M/s. Aggarwal & Co., Jalandhar V. The Dy. Commissioner of Income-tax, Jalandhar

ITA 600/ASR/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0534 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 09-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A N MISHRA
• Keywords: Depreciation
• Section: 234B; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. A.D. JAIN, JUDICIAL MEMBER AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO.600(ASR)/2011 ASSESSMENT YEAR:2008-09 PAN: AABFA4237G M/S. AGGARWAL & CO.(ENGG. & ERACTORS) VS. THE D.C. I.T., BAZAR NAUHRIAN, RANGE-3, JALANDHAR. JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SANDEEP VIJH, CA RESPONDENT BY: SH. A,N.MISHRA, DR DATE OF HEARING: 24/05/2016 DATE OF PRONOUNCEMENT: 19/07/2016 ORDER PER A.D. JAIN, JM: THIS IS THE ASSESSEES APPEAL FOR THE ASSESSMENT Y EAR 2008-09, AGAINST THE ORDER, DATED 31.10.2011, PASSED BY THE LD. CIT(A), JALANDHAR. THE ASSESSEE HAS RAISED THE FOLLOWING GR OUNDS OF APPEAL: 1. THAT THE LD. CIT(A), HAS ERRED IN UPHOLDING THE ACTION OF THE A.O. IN REJECTING THE CLAIM OF DEDUCTION U/S 80-IC AT RS.25,44,945/-. THE LD. CIT(A), HAS NOT APPRECIATE THE SUBMISSIONS AND HAS REPLIED UPON AN ASPECT NOT EVEN RAISED IN THE ASSESSMENT PROCEEDINGS. 2. THAT THE LD. CIT(A) ERRED IN UPHOLDING THE LEVY OF INTEREST U/S 234B 2. APROPOS GROUND NO.1, THE FACTS ARE THAT THE ASSE SSEE IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND ENGINEERING WORK AT JALANDHAR AND ITA NO.600/ASR/2011 A.Y. 2008-09 2 IN THE BUSINESS OF MANUFACTURING PP WOVEN FABRIC AN D SACKS AT ITS FACTORY AT BADDI, DISTRICT SOLAN, HIMACHAL PRADESH. THE ASSESSEE CLAIMED TO HAVE TWO UNITS, NAMELY UNIT-I AND UNIT-11, AT BA DDI. DURING THE PRESENT ASSTT. YEAR, THE ASSESSEE CLAIMED DEDUCTION U/S 80-IC IN RESPECT OF THE INCOME OF UNIT-II, WHEREAS NO DEDUCTION U/S 80IB IN RESPECT OF UNIT-I WAS CLAIMED. IN THE FORM NO.LOCCB, THE ASSES SEE HAD CLAIMED THAT THE UNIT-II HAD COMMENCED OPERATION ON 1.5.200 3. THE AO ASKED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION U/S 80IC IN LIGHT OF THE PROVISIONS OF THE INCOME TAX ACT, 1961. THE ASSESSE E SUBMITTED BEFORE THE AO THAT ALL ASPECTS PERTAINING TO THE DEDUCTION HAD BEEN CONSIDERED WHILE FRAMING THE ASSESSMENT ORDER FOR THE ASSTT.YE AR 2006-07 AND THE ONLY POINT OF DISPUTE WAS THAT OF SUBSTANTIAL EXPA NSION. A CALCULATION OF THE DEDUCTION CLAIMED U/S 80IC WAS SUBMITTED TO THE AO. THEREAFTER, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE U NIT-II AT BADDI SHOULD NOT BE CONSIDERED TO BE A CASE OF SPLITTING UP OF BUSINESS, AS HELD IN THE ASSESSMENT ORDER FOR THE ASSTT.YEAR 2006-07, FOR VARIOUS REASONS, INCLUDING THE FACT THAT UNIT-I & UNIT-II HAD COMMON PREMISE, COMMON INVOICE BOOK, COMMON STOCK REGISTER, COMMON EXCISE REGISTRATION NUMBER & SALES TAX NUMBER, COMMON EMPLOYEES AND COMMON INV ENTORY OF PLANT & MACHINERY. THE ASSESSEE OBJECTED TO THE PROPOSITI ON, CONTENDING THAT THIS WAS A CASE OF SUBSTANTIAL EXPANSION AND THAT, THEREFORE, THE MERE FACT THAT THERE WAS A COMMON PREMISES FOR BOTH THE UNITS, DID NOT LEAD TO ANY ADVERSE INFERENCE. IT WAS SUBMITTED THAT THE BI LLS FOR BOTH THE UNITS ITA NO.600/ASR/2011 A.Y. 2008-09 3 WERE SEPARATELY IDENTIFIABLE FROM THE COMMON INVOIC E BOOK AND THAT THEY HAD SEPARATE STOCK REGISTERS AS WELL AS A CONSOLIDA TED STOCK REGISTER FOR THE TWO UNITS. THE COMMON EXCISE REGISTRATION NUMBE R AND SALES TAX NUMBER FOR BOTH THE UNITS WAS STATED TO BE DUE TO T HE FACT THAT BOTH THE UNITS WERE OF THE SAME ASSESSEE. IT WAS SUBMITTED T HAT THE EMPLOYEES OF BOTH THE UNITS WERE SEPARATELY IDENTIFIABLE AND THA T THE OLD UNIT AND THE NEW UNIT HAD DIFFERENT MACHINERY, WHICH WAS FOUND A T THE TIME OF ON THE SPOT INSPECTION BY THE INSPECTOR DEPUTED BY THE EAR LIER AO. IT WAS FURTHER SUBMITTED THAT SINCE NEW MACHINERY HAD BEEN PURCHAS ED, THIS COULD NOT BE A CASE OF SPLITTING UP. DETAILS OF THE MACHINERY PURCHASED FOR SUBSTANTIAL EXPANSION WERE STATED TO HAVE BEEN FILE D DURING THE ASSESSMENT PROCEEDINGS FOR A.Y.2006-07. A COPY OF T HE CERTIFICATE ISSUED BY THE DEPARTMENT OF INDUSTRIES, WHEREIN, THE SUBST ANTIAL EXPANSION HAD BEEN ACCEPTED, WAS ALSO SUBMITTED BY THE ASSESSEE. 2.1 THE AO WAS NOT SATISFIED WITH THE ASSESSEES RE PLY. THE AO NOTED THAT THE ASSESSEE HAD ACCEPTED THAT BOTH THE UNITS HAD COMMON PREMISES, COMMON INVOICE BOOK, CONSOLIDATED STOCK R EGISTER AND COMMON SALES TAX AND EXCISE REGISTRATION NUMBER. THESE FAC TS WERE ALSO NOTED IN THE HEARING HELD ON 18.11.2010, DURING WHICH, THESE FACTS WERE RECORDED AGAIN AFTER EXAMINATION OF BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO NOTED THAT THE FACTS IN THE PRESENT ASSTT. YEAR WER E SIMILAR TO THOSE IN THE ASSTT.YEAR 2006-07. AFTER REFERRING TO THE RELEVANT PORTION OF THE ASSESSMENT ORDER DATED 30.12.2008 FOR THE ASSTT. YE AR 2006-07, THE AO ITA NO.600/ASR/2011 A.Y. 2008-09 4 HELD THAT THIS WAS A CASE OF SPLITTING UP OF BUSINE SS, BECAUSE OF WHICH, DEDUCTION U/S 80IC COULD NOT BE ALLOWED TO THE ASSE SSEE. THE DEDUCTION CLAIMED U/S 80IC AMOUNTING TO RS.25,44,945/- WAS, T HEREFORE, DISALLOWED. 2.1 THE LD. CIT(A) UPHELD THE DISALLOWANCE. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS CONTENDED, AS ALSO MADE OUT IN THE WRITTEN SUBMISSIONS FILED, AS FOLLOWS: 1. THE FIRST GROUND OF APPEAL IS THAT THE LEARNED CIT(A) HAS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER IN REJECTING THE CLAIM OF DEDUCTION U/S 80-1C AT RS. 2 5,44,945. THE LEGAL AS WELL AS THE FACTUAL POSITION IN THIS C ASE HAS NOT BEEN APPRECIATED BY THE LEARNED CIT(A) AND HE HAS R ELIED UPON AN ASPECT WHICH WAS NOT EVEN RAISED DURING THE ASSESSMENT PROCEEDINGS. THE FACTS OF THE CASE ARE T HAT THE ASSESSEE HAD ESTABLISHED AN INDUSTRIAL UNDERTAKING AND CLAIMED DEDUCTION U/S 80-IB FOR THE FIRST TIME FOR THE ASSESSMENT YEAR 1997-98 [PARA 5.3 AT PAGE NO. 15 OF THE ORDER OF CIT(A)] SUBSEQUENTLY A SUBSTANTIAL EXPANSI ON WAS CARRIED OUT BY THE ASSESSEE TO AN EXISTING UNIT IN THE ASSESSMENT YEAR 2004-05 BY SETTING UP A UNIT WHICH WAS DESCRIBED AS UNIT-II AND THE OLD UNIT WAS DESCRIBED AS UNIT-I. THE SUBSTANTIAL EXPANSION CARRIED OUT BY THE ASSESS EE RESULTED IN THE CREATING OF A NEW UNIT [PARA NO. 2 OF THE ORDER OF ITAT FOR AY 2006-07 I.E. PAGE NO. 19 OF THE PAPE R BOOK]. THE ESTABLISHMENT OF UNIT-II IS APPARENT FROM PAGE NO. 2 OF THE ASSESSMENT ORDER WHERE THE TURNOVER AS WELL AS THE DEDUCTION OF THE TWO UNITS HAS BEEN SEPARATELY MENTIONED TO T HE EXTENT AVAILABLE WITH THE ASSESSING OFFICER. THE POSITION IN THE PRECEDING ASSESSMENT YEARS WAS THE SAME AND IN THE ASSESSMENT YEAR THERE WAS A DISPUTE AS T O WHETHER SUBSTANTIAL EXPANSION HAD BEEN CARRIED OUT BY THE ASSESSEE OR WHETHER THERE WAS SPLITTING UP OF THE EXISTING UNIT. THE MATTER AFTER BEING DECIDED IN FAVOUR OF THE ASSESSEE BY THE CIT(A) FOR THE ASSESSMENT YEAR 2006-07 TRAVE LLED TO THE ITAT, AMRITSAR BENCH, AMRITSAR. THE HONBLE AMRITSA R BENCH HAD DISMISSED THE APPEAL OF THE REVENUE AND WHILE D OING SO ITA NO.600/ASR/2011 A.Y. 2008-09 5 HIGHLIGHTED CERTAIN VERY IMPORTANT ASPECTS CONNECTE D TO THE ISSUE UNDER APPEAL WHICH SHALL BE DISCUSSED IN DUE COURSE. THE ENTIRE THRUST OF THE ARGUMENT OF THE ASSESSING OFFICER FOR THE YEAR UNDER CONSIDERATION WAS THAT THE ASSESSEE HAD NOT CARRIED OUT SUBSTANTIAL EXPANSION AND IT WAS A CASE OF SPLITTING UP OF THE OLD UNIT. THIS IS CLEAR FROM PA RA NO. 4 AT PAGE NO. 2 TO 15 OF THE IMPUGNED ASSESSMENT ORDER U /S 143(3). THE ASSESSING OFFICER HAD RELIED HEAVILY ON THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07 AN D THIS FACT BEEN CLEARLY MENTIONED IN THE OPENING LINES OF PARA NO. 4.4 AT PAGE NO. 14 OF THE ASSESSMENT ORDER. EVEN TH E REPLIES FILED IN THE ASSESSMENT YEAR 2006-07 HAVE BEEN INCO RPORATED AND DISCUSSED BY THE ASSESSING OFFICER WHILE DECIDI NG THE ISSUE. AS SUBMITTED ABOVE THE ISSUE IN THE ORDER FO R THE ASSESSMENT YEAR 2006-07 WAS DECIDED IN FAVOUR OF TH E ASSESSEE BY THE C1T(A) AND THE ACTION OF THE CIT(A) WAS UPHELD BY THE ITAT, AMRITSAR BENCH IN THE APPEAL FI LED BY THE REVENUE. COPY OF THE ORDER OF THE ITAT IS ENCLOSED AT PAGE NO. 18 TO 31. T(RE ALLEGATION THAT THERE WAS SPLITTING UP OF THE OLD UNIT DID NOT FIND FAVOUR WITH ANY JUDICIAL AUTHORIT IES. WHILE DECIDING THE APPEAL FOR THE ASSESSMENT YEAR 2 008-09, THE C1T(A) REFERRED TO HIS OWN DECISION FOR THE ASS ESSMENT YEAR 2006-07 AND CLEARLY HELD THAT THERE WAS NO SPL ITTING UP OF THE BUSINESS. [PLEASE SEE PARA NO. 5.2 AT PAGE N O. 15 OF THE ORDER OF CIT(A)]. THIS TAKES CARE OF THE VARIOUS OB JECTIONS OF THE ASSESSING OFFICER FOR NOT ALLOWING DEDUCTION U/S 80 -IC WHICH WERE RAISED WHILE FRAMING ASSESSMENT. HOWEVER, THE CIT(A) WAS OF THE HEW THAT IN VIEW OF SUB-SECTION (6) OF S ECTION 80-IC, THE PERIOD OF DEDUCTION WAS TEN /EARS FROM THE INIT IAL ASSESSMENT YEAR AND SINCE THE FIRST YEAR IN WHICH D EDUCTION WAS CLAIMED WAS ASSESSMENT YEAR 1997-98, DEDUCTION COULD BE CLAIMED UP TO ASSESSMENT YEAR 2006-07 ONLY. SUB- SECTION (6) OF SECTION 80-IC HAS BEEN REPRODUCED BY THE CIT (A) IN PARA NO. 5.3 AT PAGE NO. 15 OF HIS ORDER. IT WAS ALSO EM PHASIZED THAT SUB-SECTION (6) OF SECTION 80-IC OVERRIDES ALL OTHER PROVISIONS OF THE INCOME TAX ACT AS IT STARTED WITH THE WORDS NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT ... . AND AS SUCH SUB-SECTION(3) OF SECTION 80-IC WHICH PROVI DES FOR DEDUCTION FOR A PERIOD OF TEN YEARS FROM THE INITIA L ASSESSMENT YEAR WILL GET PREVAILED OVER BY SUB-SECTION (6) AND DEDUCTION WOULD NOT BE AVAILABLE BEYOND THE ASSESSMENT YEAR 2 006-07. IT MAY BE SUBMITTED THAT THE ISSUE RAISED BY THE C IT(A) WAS SOMETHING NEW AND THIS WAS NOT EVEN TOUCHED UPON BY THE ITA NO.600/ASR/2011 A.Y. 2008-09 6 ASSESSING OFFICER WHILE FRAMING ASSESSMENT. WITHOUT GOING INTO MUCH DETAILS, IT IS SUBMITTED THAT THE WORDS U SED IN SUB- SECTION (6) OF SECTION 80- IC ARE UNDERTAKING OR E NTERPRISE AND NOT 'ASSESSEE'. THE PERIOD OF DEDUCTION IS THUS TO BE RESTRICTED TO TEN YEARS FOR AN UNDERTAKING OR ENTER PRISE BELONGING TO AN ASSESSEE AND NOT TO THE ASSESSEE HI MSELF. IN THIS CASE THE ASSESSEE HAS CARRIED OUT SUBSTANTIAL EXPANSION BY SETTING UP A UNIT WHICH WAS DESCRIBED AS UNIT-II AND THE OLD UNIT WAS DESCRIBED AS UNIT-I. THE CONTENTION TH AT SUBSTANTIAL EXPANSION HAS TO BE TREATED AT A SEPARA TE UNIT IS SUPPORTED BY THE DECISION OF THE MADRAS HIGH COURT IN THE CASE OF CIT VS. PREMIER COTTON MILLS REPORTED AT 24 0 ITR 434. COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 32 TO 38. IT WAS ALSO HELD BY THE HIGH COURT THAT THE WORD UNDERTAKI NG IS NOT TO BE EQUATED WITH THE LEGAL ENTITY WHICH MAY OWN UNDERTAKING. A SINGLE LEGAL ENTITY MAY OWN AND OPER ATE MORE THAN ONE INDUSTRIAL UNDERTAKING [PLEASE SEE PAGE NO . 32], THIS IS A VERY CRUCIAL OBSERVATION AND WOULD BE THE DECI DING FACTOR IN THE PRESENT APPEAL. SECTION 80- IC(1) READS AS WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED BY AN UNDERTAKING OR ANY ENTERPRISE FROM ANY BUSINESS . . . . A PLAIN READING OF THE ABOVE LEAVES NO DOUBT THAT THE WORDS UNDERTAKING AND ENTERPRISE DOES NOT REPRESENT AN ASSESSEE. THE INTERPRETATION OF THE CI T(A) IS THUS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW AS THE TIME LIMIT HAS TO BE REFERRED TO FROM THE DATE OF THE SUBSTANT IAL EXPANSION WHICH RESULTED IN A NEW UNIT. ATTENTION I S ALSO DRAWN TO THE DECISION OF THE GUJARAT HIGH COURT IN THE CASE OF CIT VS. SHREE DIGVIJAY CEMENT COMPANY REPORTED AT 1 44 ITR 532 WHEREIN IT WAS HELD THAT THE EXPANDED UNIT HAS A SEPARATE IDENTITY. COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 39 TO 42 [PLEASE SEE THE HEAD NOTES AT PAGE NO 39/4 0 AND THE LAST FIVE LINES OF THE FIRST PARA AT PAGE NO. 41]. THE TWO CASE LAWS MENTIONED ABOVE WERE HIGHLIGHTED DURING THE AP PELLATE PROCEEDINGS ITSELF AND STAND MENTIONED IN THE SECON D LAST PARA AT PAGE NO. 5 OF THE ORDER OF CIT(A) BUT THESE CASES HAVE NOT BEEN DEALT WITH AT ALL WHILE DISPOSING OFF THE APPEAL. ITT MAY ALSO BE SUBMITTED THAT THE UNIT-II HAD BEEN SET UP BY BUYING NEW MACHINERY WORTH RS. 71 LAKHS WHICH IS CL EARLY IDENTIFIABLE, HAD SEPARATE ELECTRICITY CONNECTION, HAD SEPARATE EMPLOYEES WHICH WERE IDENTIFIABLE AND A SEPARATE ST OCK REGISTER AS A RESULT OF WHICH THE PURCHASES AS WELL AS SALES WERE IDENTIFIABLE. THESE FACTS STAND CONFIRMED IN O RDER OF THE ITAT [PLEASE SEE PAGE NO. 29 & 30 OF THE PAPER BOOK ]. IT IS ALSO PERTINENT TO MENTION THAT THE UNITS WERE LOCATED SE PARATELY BUT ITA NO.600/ASR/2011 A.Y. 2008-09 7 WITHIN THE SAME COMPLEX [FIRST THREE LINES AT PAGE NO. 4 OF THE PAPER BOOK].! FURTHER, A COMMON PREMISES / COMPLEX DOES NOT MEAN THAT ALL THE UNITS WITHIN THE COMPLEX HAVE TO BE TREATED AS ONE UNIT. ONE MULTI STOREY BUILDING MAY HOUSE DI FFERENT COMMERCIAL ENTERPRISES. THESE UNITS OR ENTERPRISES CANNOT BE TREATED AS ONE. ALSO THE INSPECTION CARRIED OUT BY THE INSPECTORS ON 15/12/2008 [WHEN THE ASSESSMENT PROCE EDINGS FOR A.Y 2006-07 WERE BEING TAKEN UP] COULD NOT HAVE REVEALED THE POSITION WHICH EXISTED PRIOR TO 31/3/2008 AND T HUS THEIR REPORT CANNOT BE RELIED UPON WHILE DECIDING THE ISS UE FOR THE ASSESSMENT YEAR 2008-09. IN FACT THE INSPECTORS ALS O REPORTED PURCHASE OF NEW LOOMS AND CONSTRUCTION OF NEW SHED WHICH WILL NOT BE RELEVANT FOR THE FINANCIAL YEAR ENDING 31/3/2008J EVEN WITH THE FACTS AS CONSIDERED IN THE ASSESSMENT YEAR 2006-07, THE SUBSTANTIAL EXPANSION RESULTED IN A NE W UNIT WHICH HAS TO BE TREATED AS A NEW UNIT FOR WHICH DED UCTION WOULD BE AVAILABLE FOR A PERIOD OF TEN YEARS FROM I TS INITIAL ASSESSMENT YEAR. THE DEDUCTION THUS HAS TO START FR OM THE DATE OF ESTABLISHMENT OF THE NEW UNIT I.E. UNIT-II WHICH WAS ESTABLISHED IN THE ASSESSMENT YEAR 2004-05[LAST PAR A AT PAGE NO. 7 OF THE PAPER BOOK AND MIDDLE OF FIRST PARA AT PAGE NO. 20 WHICH IS THE ORDER OF ITAT FOR AY 2006-07]. EVEN WH ERE ONE ASSESSEE HAS SEPARATE UNITS, THERE COULD BE ONE SAL ES TAX REGISTRATION AS WELL AS EXCISE REGISTRATION NUMBER, THERE BEING ONE LEGAL ENTITY ONLY. THERE WAS SEPARATE BUI LDING SHOWN IN THE ACCOUNTS FOR THE UNIT-I AND UNIT-II AS SUBMITTED TO THE CIT(A) [LAST 8 LINES IN THE SECOND LAST PAGE AT PAGE NO. 4 OF THE PAPER BOOK]. THIS CONTENTION HAS ALSO NOT BE EN REBUTTED IN THE APPELLATE ORDER. SEPARATE ELECTRICITY CONNEC TION WOULD NOT HAVE BEEN OBTAINED UNLESS THE UNITS WERE SEPARA TELY LOCATED. THE VARIOUS DOUBTS OF THE ASSESSING OFFICE R STAND EXPLAINED IN THE REPLIES DATED 10/11/2010 AND 24/11 /2010 WHICH ARE APART OF THE PAPER BOOK. THE SECTION PROVIDING FOR QUANTIFICATION AND PERIOD OF DEDUCTION IS SECTION 80-IC(3) AND IT PROVIDES FOR D EDUCTION IN THE CASE OF SUBSTANTIAL EXPANSION FOR TEN YEARS COM MENCING FROM THE INITIAL ASSESSMENT YEAR. SUB-SECTION (8) O F SECTION 80- IC AS DEFINED 'INITIAL ASSESSMENT YEAR AND THIS DEF INITION IS REPRODUCED BELOW: 80-IC(8)(V) INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO MANUFAC TURE OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATI ONS OR COMPLETES SUBSTANTIAL EXPANSION ITA NO.600/ASR/2011 A.Y. 2008-09 8 THE SUB-SECTION (3) WILL ALSO BE RENDERED IRRELEVAN T IF THE YEARS ARE TO BE INFERRED FROM THE YEAR IN WHICH THE ORIGINAL UNI T WAS SET UP. IF THIS WAS THE INTENTION OF THE LEGISLATURE, THEN THE RE WAS NO NEED TO REFER TO THE YEAR OF SUBSTANTIAL EXPANSION WHICH HA S TO BE AFTER THE SETTING UP OF THE MAIN UNIT. SUBSTANTIAL EXPANSION IS DIFFERENT FROM NORMAL EXPANSION AND NO BENEFIT IS AVAILABLE FOR NO RMAL EXPANSION. THE PERIOD OF TEN YEARS HAS THUS TO BE CONSIDERED F ROM THE SUBSTANTIAL EXPANSION WHERE SUCH EXPANSION HAS BEEN CARRIED OUT BY THE ASSESSEE. IF THIS WAS NOT SO, THERE WAS NOT NEED TO EVEN COIN THE WORD SUBSTANTIAL EXPANSION. THE CONCEPT OF SUBSTANTIAL EXPANSION CONSTITUTING A NEW UNIT HAS ALSO BEEN APPROVED OFF BY THE ITAT, MADRAS C BENCH IN THE CASE OF ITO VS. CARBORANDUM UNIVERSAL REPORTED AT 13 TTJ 37 0. COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 43 TO 46 [PLEASE S EE PAGE NO. 43 & 46]. THE ITAT, AHMEDABAD BENCH HAS IN THE CASE OF A CIT VS. NIKO RESOURCES LTD.REPORTED AT 22 DTR 225 HELD THAT WHER E THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF EXPLORATION AND DEVE LOPMENT OF OIL AND GAS FIELDS, EACH SUCH LAND BASED WELL OR CLUSTE R OF WELL FOR OFF SHORE CONSTITUTED AN UNDERTAKING ELIGIBLE FOR TAX H OLIDAY U/S 80- IA(9). COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 47 TO 51 [PLEASE SEE PAGE NO.49]. THE ITAT, KOLKATA BENCH HAS IN THE CASE OF JOONKTOL LE TEA & INDUSTRIES LTD. VS. DCIT REPORTED AT 8 TAXMAN.COM 4 WTME DEALING WITH SECTION 80-IC ITSELF HELD THAT THE SUBSTANTIAL EXPANSION WOULD CONSTITUTE SEPARATE BUSINESS WHICH WOULD BE SEPARAT E FROM EXISTING BUSINESS. COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 52 TO 62 ( PLEASE SEE PAGE NO. 52]. THE JUDGMENT SUPPORTS THE CONTENTION OF THE ASSESSEE THAT THE NEW SUBSTANTIAL EXPANSION UNI T WOULD CONSTITUTE A NEW BUSINESS OR ENTERPRISE AND ACCORDI NGLY WOULD BE ELIGIBLE FOR DEDUCTION U/S 80IC FOR A PERIOD OF TEN ASSESSMENT YEARS FROM THE INITIAL ASSESSMENT YEAR OF THAT UNIT AS DI SCUSSED ABOVE. THE UNIT-I AND UNIT-11 WERE INDEPENDENT IN VIEW OF THE FACTS BROUGHT ON RECORD. IT WOULD ALSO BE RELEVANT TO DISCUSS CIRCULAR NO. 7 OF 2003 WHICH HAS BEEN REFERRED TO THE CIT(A) IN PARA NO. 5.3 OF HIS ORDER. THE RELEVANT PARA IN CIRCULAR NO. 7 OF 2003 IS J; NO. 49. RELEVA NT PAGES OF THE CIRCULAR CONTAINING THESE PARAS ARE ENCLOSED AT PAG E NO. & 64. THE OBSERVATIONS OF THE CIT(A) FROM CIRCULAR NO. 7 OF 2 003 ARE CONTAINED IN P NO749.4 WHICH STATES THAT THE DEDUCTION TO ANY UNDERTAKING OR ENTERPRISE SHALL NOT EXO A PERIOD OF TEN YEARS. IN THIS REGARD IT IS SUBMITTED THAT THE PERIOD OF TEN YEARS IS FOR UNDER TAKING OR ITA NO.600/ASR/2011 A.Y. 2008-09 9 ENTERPRISE AND NOT THE ASSESSEE. THE WORDS UNDERTAK ING OR ENTERPRISE THUS CANNOT BE SUBSTITUTED FOR THE WORD 'ASSESSEE'. IT IS IMPORTANT TO UNDERSTAND THE CONCEPT OF INITIA L ASSESSMENT YEAR AS THE PERIOD DEDUCTION U/S 80-IC IS WITH REFERENCE TO THE INITIAL ASSESSMENT YEAR. A PLAIN READING OF DEFINITION GIVE N IN SECTION 80- IC(8)(V) SHOWS THAT THE WORDS INITIAL ASSESSMENT Y E MEAN THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WH ICH THE UNDERTAKING OR ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATIC OR COMPLETES SUBST ANTIAL EXPANSION. FOR DIFFERENT SITUATION THE WORD USED IS OR AND EACH CLAUSE IS INDEPENDENT OF THE OTHER. IT IS ALSO PERT INENT TO MENTION THAT NO OVERALL RESTRICTION HAS BEEN PLACED BY USING WOR DS SUCH AS WHICHEVER IS EARLIER. IN THE PRESENT CASE SIR SUB STANTIAL EXPANSION WHICH RESULTED IN THE CREATION OF NEW UNIT, THE INI TIAL ASSESSMENT YEAR IS ASSESSMENT YEAR 2004-05 AND THE PERIOD OF T EN YEAR IS TO COMMENCE W REFERENCE TO THE ASSESSMENT YEAR 2004-05 . SINCE THE PERIOD OF DEDUCTION HAS NOT BE LINKED TO THE DATE W HEN THE ORIGINAL UNIT WAS PUT INTO PLACE, NO SUCH ASSUMPTION OF PRES UMPTION CAN BE MADE IN VIEW OF THE DECISIONS CITED IN THE PRECEDIN G PARAGRAPH. THE CIT(A) HAS THUS NOT JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF DEDUCTION U/S 80-IC CLAIMED AT RS. 25,44,945 WHICH WAS CLAIMED ONLY WITH RESPECT OF THE SUBSTANTIAL EXPANSION UNIT I.E UNIT NO.-II WHERE THE INITIAL ASSESSMENT YEAR IS ASSESSMENT YEA R 2004- OS. THE FINDING GIVEN AT THE END OF PARA NO. 5.4 OF THE ORDER OF CIT(A) [PLEASE SEE PAGE NO. 16 OF THE ORDER OF CIT(A)] IS NOT JUSTIFIED AS THE CONCEPT OF NEW UNIT HAS NOT BEEN APPRECIATED AT ALL . EVEN AT THE COST OF REPETITION IT IS SUBMITTED THAT SECTION 80-IC(6) HAS LAID DOWN THE TIME LIMIT IN RESPECT OF INDUSTRIAL UNDERTAKING AND NOT THE ASSESSEE. THE PROVISIONS OF SECTION 80-IC OF THE ACT BEING IN CENTIVE PROVISIONS SHOULD BE LIBERALLY CONSTRUED IN VIEW OF THE DECISI ON OF THE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. TRINITY HOSPITAL REPORTED AT 225 ITR 178. COPY OF THE DECISION IS ENCLOSED AT PAGE NO. 65 TO 71 [PLEASE SEE PAGE NO.70]. SIMILAR VIEW HAS BEEN EXPR ESSED BY THE SUPREME COURT IN THE CASE OF CIT VS. STRAWBOARD MAN UFACTURING CO LTD. REPORTED AT 177 ITR 431 [PLEASE SEE PAGE NO. 7 4], IN THE CASE OF CIT VS. SOUTH ARCOT DISTRICT CO-OP MARKETING SOCIET Y LTD. REPORTED AT 176 ITR 117 [PLEASE SEE PAGE NO. 76] AND IN THE CAS E OF HARIHAR POLYFIBRES VS. REGIONAL DIRECTOR OF ESI CORPORATION [PLEASE SEE PAGE NO. 83], COPY OF THE ABOVE DECISIONS IS ENCLOSED AT PAGE NO. 72 TO 83 [PLEASE SEE PAGE NO. 66], WITHOUT PREJUDICE TO THE ABOVE, EVEN IF THERE WAS A DOUBT IN INTERPRETATION AND TWO VIEWS W ERE POSSIBLE, THE ONE FAVOURING THE ASSESSEE SHOULD PREVAIL. RELIANCE IS PLACED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS . VEGETABLE PRODUCTS LTD. REPORTED AT 88 ITR 192. ITA NO.600/ASR/2011 A.Y. 2008-09 10 4. ON THE OTHER HAND, THE LD. DR RELIED ON THE IMP UGNED ORDER. 5. WE HEAVE HEARD THE PARTIES AND HAVE PERUSED THE MATERIAL ON RECORD. THE AO HELD IT TO BE A CASE OF SPLITTING UP OF THE OLD UNIT, RATHER THAN OF THAT SUBSTANTIAL EXPANSION, AS CANVASSED BY THE ASSESSEE. THE LD. CIT(A), ON THE OTHER HAND, RELYING ON HIS OWN DECIS ION IN THE ASSESSEES CASE FOR THE ASSESSMENT YEAR 2006-07, HELD THAT TH ERE WAS NO SPLITTING UP OF THE BUSINESS. HOWEVER, HE HAS EXPRESSED THE V IEW THAT IN VIEW OF SECTION 80-IC(6) OF THE ACT, THE PERIOD OF DEDUCTIO N WAS 10 YEARS FROM THE INITIAL ASSESSMENT YEAR AND SINCE IT WAS FROM THE A SSESSMENT YEAR 1997- 98, THAT THE DEDUCTION WAS CLAIMED FOR THE FIRST TI ME, SUCH DEDUCTION WOULD BE AVAILABLE TO THE ASSESSEE UP TO THE ASSESS MENT YEAR 2006-07 ONLY. 6. REFERENCE WAS MADE BY THE LD. CIT(A) TO CBDT CIR CULAR NO. 7 OF 2003, DATED 05.09.2003. 7. THE RELEVANT PORTION OF SECTION 80-IC(6) STATES THAT NOTWITHSTANDING ANYTHING CONTAINED IN THIS ACT, NO DEDUCTION SHALL BE ALLOWED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, WHERE THE TOTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD O F 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. 8. SECTION 80-IC(6) THUS, EVIDENTLY, TALKS OF AN U NDERTAKING OR ENTERPRISE. SECTION 80-IC(8)(V) STATES THAT INIT IAL ASSESSMENT YEAR ITA NO.600/ASR/2011 A.Y. 2008-09 11 MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN WHICH THE UNDERTAKING OR THE ENTERPRISE BEGINS TO MANUFACTURE OR PRODUCE ARTICLES OR THINGS, OR COMMENCES OPERATION OR COMPLETES SUBS TANTIAL EXPANSION. 9. SECTION 80-IV(8)(V), THEREFORE, MAKES IT FURTHER CLEAR THAT THE SUBSTANTIAL EXPANSION BEING CONSIDERED AS THAT OF T HE UNDERTAKING OR ENTERPRISES. 10. THUS, THE ASSESSEE IS CORRECT IN CONTENDING THA T WHEREAS THE RELEVANT PROVISIONS OF THE ACT ARE CLEAR WITH REGAR D TO THE ENTITLEMENT THEREIN BEING THAT OF THE UNDERTAKING OR ENTERPRI SE AND NOT OF THE ASSESSEE. OBVIOUSLY, THEREFORE, THE RESTRICTION OF THE PERIOD OF DEDUCTION PERTAINS TO AN UNDERTAKING OR ENTERPRISE BELONGING TO AN ASSESSEE AND NOT TO THE ASSESSEE, AS HAS ERRONEOUSLY BEEN DONE B Y THE LD. CIT(A). 11. IN CIT VS. PREMIER COTTON MILLS, 240 ITR 434 (MAD.), IT HAS BEEN HELD THAT A SINGLE ENTITY MAY NOT OPERATE MORE THAN ONE INDUSTRIAL UNDERTAKING; THAT AND WHEN EXISTING INDUSTRIAL UND ERTAKING IS SUBSTANTIALLY EXPANDED AND THE MANNER OF EXPANSION IS SUCH, THAT THE NEWLY INSTALLED PLANT & MACHINERY AND OTHER FACILI TIES, WHEN TAKEN TOGETHER, ARE CAPABLE OF BEING REGARDED AS AN INDU STRIAL UNDERTAKING, THE REQUIREMENTS OF SECTION 80J (WHICH WAS BEING CONSI DERED THEREIN) ARE MET. FOR OUR PRESENT PURPOSES, THE REQUIREMENTS UND ER SECTION 80-IC ARE SUBSTANTIALLY THE SAME. ITA NO.600/ASR/2011 A.Y. 2008-09 12 12. IN THE PRESENT CASE, THE ISSUE OF THE NEW UNIT, I.E., UNIT II HAVING COME INTO EXISTENCE BY VIRTUE OF THE SUBSTANTIAL EX PANSION CARRIED OUT, IS NOT AT ALL IN DISPUTE. IT HAS BEEN HELD BY THE HON BLE MADRAS HIGH COURT IN PREMIER COTTON MILLS LTD. (SUPRA), THAT THE AS SESSEE UNDERTAKING IS NOT TO BE EQUATED WITH THE LEGAL ENTITY WHICH MAY O WN THE UNDERTAKING AND THAT A SINGLE LEGAL ENTITY MAY OWN OPERATE MOR E THAN ONE INDUSTRIAL UNDERTAKING. 13. THE PROVISIONS OF SECTION 80-IC OF THE ACT ARE CONTAINED IN PART C OF CHAPTER VII-A OF THE ACT. CHAPTER VII-A OF THE A CT CONCERNS DEDUCTION TO BE MADE IN COMPUTING TOTAL INCOME. PART C THE REOF IS ABOUT DEDUCTION IN RESPECT OF CERTAIN INCOME. 14. THE HEADING OF SECTION 80-IC IS AS FOLLOWS: SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKI NGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY OF STATES: THUS, AS EVIDENT FROM THE HEADING ITSELF, SECTION 8 0-IC RELATES TO UNDERTAKING OR ENTERPRISE. THIS IS MADE MORE CLEA R BY SECTION 80-IC(1), WHICH TALKS OF DEDUCTION BEING ALLOWED FORM THE PRO FITS AND GAINS BY AN UNDERTAKING OR ENTERPRISE, WHERE THE GROSS TOTAL IN COME OF THE ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDER TAKING OR ENTERPRISE. SECTION 80-IC(2) LAYS OUT THE APPLICABILITY OF SECT ION 80-IC TO ANY UNDERTAKING OR ENTERPRISE, AS ENVISAGED IN SECTION 80-IC(2). SECTION 81- IC(3) EXPLAINS THE DEDUCTION VIS--VIS ANY UNDERT AKING OR ENTERPRISE REFEREED TO THEREIN. SECTION 80-IC(4) IS ABOUT THE CONDITIONS TO BE FULFILLED BY AN UNDERTAKING OR ENTERPRISE FOR THE APPLICABILI TY OF SECTION 80-IC. SECTION 80-IC(5) MANDATES THAT IN COMPUTING THE TO TAL INCOME OF THE ASSESSEE , NO DEDUCTION SHALL BE ALLOWED ( AS ENVISAGED), I N RELATION TO ITA NO.600/ASR/2011 A.Y. 2008-09 13 THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISES. SECTION 80-IC(6) HAS BEEN DWELT UPON EARLIER. SECTION 80-IC(7), AGAI N, TALKS OF ELIGIBLE UNDERTAKING OR ENTERPRISE. 15. FROM THE ABOVE SECTIONS, AS A WHOLE, IT IS CLEA R THAT IT IS THE UNDERTAKING OR ENTERPRISE, RATHER THAN THE ASSES SEE, OR THE PROFITS AND GAINS, WHICH IS TO BE SUBJECTED TO DEDUCTION THERE IN AND THAT UNDERTAKING AND ENTERPRISE ARE THE TERMS WHICH ARE NOT MUTUALLY INTER-CHANGEABLE WITH THE TERM ASSESSEE. IN THE P RESENT CASE, AS SEEN, THE SUBSTANTIAL EXPANSION CARRIED OUT BY THE ASSES SEE RESULTED IN A NEW UNIT, I.E. UNIT II, WHICH IS THE UNDERTAKING OR ENTERPRISE THAT TO BE SUBJECTED TO BE DEDUCTION, AND NOT THE ASSESSEE ITS ELF. AS SUCH, THE PROVISIONS OF SECTION 80-IC(B) IS TO BE CONSTRUED V IS--VIS UNIT-II. 17. THE LD. CIT(A) HAS NOT RESPONDED EITHER TO PRE MIER COTTON MILLS LTD. (SUPRA) OR TO SHRI DIGVIJAY CEMENT CO. (SU PRA), THOUGH THEY WERE CITED. EVEN BEFORE US, THE DEPARTMENT HAS NOT CITED ANY CASE LAW IN CONTRA-DISTINCTION TO THESE DECISIONS. IT REMAINS U NCHALLENGED ON RECORD THAT UNIT-II OF THE ASSESSEE IS AN ENTIRELY INDEPEN DENT UNIT FROM THE ERSTWHILE UNIT. IT WAS SET UP BY INSTALLING NEW MAC HINERY WORTH RS. 71 LACS. OBVIOUSLY, IT HAS A SEPARATE ELECTRICITY CONN ECTION. IT IS BEING WORKED BY SEPARATE EMPLOYEES. THE PURCHASES TO AND SALES FROM UNIT-II ARE SEPARATE, AS BORNE OUT FROM THE SEPARATE STOCK REGISTER MAINTAINED. ALL THIS HAS DULY BEEN TAKEN INTO CONSIDERATION BY THE TRIBUNAL IN ITS ITA NO.600/ASR/2011 A.Y. 2008-09 14 ORDER FOR THE ASSESSMENT YEAR 2006-07 (SUPRA). PHY SICALLY ALSO, THOUGH LOCATED IN THE SAME COMPLEX, UNIT-I & UNIT-II ARE HOUSED SEPARATELY. THUS, FOR ALL INTENTS AND PURPOSES, THE TWO UNITS ARE MUTUALLY DISTINCT AND SEPARATE ENTITIES, UNIT-II HAVING COME INTO BE ING ONLY AS A RESULT OF THE SUBSTANTIAL EXPANSION CARRIED OUT BY THE ASSESS EE. IT IS IN THIS LIGHT, THAT THE APPLICABILITY OF THE PROVISIONS OF SECTION 80IC(6) HAVE TO BE CONSTRUED. THE LD. CIT(A) HAS ERRED IN NOT DOING SO . 18. IN THIS REGARD, RELIANCE BY THE ASSESSEE ON IT O VS. CARBORUNDUM UNIVERSAL LTD., 13 TTJ 370 (MADRAS) AND ACIT VS. NIKO RESOURCES LTD., 22 DTR 225 (AHD.), IS APPROPRIATE. 19. JOONKTOLLE TEA & INDUSTRIES LTD. VS. DCIT, 8 TAXMAN.COM 4 ( KOL. ITAT), WHICH HOLDS THAT THE UNIT ARISING DUE TO TH E SUBSTANTIAL EXPANSION WOULD CONSTITUTE A NEW BUSINESS OR ENTERP RISE AND, ACCORDINGLY, WOULD BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IC FOR A PERIOD OF TEN YEARS FROM THE INITIAL ASSESSMENT OF THAT UNIT, IS DIRECTLY ON THE ISSUE, IN FAVOUR OF THE ASSESSEE. 20. FURTHER, CBDT CIRCULAR NO.7 OF 2003, AS NOTED, WAS REFERRED TO BY THE LD. CIT(A). PARA 49 OF THIS CIRCULAR (APB 63-64 ), WHICH IS RELEVANT FOR OUR PRESENT PURPOSES, READS AS FOLLOWS: THE UNION CABINET HAS ANNOUNCED A PACKAGE OF FISCAL AND NON- FISCAL CONCESSIONS FOR THE SPECIAL CATEGORY STATES OF HIMACHAL PRADESH, UTTARNCHAL, SIKKIM AND NORTH-EASTERN STATE S, IN ORDER TO GIVE BOOST TO THE ECONOMY IN THESE STATES. WITH A VIEW TO GIVE EFFECT TO THESE NEW PACKAGES A NEW SECTION HAS BEEN INSER TED TO ALLOW A DEDUCTION FOR TEN YEARS FROM THE PROFITS OF NEW UNDERTAKINGS OR ; OR ITA NO.600/ASR/2011 A.Y. 2008-09 15 EXISTING UNDERTAKINGS OR ENTERPRISES ON THEIR SUBST ANTIAL EXPANSION, IN THE STATES OF HIMACHAL PRADESH, UTTARANCHAL, SIK KIM AND NORTH- EASTERN STATES. FOR THIS PURPOSE, SUBSTANTIAL IS DE FINED AS INCREASE IN THE INVESTMENT IN THE PLANT AND MACHINERY BY AT LEAST 50% OF THE BOOK VALUE OF THE PLANT AND MACHINERY (BEFORE TAKIN G DEPRECIATION IN ANY YEAR), AS ON THE FIRST DAY OF US .EAR IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN. 49.2 THE SECTION PROVIDES THAT THE DEDUCTION SHALL BE AVAILABLE TO SUCH UNDERTAKINGS OR ENTERPRISES WHICH MANUFACTURE OR PRODUCE ANY ARTICLE OR THING, NOT BEING ANY ARTICLE OR THIN G SPECIFIED IN THE THIRTEENTH SCHEDULE AND WHICH COMMENCE OPERATION IN ANY EXPORT PROCESSING ZONE, OR INTEGRATED INFRASTRUCTURE DEVEL OPMENT CENTRE OR INDUSTRIAL GROWTH CENTRE OR INDUSTRIAL ESTATE, OR I NDUSTRIAL PARK, ARE TECHNOLOGY PARK OR INDUSTRIAL AREA OR THEME PARK, A S NOTIFIED BY THE BOARD IN ACCORDANCE ;S PRESCRIBED IN THIS REGARD. S IMILAR DEDUCTION SHALL BE AVAILABLE TO THRUST SECTOR INDUSTRIES, AS SPECIFIED IN THE FOURTEENTH SCHEDULE. THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF SIKKIM, AND THE EASTERN STATES SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR TEN ASSESSMENT YEARS. THE AMOUNT OF DEDUCTION IN CASE OF UNDERTAKINGS OR ENTERPRISES IN THE STATES OF UTTRANCHAL, HIMACHAL PRADESH SHALL BE ONE HUNDRED PER CENT OF THE PROFITS OF THE UNDERTAKING FOR FIVE ASSESSMENT YEARS, AND THEREAFTER TWENTY-FIVE PER CENT (THIRTY PER CEN T FOR COMPANIES) FOR THE NEXT FIVE ASSESSMENT YEARS. THE SECTION ALSO PROVIDES THAT NO DEDUCTION SHALL B E ALLOWED TO ANY UNDERTAKING OR ENTERPRISE :P S SECTION, WHERE THE T OTAL PERIOD OF DEDUCTION INCLUSIVE OF THE PERIOD OF DEDUCTION UNDE R THIS - OR UNDER SECTION 80-IB OR UNDER SECTION 10C, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS. FURTHER, IN COMPUTING THE TOTAL I NCOME OF THE ASSESSEE, NO DEDUCTION SHALL BE ALLOWED UNDER ANY S ECTION CONTAINED IN CHAPTER VIA OR IN SECTIONS 10A OR 10B, IN RELATION TO THE PROFITS AND GAINS OF THE UNDERTAKING OR ENTERPRISE . A NEW THIRTEENTH SCHEDULE HAS BEEN INSERTED IN THE INCOME -TAX ACT TO SPECIFY THE LIST OF ARTICLES THINGS, WHICH ARE I NELIGIBLE FOR THE PURPOSE OF DEDUCTION UNDER SECTION 80-IC. FURTHER, A NEW - FOURTEENTH SCHEDULE HAS ALSO BEEN INSERTED, WHICH S PECIFIES THE LIST OF ARTICLES AND THINGS, BEING THRUST ;OR INDUSTRIES , WHICH ARE ELIGIBLE FOR THE PURPOSES OF AVAILING DEDUCTION UNDER THIS S ECTION, SEQUENT TO THESE AMENDMENTS, THE PROVISIONS OF SECTION 10C AND SUB-SECTION (4) OF SECTION 80IB E BEEN MADE INOPERATIVE IN RESP ECT OF THE UNDERTAKINGS OR ENTERPRISES IN THE STATE OF HIMACHA L PRADESH OR IN ITA NO.600/ASR/2011 A.Y. 2008-09 16 NORTH-EASTERN REGION INCLUDING SIKKIM, WITH EFFECT FROM THE 1ST DAY OF APRIL, 2004. THESE AMENDMENTS WILL TAKE EFFECT FROM 1ST APRIL, 2 004 AND WILL, ACCORDINGLY, APPLY IN RELATION TO E ASSESSMENT YEAR 2004-2005 AND SUBSEQUENT YEARS. [SECTIONS 9, 39(A), 40 & 99]. 21. THUS, IN KEEPING WITH THE CLEAR MANDATE OF SECT ION 80-IC, THIS CIRCULAR EXPLAINS THE APPLICABILITY OF THE NEW PRO VISIONS TO CERTAIN UNDERTAKINGS IN THE STATES OF HIMACHAL PRADESH, UTTRANCHAL, SIK KIM AND NORTH-EASTERN STATES, ALLOWING A TEN YEARS TAX HO LIDAY. 22. SECTION 80IC(8)(V) STATES THAT INITIAL ASSES SMENT YEAR MEANS THE ASSESSMENT YEAR RELEVANT TO THE PREVIOUS YEAR IN W HICH THE UNDERTAKING OR ENTERPRISE, INTER-ALIA, BEGINS MANUFACTURE, OR COMPLETES SUB STANTIAL EXPANSION. IN THE PRESENT CASE, SUBSTANTIAL EXPANSI ON WAS BROUGHT ABOUT IN THE ASSESSMENT YEAR 2004-05 AND THAT BEING SO, T HE PERIOD OF 10 YEARS TAX HOLIDAY IS TO COMMENCE WITH REFERENCE T O THIS ASSESSMENT YEAR, I.E., A.Y. 2004-05. THE ASSESSEE CLAIMED DEDU CTION OF RS.25,44,945/- UNDER SECTION 80-IC WITH RESPECT TO UNIT-II. THIS WAS WRONGLY DISALLOWED BY THE AO AND THE LD. CIT(A) ERR ONEOUSLY CONFIRMED THE DISALLOWANCE. 23. IN VIEW OF THE PRECEDING DISCUSSION, THE INITI AL ASSESSMENT YEAR FOR THE PROPOSED UNIT-II, FOR THE PURPOSES OF SECTION 8 0-IC(6), WAS A.Y. 2004- 05. WE HOLD ACCORDINGLY. ITA NO.600/ASR/2011 A.Y. 2008-09 17 23. IN VIEW OF THE ABOVE, GROUND NO.1 RAISED BY THE ASSESSEE IS FOUND TO BE JUSTIFIED AND IS ACCEPTED, REVERSING THE ACTI ON OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE. 24. GROUND NO.2, WHICH RELATES TO UPHOLDING THE LE VY OF INTEREST U/S 234B, IS CONSEQUENTIAL. 25. IN THE RESULT, APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19/0 7/ 2016. SD/- SD/- (T.S. KAPOOR) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER /SKR/ DATED: 19/07/2016 COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. AGGARWAL & CO. (ENGG. & ERACTORS) , JALANDHAR. 2. THE DCIT, R-III, JLR 3. THE CIT(A) 4. THE CIT 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.