M/s RR Lamps, Kirpalpur V. DCIT, Circle, Parwanoo

ITA 711/CHANDI/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2646 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 09-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 80IC; 80IC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SANJAY GARG, JUDICIAL MEMBER ./ ITA NO. 711/CHD/2019 / ASSESSMENT YEAR : 2016-17 M/S R.R. LAMPS, VILLAGE KIRPALPUR, PO, NALAGARH,DISTT. SOLAN (HP) VS. ! DY CIT, CIRCLE, PARWANOO (HP) ' # ./ PAN NO: AAIFR7427E '$/ APPELLANT &' '$ / RESPONDENT ()*+ /ASSESSEE BY : SHRI VINEET KRISHAN, ADVOCATE *+ / REVENUE BY : SMT.C. CHANDRAKANTA, CIT DR , -*) .# /DATE OF HEARING : 20.02.2020 /0 *) .# / DATE OF PRONOUNCEMENT : 28. 02.2020 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 28.3.2019 OF THE COMMISSIONER OF INCOME TAX, SHIMLA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE IN THIS APPEAL HAS TAKEN FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDER PASSED UNDER SECTION 250(6) OF THE INCOME TAX ACT, 1961 BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IN APPEAL NO. ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 2 IT/374/18-19/SML DATED 28.03.2019 IS CONTRARY TO LAW AND FACTS OF THE CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN UPHOLDING THE ACTION OF THE ID. ASSESSING OFFICER WHO HAD DENIED THE CLAIM OF DEDUCTION OF RS. 1,32,45,463/- UNDER SECTION 801C FOR NON-FILING OF FORM NO. 10CCB. ALTHOUGH, THE FORM NO. 10CCB WAS DULY E-FILED AND SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ID. COMMISSIONER OF INCOME TAX (APPEALS) GRAVELLY ERRED IN DENYING APPELLANT BENEFIT OF DEDUCTION UNDER SECTION 801C @ 100% AS PER THE JUDGMENT OF HONOURABLE SUPREME COURT IN THE CASE OF M/S AARHAM SOFTRONICS. 4. THAT THE APPELLANT CRAVES TO ADD, AMEND OR ALTER ANY GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL, WITH THE PERMISSION OF THE HON'BLE INCOME TAX APPELLATE TRIBUNAL. 3. GROUND NO.1 : GROUND NO.1 IS GENERAL IN NATURE, HENCE, NEED NO SPECIFIC ADJUDICATION. 4. GROUND NO.2 : THE BRIEF FACTS RELATING TO THE ISSUE ARE THAT ASSESSEE FIRM DERIVES INCOME FROM MANUFACTURING OF ELECTRICAL LAMPS. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOME AT RS. 2,97,550/- AFTER CLAIMING DEDUCTION U/S 80IC AMOUNT ING TO RS. 1,32,45,463/-. HOWEVER, THE ASSESSING OFFICER HEL D THAT THE ASSESSEE DID NOT FILE THE FORM NO. 10CCB AND ACCORDINGLY IT HAD FAILED TO COMPLY WITH MANDATORY PROVISIONS OF SECTION 80IC OF THE A CT. ACCORDINGLY, THE ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 3 DEDUCTION CLAIMED U/S 80IC OF THE ACT AT RS. 1,32,4 5,463/- WAS DISALLOWED. 5. BEING AGGRIEVED BY THE ABOVE ORDER OF THE ASSESS ING OFFICER THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) BUT THE LD. CIT(A) AFFIRMED THE FINDINGS MADE BY THE ASSESSING OFFICER . THE ASSESSEE, THUS, HAS COME IN APPEAL BEFORE US:- 6. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, HAS SUBMITTED THAT THE ASSESSEE COULD NOT FILE FORM NO. 10CCB WITH THE RETURN OF INCOME, HOWEVER, THE SAME WAS DULY FILED DURING THE ASSESSM ENT PROCEEDINGS AND ALSO UPLOADED THE SAME ON THE WEBSITE OF THE INCOME TAX DEPARTMENT. HE, THEREFORE, HAS SUBMITTED THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. HE IN THIS RESPECT HAS RELIED UPON THE DECISION OF THE HON'BLE JURISDICTION HIGH COURT IN THE CASE OF CIT VS PUNJAB FINANCIAL CORPORATION [2002] 254 ITR 6 (P&H). 7. WE HAVE GONE THROUGH THE AFORESAID ORDER OF THE HON'BLE HIGH COURT (SUPRA). THE HON'BLE JURISDICTIONAL HIGH COUR T HELD THAT PROVISION FOR SUBMISSION OF AUDIT REPORT ALONG WITH RETURN AR E NOT MANDATORY AND THAT THE AUDIT REPORT CAN BE ENTERTAINED DURING THE ASSESSMENT PROCEEDINGS . IN VIEW OF THIS, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISION OF THE HON'BLE JURISDICTIONA L HIGH COURT IN CIT ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 4 VS PUNJAB FINANCIAL CORPORATION (SUPRA). CONSIDERI NG THE FACTS OF THE CASE, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSE E ACCORDINGLY. 8. GROUND NO. 3 : VIDE THIS GROUND, THE ASSESSEE HAS AGITATED THE ACTION OF THE LD. CIT(A) IN RESTRICTING THE DEDUC TION U/S 80IC OF THE INCOME TAX ACT, 1961 (IN SHORT 'THE ACT') TO 25% A S AGAINST 100% CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUBSTANTIAL EXPANSION OF THE UNIT. 9. 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 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. 10. LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS SETTL ED IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE APEX COUR T. 11. WE HAVE GONE THROUGH THE ORDER OF THE HON'BLE A PEX 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 RELATING TO THE RELEVANT SECTION I.E. SECTION 80IC OF THE ACT, AND ARRIVED AT THE CONCLUSION THAT THE DEFINITION OF THE INITIAL ASSES SMENT 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 F INDING OF THE HON'BLE APEX COURT AT PARA 19 OF ITS ORDER IS AS UN DER: ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 5 19. HAVING EXAMINED THE SCHEME IN THE AFORESAID MA NNER, WE ARRIVE AT THE CONCLUSION THAT THE DEFINITION OF IN ITIAL ASSESSMENT YEAR CONTAINED IN CLAUSE (V) OF SUB-SECTION (8) OF SECTION 80-IC CAN LEAD TO A SITUATION WHERE THERE CAN BE MORE THA N ONE INITIAL ASSESSMENT YEAR WITHIN THE SAID PERIOD OF 10 YEARS . AS PER SUB- SECTION (6), CAP IS ON THE 10 ASSESSMENT YEARS. IT IS NOT ON QUANTUM. WE HAVE ALSO TO KEEP IN MIND THE PURPOSE F OR WHICH SECTION 80-IC WAS ENACTED. THE PURPOSE WAS TO ESTAB LISH THE BUSINESS OF THE NATURE SPECIFIED IN THE SAID PROVIS ION IN THE SPECIFIED STATES. THIS PROVISION WAS, THUS, AIMED A T ENCOURAGING THE UNDERTAKINGS OR ENTERPRISES TO ESTABLISH AND SE T UP SUCH UNITS IN THE AFORESAID STATES TO MAKE THEM INDUSTRIALLY A DVANCED STATES AS WELL. UNDOUBTEDLY, THESE ARE DIFFICULT STATES AS MOST OF THESE STATES FALL IN HILLY AREAS. THEREFORE, COST OF PROD UCTION 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 EVEN FROM T HE YEAR WHEN THERE IS SUBSTANTIAL EXPANSION IN THE EXISTING UNIT . AFTER ALL, THIS SUBSTANTIAL EXPANSION INVOLVES GREAT DEAL OF INVEST MENT WHICH HAS TO BE, AT LEAST 50% IN THE PLANT AND MACHINERY, OF THE BOOK VALUE THEREOF BEFORE TAKING DEPRECIATION IN ANY YEAR. WIT H AN EXPANSION OF SUCH A NATURE NOT ONLY THERE WOULD BE INCREASE I N PRODUCTION BUT GENERATION OF MORE EMPLOYMENT AS WELL, WHICH WO ULD BENEFIT THE LOCAL POPULACE. IT IS FOR THIS REASON, CARRYING OUT SUBSTANTIAL EXPANSION BY ITSELF IS TREATED AS INITIAL ASSESSME NT YEAR. IT WOULD MEAN THAT EVEN WHEN AN OLD UNIT COMPLETES SUB STANTIAL EXPANSION, SUCH A UNIT ALSO BECOMES ENTITLED TO AVA IL THE BENEFIT OF SECTION 80-IC. IF THAT IS THE PURPOSE OF THE LEG ISLATURE, WE SEE NO REASON AS TO WHY 100% DEDUCTION OF THE PROFITS A ND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THI S DEDUCTION ON SETTING UP OF A NEW UNIT AND HAVE NOW INVESTED HUG E AMOUNT WITH SUBSTANTIAL EXPANSION OF THOSE UNITS. 12. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THA T A NEWLY SET UP UNDERTAKING OR ENTERPRISE IN THE STATE OF HIMACH AL PRADESH WOULD BE ENTITLED TO DEDUCTION @ 100% OF THE ACT ITS PROF ITS FOR THE FIRST FIVE YEARS AND EVEN THEREAFTER IN THE CASE OF SUBST ANTIAL EXPANSION IS CARRIED OUT BY IT, THEN THE ASSESSMENT YEAR RELEVAN T TO THE PREVIOUS ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 6 YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN B ECOMING THE INITIAL ASSESSMENT YEAR. THAT IN ANY CASE, THE PERIOD OF DE DUCTION U/S 80IC OF THE ACT WOULD NOT EXCEED 10 YEARS. THE CONCLUSION O F THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS AS UNDER: 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 NOT APPLY IN THESE CASES. THE DEFINITION S OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80- IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INI TIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL THE DIFFEREN CE. THEREFORE, WE ARE OF THE OPINION THAT THE AFORESAID JUDGMENT D OES 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 SUB- SECTION (2) OF SECTION 80-IC, WOULD BE ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE PROFITS AND GAINS FOR FIVE ASSE SSMENT YEARS COMMENCING WITH THE INITIAL ASSESSMENT YEAR. FOR THE NEXT FIVE YEARS, THE ADMISSIBLE DEDUCTION WOULD BE 25% (OR 30 % WHERE THE ASSESSEE IS A COMPANY) 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 SECTIO N 80-IC BY SUCH AN UNDERTAKING OR ENTERPRISE, WITHIN THE AFORESAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEAR IN WHICH THE SUBSTANT IAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSESSMENT YEAR , AND FROM THAT ASSESSMENT YEAR THE ASSESSEE SHALL BEEN ENTITL ED TO 100% DEDUCTIONS OF THE PROFITS 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 EXPANSION IS CARRIED OUT IMMEDIATELY, ON THE COMPLE TION OF FIRST FIVE YEARS, THE ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION AGAIN FOR THE NEXT FIVE YEARS. ON THE OTHER HAND, I F SUBSTANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASS ESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR TH E 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 HOWEVER, THIS 100% ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 7 DEDUCTION 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 APPE ALS OF THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES A RE HEREBY ALLOWED. 13. IN VIEW OF THE ABOVE, IT IS NOW SETTLED LAW TH AT EVEN A NEW UNDERTAKING, WHICH HAS CLAIMED DEDUCTION OF ITS ELI GIBLE PROFITS @ 100% THEREOF FOR THE FIRST FIVE YEARS, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS PROFITS THEREAFTER ON ACCOUNT OF SUBSTA NTIAL EXPANSION UNDERTAKEN BY IT. HOWEVER, SUCH DEDUCTION WOULD BE FOR A TOTAL PERIOD OF 10 YEARS AS PROVIDED IN SUB-SECTION (6) TO SECTI ON 80IC OF THE ACT. 14. SINCE IN THE PRESENT CASE THE FACT THAT THE ASS ESSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IS NOT DISPUTED, T HE ASSESSEE, WE HOLD, IS ENTITLED TO CLAIM DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS FOR FIVE YEARS FROM THE INITIAL YEAR OF SUBSTANTIAL E XPANSION EVEN THOUGH THE ASSESSEE HAS ALREADY CLAIMED DEDUCTION OF THE P ROFITS AT THE RATE OF 100% FOR FIRST FIVE YEARS SUBJECT TO THE CONDITION THAT THE TOTAL PERIOD OF DEDUCTION U/S 80IC WILL NOT EXCEED 10 YEARS FROM THE INITIAL YEAR OF COMMENCEMENT OF UNIT, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN THIS REGARD IN ITS DECISION IN THE CASE OF M/S AARHAM SOFTRONICS(SUPRA). THUS, THIS ISSUE IS DECIDED IN F AVOUR OF THE ASSESSEE. THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE. ITA NO. 711-C-2019 M/S R.R.LAMPS,SOLAN 8 15. GROUND NO.4 : THIS GROUND IS GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.02.2020. SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT %& / JUDICIAL MEMBER DATED : 28.02. 2020 .. 2*&)3454) / COPY OF THE ORDER FORWARDED TO : 1. '$ / THE APPELLANT 2. &' '$ / THE RESPONDENT 3. , 6) / CIT 4. , 6) ( )/ THE CIT(A) 5. 47 &)8 , . 8 , 9:;< / DR, ITAT, CHANDIGARH 6. ;= - / GUARD FILE 2 , / BY ORDER, > / ASSISTANT REGISTRAR