE OR PRODUCE ANY ARTICLE OR THING AND UNDERTAKES SUBSTANTIAL EXPANSION DURING THE PERIOD 7.1.2003 TO 1.4.2012. 10.2 A BARE READING OF PROVISIONS OF SUB SECTION (2) WOULD REVEAL THAT THE DEDUCTION UNDER THE AFORESAID TWO CATEGORIES ARE INDEPENDENT. IN THE FIRST CATEGORY THE DEDUCTION IS BEING GIVEN TO THE UNDERTAKING WHICH HAS BEGUN OR BEGINS MANUFACTURING OR PRODUCTION OF ARTICLE AND THING DURING THE SPECIFIED PERIOD OF 7.1.2003 TO 1.4.2012. THUS UNDER THE FIRST CATEGORY THE DEDUCTION IS AVAILABLE TO NEWLY SET - UP UNITS. 10.2.1 IN THE SECOND CATEGORY, THE DEDUCTION IS ALLOWED IN CASE OF EXPANSION BY THE EXISTING UNITS WH ICH UNDERTAKE SUBSTANTIAL EXPANSION DURING THE SPECIFIED PERIOD OF7.1.2003 TO 1.4.2012.' 10.3 THERE IS NO DISPUTE ON THE FACT THAT (A) THE ASSESSEE IS ENTITLED TO EXEMPTION U/S 80 IC OF THE ACT IE. THAT THE ASSESSEE HAS SATISFIED ALL THE CONDITIONS SPECI FIED IN THE SECTION; (B) THAT THERE IS SUBSTANTIAL EXPANSION DURING THE YEAR AS PER REQUIREMENT OF THE SECTION 10.4 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 80 - IC. THE A.O. REFERRED TO POLICY OF THE GOVERNMENT FOR GIVING INCENTIVES TO THE STATE OF UTTARANCHAL AND HIMACHAL PRADESH. IT IS WELL SETTLED THAT EXTERNAL AI DS SHOULD NOT BE TAKEN FOR THE PURPOSE OF INTERPRETING THE STATUTE, WHEN THE LANGUAGE OF THE SECTION IS CLEAR AND UNAMBIGUOUS. A PLAIN READING OF SEC.80 - IC(8)(V) WHICH DEFINES THE TERM 'INITIAL ASSESSMENT YEAR' READ WITH SEC.80 - IC(8)(IX) WHICH DEFINES THE TERM 'SUBSTANTIAL EXPANSION' MAKES IT CLEAR THAT THERE IS NO RESTRICTION OR BAR ON MORE THAN ONE SUBSTANTIAL EXPANSION BEING UNDERTAKEN BY AN ASSESSEE. IN OUR VIEW, A UNIT CAN UNDERTAKE ANY NUMBER OF SUBSTANTIAL EXPANSIONS, IN THE ABSENCE OF ANY SPECIFIC R ESTRICTION IN THE SECTION THERE IS NO SUGGESTION IN THE LANGUAGE OF THE SECTION THAT INCENTIVE U/S 80 IC IS NOT AVAILABLE IF THE ASSESSEE 3 SUBSTANTIALLY EXPANDS FOR A SECOND OR THIRD TIME. SUBSTANTIAL EXPANSION REQUIRES ADDITIONAL INVESTMENT AND RESULTS IN HIGHER PRODUCTION, EMPLOYMENT ETC. INDUSTRIALISTS HAVE TO BE ENCOURAGED TO UNDERTAKE SUBSTANTIAL EXPANSION THE SECTION RECOGNIZES THIS FACT AND PROVIDES FOR AN INCENTIVE, IF AN ASSESSEE UNDERTAKES 'SUBSTANTIAL EXPANSION'. 10.5 THE TERM 'SUBSTANTIAL EXPAN SION' IS STATED IN S.80 - IC(8)(IX) REQUIRES INVESTMENT IN PLANT & MACHINERY EXCEEDING AT LEAST 50% OF THE BOOK VALUE OF PLANT AND MACHINERY IE. GROSS VALUE BEFORE TAKING DEPRECIATION INTO ACCOUNT. IF SUCH SUBSTANTIAL EXPANSION IS COMPLETED, THEN, FOR THE PU RPOSE OF THIS SECTION, THE ASSESSMENT YEAR RELEVANT TO THE P.Y. IN WHICH SUCH SUBSTANTIAL EXPANSION IS COMPLETED BECOMES THE INITIAL ASSESSMENT YEAR. ONCE IT BECOMES THE INITIAL ASSESSMENT YEAR CONSEQUENTLY UNDER SUB SECTION (3) THE ASSESSEE WOULD BE ENTIT LED TO 100% DEDUCTION OF PROFITS AND GAINS FOR A PERIOD OF 5 YEARS COMMENCING FROM SUCH INITIAL ASSESSMENT YEAR, AND THEREAFTER THE % OF DEDUCTION FROM PROFITS COME DOWN THE TERM 'INITIAL YEAR' HAS BEEN DEFINED, AS A YEAR IN WHICH SUBSTANTIAL EXPANSION IS COMPLETED. THERE IS NOTHING TO SUGGEST THAT THERE CANNOT BE A SECOND INITIAL YEAR IF A SECOND SUBSTANTIAL EXPANSION IS COMPLETED. EVEN IF AN EXISTING UNIT WHICH IS CLAIMING 80 - IC, UNDERTAKES FIRST SUBSTANTIAL EXPANSION THEN ALSO THE YEAR OF COMPLETION OF THE SUBSTANTIAL EXPANSION WILL ME 'INITIAL YEAR'. IF THE LITERAL MEANING OF THE TERM 'INITIAL ASSESSMENT YEAR' IS TO BE TAKEN, THEN THERE IS NO REQUIREMENT OF DEFINING THIS TERM IN THE SECTION. WE HAVE TO GO BY THE LANGUAGE OF THE SECTION. 10.6 THE CIT(A ) DENIES THE DEDUCTION ON THE GROUND THAT IT WOULD AMOUNT TO EVERGREENING OF AN INCENTIVE PROVISION. SUB SECTION (6) OF S. 80 - IC READS AS FOLLOWS. '(6) NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENT ERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDER THIS SECTION, 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. ' THIS SECTION IMPOSES A RESTRICTION FOR A TOTAL PERIOD OF 1 0 YEARS FOR CLAIMING THE DEDUCTION IN QUESTION, IRRESPECTIVE OF THE FACT WHETHER THE DEDUCTION IS CLAIMED U/S 80 - IC OR U/S 80 - IB OR U/S 10C AS THE CASE MAY BE. THUS THERE IS NO EVERGREENING OF THE PROVISIONS. THE ASSESSEE CANNOT CLAIM THE SAID DEDUCTION FUR A TOTAL PERIOD EXCEEDING 10 YEARS. THE DEDUCTION COULD BE ALLOWABLE ONLY FOR THE BALANCE PERIOD OF 5 YEARS INCLUDING THIS ASSESSMENT YEAR 2009 - 10. ONLY THE RATE OF DEDUCTION GOES UP. 10.7 T HE CHANDIGARH 'B' BENCH OF THE TRIBUNAL IN THE CASE OF S.R. PARYAVARAN ENGINEERS CIRCLE 5(1) (P.) LTD. (SUPRA) WAS CONSIDERING A CASE WHERE THE ASSESSEE ORIGINALLY CLAIMING DEDUCTION U/S 80 IB(IV) OF THE ACT FROM THE A.Y. 1999 - 2000. FOR THE FIRST 5 YEARS I T HAD CLAIMED EXEMPTION OF 100%. THEREAFTER IT UNDERTOOK SUBSTANTIAL EXPANSION AND CLAIMED DEDUCTION U/S 80 IB(IV). THE AO REJECTED THE SAME AND OBSERVED THAT BENEFIT COULD BE AVAILED U/S 80 IC AND AS THE SUBSTANTIAL EXPANSION WAS LESS THAN 50% OF THE VALU E OF PLANT AND MACHINERY THE CLAIM IS TO BE REJECTED. THE TRIBUNAL OBSERVED THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80 - IC. IT HELD THAT MERE MENTION OF A WRONG SECTION WOULD NOT DISENTITLE THE ASSESSEE TO CLAIM THE ABOVE SAID DEDUCTION. TO OUR MIND THIS CASE LAW IS NOT DIRECTLY ON THE POINT. 4 11. IN VIEW OF THE ABOVE DISCUSSION, AS ON A PLAIN READING OF THE SECTION AND INTERPRETATION OF THE TERM INITIAL ASSESSMENT YEAR, WE CONCLUDE THAT THE CLAIM OF THE ASSESSEE IS ADMISSIBLE. EVEN IF A VIEW IS TAK EN THAT THERE IS SOME AMBIGUITY IN THE LANGUAGE OF THE SECTION, THEN, BEING AN INCENTIVE PROVISIONS, THE RATIO OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO (SUPRA), GWALIOR RAYON SILK MFG. CO. LTD. (SUPRA) HAVE TO BE FOLLOWED AN D BENEFIT GIVEN TO THE ASSESSEE. WE ALSO MAKE IT CLEAR THAT THE DEDUCTION CANNOT BE EXTENDED BEYOND THE PERIOD OF 10 YEARS FROM THE A. Y.2004 - 05. 5. THUS THE RATIO OF THE AFORESAID DECISION IS THAT EVEN IN CASE OF SUBSTANTIAL EXPANSION OF AN ELIGIBLE UNIT CLAIMING DEDUCTION U/S 80C IS ALLOWABLE FOR A MAXIMUM PERIOD OF 10 YEARS FROM THE INCEPTION. THEREFORE THE CLAIM OF THE ASSESSEE IS VALID IN THE EYES OF LAW AND IS THEREFORE IS ALLOWED. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE ALLOWED. ORDER PRONOUN CED IN THE OPEN COURT ON 2 7 . 08. 2014. - S D / - - S D / - ( B.C.MEENA ) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 2 7 / 08 / 2014 A K KEOT A.K. VERMA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI