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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R
Per Dr. A.L. Saini, AM:
The captioned appeal filed by the assessee, pertaining to assessment year 2015-16, is directed against the order passed by the Commissioner of Income Tax (Appeal)-9, Kolkata, in appeal no. 129/CIT(A)-9/Cir-31/2017-18/Kol, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 04/12/2017.
2. The grounds of appeal raised by the assessee are as follows:
Umang Goenka Assessment Year:2015-16 1. For that in view of the facts and circumstances of the case the action of the Ld. CIT(A) in upholding the claim of deduction U/s. 80IC at Rs. 10172628/- allowed by Assessing officer as against claim of the appellant at Rs. 37118499/- is erroneous and bad in law.
2. For that in view of the facts and circumstances of the case the Ld. Asst. Commissioner of Income Tax on wrong interpretation of substantial expansion and initial Assessment Year wrongly and arbitrarily restricted the claim of deduction U/s. 80IC at Rs. 10172628/- being 25% of the total claim as against eligible claim of deduction of 100% of the total income of Rs. 37118499/- and the Ld. CIT(A) erred in confirming the action of the Assessing officer inspite of the fact that similar claim of deduction @100% was allowed in earlier Assessment Year by Hon’ble ITAT Kolkata Bench in Assessment Year 2013-2014 & 2014-2015.
3. For that in view of the facts and circumstances of the case the appellant had fulfilled all the criteria for claiming deduction U/s. 80IC of the IT Act, 1961 @ 100% of the profit on making substantial expansion in the plant & machinery as provided in Section 80IC(8)(IX) of the IT Act, 1961, the Ld. CIT(A) ought to have deleted the addition in full instead of confirming the action of the Assessing officer.
4. For that in view of the facts and circumstances of the case the Ld. Assessing officer failed to compute Book profit U/s. 115JC of the IT Act, 1961 and taxed and allowed set off of tax credit U/s. 115JD and the Ld. CIT(A) failed to pass any order on the Additional Grounds taken before him.
5. For that the above Grounds of Appeal shall be argued in details at the time of hearing and the appellants crave leave to add to alter and or to amend the aforesaid grounds at or before the hearing of the appeal.
4. Ground nos. 1 to 3 raised by the assessee relate to deduction u/s 80IC of the Act.
Brief facts qua the issue are that the assessee, Sri Umang Goenka, is the proprietor of M/s. Electron Automats. The postal address of the said Firm is HIG24C, Sector-I, Dist. Solan, Parwanoo - 173 220, Himachal Pradesh. During the relevant financial year the assessee was engaged in the business of designing and developing innovative electrical and electronic control gear after studying the short coming of the existing products available in various fields. These products
Umang Goenka Assessment Year:2015-16 are microprocessor based and once the designs are appreciated and approved by the consultants they go into commercial manufacturing of the end products like automatic change over switches, motor starters, current limiters, safety power guard sockets, etc. As per information given in Form No. 10CCB, the assessee started its business activity / operation on 26-05-2007 and initial Assessment Year for claim of deduction u/s. 80-IC of the of the Income-tax Act, 1961 was Assessment Year 2008-2009. The assessee had already claimed deduction u/s. 80- IC to the extent of the 100% eligible profit for five years period of Assessment Year 2008-09 to Assessment Year 2012-2013. However, it was noticed that the assessee firm had again claimed 100% deduction against eligible profits in the relevant Assessment Year 2015-2016 which is 8th year of production for the firm by claiming substantial expansion in Financial Year 2011-2012. The assessee made following submission regarding the same :
“In this connection your kind attention is drawn to the detailed assessment orders passed in the earlier years which are all scrutiny assessments. There is no change in the activity carried on by the proprietorship concern Electron Automats & Assessment Year 15-16 is the 8th year of claim of deduction u/s 80IC which has been claimed @ 100% for which detailed explanation and submission has been filed in assessment year 13-14 & 14- 15 as well. In A. Y 13-14 the deduction was allowed @ 25% as against claim of 100% on substantial expansion as per the provisions of section 80 IC of the Income Tax Act 1961, but on appeal the learned CTT(Appeal) vide his order dated 31th May 2016 in Appeal No. 347/CIT appeal- 09/Circle31/2015-16/Kolkata was pleased to allow deduction @ 100% of the profit. Audit Report in form No. 10CCB has already been furnished on 30th August, 2016. If any further details and or explanation is required in the matter the same will be furnished accordingly………..”
6.The details submission and explanation filed in AY 2014-15 by the assessee before the Assessing Officer is reproduced below:
As per sub-section (2) of Section 80IC deduction under this Section is available to any undertaking or enterprises in the following two categories:
i) The undertaking or enterprises has begun or begins to manufacture or produce any article or thing during the period 07.01.2003 to 01.04.2012. Page | 3
Umang Goenka Assessment Year:2015-16
OR ii) The undertaking which manufacture or produce any article or thing and undertakes substantial expansion during the period 07.01.2003 to 01.04.2012.
A bare reading of provisions of sub-section (2) would reveal that the deduction under the aforesaid two categories is independent. In the first category the deduction is being given to the undertaking which has begun or begins manufacturing or production of article and thing during the specified period 07.01.2003 to 01.04.2012. Thus under the first category the deduction is available to newly set-up units.
In the second category, the deduction is allowed in case of expansion by the existing units which undertake substantial expansion during the specified period of 07.01.2003 to 01.04.2012.
There is no dispute about the fact that our manufacturing units was incorporated on 26.05.2007 and exemption U/s. 80IC has been allowed @ 100% on and from Assessment Year 2008-2009 to 2012-2013 as per the scrutiny Assessment order passed U/s. 143(3) of the IT Act, 1961.
5. There is also no dispute about the fact that our existing manufacturing unit completed substantial expansion of Plant & Machinery during the period 01.04.2011 to 31.03.2012 i.e. relevant to Assessment Year 2012-2013 and all documentary evidences i.e. details of addition to Plant & Machinery along with Bills and vouchers and the certificate issued by the Department of Industries, Parwanoo were filed during the course of scrutiny Assessment proceedings of Assessment Year 2012-2013.
In view of the substantial expansion having taken place during Assessment Year 2012-2013 i.e. before the cut off dt 01.04.2012 Assessment Year 2012-2013 becomes the initial assessment year for the claim of deduction U/s. 80IC of the IT Act, 1961 i.e. @ 100% for next 5 years commencing from Assessment Year 2012-2013 which incidentally was the 5th year of the commencement of the business.
7. Initial Assessment Year has been defined U/ s. 80IC(8)(v) as under:
“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 commence operation or completes substantial expansion. ”
8. Since in our case substantial expansion took place during Assessment Year 2012-2013 our initial Assessment Year will be considered Page | 4
Umang Goenka Assessment Year:2015-16 from Assessment Year 2012-2013 itself and 100% deduction will be allowed accordingly subject to a maximum of 10 years from Assessment Year 2008-2009.
The substantial expansion has been defined in Section 80IC(8)(IX) which is reproduced as under:
“Substantial expansion means increase in the investment in the Plant & Machinery by at least 50% of the book value of Plant & Machinery (before taking depreciation in any year) as on the 1st day of the previous year in which the substantial expansion was undertaken.”
The book value of the Plant & Machinery before taking depreciation in any year as on the 1st day of the previous year in which substantial expansion took place was Rs. 66110/ - and value of the increased in the Plant & Machinery in the year of substantial expansion was Rs. 440026/- which is more than 50% of the book value of the Plant & Machinery as provided in Section 80IC(8)(IX) of the Income Tax Act, 1961.
11. The Tax Audit Report in Form 10CCB was also furnished in AY 2012-2013 and 100% claim of deduction u/s 80IC was allowed which was the 5th year of the business on substantial expansion made as per the Provision of Section 80IC of the IT Act, 1961 @100%.
Thus, we have correctly claimed deduction U/s. 80IC of the IT Act, 1961 @ 100% of the profit as in view of the definition of initial Assessment Year and substantial expansion we are entitled to claim 100% deduction as per the Provision of Section 80IC of the IT Act, 1961 as we have satisfied all the condition laid down in the Act.
I trust you will find the same in order. If any further or other explanations are required, I am ready and willing to comply with the same. ”
The Assessing Officer having gone through the above reply of the assessee held that “the assessee’s reply has been considered but not accepted”. The interpretation being adopted by the assessee is that at the time of initial set up of the new unit, an entity can claim deduction for 100% of their profits for first five years and thereafter whenever it carries out the substantial expansion of the same unit then it can claim 100% deduction for the next five years thereby giving a new definition to the term Initial Assessment Year as given in the Act. Therefore, Assessing Officer allowed the deduction u/s 80IC only 25% of Rs. 4,06,90,511/-
Umang Goenka Assessment Year:2015-16 i.e. Rs. 1,01,72,627/- and balance amount of Rs. 3,05,17,883/- was disallowed by the Assessing Officer.
Aggrieved by the order of the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the order of the Assessing Officer observing the followings: “I have gone through the assessment order, grounds of appeal and the submissions made on behalf of the appellant. The only issue in the appeal relates to claim of deduction u/s 80IC @ 100% instead of 25% as allowed by Assessing Officer. The assessee relies on the judgement of Hon'ble ITAT in its own case for A.Y. 2013-14 and 2014-15. The issue involved is whether appellant is entitled to the claim of deduction u/s 80IC of the IT Act, 1961. On substantial expansion @ 100% as claimed by the appellant in A.Y 2015-16 which is the 8th year from the initial Assessment Year as against 25% allowed by the Assessing Officer. The issue is settled by the judgement of Hon'ble Supreme Court in the case of CIT vs Classic Binding Industries [2018] 96 taxmann.com 405 (SC), wherein it has been held that "Where assessee had availed deduction under section 80-IC for a period of 5 years at rate of 100 per cent, he would be entitled to deduction on substantial expansion for remaining 5 assessment years at rate of 25 per cent (or 30 per cent where assessee is a company), as the case may be, and not at rate of 100 per cent." In view of the above, the appeal of the assessee is dismissed.”
9. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before us.
10. The ld. Counsel for the assessee has relied on the order of the authorities below and on the other hand the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the appellant is the Page | 6
Umang Goenka Assessment Year:2015-16 proprietor of M/s. Electron Automates who is engaged in the business of designing and developing innovative electrical and electronic control gear and the factory is situated in Himachal Pradesh. The business activity in the proprietorship firm Electron Automates commenced operation on 26.05.2007 and as per the Provision of Section 80IC of the IT Act, 1961 the business income was eligible for deduction U/s. 80IC of the IT Act, 1961 commencing from Assessment Year 2008-2009 for a total period of 10 years and the deduction U/s. 80IC is being allowed to the appellant on and from AY 2008-2009 as per the provision of the Act..As per the Provision of Sub-section (2) of 80IC of the IT Act, 1961 deduction under this section is available to any undertaking or enterprises in two categories i.e. (i) the undertaking or enterprises has begun or begins to manufacture or produce any article or things during the period 07.01.2003 to 01.04.2012 or (ii) the undertaking which manufacture or produce any article or things and undertake substantial expansion during the period 07.01.2003 to 01.04.2012 and a bare reading of Subsection (2) would reveal that the deduction under the aforesaid two categories are independent to each other. In the 1st category the deduction is available to newly setup units and in the 2nd category deduction is available in case of expansion by the existing unit which undertakes substantial expansion during the specified period of 07.01.2003 to 01.04.2012. There is no dispute about the fact that the manufacturing unit of Electron Automates was incorporated on 26.05.2007 and exemption U/s. 80IC has been allowed @ 100% from Assessment Year 2008-2009 to Assessment Year 2012-2013. The appellant firm in their existing manufacturing unit of Electron Automates completed substantial expansion of Plant & machinery during the period 01.04.2011 to 31.03.2012 and was eligible for claim of deduction U/s. 80IC @ 100% for next 5 years commencing from AY 2012-2013 which becomes the ‘Initial Assessment Year’ which has been defined U/s. 80IC(v) which reads as under:
Initial Assessment Year means the Assessment Year relevant to previous year in which the undertaking or the enterprises begins to manufacture or produce articles or things or commence operation or complete substantial expansion
Umang Goenka Assessment Year:2015-16 The substantial expansion has further been defined in Section 80IC(8)(ix) which is reproduced as under: “Substantial expansion means increase in the investment in the Plant & Machinery by at least 50% of the book value of Plant & Machinery (before taking depreciation in any year) as on the 1st day of the previous year in which the substantial expansion was undertaken”
Thus, on the basis of the substantial expansion having been made in the Plant & machinery within the specified period as provided in the Act and having fulfilled all the condition for claiming deduction @ 100% for further 5 years the appellant had claimed a sum of Rs. 37118499/- as deduction U/s. 80IC of the IT Act, 1961 for which Audit report in Form No 10CCB was also furnished.
In Assessment Year 2013-2014 which was the 6th year of the production the appellant had claimed 100% deduction U/s. 80IC of the IT Act, 1961 but the AO had allowed 25% of the total claim U/s. 80IC of the IT Act, 1961. The Ld. CIT(A) vide its order dt. 31.05.2016 in Appeal No - 347/CIT(A)-9/Cir-31 /2015-16/Kol allowed the appeal and directed to allow deduction U/s. 80IC @ 100% of the total claim. The Ld. Assessing officer failed to follow the direction given in Assessment Year 2013-2014 and again allowed claimed U/s. 80IC @ 25% of Rs. 40690511/- i.e. Rs. 10172628/-as against the claim of 100% of the profit made by the industrial unit amounting to Rs. 37118499/- and the addition made needs to be deleted in full.
The Ld. Assessing officer has relied upon certain ITAT decision while making addition U/s. 80IC of the IT Act, 1961 which is not applicable and the appellant submits that the similar issue involved in various cases which have been decided by the Hon’ble Himachal Pradesh High Court, Shimla in IT Appeal No - 20/2015 vide order dated 28.11.2017 We note that the issue involved is whether the assessee is entitled to claim deduction u/s 80IC of the Act on substantial expansions @ 100% as claimed by the assessee in A.Y. 2015-16 which is the 8th Year from the initial assessment year as against allowed 25% of the Assessing Officer. Since the appeal of the Page | 8
Umang Goenka Year: Assessment Year:2015-16 assessee is covered by its own order by the judgment of the Tribunal in A.Y. 2013 assessee is covered by its own order by the judgment of the Tribunal in A.Y. 2013 assessee is covered by its own order by the judgment of the Tribunal in A.Y. 2013- 14 and the ld. CIT(A) allowed the appeal of the assessee observing the followings: . CIT(A) allowed the appeal of the assessee observing the followings: . CIT(A) allowed the appeal of the assessee observing the followings: “Similar issue was involved in AY 2013 “Similar issue was involved in AY 2013-14 and 2014-15 where the claim of 100% 15 where the claim of 100% exemption was denied by the Assessing Officer and finally the Hon’ble ITAT in exemption was denied by the Assessing Officer and finally the Hon’ble ITAT in exemption was denied by the Assessing Officer and finally the Hon’ble ITAT in both the years has accepted the claim of the appellant and has allowed Deduction both the years has accepted the claim of the appellant and has allowed Deduction both the years has accepted the claim of the appellant and has allowed Deduction @ 100% u/s 80IC of @ 100% u/s 80IC of the I T Act, 1961.
