M/S. VIMONI INDIA PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

Before us, Sh. Ajay Wadhwa, learned Counsel appearing for the assessee, submitted, the assessee had commenced its manufacturing process in the financial year relevant to the assessment year 2005-06 and deduction was claimed for the first time in assessment year 2005-06. He submitted, assessee’s claim of deduction under section 80IC of the Act has been allowed from assessment year 2005-06 till 2009-10. He submitted, in the financial year 2006-07, the assessee had undertaken substantial expansion of the unit by investing an amount of Rs. 3,99,49,251/- . He submitted, all relevant and necessary documents relating to setting up of unit, the investment made in substantial expansion of the unit, approval of the competent authority, registration under the Central Excise Act as well as returns filed under the Central Excise Act were also furnished before the departmental authorities.

Drawing our attention to section 80IC of the Act, learned Counsel submitted that all the conditions of the said provision, including the conditions relating to substantial expansion have been fulfilled by the assessee. He submitted, fulfillment of conditions for claiming deduction under section 80IC of the Act has to be examined in the first year of claim of deduction. He submitted, once, the issue is examined in the first year of claim and the Assessing Officer, having factually examined the issue, if comes to a conclusion that all the conditions of section 80IC of the Act are satisfied, the matter ends there and fulfillment of conditions under section 80IC cannot be examined in any future assessment year.

We have considered rival submissions in the light of decisions relied upon and perused the materials on record. Undisputedly, the assessee has set up a manufacturing unit for manufacture of PET, HDPE bottles etc. at Barotiwala, Himachal Pradesh. As per form No. 10CCB, a copy of which, is placed at page 61 of the paper-book, the date of commencement of manufacturing activity is 17.06.2004 and the first year of claim of deduction under section 80IC of the Act is assessment year 2005-06. It is further evident, the assessee had undertaken expansion of the unit in financial year 2007-08 and has invested an amount of about Rs. 4 crores in plant and machinery. On a careful reading of the assessment order, it is evident, the only reason on which the Assessing Officer has rejected assessee’s claim of deduction under section 80IC of the Act is, the products manufactured by the assessee come within Schedule 13 of the Act, hence, do not fulfill the condition of section 80IC(2)(a) of the Act. The Assessing Officer has not specifically assigned any other reasons for denying assessee’s claim of deduction under section 80IC of the Act. While deciding the issue in appeal, learned Commissioner (Appeals) has held that the finding of the Assessing Officer that the products manufactured by the assessee come within Schedule 13 of the Act is unsustainable in view of the decision of the Hon’ble Delhi High Court. Admittedly, against the aforesaid observation of learned Commissioner (Appeals), the Revenue has not come in appeal.

Be that as it may, there is no other specific reason or observation by the departmental authorities for denial of assessee’s claim of deduction under section 80IC of the Act. Of course, learned Commissioner (Appeals) has made a general observation that the assessee failed to furnish required details without specifying, what are the details required to be furnished by the assessee. Of course, one more reason learned Commissioner (Appeals) has assigned for denying assessee’s claim of deduction is, on earlier assessment years the fulfillment of condition of section 80IC were not examined as the returns of income filed by the assessee were processed under section 143(1) of the Act. From the materials placed before us, the aforesaid finding of learned Commissioner (Appeals) and the Assessing Officer are found to be not borne out from record.

On the contrary, it is a fact on record that assessee’s claim of deduction under section 80IC of the Act was not only examined in the first year of claim, i.e., assessment year 2005-06 but also in assessment year 2007-08, wherein, the assessment was completed under section 143(3) of the Act vide order dated 31.12.2009. A reading of the aforesaid assessment order would clearly reveal that the Assessing Officer has specifically examined the issue relating to assessee’s claim of deduction under section 80IC of the Act.

In view of the aforesaid, we hold that the disallowance of deduction claimed by the assessee under section 80IC of the Act is unsustainable. Accordingly, we direct the Assessing Officer to allow assessee’s claim of deduction under section 80IC of the Act. This ground is allowed.

In ground nos. 2 and 3, assessee has challenged disallowance of Rs. 55,00,000/- representing fixed assets written off and Rs.1,85,559/- representing non-payment of contribution to PF and ESI. Though, in the grounds raised, the assessee has challenged the disallowance on merits, however, at the time of hearing, the limited submission of learned counsel for the assessee is, since, the disallowances made go to increase the profits, the assessee is entitled to claim deduction under section 80IC of the Act, in respect of such enhanced profit. In this context, he drew our attention to Circular No. 37 of 2016 , dated 2nd November, 2016 issued by CBDT. Further, he relied upon the following decision:

Learned Departmental Representative relied upon the observations of the Assessing Officer and learned Commissioner (Appeals).

Having considered rival submissions in the light of decisions relied upon, in principle, we agree with the submissions made by the learned counsel for the assessee. The disallowance made by the Assessing Officer, which are subject matter of dispute, have the effect of enhancing the profit of the assessee. That being the case, the assessee remains entitled to claim deduction under section 80IC of the Act in respect of such enhanced profit. Therefore, we direct the Assessing Officer to allow assessee’s claim of deduction under Section 80IC of the Act on the aforesaid additions. Grounds are allowed.

In the result, the appeal is allowed, as indicated above.