Cutting Edge Technologies, Solan V. ACIT DCIT, Parwanoo

ITA 974/CHANDI/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6502 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Question of law

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACOCUNTANT MEMBER ITA NO. 974/CHD/2016 ASSESSMENT YEAR: 2013-14 M/S CUTTING EDGE TECHNOLOGIES, VS. THE DY. CIT, C IRCLE, BADDI, DISTT. SOLAN (H.P.) PARWANOO PAN NO. AADFC9018P (APPELLANT) (RESPONDENT) APPELLANT BY : SH. HARRY RIKHY RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 07.12.2016 DATE OF PRONOUNCEMENT : 16.12.2016 ORDER PER ANNAPURNA GUPTA, AM THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER OF LD. CIT(A), SHIMLA DATED 14.7.2016 FOR ASSESSMENT Y EAR 2013-14. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX (APPEALS), SHIMLA. IS DEFECTIVE BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS), 2 SHIMLA IS NOT JUSTIFIED IN UPHOLDING THE ORDER OF T HE LD. ASSESSING OFFICER REGARDING RESTRICTING THE CLA IM OF DEDUCTION U/S 80IC OF THE INCOME TAX 1961 TO 25% ONLY AS AGAINST 100% DEDUCTION AMOUNTING TO RS.6,45,44,620/-. WE WOULD ALSO LIKE TO CARRY YOUR ATTENTION THAT WE HAVE ALREADY FILED OUR CASE FOR T HE A.Y. 2010-11 & A.Y. 2011-12 (CASE NO: 22 & 23 OF 2015) ON THE SAME ISSUE WITH THE HONORABLE HIMACHAL PRADESH HIGH COURT AND THE SAME HAS BEEN ADMITTED ON THE SUBSTANTIAL QUESTION OF LAW. WE ARE REASONABLY CERTAIN FOR THE JUDGEMENT IN OUR FAVOUR. THIS ADDITION IS UNCALLED FOR AND DESERVES TO BE DELETED. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS UNJUSTIFIED IN UPHOLDING THE O RDER OF THE LD. ASSESSING OFFICER REGARDING RESTRICTING THE CLAIM OF DEDUCTION U/S 80IC TO 25% AS AGAINST 100% CLAIMED BY THE APPELLANT BEING THE FOURTH ASSESSMEN T YEAR ON THE BASIS OF SUBSTANTIAL EXPANSION DONE DUR ING THE AY 2010-11 AFTER FULFILLING THE REQUISITE CONDI TIONS U/S 80IC OF I.T. ACT, 1961. THIS DISALLOWANCE IS UNCALLED FOR AND DESERVES TO BE DELETED. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS UNJUSTIFIED IN UPHOLDING THE O RDER OF THE LD. ASSESSING OFFICER CONCLUDING THAT THE BENEFIT OF SUBSTANTIAL EXPANSION IS AVAILABLE ONLY TO THE PRE-EXISTING UNITS I.E. THE UNITS THAT EXISTED AND WERE OPERATIONAL AS ON 07-01-2003 AND NOT TO THE APPELLANT WHICH CAME IN EXISTENCE AFTER 07-01-2003 WHICH IS DISCRIMINATORY AND UNJUSTIFIED AS THE SECT ION DOES NOT SPECIFY SO THAT THE BENEFIT OF SUBSTANTIAL EXPANSION IS AVAILABLE ONLY TO PRE- EXISTING UNITS 3 OPERATIONAL AS ON 07-01-03, THIS OBSERVATION IS UNJUSTIFIED AND AGAINST THE SPIRIT OF THE LAW. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS UNJUSTIFIED IN UPHOLDING THE O RDER OF THE LD. ASSESSING OFFICER CONCLUDING THAT ONCE A N INITIAL ASSESSMENT YEAR IS DETERMINED IN CASE OF AN INDUSTRIAL UNDERTAKING CLAIMING BENEFIT U/S 80IC IT CANNOT BE CHANGED EVEN IF THE SAME UNDERTAKING COMPLETES SUBSTANTIAL EXPANSION WHICH IS UNJUSTIFIE D AS IT IS CLEARLY MENTIONED U/S 80IC(8)(V) OF THE I. T. ACT, 1961 THAT INITIAL ASSESSMENT YEAR MEANS THE ASSESSMENT YEAR IN WHICH THE UNDERTAKING COMPLETES THE SUBSTANTIAL EXPANSION AS DONE BY THE APPELLANT IN AY 2010-11 AND THERE CAN BE MORE THAN ONE INITIAL ASSESSMENT YEARS AS HELD BY THE HON'BLE DELHI TRIBUNAL IN THE CASE OF M/S TIRUPATI LPG INDUSTRIES LTD. VS. DCIT (151 TTD 1) & HON'BLE AHMEDABAD TRIBUNAL IN CASE OF SINTEX INDUSTRIES LTD V/S CIT AHMEDABAD. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), SHIMLA IS UNJUSTIFIED IN UPHOLDING THE INTERPRETATION OF SECTION 80IC BY THE LD, ASSESSING OFFICER AS IT DOES NOT ADVANCE THE BASIC OBJECT OF THE ACT AND IS AGAINST THE BASIC LEGISLATIVE INTENT TO PROMOTE INDUSTRY IN BACKWARD AREAS. SUCH INCENTIVE BASED SECTIONS SHOULD BE CONSTRUED LIBERALLY AND WHERE THERE ARE TWO POSSIBLE VIEWS THE ONE IN FAVOU R OF THE ASSESSEE SHOULD BE TAKEN AS HELD BY THE HON' BLE APEX COURT IN THE CASE OF M/S GWALIOR RAYON SILK MANF. CO. PVT. LTD. (196 ITR 149) AND M/S BAJAJ TEMPO (196 ITR 188). 4 3. THE ONLY ISSUE RAISED IN THE PRESENT APPEAL REL ATES TO RESTRICTION OF DEDUCTION U/S 80IC @ 25% AS AGAINST 100% CLAIMED BY THE ASSESSEE ON ACCOUNT OF SUBSTANTIAL EXPANSION UNDERTAKEN. 4. BRIEF FACTS RELATING TO THE CASE ARE THAT ASSESS EE IS A PARTNERSHIP FIRM ENGAGED IN THE MANUFACTURING OF DI AMOND TOOLS AND STONE CUTTING MACHINERIES. THE ASSESSEE FILED RETURN OF INCOME DECLARING INCOME OF RS. 29,330/- AFTER CLAIM ING DEDUCTION U/S 80IC OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') AMOUNTING TO RS. 6,45,44,620/-. THE ASSESSEE FIRM S TARTED ITS MANUFACTURING ACTIVITY / OPERATION ON 18.8.2004 AND INITIAL ASSESSMENT YEAR FOR THE PURPOSE OF CLAIMING DEDUCTI ON U/S 80IC OF THE ACT WAS ASSESSMENT YEAR 2005-06. THE ASSESSE E CLAIMED DEDUCTION U/S 80IC OF THE ACT TO THE EXTENT OF 100% OF THE ELIGIBLE PROFITS FOR 5 YEARS STARTING FROM ASSESSME NT YEAR 2005-06 TO ASSESSMENT YEAR 2009-10. DURING THE ASSESSMENT P ROCEEDINGS, IT WAS NOTICED THAT ASSESSEE FIRM HAD AGAIN CLAIMED DEDUCTION OF 100% OF ITS ELIGIBLE PROFITS IN THE IMPUGNED YEAR W HICH WAS 9 TH YEAR SINCE COMMENCING OF MANUFACTURING ACTIVITY. T HE BASIS FOR CLAIMING THE SAME WAS SUBSTANTIAL EXPANSION UNDERTA KEN BY THE ASSESSEE FIRM IN ASSESSMENT YEAR 2010-11, WHICH WAS CLAIMED BY THE ASSESSEE AS ITS INITIAL ASSESSMENT YEAR. THE AS SESSING OFFICER FOR THE DETAILED REASONS IN THE ASSESSMENT ORDER HE LD THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION U/S 80IC ONLY T O THE EXTENT OF 25% OF ITS ELIGIBLE PROFITS AS AGAINST 100% CLAIMED BY THE 5 ASSESSEE AND CONSEQUENTLY REDUCED THE DEDUCTION CLA IMED BY THE ASSESSEE TO THAT EXTENT. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS ORDER DATED 14.07.2016 UPHELD THE RESTRICTION OF DEDUCTION FOLLOWING THE ORDER OF TH E CHANDIGARH BENCH OF THE ITAT IN THE CASE OF M/S HYCRON ELECTRO NICS VS. ITO IN ITA NO. 798/CHD/2012 AND OTHER RELATED CASES DAT ED 27.5.2015. AGGRIEVED, THE ASSESSEE FILED PRESENT A PPEAL BEFORE US. 5. DURING THE COURSE OF HEARING, IT WAS CONCEDED THAT THE ISSUE WAS COVERED BY THE ORDER OF THE CHANDIGARH BENCH O F THE TRIBUNAL IN THE CASE OF M/S HYCRON ELECTRONICS VS. ITO. (SUPRA). 6. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW AND ALSO THE DOCUMENTS PLACED BEFORE US. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) UPHOLDING THE RESTRICTION O F DEDUCTION U/S 80IC OF THE ACT TO THE EXTENT OF 25% OF THE ELIGIBL E PROFITS FOLLOWING THE DECISION OF THE CHANDIGARH BENCH OF T HE ITAT IN THE CASE OF HYCRON ELECTRONICS VS. ITO (SUPRA). IT IS NOT DISPUTED THAT THE ASSESSEE FIRM HAD COMMENCED ITS MANUFACTUR ING OPERATION ON 18.8.2004,I.E AFTER SECTION 80IC OF TH E INCOME TAX ACT,1961, WAS BROUGHT ON THE STATUTE, VIDE FINANCE ACT, 2003 W.E.F. 1.4.2004. FURTHER IT IS NOT DISPUTED THAT TH E ASSESSEE HAS CLAIMED A.Y 2005-06 AS ITS INITIAL ASSESSMENT YEAR AND HAS ALREADY CLAIMED DEDUCTION U/S 80IC @ 100% OF ITS EL IGIBLE PROFITS FOR 5 YEARS FROM ASSESSMENT YEAR 2005-06 TO ASSESSM ENT YEAR 2009-10. IN THE ASSESSMENT YEAR 2010-11, THE ASSES SEE 6 UNDERTOOK SUBSTANTIAL EXPANSION OF ITS UNIT AND CLA IMED THE SAME AS ITS INITIAL ASSESSMENT YEAR FOR THE SECOND TI ME, FOR CLAIMING 100% DEDUCTION OF ITS ELIGIBLE PROFITS FOR ANOTHER FIVE YEARS. THE ITAT ,CHANDIGARH BENCH, IN THE CASE OF M/S HYCR ON ELECTRONICS VS. ITO (SUPRA) HAS WHILE DEALING WITH AN IDENTICAL ISSUE ,ELABORATELY DISCUSSED THE PROVISIONS OF SECT ION 80 IC AND CATEGORICALLY HELD THAT THE BENEFIT OF DEDUCTION U /S 80IC OF THE ACT @ 100% WAS AVAILABLE TO NEW UNITS, ONLY ON TH E SETTING UP OF THE UNIT AND NOT ON ACCOUNT OF SUBSTANTIAL EXPAN SION UNDERTAKEN BY IT. IT FURTHER HELD THAT THERE CAN BE ONLY ONE INITIAL ASSESSMENT YEAR FOR CLAIMING 100% DEDUCTIO N OF PROFITS THEREFROM ,FOR THE PURPOSE OF SECTION 80 IC OF THE ACT AND THAT IN ANY CASE THE BENEFIT OF 100% DEDUCTION, FOR UNITS S ET UP IN SPECIFIED AREAS IN THE STATE OF HIMACHAL PRADESH, CANNOT BE CLAIMED BEYOND THE PERIOD OF 5 YEARS. IN VIEW OF T HE SAME, WE UPHOLD THE ORDER OF THE LD. CIT(A) RESTRICTING THE DEDUCTION CLAIMED U/S 80IC OF THE ACT, TO THE EXTENT OF 25% OF THE ELIGIBLE PROFITS. 7. THE APPEAL OF THE ASSESSEE IS THEREFORE, DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16 TH DECEMBER, 2016 RKK 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR