DCIT, Circle , Parwanoo V. M/s Aqua Vitoe Laboratories, Baddi

ITA 619/CHANDI/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 3966 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-10-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 04-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: GULSHAN RAJ
• Keywords: Question of law
• Section: 6; 260A; 80IC; 80IC; 20

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH !, ' # . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R.KUMAR, AM ITA NO. 619/CHD/2018 ASSESSMENT YEAR : 2015-16 THE DCIT, CIRCLE, PARWANOO. VS M/S AQUA VITOE LABORATORIES, PLOT NO. 4, KUBJHAL, JHARMAJRI, BADDI, SOLAN (HP). PAN NO: AAMFA1630L APPELLANT RESPONDENT ! REVENUE BY : DR. GULSHAN RAJ, CIT '# ! ASSESSEE BY : NONE $ % #& DATE OF HEARING : 29.08.2018 '()* #& D ATE OF PRONOUNCEMENT : 08.10.2018 ')/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILI NG THE CORRECTNESS OF THE ORDER DATED 20.03.2018 OF CIT, SHIMLA P ERTAINING TO 2015-16 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.18,18,61,419/- MADE BY A.O. BY R ESTRICTING THE CLAIM OF THE ASSESSEE TO 25% AS AGAINST THE 100% CLAIM MADE IN THE 8 TH YEAR, IGNORING THE FACT THAT UNITS WHICH COMMENCED PRODUCTION AFTER 07-01-2003 CAN'T CARRY OUT MULTIPLE 'SUBSTANTIAL EXPANSION' AS PER PROVISIONS OF SECTIO N 80-IC OF THE INCOME TAX ACT AND AS EXPLAINED IN CBDT CIRCULAR NO. 7/2003. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THERE CAN BE MORE THAN ONE 'INITIAL ASSESSMENT YEAR' FOR AVAILING THE DEDUCTION UNDER SECTION 80-IC OF THE INCOME TAX ACT. IN OTHER WORDS, THE ASSESSEE CAN FIRST CLAIM DEDUCTION FROM THE INITIAL ASSESSMENT YEAR, BEING T HE YEAR OF SETTING UP OF THE INDUSTRIAL UNDERTAKING AND, THEREAFTER, ONCE AGAIN CLAIM THE D EDUCTION FROM ANOTHER INITIAL ASSESSMENT YEAR, BEING THE ASSESSMENT YEAR IN WHICH THE ASSESSEE CARRIES OUT SUBSTANTIAL EXPANSION OF ITS UNDERTAKING. 2. AT THE TIME OF HEARING, NO ONE WAS PRESENT ON BEH ALF OF THE ASSESSEE. THE LD. SR.DR INVITING ATTENTION TO THE GROUND RAISED AND THE MATERIAL AVAILABLE ON RECORD SUBMITTED THAT THE POINT AT I SSUE IS FULLY ITA 619/CHD/2018 A.Y. 2015-16 PAGE 2 OF 7 COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE A PEX COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (2018) 96 TAXMAN N.COM 405 (S.C). ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE APPEAL MA Y BE DECIDED IN TERMS OF THE JUDICIAL PRECEDENT AVAILABLE AS THE RELIANCE PLACED BY THE CIT(A) UPON THE DECISION OF THE JURISDICTIONAL HIGH COURT BY THE CIT(A) NAMELY STOVEKRAFT INDIA VERSUS CIT-V AND OTHERS (ITA 2 0 TO 24/2015 IS OF NO HELP AS IT IS NO LONGER GOOD LAW. 3. WE HAVE HEARD THE SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. IT IS SEEN THAT IN THE FACTS OF THE PRESENT CA SE, THE AO HAD REJECTED THE CLAIM OF 100% DEDUCTION U/S 80IC IN THE 8 TH YEAR AND RESTRICTED THE CLAIM TO 25% REJECTING THE CLAIM OF SUBSTAN TIAL EXPANSION HAVING BEEN CARRIED OUT IN 2010-11 ASSESSMENT YEAR, THE AO TAKING NOTE OF THE FACT THAT THE ASSESSEE HAD STARTED ITS BUSINESS ACTIVITY ON 29.06.2007 AND THE INITIAL YEAR OF DEDUCTION WAS 2008-09 AS SESSMENT YEAR AND HAD ALREADY CLAIMED 100% DEDUCTION OF THE ELIGIBLE PROFIT FOR FIVE YEARS FROM 2008-09 TO 2012-13 ASSESSMENT YEAR, REFU SED TO GRANT 100% DEDUCTION ON THE GROUNDS OF HAVING CARRIED OUT SU BSTANTIAL EXPANSION. THE CIT(A) IN APPEAL RELYING UPON DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S STOVEKRAFT IN DIA GRANTED RELIEF. THE CORRECTNESS OF THE SAID ORDER IS UNDER CHALLEN GE IN THE PRESENT PROCEEDINGS. WE FIND ON GOING THROUGH THE AFORESAID DECISIO N OF THE APEX COURT NOTE THAT THE POINT AT ISSUE HAS BEEN LAID AT RES T BY THE APEX COURT. THE SPECIFIC QUESTION IN THE BATCH OF APPEALS WITH WH ICH THE APEX COURT WAS DEALING WITH : 'WHETHER AN ASSESSEE WHO SETS UP A NEW INDUSTRY OF A KIND MENTIONED IN SUB-SECTION (2) OF SECTION 80-IC OF THE ACT AND STARTS AVAILING EXEMPTION OF 100 PER CENT TAX UNDER SUB-SECTION (3) OF SECTION 80-IC (WHICH IS AD MISSIBLE FOR FIVE YEARS) CAN START CLAIMING THE EXEMPTION AT THE SAME RATE OF 10 0% BEYOND THE PERIOD OF FIVE YEARS ON THE GROUND THAT THE ASSESSEE HAS NOW CARRI ED OUT SUBSTANTIAL EXPANSION IN ITS MANUFACTURING UNIT?' 3.1. THE BACKGROUND OF THE CASE HAS BEEN ADDRESSED IN P ARA 2 OF THE AFORESAID DECISION IN THE FOLLOWING MANNER : 2. TO UNDERSTAND THE AFORESAID QUESTION OF LAW IN CLEAR TERMS, IT MAY BE MENTIONED AT THIS STAGE ITSELF THAT SUBSECTION (2) OF SECTION 80-IC APPLIES TO AN UNDERTAKING OR ENTERPRISE WHICH HAS, INTER ALIA, BEGUN OR BEGINS T O MANUFACTURE OR PRODUCE ANY ARTICLE OR THING BY SETTING UP A NEW FACTORY IN THE AREA SPECIFIED THEREIN WHICH INCLUDES STATE OF HIMACHAL PRADESH AS WELL. SUB-SEC TION (3) OF SECTION 80-IC IS IN TWO PARTS: IN CERTAIN CASES, EXEMPTION FROM INCOME IS PROVIDED AT THE RATE OF 100% OF SUCH PROFITS AND GAINS EARNED FROM THE AFORESAID UNDERTAKING OR ENTERPRISE FOR 10 ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT YEAR. THE PRESENT APPEALS DO NOT FALL IN THAT CATEGORY. OTHER CLAUSE RELATES TO ANOTHER CATEGORY OF UNDERTAKINGS OR ENTERPRISES (THESE CASES BELONG TO THAT CATEGORY) WHERE THE ITA 619/CHD/2018 A.Y. 2015-16 PAGE 3 OF 7 EXEMPTION IS AT THE RATE OF 100% OF PROFITS AND GAI NS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND, TH EREAFTER, 25% OF PROFITS AND GAINS. TOTAL EXEMPTION, THUS, IS FOR A PERIOD OF 10 YEARS, NAMELY, @100% FOR 1ST FIVE YEARS AND @ 25% FOR REMAINING FIVE YEARS. IN THESE CASES, ALL THE ASSESSEES STARTED CLAIMING EXEMPTION @ 100% ON PROFITS AND GAINS AND AVAILED IT FOR A PERIOD OF FIVE YEARS. DURING THIS PERIOD THESE ASSESSEES CARRIED O UT 'SUBSTANTIAL EXPANSION' AND THEY CLAIMED THAT, ON THAT BASIS, THEY SHOULD BE AL LOWED EXEMPTION FROM PROFITS AND GAINS FOR ANOTHER FIVE YEARS @ 100% INSTEAD OF 25% FROM 6TH TO 10TH YEAR AS WELL. INTERESTINGLY, THEY ADMIT THAT THE TOTAL PERIOD DUR ING WHICH THEY ARE ENTITLED TO EXEMPTION WOULD NOT EXCEED 10 YEARS, AS PER THE MAN DATE OF SUB-SECTION (6). IN THIS BACKDROP, THE QUESTION IS AS TO WHETHER THE ASSESSE ES CAN AGAIN START CLAIMING 100% EXEMPTION FOR THE NEXT FIVE YEARS FROM PROFITS AND GAINS AFTER AVAILING THE SAME FOR FIRST FIVE YEARS ON THE GROUND THAT THEY H AVE NOW CARRIED OUT SUBSTANTIAL EXPANSION. THE HIGH COURT HAS ANSWERED THE QUESTION IN AFFIRMATIVE AND FOR THIS REASON, IT IS THE DEPARTMENT WHICH HAS COME UP TO T HIS COURT CHALLENGING THE SAID DECISION BY FILING THESE APPEALS. 3.2 THE HISTORICAL POSITION OF THE SAID PROVISION WAS ADDR ESSED IN THE FOLLOWING MANNER : 4. SECTION 80-IA WAS INSERTED BY THE FINANCE (NO. 2) ACT, 1991, WITH EFFECT FROM 1ST APRIL, 1991. BY VIRTUE OF SAID SECTION, THE GROSS T OTAL INCOME (PROFITS AND GAINS) OF AN ASSESSEE DERIVED FROM ANY BUSINESS OF AN INDU STRIAL UNDERTAKING, SO SPECIFIED THEREIN, WAS ENTITLED TO CERTAIN DEDUCTIONS FOR A P ERIOD COMMENCING FROM 1ST APRIL, 1993. WITH EFFECT FROM 1ST APRIL, 2000, THE SAID PR OVISION WAS BIFURCATED WITH THE INSERTION OF ANOTHER SECTION, I.E., 80-IB, DEALING WITH 'CERTAIN INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOP MENT UNDERTAKINGS.' THEREAFTER, THE LEGISLATOR, IN ITS WISDOM, ENACTED A SPECIAL PROVIS ION, IN RESPECT OF 'UNITS' ESTABLISHED IN CERTAIN SPECIAL CATEGORY STATES. THU S, SECTION 80-IC CAME TO BE INSERTED BY VIRTUE OF FINANCE ACT, 2003, APPLICABLE WITH EFFECT FROM 1ST APRIL, 2004. AT THIS POINT., IT MAY ONLY BE NOTICED THAT CORRESP ONDINGLY CERTAIN PROVISIONS OF SECTION 80-IB WERE ALSO AMENDED/REPEALED. DEDUCTION S UNDER THE SAID SECTION WERE DISCONTINUED FOR THE ASSESSMENT YEARS COMMENCING FR OM 1ST APRIL, 2004 (SUB- SECTION (4) OF SECTION 80-IB). 3.3. THE ASSESSEE IN THE FACTS OF THE SAID DECISION, WAS CA RRYING OUT MANUFACTURING ACTIVITY AND HAD STARTED ITS BUSINESS ACTIVIT Y IN 2006-07 ASSESSMENT YEAR FOR CLAIM OF DEDUCTION U/S 80IC AND ASSE SSEE LIKE IN THE FACTS OF THE PRESENT CASE HAD ALREADY CLAIMED DEDUCTION T O THE EXTENT OF 100% OF ITS ELIGIBLE PROFITS FOR FIVE ASSESSMENT YEARS FROM 200 6-07 TO 2010-11 ASSESSMENT YEAR. (THE PERIOD IN THE FACTS OF THE PRESENT CASE IS 2008-09 TO 2012-13 ASSESSMENT YEAR). THE YEAR UNDER C ONSIDERATION BEFORE THE APEX COURT WAS 7 TH YEAR OF PRODUCTION ( IN THE FACTS OF THE PRESENT CASE, IT IS THE 8 TH YEAR) LIKE IN THE FACTS OF THE PRESENT CASE JUSTIFICATION FOR CLAIMING DEDUCTION @ 100% OF ELIGIBLE PROFITS W AS BASED ON THE ARGUMENT OF HAVING CARRIED OUT SUBSTANTIAL EXPAN SION. THE APPEAL OF THE ASSESSEE WAS DISMISSED UPTO THE STAGE OF ITAT RE LYING UPON THE DECISION RENDERED IN THE CASE OF M/S HYCRON ELECTRONICS V ITO (SUPRA) WHICH ORDER WAS CHALLENGED BEFORE THE HIGH COURT AND PUR SUANT TO THE ITA 619/CHD/2018 A.Y. 2015-16 PAGE 4 OF 7 RELIEF GRANTED BY THE HON'BLE HIGH COURT, THE ABOVE SUBST ANTIAL QUESTION OF LAW WAS FORMULATED IN THE APPEAL FILED BEFORE THE APEX CO URT. THE FOLLOWING DISCUSSION OF THE ORDER ADDRESSES THE LEGAL POSITION ON IDENTICAL FACTS : 12.DISSATISFIED WITH THE AFORESAID ORDER DATED LLT H AUGUST, 2016, ASSESSEE FILED APPEAL UNDER SECTION 260A OF THE ACT, 1961 BE FORE THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA RAISING THEREIN SUBSTANTIA L QUESTIONS OF LAW. THE RESULT OF OTHER ASSESSEES WAS ALSO ON ALMOST SAME P ATTERN, WHO FILED THEIR RESPECTIVE APPEALS AS WELL. THE HIGH COURT HAS DECI DED THE ISSUE IN A COMPOSITE JUDGMENT, IN FAVOUR OF ALL THESE ASSESSEE S. THE HIGH COURT HELD THAT THERE IS NO RESTRICTION THAT UNDERTAKING OR ENTERPR ISE ESTABLISHED AFTER 7TH JANUARY, 2003 CANNOT CARRIED OUT 'SUBSTANTIAL EXPAN SION' CANNOT BE CARRIED OUT MORE THAN ONCE AS LONG AS PERIOD OF ELIGIBILITY FOR CLAIMING DEDUCTION UNDER SECTION 80-IC OF THE ACT. THE HIGH COURT FURTHER HE LD HAT SINCE THE LANGUAGE OF SECTION IS VERY CLEAR, RELIANCE CANNOT BE PLACED ON CIRCULAR NO. 7 OF 2003 ISSUED Y CBDT ON THIS ISSUE SUBSTANTIAL QUESTIONS OF LAW WERE ANSWERED IN FAVOUR OF ASSESSEE AND APPEALS WERE ALLOWED WITH DI RECTION THAT WITH RESPECT TO EACH OF THE ASSESSEES THE ASSESSING OFFICER SHALL C ARRY OUT FRESH ASSESSMENT AND PASS APPROPRIATE ORDERS. 13. WITH THE AFORESAID FACTUAL BACKGROUND, WE NOW PROCEED TO ANSWER THE QUESTION OF LAW FORMULATED ABOVE. 14. A GIST OF THE LEGISLATIVE HISTORY AND PURPOSE BEHIND THE INSERTION OF SECTION 80-IA, 80-IB AND 80-IC HAS ALREADY BEEN MENTIONED A BOVE. WE HAVE TO KEEP IN MIND THAT THESE CASES ARE CONFINED TO SECTION 80-IC ALONE. AS MENTIONED ABOVE, SUB-SECTION (2) OF SECTION 80-IC PROVIDES FOR TAX B ENEFIT TO THOSE UNDERTAKINGS OR ENTERPRISES WHICH HAD SET UP THEIR MANUFACTURING UN ITS IN CERTAIN SPECIFIED AREAS INCLUDING STATE OF HIMACHAL PRADESH TO WHICH THIS CASE IS BELONGED. 15. IT ALSO GIVES BENEFIT TO THESE UNDERTAKINGS AND ENT ERPRISES WHICH HAVE UNDERTAKEN SUBSTANTIAL EXPANSION DURING THE PERIODS MENTIONED THEREIN. AS THERE IS NO DISPUTE THAT ALL THESE ASSESSEES ARE CO VERED BY THE PROVISIONS OF SUB-SECTION (2), THAT ASPECT NEED NOT BE STATED IN DETAIL. WE, THUS, REPRODUCE THOSE PORTIONS OF THE PROVISION WHICH ARE RELEVANT FOR OU R DISCUSSION: 'S. 80-IC. SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES. (1) WHERE THE GR OSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFITS AND GAINS DERIVED BY AN UNDERT AKING OR AN ENTERPRISE FROM ANY BUSINESS REFERRED TO IN SUB-SECTION (2), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOW ED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DEDUCTION FROM SUCH PROFI TS AND GAINS, AS SPECIFIED IN SUB-SECTION (3). ** ** ** (3) THE DEDUCTION REFERRED TO IN SUB-SECTION (1) SH ALL BE-(I) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-CLAUSE S (I) AND (III) OF CLAUSE (A) OR SUB-CLAUSES (I) AND (III) OR CLAUSE (B), OF SUB-SEC TION (2), ONE HUNDRED PER CENT, OF SUCH PROFITS AND GAINS FOR TEN ASSESSMENT YEARS COM MENCING WITH THE INITIAL ASSESSMENT YEARS; (II) IN THE CASE OF ANY UNDERTAKING OR ENTERPRISE R EFERRED TO IN SUB-CLAUSE (II) OF CLAUSE (A) OR SUB-CLAUSE (II) OF CLAUSE (B), OF SUB -SECTION (2), ONE HUNDRED PER CENT OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR AND THEREAFTER, TWENTY-FIVE PER CEN T, (OR THIRTY PER CENT WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS. ITA 619/CHD/2018 A.Y. 2015-16 PAGE 5 OF 7 (6) 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 OF DEDUCTION UNDE R THIS SECTION, OR UNDER THE SECOND PROVISO TO SUB-SECTION (4) OF SECTION 80-IB OR UNDER SECTION IOC, AS THE CASE MAY BE, EXCEEDS TEN ASSESSMENT YEARS' 16. THE ESSENCE OF SECTION 3 AS WELL AS SECTION 6 HAVE ALREADY BEEN REPRODUCED ABOVE. WHEREAS THE EXEMPTION IS PROVIDED @ 100% OF SUCH PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENC ING WITH THE INITIAL ASSESSMENT YEARS AND, THEREAFTER, 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF THE PROFITS AND GAINS FOR NEXT FIVE YEA RS. THE DEDUCTION IS LIMITED TO A PERIOD OF 10 YEARS. 