DCIT, Circle, Parwanoo V. Ruby Singla, Solan

ITA 680/CHANDI/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 0667 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-09-2018
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH , !' # $ % &' , BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER . / ITA NO.680/CHD/2018 / ASSESSMENT YEARS : 2014-15 ) THE D.C.I.T., CIRCLE, PARWANOO. SMT.RUBY SINGLA PROP. M/S IMPERIAL HOME APPLIANCES, VILL-KOTI, POST- JABLI, SOLAN(H.P) ./ PAN: ACBPS1626F /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI SURINDER BABBAR, CA / REVENUE BY : SHRI YOGINDER MITTAL, SR. DR ! '#$ /DATE OF HEARING : 28.03.2019 %&'(#$ /DATE OF PRONOUNCEMENT: 28.03.2019 /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER : THE IMPUGNED APPEAL WAS EARLIER DISMISSED EXPARTE A ND THEREAFTER RECALLED VIDE ORDER OF EVEN DATE IN MA NO.57/CHD/2019. 2. THE ORDER WAS RECALLED ON NOTING THE MISTAKE THA T THE ISSUE INVOLVED IN THE APPEAL WAS DECIDED AGAINST TH E ASSESSEE FOLLOWING THE THEN PREVAILING DECISION OF THE HON'BLE APEX COURT, AND THAT SUBSEQUENTLY THE HON'BLE APEX COURT HAD REVERSED ITS EARLIER DECISION, RULING IN FAVOUR OF THE ASSESSEE. ITA NO.1648/CHD/2017 A.Y., 2013-14 2 THE ISSUE INVOLVED IN THE PRESENT APPEAL RELATES TO ALLOWANCE OF CLAIM OF DEDUCTION U/S 80IC OF THE ACT @ 100% OF PROFITS FROM THE ELIGIBLE BUSINESS OF THE ASSESS EE, ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN, AFTER AVAILING 100% DEDUCTION OF THE PROFITS FOR THE FIRST FIVE YE ARS, 3. BRIEFLY STATED THE ASSESSEE WAS ELIGIBLE FOR CLA IMING DEDUCTION OF ITS PROFITS U/S 80IC OF THE ACT AND HA D STARTED ITS MANUFACTURING ACTIVITY ON 24.09.2007. THE INIT IAL YEAR FOR CLAIMING DEDUCTION U/S 80IC WAS THUS A.Y 2008-0 9. THE ASSESSEE CLAIMED DEDUCTION TO THE EXTENT OF 100% OF ITS PROFITS FOR THE STIPULATED FIVE YEARS UPTO A.Y. 201 2-13. IN THE IMPUGNED YEAR, I.E. A.Y. 2014-15 WHICH WAS THE SEV ENTH YEAR OF PRODUCTION, THE ASSESSEE AGAIN CLAIMED DEDU CTION TO THE EXTENT OF 100% OF ITS PROFITS BY CLAIMING TO HA VE CARRIED OUT SUBSTANTIAL EXPANSION IN F.Y. 2012-13 RELEVANT TO A.Y. 2013-14. THE A.O., FOR DETAILED REASONS MENTIONED I N THE ASSESSMENT ORDER, RESTRICTED THE CLAIM TO 25% OF TH E ELIGIBLE PROFITS. THE ASSESSEE WENT IN APPEAL TO THE CIT(A), WHO ALLOWED THE ASSESSEE CLAIM FOLLOWING THE DECISION O F THE JURISDICTIONAL HIGH COURT IN THE GROUP OF CASES WIT H THE LEAD CASE BEING M/S STOVE KRAFT INDIA VS CIT IN ITA NOS. 20 TO 24 AND ORS. OF 2015 AND 2017 DATED 28.11.2017. THE REV ENUE FILED APPEAL TO THE I.T.A.T., WHO ALLOWED THE APPEA L OF THE REVENUE FOLLOWING THE DECISION OF THE H APEX COURT IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES IN CIVIL APPEAL NO.7208/2018 DATED 28 TH AUGUST 2018. ITA NO.1648/CHD/2017 A.Y., 2013-14 3 4. NOW IT HAS BEEN POINTED OUT AND CONCEDED BY BOT H THE PARTIES THAT THE HON'BLE APEX COURT HAS DECIDED THI S ISSUE IN FAVOUR OF THE ASSESSEE IN A SUBSEQUENT DECISION IN BUNCH OF CASES WITH THE LEAD CASE BEING PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONICS IN CIVIL NO.1784 OF 2019 DATED 20 .2.2019. 5. WE HAVE GONE THROUGH THE ORDER OF THE HON'BLE AP EX COURT IN THE CASE OF M/S AARHAM SOFTRONICS (SUPRA) AND FIND THAT THE HON'BLE APEX COURT DEALT WITH THE ENTIRE S CHEME OF THE ACT RELATING TO THE RELEVANT SECTION I.E. SECTI ON 80IC OF THE ACT, AND ARRIVED AT THE CONCLUSION THAT THE DEF INITION OF THE INITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB- SECTION(8) OF SECTION 80IC OF THE ACT CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE ASSESSMENT YEAR WI THIN THE SAID PERIOD OF TEN YEARS. THE RELEVANT FINDING OF THE HON'BLE APEX COURT AT PARA 19 OF ITS ORDER IS AS UN DER: 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF I NITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTIO N (8) OF SECTION 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIO D OF 10 YEARS. AS PER SUB-SECTION (6), CAP IS ON THE 10 ASSE SSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP IN MI ND THE PURPOSE FOR WHICH SECTION 80-IC WAS ENACTED. THE PUR POSE WAS TO ESTABLISH THE BUSINESS OF THE NATURE SPECIFI ED IN THE SAID PROVISION IN THE SPECIFIED STATES. THIS PROVISI ON WAS, THUS, AIMED AT ENCOURAGING THE UNDERTAKINGS OR ENTERPR ISES TO ESTABLISH AND SET UP SUCH UNITS IN THE AFORESAID STA TES TO MAKE THEM INDUSTRIALLY ADVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT STATES AS MOST OF T HESE STATES FALL IN HILLY AREAS. THEREFORE, COST OF PRODUCTION AND TRANSPORTATION MAY ALSO GO UP. 20. WHEN WE KEEP IN MIND THESE OBJECTIVES FOR WHICH SECTION 80-IC WAS ENACTED, AN IRRESISTIBLE CONCLUSION WOULD BE TO GRANT 100% DEDUCTION OF THE PROFITS AND GAINS EV EN FROM THE YEAR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXIS TING UNIT. AFTER ALL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVESTMENT WHICH HAS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE THEREOF BEFORE TAKING ITA NO.1648/CHD/2017 A.Y., 2013-14 4 DEPRECIATION IN ANY YEAR. WITH AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE IN PRODUCTION BUT G ENERATION OF MORE EMPLOYMENT AS WELL, WHICH WOULD BENEFIT THE LOC AL POPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANT IAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSMENT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUBSTA NTIAL EXPANSION, SUCH A UNIT ALSO BECOMES ENTITLED TO AVAIL TH E BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEGISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCTIO N OF THE PROFITS AND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT A ND HAVE NOW INVESTED HUGE AMOUNT WITH SUBSTANTIAL EXPANSION O F THOSE UNITS. 6. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT A NEWLY SET UP UNDERTAKING OR ENTERPRISE IN THE STATE OF HIMACHAL PRADESH WOULD BE ENTITLED TO DEDUCTION @ 1 00% OF THE ACT ITS PROFITS FOR THE FIRST FIVE YEARS AND EV EN THEREAFTER IN THE CASE OF SUBSTANTIAL EXPANSION IS CARRIED OUT BY IT, WITH THE PREVIOUS YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN BECOMING THE INITIAL ASSESSMENT YEAR. TH AT IN ANY CASE THE PERIOD OF DEDUCTION U/S 80IC OF THE AC T WOULD NOT EXCEED 10 YEARS. THAT THE DECISION IN THE CLASS IC BINDING (SUPRA) DID NOT LAY DOWN THE CORRECT LAW. THE CONCL USION OF THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS A S UNDER: 24. THE AFORESAID DISCUSSION LEADS US TO THE FOLLOWIN G CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BINDINGINDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL ASSESSMENT YEAR CONTAINED IN SECTION 80-IC IT SELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTA INED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. T HE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SE CTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. TH E DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80 -IC HAS MADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPIN ION 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 HIMACHALPRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF SUB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO D EDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FI VE ASSESSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMEN T ITA NO.1648/CHD/2017 A.Y., 2013-14 5 YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTIO N WOULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPANY) OF T HE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRIED OU T AS DEFINED IN CLAUSE (IX) OF SUB-SECTION (8) OF SECTION 8 0-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESA ID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBS TANTIAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMEN T YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHA LL 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 T HE EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDU CTION AGAIN FOR THE NEXT FIVEYEARS. ON THE OTHER HAND, IF SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASS ESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION F OR THE FIRST FIVE YEARS, DEDUCTION @ 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 HOWE VER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEAR S, I.E., 8TH, 9TH AND 10TH ASSESSMENT YEARS. 25. IN VIEW OF THE AFORESAID, WE AFFIRM THE JUDGMENT OF THE HIGH COURT ON THIS ISSUE AND DISMISS ALL THESE APPEALS OF THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES ARE H EREBY ALLOWED. 7. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW THA T EVEN A NEW UNDERTAKING, WHICH HAS CLAIMED DEDUCTION OF ITS ELIGIBLE PROFITS @ 100% THEREOF FOR THE FIRST FIVE YEARS, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN BY IT. 8. SINCE IN THE PRESENT CASE THE FACT THAT THE ASSE SSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN A.Y. 2013- 14 ,IS NOT DISPUTED, THE ASSESSEE, WE HOLD, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS EVEN IF IT HAS ALREADY CLAIMED DEDUCTION OF ITS PROFITS AT THE SAID RATE F OR FIVE YEARS, IN VIEW OF THE LAW LAID DOWN BY THE APEX COU RT IN THIS REGARD IN ITS DECISION IN THE CASE OF M/S AARHAM SOFTRONICS(SUPRA). ITA NO.1648/CHD/2017 A.Y., 2013-14 6 9. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD.CIT (A) AND ALLOW THE APPEAL OF THE ASSESSEE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- # $ % &' (SANJAY GARG) (ANNAPURNA GUPTA) /JUDICIAL MEMBER '( /ACCOUNTANT MEMBER *# /DATED: 28 TH MARCH, 2019 * ' * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ! - / CIT 4. ! - ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) ! / BY ORDER, / ASSISTANT REGISTRAR