ARUN TREHAN vs. PRINCIPAL COMMISSIONER OF INCOME TAX, CHD

Facts

The High Court of Punjab and Haryana was considering two review applications (RA-CR-28-2019 and RA-CR-27-2019) arising from earlier appeals (ITA-240-2016 and ITA-449-2015). The original appeals dealt with questions of law concerning the admissibility of deduction under Section 80IC of the Income Tax Act, 1961. The Court's order dated 06.09.2018 had decided these questions against the Assessee and in favour of the Revenue, relying on the Supreme Court's decision in Commissioner of Income Tax Vs. M/s Classic Binding Industries. The Assessee filed the review applications seeking to revisit this decision, citing a subsequent Supreme Court judgment in Pr. Commissioner of Income Tax, Shimla Vs. M/s AARHAM Softronics, which reviewed the very basis of the earlier decision.

Held

The High Court allowed the review applications. While acknowledging that the Revenue's technical argument based on Order 47 CPC was not entirely incorrect, the Court found that accepting this plea would lead to multiplicity of litigation. The Court noted that the original judgment of 06.09.2018 was based on M/s Classic Binding Industries, but the subsequent Supreme Court decision in M/s AARHAM Softronics specifically pointed out that M/s Classic Binding Industries had omitted to consider the definition of 'initial assessment year' under Section 80IC and had instead relied on the definition under Section 80IB. The Supreme Court in AARHAM Softronics held that M/s Classic Binding Industries did not lay down the correct law. Therefore, in the interest of justice, the Court decided to allow the review. Consequently, questions No. (iii) and (iv) concerning the claim of 100% deduction under Section 80IC for the assessment years 2011-2012 and 2010-2011 were answered in favour of the Assessee and against the Revenue. The remaining part of the original judgment was maintained.

Key Issues

1. Whether, on the facts and in the circumstances of the case, the Tribunal erred in law in disallowing the benefit of substantial expansion under Section 80IC to units that came into existence after 7.1.2003 by stating that the initial assessment year cannot be re-fixed? (Question of law) 2. Whether the learned Income Tax Appellate Tribunal is right in law and facts in holding that the definition of initial assessment year does not allow the undertaking to claim deduction under Section 80IC at the rate of 100% upon their substantial expansion? (Question of law) Assessee's contention: The Assessee sought review of the Court's order dated 06.09.2018, arguing that the Supreme Court judgment in M/s Classic Binding Industries, on which the Court's decision was based, was subsequently reviewed and overruled by the Supreme Court itself in M/s AARHAM Softronics. The Assessee contended that the subsequent judgment clarified the correct interpretation of the law regarding Section 80IC. Revenue's contention: The Revenue argued that Order 47 Rule 1 and 2 of the Code of Civil Procedure, as explained, bars a review on the ground that a decision on a question of law, upon which the Court's judgment is based, has been reversed or modified by a subsequent decision of a superior Court in another case. The Revenue relied on the Supreme Court judgment in Shanti Devi Vs. State of Haryana and others.