HANGYO ICECREAMS PRIVATE LIMITED,MANGALORE vs. INCOME TAX OFFICER, WARD-1(1), MANGALORE

IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER

ITA No. 1991/Bang/2025 Assessment Year: 2018-19 M/s Hangyo Ice-creams Pvt. Ltd., Vs. The Income Tax Officer, 301, Sterling Chambers, Ward – 1(1), PVS Kalakunj Road, Mangalore. Mangalore – 575 003. PAN – AAHCS 6664 E APPELLANT RESPONDENT Assessee by : Shri Siddesh N Gaddi, CA Revenue by : Shri N Balusamy, JCIT (DR) Date of hearing : 23.06.2026 Date of Pronouncement : 07.08.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

This appeal is filed by the assessee against the order passed by the learnt Commissioner of Income Tax (Appeals) [ ld. CIT(A) in short] for the Assessment Year 2018-19.

ITA No.1991/Bang/2025 Page 2 of 5 Mr. Dinesh Pai is one of the directors of the assessee company and is also a director in several other companies. 11. On verification of the financial statements furnished by the assessee, it is seen that although the assessee claimed to maintain separate books of account, the expenses relating to the new undertaking at Kirawatti were reflected in the accounts of the undertaking at Heroor Village. Therefore, it is clear that the assessee was not actually maintaining separate books of account for both the units and that the units were not functioning independently. 12. From the above, it is concluded that no new industrial undertaking, as required under section 80IB(11A) of the Income Tax Act, came into existence. Therefore, based on the information available and the submissions made by the assessee, it is held that the assessee is not an eligible undertaking to claim deduction under section 80IB(11A) of the Income Tax Act.”

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ITA No.1991/Bang/2025 Page 3 of 5 7. We have heard the submissions of both parties and perused the materials available on record. It is an admitted fact that the initial assessment year for claiming deduction under section 80IB of the Act was AY 2017-18, and the Revenue did not challenge the claim allowed in that year. The Hon’ble Delhi Court in the case of Commissioner of Income-tax v. Tata Communications Internet Services Ltd. reported in 17 taxmann.com 241 has clearly held that the conditions for claiming deduction under section 80IB of the Act are to be examined only in the initial assessment year. Once the claim allowed in the initial assessment year has attained finality, it cannot be disturbed in the subsequent assessment years unless there is a change in the facts or in the law. The relevant extract of the judgment is reproduced below: 10. There is no dispute with regard to the fact that Clause (ii) of the Section 80IA(4) was inserted in Section 80IA(3) by the Finance Act II of 2004 with effect from 1.4.2005 and that this was not with retrospective effect. It became applicable only after its insertion with effect from 1.4.2005. The Circular issued by DBDT explaining the provisions of Finance Act II of 2004 testifies the fact that this insertion took effect from 1.4.2005 and is to apply in relation to the assessment year 2005-06 and subsequent years. The first claim of the assessee for deduction under Section 80IA indisputably was for assessment year 2004-05. The Tribunal has rightly recorded that the business of fax and email has been started by the assessee in 1997 and the business of providing internet services during the year 2000 being from 17.10.2000, the relevant assessment year 2001-02. The question for consideration would be as to whether there was any violation of provisions in the claim of deduction under Section 80IA(4)(ii) of the Act for assessment year 2001-02 or at the maximum for the first year of deduction under Section 80IA being the assessment year 2004-05. Admittedly, the assessee was granted deduction under Section 80IA for the assessment year 2004-05. The Tribunal was right in holding that the revenue could not pick up the assessment year granting claim holding that there was violation of provisions of Section 80IA(3) on the ground that the business was formed by splitting up and reconstruction of business already in existence or that it was formed by transfer of plants and machinery to the new business. The bar as provided under Section 80IA(3) is to be considered only for the first year of claim for deduction under Section 80IA. Once the assessee is able to show that it has used new plants and machinery which has not been previously used for any purpose and the new undertaking is not formed by splitting up or reconstruction of business already in existence, it is entitled to the deduction under Section 80IA for subsequent years. Since the assessee had been granted claim of deduction right from the assessment year 2004-05 under Section 80IA, consequently it cannot be denied deduction for the subsequent years inasmuch as restrain of Section 80IA(3) cannot be considered for every year of claim of deduction, but can be considered only in the year of formation of the business.

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ITA No.1991/Bang/2025 Page 4 of 5 Similarly, the Hon’ble Karnataka High Court in the case of Commissioner of Income-tax v. Nippon Electronics (India) (P.) Ltd reported in 181 ITR 518 has observed as under: An assessee, which does not satisfy the prescribed condition to get relief under section 80J in the initial year of its manufacture or production, cannot claim such relief even if those conditions are satisfied in the subsequent years. Therefore, deduction under section 80J would not be available if in the initial assessment year the proportion of old assets transferred or utilised for the new business is above 20 per cent of the total investment, though, in any subsequent year, even if it be within five years, new investment is made so as to reduce the proportion of the value of old assets below 20 per cent. The eligibility stands determined in the initial assessment year. Thus, in the instant case, the assessee not being eligible for exemption in the initial year would not be eligible for exemption in the subsequent years.

Order pronounced in court on 4th day of August, 2026

Sd/- Sd/- (SANDEEP SINGH KARHAIL) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 4th Aug, 2026 / vms / Copy to: 1. The Applicant

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ITA No.1991/Bang/2025 Page 5 of 5 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order

Asst. Registrar, ITAT, Bangalore

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