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Income Tax Appellate Tribunal, CHANDIGARH
Before: SMT. DIVA SINGH, JM
आदेश/ORDER
The present appeal has been filed by the assessee wherein the correctness of the order dated 31/01/2019 of CIT(A) Shimla pertaining to 2015-16 assessment year is assailed on the following ground : “The Id. 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% claimed by assessee on undertaking substantial expansion.” 2. At the time of hearing no one was present on behalf of the assessee. The appeal was passed over. In the 2 n d round also the position remained the same. However, on considering the aforementioned ground it was deemed appropriate to proceed
ITA 369/CHD/2019 A.Y. 2015-16 Page 2 of 4
with the present appeal ex-parte qua the assessee appellant on
merits after hearing the ld. Senior DR.
On a reading of the impugned order, the ld. Sr.DR agreed
that the order cannot be upheld. A perusal of the record shows
that the assessing officer in the year under consideration
restricted the 80IC claim to 25% in view of the fact that this
was the 9 t h year of commencement of production in the activity
of the manufacturing of watches. It is seen that the assessee
challenged this be fore the CIT(A) who 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. It is seen that the said view has been
reconsidered by the Apex Court in the case of M/s Aarham
Softronics & others in Civil Appeal No. 1784 of 2019 dated
20.02.2019 wherein the Court held as under :
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. “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.
ITA 369/CHD/2019 A.Y. 2015-16 Page 3 of 4
“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.” 3.1 Accordingly, the position of law as appreciated by the ld.
CIT(A) is no longer a correct law. The issue of having carried
out substantial expansion in the context of 80IC claim in a
similar matter has already been elaborated by the Apex Court
as has been brought out herein above. Accordingly, the
impugned order is set-aside following the legal position as
addressed by the Apex Court and the issue for consideration
on facts is restored back to the file of the assessing officer
with the direction to grant necessary relief in accordance with
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law. Needless to say that the assessing officer shall grant a
reasonable opportunity of being heard to the assessee .
Accordingly, the appeal of the assessee is allowed for
statistical purposes. Said order was pronounced in the Open
Court at the time of hearing itself.
In the result, appeal of the assessee is allowed.
Order pronounced in the Open Court on 17th October,2019.
Sd/- (�दवा �संह ) (DIVA SINGH) �या�यक सद�य/Judicial Member “Poonam” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar