M/s Amit Engineers, Solan V. DCIT, Circle, Parwanoo

ITA 853/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0038 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-04-2019
• Assessment Year: 2015-2016
• Appeal Filed On: 06-06-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Bad and doubtful debts; TDS
• Section: 43B; 40(a)(ia); 80IC; 80IC

Judgement Text

, - , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH . . , , BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SH SANJAY GARG, JUDICIAL MEMBER ./ ITA NO.795/CHD/2018 ! / ASSESSMENT YEAR : 2015-16 THE DCIT, CIRCLE, PARWANOO '# M/S AMIT ENGINEERING, VILLAGE JUDDIKALAN, BADDI, SOLAN $ % ./PAN NO: AAFKA5620L APPEAL AGAINST THE ORDER OF CIT(A), SHIMLA DATED 27.3.2018 ./ ITA NO. 853/CHD/2018 ! / ASSESSMENT YEAR : 2015-16 M/S AMIT ENGINEERING, VILLAGE JUDDIKALAN, BADDI, SOLAN '# THE DCIT, CIRCLE, PARWANOO $ % ./PAN NO: AAFKA5620L APPEAL AGAINST THE ORDER OF CIT(A), SHIMLA DATED 27.3.2018 &' ( ) /ASSESSEE BY : SH. B.M.MONGA, ADVOCATE & SH. ROHIT KAURA, ADVOCATE. ( ) / REVENUE BY : SH. RAJESH KUMAR, SR.DR * + ( ',% /DATE OF HEARING : 25.04.2019 -.! ( ',% /DATE OF PRONOUNCEMENT : 23.05.2019 / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE CAPTIONED CROSS APPEALS BY THE ASSESSEE AND REV ENUE FOR ASSESSMENT YEAR 2015-16 ARE ARISING OUT OF THE ORD ER DATED 27.3.2018 OF ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 2 THE LD. COMMISSIONER OF INCOME TAX (APPEALS), SHIML A [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOW ING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,97,50,59 1/- MADE BY A.O. BY RESTRICTING THE CLAIM OF THE ASSESSES TO 25% AS AGAINST THE 100% CLAIM MADE IN THE 10 TH YEAR, IGNORING THE FACT THAT UNITS WHICH COMMENCED PRODUCTION AFTER 07-01-2003 CAN'T CARRY OUT MULTIPLE 'SUBSTANTIAL EXPANSION' AS PER PROVISION S OF SECTION 80- LC OF THE INCOME TAX ACT AND AS EXPLAINED IN CBDT C IRCULAR 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 ON E 'INITIAL ASSESSMENT YEAR' FOR AVAILING THE DEDUCTION UNDER S ECTION 80-IC OF THE INCOME TAX ACT. IN OTHER WORDS, TINE ASSESSE E 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 DEDUCTION FROM ANOTHER INITIAL ASSES SMENT YEAR, BEING THE ASSESSMENT YEAR IN WHICH THE ASS ESSEE CARRIES OUT SUBSTANTIAL EXPANSION OF ITS UNDERTAKING. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.6,22,693 /- DISALLOWANCE OF DEDUCTION U/S 80-IC ON DISCOUNT ON PURCHASE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.2,25,850/- ON ACCOUNT OF DISALLOWANCE OF DEDUCTION U/S 80-IC ON ACCOUNT REBA TE AND DISCOUNT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.61,294/- M ADE ON ACCOUNT ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 3 OF DISALLOWANCE OF INTEREST ON SERVICE TAX CLAIMED AS BUSINESS EXPENDITURE. 6. IT IS PRAYED THAT THE ORDER OF THE LD. CIT (A) BE SET-ASIDE AND THAT OF THE A.O. RESTORED. 7. THE APPELLANT CRAVES LEAVE TO ADD ANY OTHER GROUND OF APPEAL WHICH MAY ARISE AT THE TIME OF HEARING LECTURE. WHEREAS THE ASSESSEE IN ITS APPEAL HAS RAISED THE F OLLOWING GROUNDS OF APPEAL:- 1. THAT THE ORDER OF LEARNED CIT(A), IS AGAINST THE LA W AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT(A), IS NOT JUSTIFIED IN UPHOLD ING THE ADDITION OF RS.1,91,826/- ON ACCOUNT OF INTEREST ON CAR LOAN. 3. THAT THE LEARNED CIT(A), IS NOT JUSTIFIED IN UPHOLD ING THE ADDITION OF RS. 25,000/- ON ACCOUNT OF 'BAD DEBTS W RITTEN OFF' AND OF RS. 2,55,512/- ON ACCOUNT OF LOSS FROM AD VANCE'. 4. THAT THE LEARNED CIT(A), HAS ERRED IN UPHOLDING THE ADDITION MADE BY THE AO ON ACCOUNT OF INTEREST ON TDS' AMOU NTING TO RS. 29,560/- AND RS. 32,400/- ON ACCOUNT OF 'LATE F EE EXPENSES'. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND THE GROUNDS OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD AND DI SPOSED OFF. 3. GROUND NOS. 1&2 OF REVENUES APPEAL (ITA NO. 795/CH D/2018) : THE MAIN ISSUE RAISED VIDE THESE GROUNDS IS AS T O WHETHER THE ASSESSEE IS ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE ELIGIBLE PROFITS U/S 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT ') FOR ANOTHER FIVE YEARS IN THE CASE OF SUBSTANTIAL EXPANSION OF UNIT . IN OTHER WORDS, ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 4 WHETHER THE YEAR 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 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. LD. DR FAIRLY CONCEDED THAT THE ISSUE WAS SETTLE D IN FAVOUR OF THE ASSESSEE BY THE ABOVE DECISION OF THE APEX COUR T. 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 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: 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 ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 5 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 SUBSTANTI AL EXPANSION, SUCH A UNIT ALSO BECOMES ENTITLED TO AVAIL THE BENE FIT OF SECTION 80- IC. IF THAT IS THE PURPOSE OF THE LEGISLATURE, WE S EE NO REASON AS TO WHY 100% DEDUCTION OF THE PROFITS AND GAINS BE NOT ALLOWED TO EVEN THOSE UNITS WHO HAD AVAILED THIS DEDUCTION ON SETTING UP OF A NEW UNIT AND HAVE NOW INVESTED HUGE AMOUNT WITH SUB STANTIAL EXPANSION OF THOSE UNITS. 7. THE HON'BLE APEX COURT THEREAFTER CONCLUDED THAT 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 YEAR IN WHICH SUBSTANTIAL EXPANSION IS UNDERTAKEN B ECOMING THE ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 6 INITIAL ASSESSMENT YEAR. THAT IN ANY CASE, THE PERI OD OF DEDUCTION U/S 80IC OF THE ACT WOULD NOT EXCEED 10 YEARS. THE CONC LUSION OF THE HON'BLE APEX COURT AT PARA 24 OF ITS ORDER IS AS UN DER: 24. THE AFORESAID DISCUSSION LEADS US TO THE FOLLO WING 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-I C ITSELF AND INSTEAD BASED ITS CONCLUSION ON THE DEFINITION CONT AINED IN SECTION 80-IB, WHICH DOES NOT APPLY IN THESE CASES. THE DEF INITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIALLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS MADE ALL T HE DIFFERENCE. THEREFORE, WE ARE OF THE OPINION THAT THE 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 HIMACHALPRADESH 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 ENTITLED 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 FIVEYEARS. ON THE OTHER HAND, IF SUBST ANTIAL EXPANSION IS UNDERTAKEN, SAY, IN 8TH YEAR BY AN ASSESSEE SUCH AN ASSESSEE WOULD BE ENTITLED TO 100% DEDUCTION FOR THE FIRST F IVE YEARS, DEDUCTION @ 25% OF THE PROFITS AND GAINS FOR THE NE XT TWO YEARS AND @ 100% AGAIN FROM 8 TH YEAR AS THIS YEAR BECOMES INITIAL ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 7 ASSESSMENT YEAR ONCE AGAIN HOWEVER, THIS 100% DEDU CTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10 TH 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 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. 9. SINCE IN THE PRESENT CASE THE FACT THAT THE ASSE SSEE HAD UNDERTAKEN SUBSTANTIAL EXPANSION IN THE IMPUGNED YE AR IS NOT DISPUTED, THE ASSESSEE, WE HOLD, IS ENTITLED TO CLA IM DEDUCTION @ 100% OF ITS ELIGIBLE PROFITS EVEN IF IT HAS ALREADY CLAIMED DEDUCTION OF ITS PROFITS AT THE SAID RATE FOR FIRST FIVE YEAR S, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN THIS REGARD IN ITS D ECISION IN THE CASE OF M/S AARHAM SOFTRONICS(SUPRA). WE, THEREFORE, DO NOT FIND ANY MERIT IN GROUND NOS . 1 & 2 OF THE REVENUES APPEAL AND THE SAME ARE, THEREFORE, DISMI SSED. 10. GROUND NOS. 3 TO 7 OF REVENUES APPEAL ITA NO. 795 /CHD/2018 AND GROUND NOS 1 TO 5 OF ASSESSEES APPEAL ITA NO. 853/CHD/2018 : ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 8 A PERUSAL OF THE ABOVE GROUNDS OF APPEAL REVEAL THA T THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE C ERTAIN ADDITIONS MADE BY THE ASSESSING OFFICER INTO THE INCOME OF THE ASS ESSEE WHEREAS THE ASSESSEE IN ITS APPEAL HAS CONTESTED THE CONFIRMATI ON OF CERTAIN DISALLOWANCES. 11. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AFORESAID VARIOUS DISALLOWANCE MADE BY THE ASSESSING OFFICER WOULD GO ON TO ENHANCE THE INCOME OF THE ASSESSEE, HOWEVER, ON SUC H ENHANCED INCOME, THE ASSESSEE IS ENTITLED TO DEDUCTION @ 100% IN T HE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT IN PR. CIT VS. M/S AARHAM SOFTRONICS IN ITA NO. 1784 OF 2019 VIDE ORDER DAT ED 20.02.2019. HE, THEREFORE, HAS SUBMITTED THAT IF THE ISSUE RAISED GROUND NO.1 IS DECIDED IN FAVOUR OF THE ASSESSEE, THEN, THE OTHER GROUNDS OF APPEAL WILL BECOME INFRUCTUOUS AS THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER ON THE EXPENDITURE INCLUDING THE SPECIFIC DISALLOWANCE UN DER THE PROVISIONS OF SECTIONS 32, 40(A)(IA) 43B ETC., WOULD RESULT IN E NHANCEMENT OF THE PROFITS OF THE ELIGIBLE BUSINESS IN THE LIGHT OF TH E CIRCULAR OF THE CBDT BEARING NO. 37/2016 DATED 2.11.2016 THE ASSESSEE WO ULD BE ENTITLED TO DEDUCTION@ 100% ON SUCH ENHANCED INCOME. HE, THEREF ORE, HAS SUBMITTED THAT THE GROUND NOS. 3 TO 7 OF THE REVENU ES APPEAL BE DISMISSED HAVING BECOME INFRUCTUOUS IN THE LIGHT OF THE CBDT CIRCULAR ITA NOS. 795 & 853-C-18- AMIT ENGINEERING, BADDI 9 NO. 37/2016 DATED 2.11.2016. SIMILARLY, THE GROUND S TAKEN BY THE ASSESSEE IN ITS APPEAL HAVE ALSO LOST THEIR RELEVAN CY. 12. IN VIEW OF THE ABOVE SUBMISSIONS, GROUND NOS. 3 TO 7 OF THE REVENUES APPEAL AS WELL AS GROUNDS TAKEN BY THE A SSESSEE IN ITS APPEAL, SINCE HAVING BECOME INFRUCTUOUS ARE ACCORDINGLY DIS MISSED. THE ASSESSING OFFICER IS DIRECTED TO COMPUTE THE INCOME OF THE ASSESSEE IN VIEW OF THE ABOVE FINDINGS GIVEN ON ISSUE NO.1 AND ALSO IN THE LIGHT OF THE CIRCULAR OF CBDT NO. 37/2016. SUBJECT TO THE OBSERVATIONS MADE ABOVE, THE APPEAL OF THE REVENUE AS WELL AS OF THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23/05/2019. SD/- SD/- ( . . / N.K. SAINI) ( ! / SANJAY GARG) '#$ / VICE PRESIDENT % & /JUDICIAL MEMBER ' /DATE: 23. 05.2019 . . / ( 0'12 32!' / COPY OF THE ORDER FORWARDED TO : 1. $4 / THE APPELLANT 2. 05$4 / THE RESPONDENT 3. * 6' / CIT 4. * 6' ( )/ THE CIT(A) 5. 27 0'8 , , 8 , 9:;< / DR, ITAT, CHANDIGARH 6. ; =+ / GUARD FILE