MS PARK PHARMACEUTICALS V. PRINCIPAL COMMISSIONER OF INCOME TAX

ITA/14/2017

AI Insights

The case involves M/S Park Pharmaceuticals, which appealed against the order of the Income Tax Appellate Tribunal, Chandigarh, concerning the eligibility for deductions under Section 80IC of the Income Tax Act, 1961. The Tribunal had ruled that only units existing prior to 2003 with substantial expansions were eligible for deductions, and those set up after 2003 were ineligible. The High Court's decision was influenced by the Supreme Court's ruling in Aarham Softronics, which clarified the application of Section 80IC, allowing for 100% deductions for new units established within a specific period in Himachal Pradesh and for those undergoing substantial expansion.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 747414 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-12-2021
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income-Tax versus Aarham Softronics [2019] 412 ITR 623 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VINAY KUTHIALA; DIWAN NEGI
• Assessee Lawyers: VISHAL MOHAN
• Keywords: Deduction; Income Tax; Initial assessment year; Substantial Expansion
• Section: 80IC; 80IC; 260-A

Judgement Text

"1 IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA ON THE 23rd DAY OF DECEMBER, 2021 BEFORE HON’BLE MS. JUSTICE SABINA & HON’BLE MR. JUSTICE SATYEN VAIDYA INCOME TAX APPEAL No.14 of 2017 Between:- M/S PARK PHARMACEUTICALS, VILLAGE KALLUJHANDA, TEHSIL KASAULI, DISTRICT SOLAN, THROUGH ITS PARTNER SH. HARISH KUMAR SWAHNEY. ….APPELLANT (BY MR. VISHAL MOHAN, ADVOCATE) AND PRINCIPAL COMMISSIONER OF INCOME TAX, INCOME TAX OFFICE, RAILWAY BOARD BUILDING, THE MALL, SHIMLA. ….RESPONDENTS (BY MR. VINAY KUTHIALA, SENIOR ADVOCATE WITH MR. DIWAN NEGI, ADVOCATE) This petition coming on for orders this day, Hon’ble Ms. Justice Sabina, passed the following: O R D E R Appellant has filed the appeal under Section 260-A of the Income Tax, Act 1961, challenging the order passed by the Income Tax Appellate Tribunal, Chandigarh in ITA No.523/CHD/2016 on 30th November, 2016. 2 2. Vide order dated 18th May, 2017, the appeal was admitted on the following substantial questions of law:- a) Whether the Ld. Income Tax Appellate Tribunal is right in law in holding that benefit of deduction under Section 80IC are allowable to only those units which were existing prior to the year 2003 on account of their substantial expansions and the units which were set up after 2003 were ineligible in respect of the same? b) Whether the Ld. Income Tax Appellate Tribunal is right in law and facts in holding that undertaking which has been claimed deduction under Section 80IC is debarred from claiming further deduction though the factum of substantial expansion is not in dispute? c) Whether the Ld. Income Tax Appellate Tribunal is right in law and facts in holding that the circular bearing No.7 of 2003 could be relied upon while interpreting provisions of Section 80IC of the Income Tax Act, 1961? d) Whether the Ld. Income Tax Appellate Tribunal is right in law and facts in holding that definition of initial assessment year does not allow the undertaking to claim deduction under Section 80IC of 100% upon their substantial expansion? e) That whether the orders of the Ld. Income Tax Appellate Tribunal is perverse as the same is based on incorrect application of the provisions of law ? 3. Learned counsel for the appellant has submitted that the present appeal is liable to be allowed, in terms of the decision given by 3 the Hon’ble Supreme Court in Principal Commissioner of Income- Tax versus Aarham Softronics [2019] 412 ITR 623 (SC). 4. Learned counsel for the respondent has not controverted the submission made by learned counsel for the appellant to the effect that the appeal is covered by the decision of the Hon’ble Supreme Court in Aarham Softronics’s case supra. 5. Hon’ble Supreme Court in Aarham Softronics’s case supra has held as under:- “24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated August 20, 2018 in Classic Binding Industries case omitted to take note of the definition \"initial 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 definitions 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 the 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 up a new unit between January 7, 2003 and April 1, 2012 in the State 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 per cent. of 4 the profits and gains for five assessment years commencing with the \"initial assessment year\". For the next five years, the admissible deduction would be 25 per cent. (or 30 per cent. where the assessee is a company) of the profits and gains. (c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC by such undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become \"initial assessment year\", and from that assessment year the assessee shall be entitled to 100 per cent. deductions of the profits and gains, (d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100 per cent. deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in the eighth year by an assessee such an assessee would be entitled to 100 per cent. deduction for the first five years, deduction at 25 per cent. of the profits and gains for the next two years and at 100 per cent. again from the eighth year as this year becomes \"initial assessment year\" once again. However, this 100 per cent. deduction would be for the remaining three years, i.e., eighth, ninth and tenth assessment years.” 5 6. The substantial questions of law, framed in this case, stand answered accordingly. Consequently, the appeal is allowed and the impugned order dated 30th November, 2016, is modified, in terms of the order of Hon’ble Supreme Court in Aarham Softronics’s case supra. (Sabina) Judge (Satyen Vaidya) Judge December 23, 2021 (ps/vh) "