ASSAM ROOFING LIMITED,GUWAHATI vs. INCOME TAX OFFICER, WARD-3(1), GUWAHATI

आदेश /O R D E R PER BENCH:- This assessee’s appeal for assessment year 2014-15 arises against the Commissioner of Income Tax (Appeals)-2 Guwahati’s order dated 28.09.2018 passed in Acknowledgement No.551092081031216/, involving proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’.

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 2 showing total violation of judicial discipline and disowning / disregarding the findings of the jurisdictional Hon'ble Income Tax Appellate Tribunal, Guwahati, in the appellant's own case for the immediately two preceding assessment years. Accordingly, it is prayed that the order may kindly be quashed / cancelled / set aside. 2. Without prejudice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred in treating the assessment year under appeal - that is assessment year 2014- 15 to be the 13th Year for claiming the deduction under section 80lE of the Act in respect of the Asbestos Unit; 3. Without prejudice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had further erred in holding the Assessment Year 2002-03 to be the initial assessment year, for claiming the deduction under section 801E of the Act in respect of the Asbestos Unit; 4. Without prejudice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred in not appreciating the fact that the Assessing Officers, his predecessor CIT(A)'s in the appellant's own case, had given a categorical finding that the initial assessment year for claiming the deduction under section 80-IE in respect of the Asbestos Unit, should be the Assessment Year 2008-09 and accordingly, 5. Without prejudice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred and have acted in excess or without jurisdiction, conferred upon him by the statute, in not following the specific directions of the Hon'ble Income Tax Appellate Tribunal, Guwahati, Bench, decided in the appellant's own case, for the immediately two preceding assessment years - 2011-12 and 2012-13, that the initial assessment year for claiming the deduction under section 80-IE in respect of the Asbestos Unit, should be the Assessment Year 2008-09 6. Without prejudice to the validity and the legality of the order as challenged above, that on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred and have acted in excess or without jurisdiction, conferred upon him by the statute, in not following the specific directions of the Hon'ble Income Tax Appellate Tribunal, Guwahati, Bench, decided in the appellant's own case, for the immediately two preceding assessment years - 2011-12 and 2012-13, and erred in not holding the assessment year under appeal as the rh. Consecutive Assessment Year for claiming such deduction under section80lE of the Act, in respect of the Asbestos Unit. 7. Without prejudice to the validity and the legality of the order as challenged above, that on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred in giving directions to the AD to examine the claims of the appellant in respect of deduction u/s. 80-IE in respect of the Asbestos Unit, claimed for assessment years 2015-16, 2016-17 2017-18 and 2018-19 and it is submitted that such action of the Learned CIT(A) is without or in excess of jurisdiction conferred upon by him by the Statute and is illegal, bad in law and ab initio void. 8.Without prejudice to Grounds above and with due respect to the decision of the Hon'ble Income Tax Appellate Tribunal, Guwahati, rendered in the case of appellant for the assessment years 2012-13 and 2013-14, since the Department had filed an appeal before the Hon'ble High Court at Guwahati, and the appellant is filing cross appeal and also to keep the issue alive, the following further Ground is preferred -

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(i) That on the facts and on the circumstances of the case, the AO and the CIT(A) had grossly erred in not appreciating the fact that since the appellant had gone in for a substantial expansion in respect of both its units - including that of the asbestos unit also, during the previous year ended 31't March 2011, relevant to the assessment year 2011-12; (ii) That on the facts and on the circumstances of the case, the AO and the CIT(A) had grossly erred in not appreciating the fact that since the commercial production, pursuant to such substantial expansion, started on 28th February, 2011 - a fact which has not disputed by the AO and the CIT(A) - the appellant is fully eligible to its bona fide and legitimate claim for deduction under section 80lE of the Act, in the 4th. year of such "substantial expansion" for the previous year ended 31st March 2014, relevant to the assessment year 2014-15, which is under appeal, as under the provisions of section 80lE, there is no restriction, whatsoever, that the benefit of exemption will be allowed only for one "substantial expansion" or only once, ignoring further "substantial expansion" within the prescribed period as envisaged under section 801 E of the Act. 9. That on the facts and on the circumstances of the case, the Learned ClT(A) had grossly erred and acted beyond or in excess of jurisdiction conferred upon him by the statute in not appreciating and holding the fact that on exactly similar facts and circumstances of the case the Hon'ble Income Tax Appellate Tribunal, Guwahati Bench had for the assessment years 2011-12 had allowed such claim of the appellant and accordingly such action of the CIT(A) is bad in law, illegal, had acted without or in excess of jurisdiction conferred upon him by the statute, on a misconception of law, without proper application of mind to the facts and to the circumstances of the case, showing total violation of judicial discipline and disowning / disregarding the findings of the jurisdictional Hon'ble Income Tax Appellate Tribunal, Guwahati, in the appellant's own case for the immediately two preceding assessment years. 10.That on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred in confirming the action of the AO by arbitrarily disallowing the claim of deduction of the interest of Rs. 6,59,205/- earned from banks while u/s 80lE of the Act, without appreciating the fact that the same was earned during the ordinary course of the business of the new industrial undertakings; 11. Without prejudice to Grounds above, the ClT had grossly erred in arbitrarily confirming the action of the AD while disallowing the claim of deduction of the interest of Rs. 6,59,205/- earned from banks credited to P&L a/c under the head "Other Income" u/s 80lE of the Act while assessing the total income under the normal provisions of the Act despite the fact that Interest Income constitutes a part of the profits and gains derived from the said business of manufacturing & production of articles and such remission has been judiciously held as an allowable deduction u/s 801E. Such action of the A.O as confirmed by the Learned CIT(A) was wholly unreasonable, uncalled for and bad in law. 12. For that your petitioner craves the right to put additional grounds and/or to alter/amend/modify the present grounds before or at the time of hearing.”

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 4 3. Both the learned representatives state during the course of hearing that the sum and substance of the assessee’s foregoing pleadings raises the sole issue of its deduction claim raised u/s 80IE of the Act involving total sum of ₹9,56,84,571/-. This deduction claims involved assessee’s two units i.e. steel and asbestors. There is hardly any dispute that the latter unit forms subject- matter of the instant lis. The assessee’s pleading and detailed paper book running into 37 pages made it clear that the very issue of sec. 80IE deduction pertaining to asbestors units itself had come up before the tribunal in preceding two assessment year(s) 2012-13 & 2013-14. Learned co-ordinate bench’ order dated 07.06.2017 concluded that the “initial assessment year” in its case qua this unit involving sec. 80IE deduction had to be taken as assessment year 2008-09 as under:- “2. The only issue to be decided in these appeals is as to whether the ld CITA was justified in treating the Asst Year 2011-12 as initial assessment year for claim of deduction u/s 80IE of the Act, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee company is engaged in the business of manufacturing of Asbestos Cement Corrugated and Plain Sheets and moulds and galvanized, Plain & Galvanised Corrugated Sheets and accessories. The assessee company has two units namely Asbestos Unit and Steel Unit. The date of commencement of operation was 1.1.1978 for asbestos unit and date of commencement for steel unit was 25.3.1995. On examination of the old assessment records i.e AY 2005-06, the ld AO found that there was substantial expansion of the Asbestos Unit during the FY 2001-02 and the Asbestos Unit became eligible for claiming deduction u/s 80IC of the Act since Asst Year 2002-03. However, in the initial years, the assessee company suffered loss and the assessee company was claiming deduction u/s 80IC of the Act since Asst Year 2004-05. The ld AO observed that ‘Initial Assessment Year’ is defined in section 80IC(8)(v) as under:- (8) For the purposes of this section,— (v) "Initial assessment year" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufacture or produce articles or things, or commences operation or completes substantial expansion; Accordingly he held that the Initial Assessment Year for the assessee for its Asbestos Unit Expansion would be Asst Year 2002-03 and 10 years period had already expired in Asst Year 2011-12 . 3.1. However, on examination of various details submitted by the assessee company, he observed that the assessee company was claiming deduction u/s 80IE of the Act for

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 5 its Asbestos Unit since Asst Year 2011-12 due to substantial investment in plant and machinery wherein installed capacity was more than 25% of existing capacity. The assessee had also produced the Chartered Accountants Certificate to support these facts. It was pleaded that as far as the provisions contained in section 80IE of the Act, such benefit of exemption u/s 80IE was available for 10 consecutive assessment years commencing from Asst Year 2011-12 being the initial assessment year and hence deduction u/s 80IE of the Act is very much available for Asst Years 2012-13 and 2013-14 being the second and third year of claim of deduction. 3.2. The ld AO applied the provisions of section 80IE(5) of the Act, which read as under:- (5) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking under this section, where the total period of deduction inclusive of the period of deduction under this section, or under section 80IC or under the second proviso to sub-section (4) of section 80IB or under section 10C, as the case may be, exceeds ten assessment years. Based on this provision, the ld AO concluded that the total period of 10 assessment years commencing from Asst Year 2002-03 was already over in Asst Year 2011-12 in respect of the Asbestos Unit, the assessee was not entitled for any deduction u/s 80IE of the Act in respect of Asbestos Unit and accordingly disallowed the same. 3.3. The ld AO however, in the case of Steel Unit, observed that the said unit had fulfilled all the prescribed conditions as laid down in section 80IE(2) & (3) of the Act and Asst Year 2012-13 being the second year of claim for steel unit, he granted deduction u/s 80IE of the Act for the same for Asst Years 2012-13 and 2013-14, being the second and third year of claim of deduction. 4. The ld CITA observed that the main assertions of the ld AO in disallowing the claim of deduction are as under:- a) The initial year for claiming such deduction u/s 80IE would have been the year when the ‘substantial expansion’ first took place and not assessment year when such claim was first made. b) The case of the assessee has been hit by the provisions of section 80IE(5) of the Act. 4.1. It was stated by the assessee before the ld CITA that the ld AO while framing the assessment for the Asst Year 2011-12 , which incidentally was the first year for claiming the deduction u/s 80IE of the Act, had allowed the deduction u/s 80IE of the Act for both the units – i. e Steel as well as Asbestos Unit, considering the said assessment year to be ‘Initial Assessment Year’. The relevant observations of the ld AO in the scrutiny assessment order for Asst Year 2011-12 u/s 143(3) dated 20.2.2014 are reproduced below for the sake of convenience :- 4. The assessee company is engaged in the business of manufacturing of steel and asbestos. Date of commencement of operation was 1.1.1978 for Asbestos unit and date of commencement for steel unit was 25.3.1995. The assessee

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 6 company was claiming deduction under section 80IC of the Income Tax Act, 1961 since the assessment year 2004-05 but allowed for the first time in the A.Y. 2008-09. The assessee company claimed deduction u/s 80IE for the first time in A.Y. 2011-12. From various details filed/ produced before me during the course of assessment proceedings and on examination of Audit Report as well as other relevant documents, it is evident that the Industrial undertaking was not formed by the transfer of machinery or plant previously used for any purposes and also not formed by splitting up or the reconstruction of a business already in existence. As evident from the Form No. 10CCB [Sl.25(d)] , the assessee company undertook substantial expansion in both the units of Steel & Asbestos. The same was also examined and found to be correct during the course of hearing. However in Form No.3CD as well as in the return of Income it was noticed that the assessee company claimed deduction u/s 80IC. The assessee company was asked to explain. The assessee company vide its reply dated 28.10.2013 stated that 80IC was mentioned due to oversight and the applicable section was 80IE, which was correctly mentioned in Form No. 10CCB. The submission of the assessee company is considered and accepted. It is found that the assessee company fulfilled all the prescribed conditions as laid down in sub-section (2) & (3) of the section 80IE to become eligible for deduction under this section for the 1st year. 4.2. The ld CITA observed that it is an undisputed fact that ‘substantial expansion’ of both the Asbestos as well as the Steel unit took place, which has been admitted and accepted by the ld AO. The ld AO while framing the assessment for the Asst Year 2011-12 u/s 143(3) after examining, the various approvals from various authorities, books of accounts, audit report in Form 10CCB and other relevant details had considered and accepted the claim for deduction u/s 80IE of the Act for both the units – Steel unit as well as Asbestos unit. It is clear that the ld AO was satisfied that the provisions of section 80IE(5) of the act was not applicable in the case of the assessee for both the units while framing the assessment for the Asst Year 2011-12, otherwise he would not have allowed such claim made before him and would not have considered the same to be the ‘Initial assessment year’ for both the units. He observed that the ld AO had himself while passing the assessment order for assessment year 2011-12 had considered the assessment year 2011-12 to be the ‘Initial assessment year’ as envisaged in sub-section (7) to section 80IE of the Act. Accordingly by applying the principles laid down by the Hon’ble Supreme Court in the case of Radhasoami Satsang vs CIT reported in 193 ITR 321 (SC) wherein it was held that although res judicata is not applicable to IT proceedings, in the absence of any material change, a different view than that taken in earlier years, could not be taken. The ld CIT(A) accordingly directed the ld AO to allow deduction u/s 80IE of the Act for both Asbestos as well as Steel Unit considering the same to be the 2nd and 3rd consecutive assessment year commencing from the ‘Initial assessment year’ of AY 2011-12 and allowed the grounds of the assessee. Aggrieved, the revenue is in appeal before us on the following common ground:- a) For that the Ld. CIT(A) was not justified in law as well as in facts in allowing the assessment year 2011-12 as initial assessment for claim of deduction u/s 80IE of the Income Tax Act, 1961 in respect of the asbestos unit

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 7 of assessee undertaking without considering the provisions of section 80IE(5) of the Income Tax Act, 1961. b) Any other ground or grounds that may be raised at the time of hearing. 5. We have heard the rival submissions. At the outset, we would like to point out that the assessee is an eligible undertaking engaged in the business of manufacture of eligible articles as prescribed in section 80IE of the Act. It is not in dispute that the assessee had fulfilled the conditions prescribed in sub-section (2) & (3) of section 80IE of the Act. It is not in dispute that the assessee had indeed carried out substantial expansion by way of increase in installed capacity beyond 25%. As per the provisions of the Act, the deduction is eligible for 10 assessment years commencing from the initial assessment year. It is not in dispute that the assessee is eligible for deduction u/s 80IE of the Act for Asst Years 2012-13 and 2013-14 being the second and third year of claim of deduction in respect of its Steel Unit as deduction was first allowed to the assessee from Asst Year 2011-12, which has been accepted by the ld AO. The only short dispute that arises for our consideration is determination of ‘Initial Assessment Year’ for the claim of deduction so as to reckon the eligibility in the years under appeal, in respect of Asbestos Unit. We find that the ld CIT(A) by placing reliance on the order of the ld AO u/s 143(3) of the Act dated 20.2.2014 framed for the Asst Year 2011-12 , had held that Asst Year 2011-12 would be the ‘Initial Assessment Year’ for the Asbestos Unit and accordingly the years under appeal would only be 2nd and 3rd year of claim by the assessee and accordingly the ld AO erred in denying deduction to the assessee. But we find that the finding given by the ld AO in AY 2011-12 section 143(3) order is only in respect of substantial expansion carried out on 28.2.2011 relevant to Asst Year 2011-12 in Asbestos unit. This fact is evident from the audit report given in Form No, 10CCB which is placed on record before us, where in response to reply to Question No. 25, the chartered accountant had mentioned the date of substantial expansion in Asbestos Unit as 28.2.2011 by also mentioning the value of increase in plant and machinery in the year of substantial expansion to the tune of Rs.7,55,44,483/-. Hence it would be incorrect to place reliance only on the assessment order for AY 2011-12 for deciding the ‘Initial Assessment Year’ for the entire Asbestos Unit. We find lot of force in the argument of the ld AR that substantial expansion was also carried out earlier in Asbestos Unit for which deduction was first allowed to the assessee by the ld AO in Asst Year 2008- 09. Hence Asst Year 2008-09 shall become the ‘Initial Assessment Year’. Even though substantial expansion was further made in Asst Year 2011-12 as stated supra in Asbestos Unit, the total deduction u/s 80IE of the Act could be given only for 10 consecutive assessment years commencing from ‘Initial Assessment Year’ in terms of specific restriction provided in section 80IE(5) of the Act. For the sake of convenience, the relevant provisions of section 80IE(5) of the Act are reproduced below:- (5) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking under this section, where the total period of deduction inclusive of the period of deduction under this section, or under section 80-IC or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years.

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 8 5.1. We also deem it necessary to reproduce the relevant provisions of section 80IE of the Act as below:- Special provisions in respect of certain undertakings in North-Eastern States. 80-IE. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking, to which this section applies, from any business referred to in sub-section (2), there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years commencing with the initial assessment year. (2) This section applies to any undertaking which has, during the period beginning on the 1st day of April, 2007 and ending before the 1st day of April, 2017, begun or begins, in any of the North-Eastern States,— (i) to manufacture or produce any eligible article or thing; (ii) to undertake substantial expansion to manufacture or produce any eligible article or thing; (iii) to carry on any eligible business. (3) This section applies to any undertaking which fulfils all the following conditions, namely :— (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as referred to in section 33B, in the circumstances and within the period specified in the said section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation - ………… (4) ……………. (5) …………… (6) …………… (7) For the purposes of this section,— (i) "initial assessment year" means the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things, or completes substantial expansion; 5.1.1. From the bare reading of the aforesaid provisions, it could be concluded that deduction u/s 80IE of the Act would be eligible to an undertaking as and when substantial expansion is carried out by the assessee by making huge investment in plant and machinery resulting in installed capacity increasing by more than 25% as compared to the earlier year.

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 9 For example, if an assessee had commenced the manufacturing of eligible articles say in Asst Year 2009-10 , deduction u/s 80IE of the Act is also allowed to him in that year treating Asst Year 2009-10 as the ‘Initial Assessment Year’. Thereafter in Asst Year 2013-14, the undertaking carries out substantial expansion, then more liberal interpretation of the meaning of ‘Initial Assessment Year’ in section 80IE of the Act would confer fresh lease of 10 years for the undertaking for claiming deduction u/s 80IE of the Act in view of substantial expansion carried out in Asst Year 2013-14 treating Asst Year 2013-14 as the ‘Initial Assessment Year’ for the expanded portion alone. 5.1.2. The provisions also make it clear that the deduction shall be allowed to the eligible undertaking by treating the said undertaking as the only source and as if that is the only undertaking of the assessee. But , in our considered opinion, it would result in accounting confusion , in as much as, it would be very difficult to ascertain the profits derived by the undertaking out of expanded activities alone so as to warrant deduction for the same commencing from Asst Year 2013-14. In other words, the assessee should divide the accounts of the eligible undertaking for the regular production unit (for example Unit A) and expanded production unit (for example Unit B) and apportion the expenses accordingly either on the basis of production or by some rational method. This would enable the assessee to arrive at the profits derived from Unit A for claiming deduction u/s 80IE of the Act from Asst Year 2009-10 onwards for 10 consecutive assessment years. This would also enable the assessee to arrive at the profits derived from Unit B for claiming deduction u/s 80IE of the Act from Asst Year 2013-14 onwards for 10 consecutive assessment years. However, this problem would arise only in the event of substantial expansion carried out during the years in which section 80IE deduction is otherwise allowed (i.e overlapping years). 5.1.3. The provisions of section 80IE of the Act are beneficial provisions and had to be interpreted liberally and are meant to promote industrial growth in North Eastern States by frequent investments in capital expenditure. If the aforesaid liberal interpretation is not given, then the undertaking would not engage itself in further investments beyond the section 80IE period (i.e after 10 asst years) thereby tampering industrial growth in North Eastern States. This would bring the industrial growth in North Eastern States, through the assistance of industrial undertakings, to a grinding halt. That is why the legislature had provided deduction to the assessee by defining ‘Initial Assessment Year’ to include the expression ‘or completes substantial expansion’. Hence the undertaking even if it involves in substantial expansion after 20 years from the date of its commencement and even if it had already enjoyed deduction u/s 80IE of the Act for 10 years, that would not disturb the fresh claim and allowability of deduction u/s 80IE for future 10 years i.e from the year in which substantial expansion has been undertaken. This in our considered opinion, would be the correct understanding of the provisions of section 80IE of the Act from its plain reading. 5.2. Looking at the issue before us in the light of the aforesaid provisions and example stated therein, the deduction u/s 80IE of the Act overlaps to the assessee from Asst Year 2011-12 onwards for the substantial expansion carried out in Asbestos Unit on 28.2.2011. It is not in dispute that the assessee has already been allowed deduction u/s 80IE of the Act from Asst Year 2008-09 onwards treating the same as ‘Initial Assessment Year’ for its Asbestos Unit. The substantial expansion carried out in

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 10 Asbestos Unit in Asst Year 2011-12 makes the assessee eligible for fresh claim of 10 years treating AY 2011-12 as ‘Initial Assessment Year’, but in the absence of break- up of profits of the original unit and expanded unit separately, the same would not be eligible for the assessee herein. It is also not the claim of the assessee either before the lower authorities or before us. 5.3. Hence by applying the provisions of section 80IE(5) of the Act and taking into account the overlapping years, we hold that for Asbestos Unit, the ‘Initial Assessment Year’ would be Asst Year 2008-09 and would be eligible for deduction u/s 80IE of the Act 10 consecutive assessment years thereon. Accordingly, the Asst Years 2012- 13 and 2013-14 would be the 5th and 6th year of deduction u/s 80IE of the Act for the Asbestos Unit. It is not in dispute that the assessee had complied with all the provisions of section 80IC / 80IE of the Act in order to make itself eligible for the deduction thereon. 5.4. We also find that the reliance placed by the ld AR on the decision of the Hon’ble Supreme Court in the case of CIT vs Defree Engineering (P) Ltd reported in (2017) 244 Taxman 217 (SC), wherein the Special Leave Petition filed by the Revenue was dismissed, In the said case, the assessee interpreted the Initial assessment year in section 80IA(5) of the Act to be the year of claim of deduction u/s 80IA and not year of commencement of eligible business. This interpretation was allowed in favour of the assessee by the Hon’ble Madras High Court and SLP of the revenue against the same was dismissed by the Hon’ble Apex Court. The ld AR also placed reliance on the Circular issued by the Central Board of Direct Taxes (CBDT) vide Circular No. 1/2016 dated 15.2.2016 explaining the meaning of ‘Initial Assessment Year’. For the sake of convenience, the said Circular is reproduced hereinbelow:- SECTION 80-IA OF THE INCOME-TAX ACT, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INFRASTRUCTURE UNDERTAKINGS - CLARIFICATION OF TERM 'INITIAL ASSESSMENT YEAR' IN SECTION 80-IA(5) CIRCULAR NO.1/2016 [F.NO.200/31/2015-ITA-I], DATED 15-2-2016 Section 80-IA of the Income-tax Act, 1961 ('Act'), as substituted by the Finance Act, 1999 with effect from 1-4-2000, provides for deduction of an amount equal to 100 % of the profits and gains derived by an undertaking or enterprise from an eligible business (as referred to in sub-section (4) of that section) in accordance with the prescribed provisions. Sub-section (2) of section 80-IA further provides that the aforesaid deduction can be claimed by the assessee, at his option, for any ten consecutive assessment years out of fifteen years (twenty years in certain cases) beginning from the year in which the undertaking commences operation, begins development or starts providing services etc. as stipulated therein. Sub- section (5) of section 80-IA further provides as under— "Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub- section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 11 assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made". In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from sub- section (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen ( or twenty) years, as prescribed under that sub-section. It is hereby clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 80-IA for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfilment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80-IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity. The Assessing Officers are, therefore, directed to allow deduction u/s 80-IA in accordance with this clarification and after being satisfied that all the prescribed conditions applicable in a particular case are duly satisfied. Pending litigation on allowability of deduction u/s 80 IA shall also not be pursued to the extent it relates to interpreting 'initial assessment year' as mentioned in sub-section (5) of that section for which the Standing Counsels/D.R.s be suitably instructed. The above be brought to the notice of all Assessing Officers concerned

5.5. The ld DR was given time to file a written submission after going through this Circular and the case laws relied upon by the ld AR . The ld DR vide his submissions dated Nil filed before us on 4.5.2017 had stated in Para 3) as under:- The CBDT Circular dated 15/02/2016 is perused. It is submitted that the Hon’ble ITAT may consider the above cases and the Circular by also considering the averments of revenue in the aforementioned case laws for the present appeal as well.

5.6. In view of our aforesaid findings and respectfully following the aforesaid Circular issued by the CBDT and the decision of the Hon’ble Apex Court supra, we decide the issue before us in favour of the assessee. To summarise, we hold that the deduction u/s 80IE of the Act would be eligible to the assessee as follows:- For Asbestos Unit – Asst Year 2012-13 – 5th year of claim

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 12 Asst Year 2013-14 – 6th year of claim For Steel Unit – Asst Year 2012-13 – 2nd year of claim Asst Year 2013-14 – 3rd year of claim Accordingly the Grounds raised by the Revenue for both the years are dismissed.”

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 13 mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction at the rate of 100% of 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% (or 30% 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 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 been entitled to 100% 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% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes ‘initial assessment year’ once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years.”

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 14 assessee’s very unit’s production of asbestos sheet has been held to be entitled for sec. 80IE deduction itself wherein initial assessment year stand taken as assessment year 2008-09. We are in assessment year 2014-15 wherein the assessee has already succeeded on the issue in assessment years 2012-13 and 2013-14. This clinching finding of the “initial assessment year” involved herein for the purpose of 80IE deduction to be assessment year 2008-09 has attained finality so far the tribunal is concerned. We therefore adopt judicial consistency in these peculiar facts and circumstance. The Revenue’ argument seeking to carve out an exception fails accordingly. We make it clear that our agreement with the Revenue’s argument regarding initial assessment year 2002-03 in facts of instant case, would lead to an anomaly wherein the asbestos unit’s initial assessment year has been taken as 2008-09 in assessment years 2012-13 and 2014-15 whereas the Revenue seeks to adopt assessment year 2002-03. We go by consistency principle as per hon'ble apex court’s landmark decision in Union of India vs. Azadi Bachao Andolan & Anr. (2003) 263 ITR 706 (SC) and direct the Assessing Officer to treat the assessee as entitled for sec. 80IE deduction in issue. We make it clear before parting that the Revenue’s reliance on sec. 80IE(5) of the Act in seeking to restore the assessee’s deduction claim carries no substance since the latter’s relief nowhere exceeds ten assessment years time span since initial assessment year taken is 2008-09 only. The Revenue’s arguments to this effect are declined.

ITA No.352/Gau/2018 A.Y. 2014-15 Asam Roofing Ltd. Vs. ITO Wd-3(1), Gau Page 15 8. Lastly comes the assessee’s grievance that lower authorities have erred in treating its interest income of ₹6,59,205/- from bank fixed deposits. We find that this very issue regarding interest income derived from fixed deposit account as a pre-condition for letter of credit also stands decided in earlier co ordinate bench’s order (supra) accepting the taxpayer’s grievance having regard to hon'ble jurisdictional high court in case of CIT vs. Universal Pipes Pvt. Ltd. (2012) 79 DDTR 175 (Gau). We therefore delete the impugned disallowance by adopting judicial consistency herein as well.