The Hon’ble ITAT in order daed 21.03.2018 in IT appeal no. 1637/Kol/2016 The Hon’ble ITAT in order daed 21.03.2018 in IT appeal no. 1637/Kol/2016 The Hon’ble ITAT in order daed 21.03.2018 in IT appeal no. 1637/Kol/2016 relating to AY 2013 relating to AY 2013-14 (Departmental Appeal) while allowing the claim of 14 (Departmental Appeal) while allowing the claim of deduction u/s 80IC @ 100% on substantial expansion held as under: deduction u/s 80IC @ 100% on substantial expansion held as under: deduction u/s 80IC @ 100% on substantial expansion held as under:
Umang Goenka Year: Assessment Year:2015-16
Since the issue is squarely covered in favour of the assessee and this is a ssue is squarely covered in favour of the assessee and this is a ssue is squarely covered in favour of the assessee and this is a subsequent year of deduction in respect of substantial expansion of deduction in respect of substantial expansion of deduction in respect of substantial expansion u/s 80IC of the Act, therefore the ground nos. 1 to 3 are allowed. therefore the ground nos. 1 to 3 are allowed.
Now we shall take Ground no. 4 Ground no. 4 raised by the assessee which relates to book raised by the assessee which relates to book profit u/s 115JC and allow the set off of tax credit u/s 115J profit u/s 115JC and allow the set off of tax credit u/s 115JD for tax paid in earlier for tax paid in earlier year on book profit.
We note before the ld. CIT(A) the ld. CIT(A), the assessee had raised additional grounds additional grounds which is given below: “Provision of Section 115JC regarding special provision for payment of tax by “Provision of Section 115JC regarding special provision for payment of tax by “Provision of Section 115JC regarding special provision for payment of tax by certain person other than a company was introduced by Finance Act 2012 w.e.f. certain person other than a company was introduced by Finance Act 2012 w.e.f. certain person other than a company was introduced by Finance Act 2012 w.e.f. 01.04.2013 relevant to A.Y. 2013 01.04.2013 relevant to A.Y. 2013-14 and in compliance to the said provision 14 and in compliance to the said provision taxes were paid u/s 1 taxes were paid u/s 115JC of the I T Act, 1961 and a statement of taxes paid w.e..f 15JC of the I T Act, 1961 and a statement of taxes paid w.e..f A.Y. 2013-14 is enclosed. The Assessing Officer has computed the income as per 14 is enclosed. The Assessing Officer has computed the income as per 14 is enclosed. The Assessing Officer has computed the income as per the provision of the I T Act, 1961 at Rs. 3,02,98,970/ the provision of the I T Act, 1961 at Rs. 3,02,98,970/- and has levied tax of Rs. and has levied tax of Rs. 9917852/- but has failed to com but has failed to compute book profit u/s 115JC of the IT Act, 1961 and pute book profit u/s 115JC of the IT Act, 1961 and allow credit for taxes paid u/s 115JD for which necessary direction be given as allow credit for taxes paid u/s 115JD for which necessary direction be given as allow credit for taxes paid u/s 115JD for which necessary direction be given as per law.”
Umang Goenka Assessment Year:2015-16
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We direct the Assessing Officer to compute the book profit u/s 115JC of the Act and allow the set off of tax credit u/s 115JD for taxes paid by the assessee in earlier years on book profit in accordance with law. Statistical purposes the additional grounds raised by the assessee is allowed.
Before parting, it is noted that the order is being pronounced after 90 days of hearing. However, taking note of the extraordinary situation in the light of the Covid-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Co- ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JCB Limited in and ITA No. 6103/Mum/2018 for A.Y. 2013-14 order dated 14.05.2020.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Court on 12.06.2020