DCIT, Circle , Shimla V. M/s IDEAL STRIPS, Nahan

ITA 681/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0816 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 11-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MINAKSHI VOHRA CIT
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.681/CHD/2018 / ASSESSMENT YEAR : 2014-15 THE DCIT, CIRCLE, PARWANOO. VS. M/S IDEAL STRIPS, VILLAGE MOGINAND, NAHAN ROAD, KALA AMB, SIRMOUR, H.P. 173030 ! ' ./ PAN NO:AGOPK7450N !#/ APPELLANT %& !# / RESPONDENT '()* / ASSESSEE BY : SH. ATUL GOYAL, CA )* / REVENUE BY : SMT. MINAKSHI VOHRA, ADDL. CIT + ,)( -' / DATE OF HEARING : 05.03.2019 ./ )( -' / DATE OF PRONOUNCEMENT : 03.06.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 21.02.2018 OF THE COMMISSIONER OF INCOM E TAX (APPEALS), SHIMLA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. AT THE OUTSET, THE LD. COUNSEL HAS SUBMITTED THA T THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AS TO WHETHER THE ASSESS EE IS ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE ELIGIBLE PROFITS U/S 80I C OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') FOR ANOTHER FIVE YEARS I N THE CASE OF SUBSTANTIAL ITA NO.681-C-2018 M/S IDEAL STRIPS, SIRMOUR H.P. 2 EXPANSION OF UNIT. IN OTHER WORDS, WHETHER THE YEA R IN WHICH THE SUBSTANTIAL EXPANSION IS CARRIED OUT IS TO BE TAKEN AS INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF GRANT OF DEDUCTION U/S 80IC OF THE ACT. 4. DURING THE COURSE OF HEARING BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET ITSELF, POINTED OUT THAT TH E HON'BLE APEX COURT HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN BUN CH OF CASES WITH THE LEAD CASE BEING PR.CIT, SHIMLA VS. M/S AARHAM SOFTRONIC S IN CIVIL NO.1784 OF 2019 DATED 20.2.2019. 5. LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS SETTLE D IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE APEX COURT. 6. 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 SCHEME OF THE ACT RELAT ING TO THE RELEVANT SECTION I.E. SECTION 80IC OF THE ACT, AND ARRIVED A T THE CONCLUSION THAT THE DEFINITION 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 INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIOD OF TEN YEARS. THE RELEVANT FINDING OF THE HON'BLE APEX COU RT AT PARA 19 OF ITS ORDER IS AS UNDER: 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF INITIAL A SSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTION (8) OF SECTI ON 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEAR ITA NO.681-C-2018 M/S IDEAL STRIPS, SIRMOUR H.P. 3 WITHIN THE SAID PERIOD OF 10 YEARS. AS PER SUB-SECT ION (6), CAP IS ON THE 10 ASSESSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP IN MIND THE PURPOSE FOR WHICH SECTION 80-IC WAS ENACTED. TH E PURPOSE WAS TO ESTABLISH THE BUSINESS OF THE NATURE SPECIFIED IN T HE SAID PROVISION IN THE SPECIFIED STATES. THIS PROVISION WAS, THUS, AIMED A T ENCOURAGING THE UNDERTAKINGS OR ENTERPRISES TO ESTABLISH AND SET UP SUCH UNITS IN THE AFORESAID STATES TO MAKE THEM INDUSTRIALLY ADVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT STATES AS MOST OF THESE STATES FALL IN HILLY AREAS. THEREFORE, COST OF PRODUCTION AND TRAN SPORTATION 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 EVEN FROM THE YE AR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXISTING UNIT. AFTER A LL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVESTMENT WHICH H AS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE T HEREOF BEFORE TAKING DEPRECIATION IN ANY YEAR. WITH AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE IN PRODUCTION BUT GENERATIO N OF MORE EMPLOYMENT AS WELL, WHICH WOULD BENEFIT THE LOCAL P OPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANTIAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSMENT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUBSTANTIAL EXPANSION, SUCH A UNIT ALSO B ECOMES ENTITLED TO AVAIL THE BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEGISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCT ION OF THE PROFITS AND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HA D AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT AND HAVE NOW INVESTED HUGE AMOUNT WITH SUBSTANTIAL EXPANSION OF THOSE UNITS. 7. 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 @ 100% OF THE ACT ITS PROFITS FOR THE FIRST FIVE YEARS AND EVEN THEREAFTER IN THE CASE OF SUBSTANTIAL EXPA NSION IS CARRIED OUT BY IT, THEN THE ASSESSMENT YEAR RELEVANT TO THE PREVIO US YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN BECOMING THE IN ITIAL ASSESSMENT YEAR. THAT IN ANY CASE, THE PERIOD OF DEDUCTION U/S 80IC OF THE ACT WOULD NOT EXCEED 10 YEARS. THE CONCLUSION OF THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS AS UNDER: ITA NO.681-C-2018 M/S IDEAL STRIPS, SIRMOUR H.P. 4 24. THE AFORESAID DISCUSSION LEADS US TO THE FOLLO WING CONCLUSIONS: (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BINDING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIA L ASSESSMENT YEAR CONTAINED IN SECTION 80-IC ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONTAINED IN SECTION 80-IB, WHICH DOES N OT APPLY IN THESE CASES. THE DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFER ENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS M ADE ALL THE DIFFERENCE. THEREFORE, WE ARE OF THE OPINION THAT T HE AFORESAID JUDGMENT DOES NOT LAY DOWN THE CORRECT LAW. (B) AN UNDERTAKING OR AN ENTERPRISE WHICH HAD SET U P A NEW UNIT BETWEEN 7TH JANUARY, 2003 AND 1ST APRIL, 2012 IN ST ATE OF HIMACHAL PRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF S UB-SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTION AT TH E RATE OF 100% OF THE PROFITS AND GAINS FOR FIVE ASSESSMENT YEARS COMMENC ING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMI SSIBLE DEDUCTION WOULD BE 25% (OR 30% WHERE THE ASSESSEE IS A COMPAN Y) OF THE PROFITS AND GAINS. (C) HOWEVER, IN CASE SUBSTANTIAL EXPANSION IS CARRI ED 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 UNDERTAK EN WOULD BECOME INITIAL ASSESSMENT YEAR, AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITLED TO 100% DEDUCTIONS OF THE PROFI TS AND GAINS. (D) SUCH DEDUCTION, HOWEVER, WOULD BE FOR A TOTAL P ERIOD OF 10 YEARS, AS PROVIDED IN SUB-SECTION (6). FOR EXAMPLE, IF THE EX PANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLETION OF 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 AN D GAINS FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8 TH YEAR AS THIS YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN HOWEVER, THIS 100% DEDU CTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSESSMENT YEARS. 25. IN VIEW OF THE AFORESAID, WE AFFIRM THE JUDGMEN T OF THE HIGH COURT ON THIS ISSUE AND DISMISS ALL THESE APPEALS O F THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES ARE HEREBY ALLOWED. 8. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW THA T EVEN A NEW UNDERTAKING, WHICH HAS CLAIMED DEDUCTION OF ITS ELI GIBLE PROFITS @ 100% THEREOF FOR THE FIRST FIVE YEARS, IS ENTITLED TO CL AIM DEDUCTION @ 100% OF ITA NO.681-C-2018 M/S IDEAL STRIPS, SIRMOUR H.P. 5 ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTANTIAL EX PANSION UNDERTAKEN BY IT. HOWEVER, SUCH DEDUCTION WOULD BE FOR A TOTAL PERIOD OF 10 YEARS AS PROVIDED IN SUB-SECTION (6) TO SECTION 80IC OF THE ACT. 9. SINCE IN THE PRESENT CASE THE FACT THAT THE ASSE SSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN THE IMPUGNED YEAR IS NOT D ISPUTED, THE ASSESSEE, WE HOLD, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF I TS ELIGIBLE PROFITS EVEN IF IT HAS ALREADY CLAIMED DEDUCTION OF ITS PROFITS AT THE SAID RATE FOR FIRST FIVE YEARS, IN VIEW OF THE LAW LAID DOWN BY THE APE X COURT IN THIS REGARD IN ITS DECISION IN THE CASE OF M/S AARHAM SOFTRONICS(S UPRA). WE, THEREFORE, DO NOT FIND ANY MERIT IN GROUND NOS . 1 & 2 OF THE REVENUES APPEAL AND THE SAME ARE, THEREFORE, DISMI SSED. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.06.2019. SD/- SD/- ( . . / N.K. SAINI) ( / SANJAY GARG) !'# / VICE PRESIDENT $% / JUDICIAL MEMBER DATED : 03.06.2019 .. 1)%(2343( / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. %& !# / THE RESPONDENT 3. + 5( / CIT 4. + 5( ( )/ THE CIT(A) 5. 36 %(7 , - 7 , 89:; / DR, ITAT, CHANDIGARH 6. :< , / GUARD FILE 1 + / BY ORDER, = / ASSISTANT REGISTRAR ITA NO.681-C-2018 M/S IDEAL STRIPS, SIRMOUR H.P. 6