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Income Tax Appellate Tribunal, [ DEHRADUN BENCH “DB” : DELHI ]
Before: SHRI CHALLA NAGENDRA PRASADSHRIM. BALAGANESH
25/08/2023 सुनवाईक�तारीख/ Date of hearing : उ�ोषणाक�तारीख/Pronouncement on 21/11/2023 : आदेश /O R D E R PER C. N. PRASAD, J.M.
This appeal is filed by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-II [hereinafter referred 1 to CIT (Appeals)] Dehradun, dated 24.08.2016 for assessment year 2013-14.
The Revenue has raised the following substantive grounds of appeal:-
“1. The Ld. CIT (A) has erred in law and on facts holding the initial assessment year second time after substantial expansion taken by the assessee in the F.Y. 2011-12 while as per Form 10CCB submitted by the assessee, the initial assessment year is 2006-07.
2. The Ld. CIT (A) has erred in law and on facts in rejecting the decision of the AO that as per Form 10CCB, the A.Y.2013-14 is the eighth year of claim of deduction u/s 80IC and being a non company only 25% of deduction is allowable to the assessee. On the contrary, the Ld. CIT (A) has allowed 100% deduction u/s. 80IC for the eighth year.
3. Since the law provides for only one initial assessment year, therefore there is no scope of having second initial assessment year, hence the order of the CIT (A) be set aside and the order of the AC be restored. “
The ld. Counsel for the assessee, at the outset, submits that an identical issue i.e. whether the assessee is entitled for 100% under section 80IC of the Income Tax Act, 1961 (the Act) or 25% deduction as allowed by the Assessing Officer came up for hearing in assessee’s own case for the assessment year 2012-13 and the Tribunal adjudicated the issue in favour of the assessee holding that the assessee is eligible for deduction under section 80IC of the Act at 100% in view of the decision of the Hon’ble Supreme Court in the case of PCIT Vs. Aarham Softronics In Civil Appeal Nos. 1784 to 1790 of 2019. Copy of the order is placed on record.
The ld. DR supported the order of the Assessing Officer.
Heard rival contentions perused the orders of the Tribunal in assessee’s own case and find that the issue has been decided in favour of the assessee by the Tribunal in dated 31.05.2021 observing as under:-
“6.0 The Ld. SR. Departmental Representative (DR) submitted that the Ld. CIT(A) had erred in allowing the assessee’s claim of deduction to the full as against the legally permissible deduction of 25% because the law was very clear on the issue that for persons other than the companies deduction was allowable only @ 25% after expiry of the initial five years. It was submitted by the Ld. Sr. DR that the assessee does not have an option to re-fix the initial assessment year, and therefore, the claim of deduction @ 100% for the 7th Assessment Year from the initial assessment year was not valid in the eyes of law. 7.0 Having heard the submissions of the Ld. Sr. DR and after having gone through the written submissions of the assessee, it is seen that the assessee had initially established a new unit and had commenced production on 01.07.2005/- claiming itself to be a new unit for the claim of deduction u/s 80IC of the Act. The assessee has already claimed deduction @ 100% for 5 Assessment Years. During the captioned Assessment Year i.e. 7th Assessment Year, the assessee under took substantial expansion of the new unit and again claimed deduction @ 100%. It is the beyond dispute that the claim @ 100% was not questioned by the Department for non fulfillment of statutory conditions and the only question before us is whether the initial Assessment Year can be re-fixed in case of substantial expansion. A perusal of the impugned order shows that the Ld. CIT(A) has allowed the assessee’s claim by following the order of ITAT Delhi Bench in the case of Tirupati LPG Industries Limited vs. DCIT Range-2, Dehradun in vide order dated 29.01.2014. In this case, the Co-ordinate Bench of ITAT had held that in case of substantial expansion, the deduction will be allowable @ 100% subject to a maximum of 10 years. Thus, it has been held that the assessee can re-fix the initial Assessment Year in the case of substantial expansion from the year in which the substantial expansion has taken place for the purpose of claiming deduction at full rate subject to over of limit of 10 years. Although, the Department has vehemently opposed the order of the Ld. CIT(A) 3 granting deduction @ 100%, we find no error either in law or facts having been committed by Ld. CIT(A) as the Ld. CIT(A) has only followed the interpretation as laid down by the Co-ordinate Bench of this Tribunal. Further, the Ld. Sr. DR also could not bring to our notice any order contrary to the order of the Co-ordinate Bench of this Tribunal in the case of Tirupati LPG Industries (supra). It will also be relevant here to reproduce the relevant portion of the order of the Tribunal in as under: "10.4. The only dispute that arises for our consideration is the interpretation of the term "initial assessment year" and whether the same comes with any restriction. The Revenue seeks to take the color from the object of introducing Section 80-IC. The A.O. referred to policy of the government for giving incentives to the State of Uttaranchal and Himachal Pradesh. It is well settled that external aids should not be taken for the purpose of interpreting the Statute, when the language of the Section is clear and unambiguous. A plain reading of Sec.80-IC(8)(v) which defines the term "initial assessment year" read with Sec.80- IC(8)(ix) which defines the term "substantial expansion" makes it clear that there is no restriction or bar on more than one substantial expansion being undertaken by an assessee. In our view, a unit can undertake any number of substantial expansions, in the absence of any specific restriction in the Section. There is no suggestion in the language of the section that incentive u/s 80 1C is not available if the assessee substantially expands for a second or third time. Substantial expansion requires additional investment and results in higher production, ITA N0.2786/Del/2013 8 employment etc. Industrialists have to be encouraged to undertake substantial expansion. The section recognizes this fact and provides for an incentive, if an assessee undertakes "substantial expansion". 10.5 The term ‘substantial expansion’ is stated in S.80-IC(8)(ix) requires investment in plant & machinery exceeding at least 50% of the book value of plant and machinery i.e. gross value before taking depreciation into account. If such substantial expansion is completed, then, for the purpose of this section, the Assessment Year relevant to the P.Y. in which such substantial expansion is completed becomes the initial assessment year. Once it becomes the initial Assessment Year consequently under sub section (3) the assessee would be entitled to 100% deduction of profits and gains for a period of 5 years commencing from such initial Assessment Year, and thereafter the % of deduction from profits come down. The term "initial 4 year" has been defined, as a year in which substantial expansion is completed. There is nothing to suggest that there cannot be a second initial year if a second substantial expansion is completed. Even if an existing unit which is claiming 80-IC, undertakes first substantial expansion then also the year of completion of the substantial expansion will be the "initial year". If the literal meaning of the term "initial assessment year" is to be taken, then there is no requirement of defining this term in the section. We have to go by the language of the section. 10.6. The CIT(A) denies the deduction on the ground that it would amount to evergreening of an incentive provision. Sub section (6) of S.80-IC reads as follows. ITA N0.2786/Del/2013 9"6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to subsection (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years." This section imposes a restriction for a total period of 10 years for claiming the deduction in question, irrespective of the fact whether the deduction is claimed u/s 80-IC or u/s 80-IB or u/s 10 C as the case may be. Thus there is no evergreening of the provisions. The assessee cannot claim the said deduction for a total period exceeding 10 years. The deduction could be allowable only for the balance period of 5 years including this Assessment Year 2009-10. Only the rate of deduction goes up. 10.7. The Chandigarh "B" Bench of the Tribunal in the case of M/s S. R. Paryavaran Engineers P. Ltd. (supra) was considering a case where the assessee originally claiming deduction u/s 80 IB(iv) of the Act from the A. Y. 1999-2000. For the first 5 years it had claimed exemption of 100%. Thereafter it undertook substantial expansion and claimed deduction u/s 80 IB(iv). The AO rejected the same and observed that benefit could be availed u/s 80 1C and as the substantial expansion was less than 50% of the value of plant ITA N0.2786/Del/2013 10 and machinery the claim is to be rejected. The Tribunal observed that the assessee is entitled to deduction u/s 80-IC. It held that mere mention of a wrong Section would not disentitle the assessee to claim the above said deduction. To our mind this case law is not directly on the point. 5
In view of the above discussion, as on a plain reading of the section and interpretation of the term initial Assessment Year, we conclude that the claim of the assessee is admissible. Even if a view is taken that there is some ambiguity in the language of the section, then, being an incentive provisions, the ratio of the decisions of the Hon’ble Supreme Court in the case of Bajaj Tempo (supra), Gwaliar Rayan Silks Mfg. Co. Ltd. (supra) have to be followed and benefit given to the assessee. We also make it clear that the deduction cannot be extended beyond the period of 10 years from the A.Y.2004-05.” 7.1 Further, the issue now stands squarely covered by the judgment of the Hon’ble Apex Court in the case of Pr. Commissioner of Income Tax vs. Aarham Softronics in Civil Appeal No.1784 of 2009 and related cases wherein the Hon’ble Apex Court has laid down that in case substantial expansion is carried out as defined in clause (ix) of Sub-section-8 of Section 80IC by such an 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% deduction of profits and gains. It was also laid down by the Hon’ble Apex Court that deduction would be for a total period of 10 years. 7.2 Therefore, respectfully following the judgment of the Hon’ble Apex court as aforesaid, we find no reason to interfere with the findings and observations of the Ld. CIT(A).”
Respectfully following the said decision we see no reason to interfere with the order of the ld. CIT (Appeals) in allowing the claim under section 80IC of the Act at 100% to the assessee. Grounds raised by the Revenue are rejected.
In the result, appeal of the Revenue is dismissed.
Order pronounced in the open court on : 21/11/2023.