ACIT, C-5(1), Chandigarh V. M/s Shree Naina Polymers Inc., Chandigarh

ITA 859/CHANDI/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4119 (ITAT-CHANDIGARH)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-02-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 06-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Assessee Lawyers: RACHIT GOYALC A
• Section: 80IC

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B CHANDIGARH !, ' # $ , $ % & ' ( ) , *+ # BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 859/CHD/2018 / ASSESSMENT YEAR : 2014-15 THE ACIT, CIRCLE 5(1), CHANDIGARH. VS M/S SHREE NAINA POLYMERS INC., SCF 8, SECSTOR 27-D, CHANDIGARH. ./ PAN NO. : ABJFS6309L / APPELLANT / RESPONDENT ! / REVENUE BY : SHRI MANJIT SINGH, SR.DR '# ! / ASSESSEE BY : SHRI RACHIT GOYAL,C.A $ % #& / DATE OF HEARING : 27.02.2019 '()* #& / DATE OF PRONOUNCEMENT : 13.03.2019 *,/ ORDER PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE ASSAILIN G THE CORRECTNESS OF THE ORDER DATED 29.03.2018 OF CIT(A) CHA NDIGARH PERTAINING TO 2014-15 ASSESSMENT YEAR ON VARIOUS GROUNDS CHALLENG ING THE RELIEF GRANTED IN TERMS OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S STOVE CRAFT INDIA VERSUS CIT-V AND OTHERS IN ITA 20 TO 24 /2015. 2. THE LD. SR.DR REFERRING TO THE GROUNDS SUBMITTED THAT THE APPEAL HAS BEEN FILED AS THE ISSUE OF DEDUCTION U/S 80IC @ 100% BEYO ND THE FIVE YEARS PERIOD AS CONSIDERED AND ALLOWED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S STOVE CRAFT INDIA VERSUS CIT-V AND OTHERS IN ITA 20 TO 24/2015 HAD NOT BEEN ACCEPTED BY THE DEPARTMENT. THE DECISION OF THE JURISDICTIONAL HIGH COURT, IT WAS SUBMITTED BY THE LD. SR.DR W AS UPSET BY THE APEX COURT IN THE CASE OF CIT VS CLASSIC BINDING IND USTRIES (2018) 96 TAXMANN.COM 405 (S.C) HOWEVER, IT TOO HAS BEEN RE-APPREC IATED BY THE APEX COURT RECENTLY. THE LD. AR MR. RACHIT GOYAL SUBMITTED TH AT THE VIEW TAKEN BY THE APEX COURT IN THE CASE OF CLASSIC BINDING INDUS TRIES HAS BEEN RE- APPRECIATED IN THE DECISION DATED 20.02.2019 IN THE CASE O F CIT VS M/S ITA 859/CHD/2018 A.Y. 2014-15 PAGE 2 OF 3 AARHAM SOFTRONICS. ACCORDINGLY, IT WAS HIS SUBMISSION THAT THE DEPARTMENTAL APPEAL MAY BE DISMISSED AS IT HAS NO MERIT. 3. IN VIEW OF THE LATEST STATED POSITION BY THE APEX COU RT , NO CONTRARY DECISION OR FACT WAS BROUGHT TO THE NOTICE OF THE BENCH ON BEHALF OF THE REVENUE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE SAME SHOWS THAT T HE AO CONSIDERING THE ASSESSEE'S CLAIM OF HAVING CARRIED OUT SUBSTANTIAL EX PANSION RELYING UPON THE DECISION OF THE ITAT IN THE CASE OF M/S HYCRON ELECTRONICS V ITO IN ITA 798/CHD/2012 DATED 27.05.2015 RESTRICTED THE DE DUCTION CLAIMED U/S 80IC TO 25% OF THE ELIGIBLE PROFITS. THE ASSESSEE, IT IS S EEN IS CLAIMED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING OF PHARMA PE T BOTTLES AND JARS ETC. AT BADDI WHERE THE CLAIM OF DEDUCTION @ 100% OF ELIGIBLE PROFITS U/S 80IC STOOD ALLOWED FOR FIVE YEARS. THE YEAR UNDER CO NSIDERATION BEING SIXTH YEAR THE AO RESTRICTED THE CLAIM. THE CIT(A) RELYING UPON DECISION OF THE JURISDICTIONAL HIGH COURT IN THE AFOREMENTIONED CASE AS IT THEN PREVAILS, DIRECTED THE AO TO GRANT RELIEF IN TERMS OF DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S STOVE CRAFT INDIA. IT IS SEEN T HAT THE SAID ISSUE TRAVELLED TO THE APEX COURT AND THE INITIAL VIEW TAKEN IN THE CASE OF CIT VS CLASSIC BINDING INDUSTRIES (SUPRA) ULTIMATELY STOOD RE-APPRE CIATED BY THE APEX COURT IN THE DECISION OF CIT VS M/S AARHAM SOFTRONIC S CITEDE SUPRA. FOR READY REFERENCE, RELEVANT PARAS OF THE SAID DECISION A RE REPRODUCED HEREUNDER : 22. IT WOULD BE PERTINENT TO POINT OUT THAT IN PAR A 20 OF THE JUDGMENT IN CLASSIC BINDING INDUSTRIES, THIS COURT OBSERVED THA T IF DEDUCTION @ 100% FOR THE ENTIRE PERIOD OF 10 YEARS, IT WOULD BE DOING VI OLENCE TO THE LANGUAGE OF SUB- SECTION (6) OF SECTION 80-IC. HOWEVER, THIS OBSERV ATION CAME WITHOUT NOTICING THE DEFINITION OF INITIAL ASSESSMENT YEAR CONTAIN ED IN THE SAME VERY PROVISION. 23. HAVING EXAMINED THE MATTER IN THE AFORESAID PERSPECTIVE, JUDGMENT IN THE CASE OF MAHABIR INDUSTRIES V. PRINCIPAL COMMISSIONER OF INCOME TAX WOULD, IN FACT, HELP THE ASSESSEE. THE FINE DISTINCTION POINTED OUT IN C LASSIC BINDING INDUSTRIES ELOPES THEREBY. TO RECAPITULATE, IN MAHABIR INDUSTRIES, IT WAS HELD THAT IF AN ASSESSEE GET 100% 2 CIVIL APPEAL NOS. 4765-4766 OF 2018 DECIDED ON MA Y 18, 2018 24 EXEMPTION UNDER SECTION 80-IB OF THE ACT FOR FIVE YEARS AND T HEREAFTER CARRIES OUT THE SUBSTANTIAL EXPANSION BECAUSE OF WHICH SAID ASSESSEE BECOMES EN TITLED TO EXEMPTION UNDER THE NEW PROVISION I.E. SECTION 80-IC OF THE ACT, THE AS SESSEE WOULD BE ENTITLED TO DEDUCTION @ 100% EVEN AFTER FIVE YEARS. THIS RULING WAS PREDICATED ON THE GROUND THAT THERE CAN BE TWO INITIAL ASSESSMENT YEARS, ONE FOR THE PURPOSE OF SECTION 80-IB AND OTHER FOR THE PURPOSES OF SECTION 80-IC OF THE ACT. ONCE WE FIND THAT THERE CAN BE TWO INITIAL ASSESSMENT YEARS, EVEN AS PER THE DEFIN ITION THEREOF IN SECTION 80-IC ITSELF, THE LEGAL POSITION COMES AT PAR WITH THE ONE WHICH WAS DISCUSSED IN MAHABIR INDUSTRIES. 24. THE AFORESAID DISCUSSION LEADS US TO THE FOL LOWING CONCLUSIONS: ITA 859/CHD/2018 A.Y. 2014-15 PAGE 3 OF 3 (A) JUDGMENT DATED 20TH AUGUST, 2018 IN CLASSIC BIN DING INDUSTRIES CASE OMITTED TO TAKE NOTE OF THE DEFINITION INITIAL ASSESSMENT YEA R 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 DEFINITIONS OF INITIAL ASSESSMENT YEAR IN THE TWO SECTIONS, VIZ. SECTIONS 80-IB AND 80-IC ARE MATERIA LLY DIFFERENT. THE DEFINITION OF INITIAL ASSESSMENT YEAR UNDER SECTION 80-IC HAS M ADE ALL THE DIFFERENCE. 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 STATE OF HIMAC HAL 25 PRADESH OF THE NATURE MENTIONED IN CLAUSE (II) OF SUB-SECTION (2) OF SECT ION 80-IC, WOULD BE ENTITLED TO DEDUCTION AT THE RATE OF 100% OF THE PROFITS AND GA INS FOR FIVE ASSESSMENT 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 SECTION 80-IC BY SUCH AN UNDERTA KING OR ENTERPRISE, WITHIN THE AFORESAID PERIOD OF 10 YEARS, THE SAID PREVIOUS YEA R IN WHICH THE SUBSTANTIAL EXPANSION IS UNDERTAKEN WOULD BECOME INITIAL ASSES SMENT 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 C ARRIED 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, I F 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 AND GAINS FOR THE NEXT TWO YEARS AND @ 100% AGAIN FROM 8TH YEAR A S THIS YEAR BECOMES INITIAL ASSESSMENT YEAR ONCE AGAIN. 26 HOWEVER, THIS 100% DEDUCTION WOULD BE FOR REMAINING THREE YEARS, I.E., 8TH, 9TH AND 10TH ASSE SSMENT YEARS. 25. IN VIEW OF THE AFORESAID, WE AFFIRM THE JUDGMEN T OF THE HIGH COURT ON THIS ISSUE AND DISMISS ALL THESE APPEALS OF THE REVENUE. LIKEWISE, APPEALS FILED BY THE ASSESSEES ARE HEREBY ALLOWED. 4.1 ACCORDINGLY, IN THE LIGHT OF THE JUDICIAL POSITION HAVING BE EN SET AT REST BY THE APEX COURT, WE FIND NO GOOD REASON AVAILABLE ON RECORD TO VARY THE CONCLUSION ARRIVED AT. NO DISTINGUISHING FACT OR CIRCUMST ANCE WAS CANVASSED BY THE REVENUE IN ORDER TO TAKE A CONTRARY VIEW. THE DEPARTMENTAL APPEAL, ACCORDINGLY, IS DISMISSED. SAID ORDER W AS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.03. 2019. SD/- SD/- ( % & ' ( ) ) ( ! ) (ANNAPURNA GUPTA) (DIVA S INGH) *+ #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER POONAM (+ #,- .-# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ /# / CIT 4. $ /# ( )/ THE CIT(A) 5. -01 #2 , & 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7% / GUARD FILE (+ $ / BY ORDER, 8 / ASSISTANT REGISTRAR