SHRI BHAVESH T PRASANA,PARWANOO vs. DCIT, CIRCLE, PARWANOO

आदेश/ORDER

PER DIVA SINGH

The present appeal has been filed by the assessee wherein the correctness of the order dated 15.02.2019 of CIT(A) Shimla pertaining to 2015-16 assessment year is assailed on the following ground : “1. The ld. CIT(A) is wrong in disallowing the benefit of substantial expansion u/s 80IC(2) and confirming the deduction u/s 80IC only to the extent of 25% as against 100% as claimed by assessee on undertaking substantial expansion.” 2. At the time of hearing, no one was present on behalf of the assessee. The record shows that the appeal came up for he aring on 23.09.2019. On the said date, the appeal was adjourned in order to give time to the Revenue to consider

ITA 472 /CHD/2019 A.Y. 2015-16 Page 2 of 4

the facts wherein the record shows that the assessee is

claiming 100% deduction u/s 80IC for its alleged

manufacturing activity of chemicals from plot No. 78 Sector-

1, Parwanoo.

may be remanded for addressing the facts as the legal

position as appreciated by the CIT(A) had undergone a

change.

It is seen that the CIT(A) in the present proceedings, as is

evident from pages 13 to 21 in para 5.3 has dismissed the

assessee's prayer for allowing de duction @ 100% relying

upon the decision of the Apex Court in the case of CIT Vs

M/s Classic Binding Industries & Ors. in Civil Appeal No.

7208 and others of 2018 dated 20.08.2018. The said

decision, as we have seen, has been re-considered by the

Apex Court in the case of PCIT Shimla Vs M/s Aarham

Softronics & others in Civil Appeal No. 1784 of 2019 dated

20.02.2019 wherein the Court reconsidered the view taken in

M/s Classic Binding Industries & Ors. as under : “ 22. It would be pertinent to point out that in Para 20 of the judgment in Classic Binding Industries, this Court observed that if deduction @ 100% for the entire period of 10 years, it would be doing violence to the language of sub- section (6) of Section 80-IC. However, this observation came without noticing the definition of ‘initial assessment year’ contained in the same very provision.

ITA 472 /CHD/2019 A.Y. 2015-16 Page 3 of 4

“23. Having examined the matter in the aforesaid perspective, judgment in the case of Mahabir Industries v. Principal Commissioner of Income Tax would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, in Mahabir Industries, it was held that if an assessee get 100% 2 Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018 24 exemption under Section 80-IB of the Act for five years and thereafter carries out the substantial expansion because of which said assessee becomes entitled to exemption under the new provision i.e. Section 80-IC of the Act, the assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on the ground that there can be two initial assessment years, one for the purpose of Section 80-IB and other for the purposes of Section 80-IC of the Act. Once we find that there can be two initial assessment years, even as per the definition thereof in Section 80-IC itself, the legal position comes at par with the one which was discussed in Mahabir Industries. “24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition ‘initial assessment year’ contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80-IB, which does not apply in these cases. The definitions of ‘initial assessment year’ in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of ‘initial assessment year’ under Section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law. (b) An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of Himachal 25 Pradesh of the nature 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. 26 However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years. 25. In view of the aforesaid, we affirm the judgment of the High Court on this issue and dismiss all these appeals of the Revenue. Likewise, appeals filed by the assessees are hereby allowed.” (Emphasis supplied)

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4.1. Accordingly, we find that in view of the latest legal

position as enunciated by the Apex Court, the impugned

order cannot be upheld. Thus, holding that the legal issue

stands decided in assessee's favour, the orders are set aside

and the issue is restored to the file of the AO. The AO shall

pass a speaking order in accordance with law addressing the

facts. Needless to say that the assessee shall be afforded a

reasonable opportunity of being heard. Said order was

pronounced in the Open Court at the time of hearing itself.

statistical purposes.

Order pronounced in the Open Court on 4 th Oct.,2019.

Sd/- Sd/-

( अ�नपूणा� गु�ता ) ( �दवा �संह ) (ANNAPURNA GUPTA) (DIVA SINGH) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member “Poonam” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 2.��यथ�/ The Respondent 3.आयकर आयु�त/ CIT 4.आयकर आयु�त (अपील)/ 1. The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar