ACIT, C-5(1), CHANDIGARH vs. M/S SHREE NAINA CONTAINERS INC., CHANDIGARH

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ITA 858/CHANDI/2018Status: DisposedITAT Chandigarh12 March 2019AY 2014-155 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the year of substantial expansion becomes the initial assessment year, entitling the assessee to a fresh 100% deduction for the remaining period of the total 10 years. This decision was based on a recent Supreme Court ruling.

What were the facts?

The Revenue appealed against the CIT(A)'s orders concerning the deduction under Section 80IC for substantial expansion. The core issue was whether the year of substantial expansion becomes the initial assessment year for a fresh 10-year deduction period.

What were the issues?

Whether the year of substantial expansion under Section 80IC qualifies as the 'initial assessment year' for a fresh deduction period.

Which sections of the Income-tax Act were involved?

Section 80IC

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’, CHANDIGARH

Before: SHRI SANJAY GARG & Ms. ANNAPURNA GUPTA

For Appellant: Shri Rachit Goyal, CA
For Respondent: Shri G.S. Phani Kishore, CIT DR
Hearing: 12.03.2019Pronounced: 12.03.2019

आदेश/ORDER

Per Bench:

The present appeals preferred by the Revenue are against the separate orders dated 28.2.2018 (for A.Y. 2010- 11) and dated 29.3.2008 (for A.Ys. 2011-12 to 2014-15) of Commissioner of Income Tax (Appeals)-2, Chandigarh [hereinafter referred to as ‘CIT(A)’]

2.

Since identical issue is involved in all the assessment years, hence, these have been heard together and are being disposed off by this common order.

3.

First, we shall deal with the appeal in ITA No. 854/Chd/2018 for assessment year 2010-11.

ITA No.854 to 858-Chd-2018 - 2 M/s Shree Naina Containers Inc. Chandigarh

4.

At the outset, the Ld. DR has submitted that the only

issue involved in this appeal is as to whether the assessee is

entitled to deduction at the rate of 100% of the eligible

profits u/s 80IC of the Income-tax Act, 1961 (in short 'the

Act') for the first 5 years or 10 years in the case of

substantial expansion of unit. In other words, whether the

year in which the substantial expansion is carried out is to

be taken as initial assessment year for the purpose of grant

of deduction for 10 years u/s 80IC of the Act. He has

further submitted that the issue raised in this appeal has

been earlier adjudicated by the Hon'ble H.P. High Court

in the case of ‘M/s Stovekraft India Vs. CIT’ ITA No. 20 of

2015 dated 28.11.2017, wherein, the issue was decided in

favour of the assessee. However, the Department on the

issue of substantial expansion went in appeal before the

Hon'ble Supreme Court and the Hon'ble Supreme Court

decided the issue in favour of the Revenue by the decision

dated 20.8.2018 in the group of cases with the lead case

titled as ‘CIT Vs. M/s Classic Binding Industries, in Civil

Appeal No(s) 7208 of 2018 dated 20.08.2018.

The Ld. DR has further fairly admitted that the order

of the Hon'ble Supreme Court in M/s Classic Binding

Industries (supra) has been recalled in a Review Petition

filed by the Petitioners and proposition of law laid down

by the Hon'ble H.P. High Court in the case of ‘M/s

Stovekraft India Vs. CIT’ ITA No. 20 of 2017 dated

28.11.2017 has been reaffirmed recently by the Hon'ble

ITA No.854 to 858-Chd-2018 - 3 M/s Shree Naina Containers Inc. Chandigarh

Supreme Court in the group of cases with the lead case in

‘Pr. CIT Vs. M/s Aarham Softronics’ vide order dated

20.02.2019.

5.

The Ld. AR of the assessee has relied upon the

detailed written submissions placed on record in this

behalf and submitted that the issue now stands covered

in favour of the assessee.

6.

We have gone through the recent decision of the

Hon'ble Supreme Court in ‘Pr. CIT Vs. M/s Aarham

Softronics’ (supra), wherein, the Hon'ble Supreme Court

on deliberations, vide para 24 has concluded as under:-

“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

ITA No.854 to 858-Chd-2018 - 4 M/s Shree Naina Containers Inc. Chandigarh

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.”

7.

In view of the above discussion and as per the recent

ruling of Hon'ble Supreme Court on the issue in the case

of ‘Pr. CIT Vs. M/s Aarham Softronics’ order dated

20.02.2019 (supra), the impugned order of the CIT(A) is

upheld. We do not find any merit in the appeal of the

Revenue and the same is accordingly dismissed.

ITA Nos. 855 to 858/Chd/2018–(A.Ys. 2011-12 to 2014-15)

8.

Since the facts and issues involved in all the appeals of

the Revenue for aforesaid assessment years are identical,

therefore, our findings given above will apply mutatis-

mutandis to these assessment years also.

ITA No.854 to 858-Chd-2018 - 5 M/s Shree Naina Containers Inc. Chandigarh

In the result, all the appeals of the Revenue are dismissed.

Order pronounced in the Open Court immediately on completion of hearing.

Sd/- Sd/- (अ�नपूणा� गु�ता / ANNAPURNA GUPTA) (संजय गग� / SANJAY GARG) लेखा सद�य/ Accountant Member �या�यक सद�य/ Judicial Member Dated : 12. 03.2019 “आर.के.”

आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ 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

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