17. IN THIS BACKDROP, THE QUESTION IS AS TO WHETHER THE SE ASSESSEES, WHO HAD AVAILED DEDUCTIONS @ 100% FOR FIRST FIVE YEARS ON T HE GROUND THAT THEY HAD SET UP A MANUFACTURING UNIT AS PRESCRIBED UNDER SUB-SECTIO N (2) OF THE ACT, CAN START CLAIMING DEDUCTIONS @ 100% AGAIN FOR NEXT FIVE YEAR S AS THEY HAD UNDERTAKING 'SUBSTANTIAL EXPANSION' DURING THE PERIOD MENTIONED IN SUB-SECTION (2)? THE ANSWER HAS TO BE IN THE NEGATIVE FOR THE FOLLOWING THE REASONS: 18. WE ARE DEALING WITH THE DEDUCTIONS IN RESPECT OF PR OFITS AND GAINS UNDER SECTION 80-IC OF THE ACT. NO OTHER PROVISION IS INV OLVED. THIS SECTION MAKES SPECIAL PROVISIONS IN RESPECT OF CERTAIN UNDERTAKIN GS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES. SECTION 80-IC WAS INSERTED BY THE FINANCE ACT, 2003 W.E.F. APRIL 1, 2004. AS PER THIS PROVISION, CERTAIN UNDER TAKINGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES ARE ALLOWED DEDUCTI ON FROM SUCH PROFITS AND GAINS, AS SPECIFIED IN SUB-SECTION (3) OF SECTION 8 0-IC. THE PROVISIONS OF SECTION 80-IC PROVIDED DEDUCTION TO MANUFACTURING U NITS SITUATED IN THE STATE OF SIKKIM, HIMACHAL PRADESH AND UTTARANCHAL A ND NORTH-EASTERN STATES. THE DEDUCTION WAS PROVIDED TO NEW UNITS EST ABLISHED IN THE AFORESAID STATES, AND ALSO TO EXISTING UNITS IN THOSE STATES IF SUBSTANTIAL EXPANSION WAS CARRIED OUT. THE DEDUCTION WAS AVAILABLE @ 100% FOR TEN ASSESSMENT YEARS FOR THE UNITS LOCATED IN NORTH- EASTERN AND IN THE STAT E OF SIKKIM AND FOR THE UNITS LOCATED IN HIMACHAL PRADESH, THE DEDUCTION WAS AVAI LABLE @ 100% FOR FIVE YEARS AND @ 25% FOR NEXT FIVE YEARS. 19. IN THE INSTANT CASE, WE ARE CONCERNED WITH THE ASSE SSEES WHO HAD ESTABLISHED THEIR UNDERTAKINGS IN THE STATE OF HIMA CHAL PRADESH. SUB-SECTION (3), AS NOTED ABOVE, MENTIONS THE PERIOD OF 10 YEAR S COMMENCING WITH THE INITIAL ASSESSMENT YEAR. SUB-SECTION (6) PUTS A CAP OF 10 YEARS, WHICH IS THE MAXIMUM PERIOD FOR WHICH THE DEDUCTION CAN BE ALLOW ED TO ANY UNDERTAKING OR ENTERPRISE UNDER THIS SECTION, STARTING FROM THE IN ITIAL ASSESSMENT YEAR. ANOTHER SIGNIFICANT FEATURE UNDER SUB-SECTION (3) I S THAT THE DEDUCTION ALLOWABLE IS 100% OF SUCH PROFITS AND GAINS FROM AN UNDERTAKI NG OR AN ENTERPRISE FOR FIVE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESS MENT YEAR AND THEREAFTER THE DEDUCTION IS ALLOWABLE AT 25% (OR 30% WHERE THE ASS ESSEE IS A COMPANY) OF THE PROFITS AND GAINS. CUMULATIVE READING OF THESE PROV ISIONS BRINGS OUT THE FOLLOWING ASPECTS: (A) THOSE UNDERTAKINGS OR ENTERPRISES FULFILLING THE CO NDITIONS MENTIONED IN SUB-SECTION (2) OF SECTION 80-IC BECOME ENTITLED TO DEDUCTION UNDER THIS PROVISION. (B) THIS DEDUCTION IS ALLOWABLE FROM THE INITIAL ASSESS MENT YEAR. 'INITIAL ASSESSMENT YEAR' IS DEFINED IN SECTION 80-IB(14)(C) OF THE ACT. (C) THE DEDUCTION IS @ 100% OF SUCH PROFITS AND GAINS F OR FIRST 5 ASSESSMENT YEARS AND THEREAFTER A DEDUCTION IS PERM ISSIBLE @ 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY). (D) TOTAL PERIOD OF DEDUCTION IS 10 YEARS, WHICH MEANS 100% DEDUCTION FOR ITA 619/CHD/2018 A.Y. 2015-16 PAGE 6 OF 7 FIRST 5 YEARS FROM THE INITIAL ASSESSMENT YEAR AND 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) FOR THE NEXT 5 YEARS. 20. WHEN WE KEEP IN MIND THE AFORESAID SCHEME AND SPIRI T BEHIND THIS PROVISION, SUCH A SITUATION CANNOT BE COUNTENANCED WHERE AN ASSESSEE IS ABLE TO SECURE DEDUCTION @ 100%O FOR THE ENTIRE PERIOD OF 1 0 YEARS. IF THAT IS ALLOWED IT WILL AMOUNT TO DOING VIOLENCE TO THE PROVISIONS OF SUB-SECTION (3) READ WITH SUB- SECTION (6) OF SECTION 80-IC. A PRAGMATIC AND REASO NABLE INTERPRETATION OF SECTION 80-IC WOULD BE TO HOLD THAT ONCE THE INITIA L ASSESSMENT YEAR COMMENCES AND AN ASSESSEE, BY VIRTUE OF FULFILLING THE CONDITIONS LAID DOWN IN SUB SECTION (2) OF SECTION 80-IC, STARTS ENJOYING D EDUCTION, THERE CANNOT BE ANOTHER 'INITIAL ASSESSMENT YEAR' FOR THE PURPOSES OF SECTION 80-IC WITHIN THE AFORESAID PERIOD OF 10 YEARS, ON THE BASIS THAT IT HAD CARRIED SUBSTANTIAL EXPANSION IN ITS UNIT. 21. WE ARE CONSCIOUS OF OUR RECENT JUDGMENT RENDERE D BY THIS VERY BENCH IN MAHABIR INDUSTRIES V. PRINCIPAL COMMISSIONER OF INC OME TAX (CIVIL APPEAL NOS. 4765-4766 OF 2018 DECIDED ON MAY 18, 2018). HOWEVER , A FINE DISTINCTION NEEDS TO BE NOTED BETWEEN THE TWO SETS OF CASES. IN MAHABIR INDUSTRIES, THE ASSESSEES HAD AVAILED THE INITIAL DEDUCTION UNDER A DIFFERENT PROVISION, NAMELY, SECTION 80- IA OF THE ACT, I.E. BY FULFILLING THE CONDITIONS ME NTIONED IN SUB-SECTION (4) OF SECTION 80-IA. THOSE CONDITIONS ARE ALTOGETHER DIFF ERENT. DEDUCTION IN RESPECT OF PROFITS AND GAINS UNDER THE SAID PROVISION IS AD MISSIBLE WHEN THESE PROFITS AND GAINS ARE FROM INDUSTRIAL UNDERTAKINGS OR ENTERPRIS ES ENGAGED IN INFRASTRUCTURE DEVELOPMENT ETC. EVEN THIS AVAILMENT STARTED AT A T IME WHEN SECTION 80-IC WAS NOT EVEN ON THE STATUTE BOOK. AS MENTIONED ABOVE, S ECTION 80-IC WAS INSERTED BY THE FINANCE ACT, 2003 WITH EFFECT FROM APRIL 01, 20 04. THE ASSESSEES IN THOSE CASES HAD STARTED CLAIMING AND WERE ALLOWED DEDUCTI ONS FROM THE ASSESSMENT YEARS 1998-99 AND 1999-2000 UNDER SECTION 80-IA AND FROM THE ASSESSMENT YEAR 2000-01 TO ASSESSMENT YEAR 2005-06 UNDER SECTI ON 80-IB OF THE ACT. THE DEDUCTION WAS, THUS, CLAIMED BY THE ASSESSEES IN TH OSE APPEALS UNDER THE NEW PROVISION I.E. SECTION 80-IC ON FULFILLING CONDITIO NS CONTAINED IN SUB-SECTION (2) OF SECTION 80-IC FOR THE FIRST TIME FOR THE ASSESSMENT YEAR 2006-07. THUS, INSOFAR AS THOSE CASES ARE CONCERNED, THE INITIAL ASSESSMENT Y EAR UNDER SECTION 80-IC STARTED ONLY FROM THE ASSESSMENT YEAR 2006-07. IN C ONTRAST, POSITION HERE IS ALTOGETHER DIFFERENT. THESE ASSESSEES HAVE AVAILED DEDUCTION UNDER SECTION 80- IC ALONE. INITIALLY, THEY CLAIMED THE DEDUCTION ON THE GROUND THAT THEY HAD SET UP THEIR UNITS IN THE STATE OF HIMACHAL PRADESH AND AFTER AVAILING THE DEDUCTION @ 100% THEY WANT CONTINUATION OF THIS RATE OF 100% FOR THE NEXT 5 YEARS ALSO UNDER THE SAME PROVISION ON THE GROUND THAT THEY HAVE MAD E SUBSTANTIAL EXPANSION. AS POINTED OUT ABOVE, ONCE THE ASSESSEES HAD STARTED C LAIMING DEDUCTION UNDER SECTION 80-IC AND THE INITIAL ASSESSMENT YEAR HAS C OMMENCED WITHIN THE AFORESAID PERIOD OF 10 YEARS, THERE CANNOT BE ANOTH ER INITIAL ASSESSMENT YEAR THEREBY ALLOWING 100% DEDUCTION FOR THE NEXT 5 YEAR S ALSO WHEN SUB-SECTION (3), IN NO UNCERTAIN TERMS, PROVIDES FOR DEDUCTION @ 25% ONLY FOR THE NEXT 5 YEARS. IT MAY BE ASSERTED AGAIN THAT THE ASSESSEES ACCEPT THE LEGAL POSITION THAT THEY CANNOT CLAIM DEDUCTION OF MORE THAN 10 YEARS IN ALL UNDER SECTION 80-IC. 22. IN VIEW OF THE AFORESAID DISCUSSION, WE HOLD TH AT AFTER AVAILING DEDUCTION FOR A PERIOD OF 5 YEARS @ 100% OF SUCH PROFITS AND GAINS FROM THE 'UNITS', THE ASSESSEES WOULD BE ENTITLED TO DEDUCTION FOR REMAIN ING 5 ASSESSMENT YEARS. @ 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY), AS TH E CASE MAY BE, AND NOT @ 100%. THE QUESTION OF LAW IS, THUS, ANSWERED IN FAV OUR OF THE REVENUE THEREBY ALLOWING ALL THESE APPEALS. NO ORDER AS TO COSTS. 3.4 ACCORDINGLY, IN VIEW THEREOF, THE LEGAL POSITIO N HAVING BEEN SET AT REST, THE APPEAL OF THE REVENUE IS ALLOWED AND THE IMPUGNED ORDER IS SET ITA 619/CHD/2018 A.Y. 2015-16 PAGE 7 OF 7 ASIDE UPHOLDING THE ASSESSMENT ORDER ON THE ISSUE. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.10. 2018. SD/- SD/- ( . %.. . & ) ( ! ) (DR. B.R.R. KUMAR) (DIVA SINGH) '( #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER + , (+ #,-.-# COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT - 2. THE RESPONDENT - 3. $ /# CIT 4. $ /#01 THE CIT(A) 5. -2#45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; ASSISTANT REGISTRAR