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Income Tax Appellate Tribunal, DELHI BENCHES “DB” : DELHI
Before: SHRI ANIL CHATURVEDI & SHRI CHALLA NAGENDRA PRASAD
ORDER PER ANIL CHATURVEDI, A.M.
This appeal by Revenue has been directed against the Order of the Ld. CIT(A), Haldwani, dated 31.07.2018 in Appeal No.10212/CIT(A)/HLD/2017-18 relating to the A.Y. 2015-2016. 2. Facts of the case, in brief as culled out from the material on record are as under :
2 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. 2.1. The assessee is a company stated to be engaged in the business of manufacturing of writing and printing paper. The assessee electronically filed its return of income for the A.Y. 2015-16 on 26.09.2015 declaring total income of Rs.4,40,95,740/-. The case was selected for scrutiny. Thereafter, assessment was framed under section 143(3) vide order dated 29.11.2017 and the total income of the assessee was determined at Rs.30,20,38,530/-. Aggrieved by the order of the A.O, the assessee carried the matter in appeal before the Ld. CIT(A) who vide order dated 31.07.2018 in Appeal No.10212/CIT(A)/HLD/2017-18 allowed the appeal of assessee.
Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before the Tribunal by raising the following grounds :
1. Ld. CIT (A) has erred in law, I acts and circumstances of the case in allowing appeal of the assessee for the claim of deduction u/s 80IC to 100% as against 30% only by following the order of Hon’ble ITAT, Delhi in 3 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. the case of M/s Tirupati LPG Industries Limited Vs JCIT, Range -2, Dehradun which is not accepted by the department, therefore, it is not binding on the department. In the recent judgment in the case of Commissioner of Income Tax vs M/s Classic Binding Industries, Hon’ble Supreme Court has hold that after availing deduction for a period of 5 years @ 100% of such profits and gains from the ‘units’, the assesses would be entitled to deduction for remaining 5 Assessment Year @ 25% (or 10% where the assessee is a company), as the case may be, and not @ 100%.
2. Ld. CIT (A) has erred in law, facts and circumstances that the assessee made the claim of deduction (a) 100% of profits in the tenth year while the position of law was clear that for balance five years the deduction was admissible @ 10% of the profits derived from eligible business.
3. Ld. CIT (A) has erred In law, facts and circumstances that the assessee is not given an option to re-fix its 4 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. Initial assessment year except only in one case as provided in section 801A. Had the legislature intended to give this option in section 80IC then it could have been provided in as clear words as it has been provided in section 80IA.”
The case file reveals that on earlier occasion, the matter was listed for hearing, but, none appeared on behalf of assessee despite the service of notice. On the date of hearing also none appeared on behalf of assessee nor any application for adjournment was filed on behalf of assessee. We, therefore, proceed to dispose of the appeal ex-parte qua the assessee and after hearing the Ld. D.R. and considering the material on record.
Before us, at the outset, the Ld. D.R. submitted that that though the Revenue has raised various grounds, but, the sole controversy is with respect to allowing the claim of deduction under section 80IC of the I.T. Act, 1961.
5 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand.
During the course of assessment proceedings, the A.O. noticed that assessee had established new unit and had commenced production w.e.f. 16.05.2005 and had claimed itself to be a new unit for the purpose of claim of deduction under section 80IC of the I.T. Act, 1961. He noted that assessee had claimed deduction at 100% of the profits for five assessment years namely A.Ys. 2006-07 to 2010-11. During the 10th year and the current year it had claimed deduction at 100% by undertaking substantial expansion of the new unit during F.Y. 2010-11 and in re-fixing the initial A.Y. to A.Y. 2011-12. According to A.O. as per the provisions of Section 80IC(3) of the I.T. Act, 1961, assessee was eligible for deduction at 30% of the profits derived from eligible business and, therefore, the assessee was asked to justify its claim of deduction @ 100% under section 80IC(2)(b)(ii) of the I.T. Act, 1961. In response to the query of the A.O, assessee made detailed submissions and alia inter submitted that it had completed substantial expansion in A.Y. 2011-12 and had started production of articles specified in 14th Schedule and was eligible for exemption
6 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. again at 100%. The submissions of the assessee was not found acceptable to A.O. A.O. was of the view that deduction under section 80IC can be claimed only for 10 years at 100% of profits from eligible business and for the subsequent years, deduction at 30% is allowed in case of companies. A.O. was of the view that since the maximum number of years for which deduction can be claimed has been restricted to 10 years by sub-section (b), therefore, it implied that deduction under section 80IC at 100% of profits is allowable for first 05 years and for balance 05 years it is allowable at 25% or 30% of the profits as the case may be. In the case of the assessee, the A.O. noted that it was a new unit which was established during the period 07.01.2003 to 31.03.2012, assessee had commenced commercial production from 16.05.2005 and had claimed A.Y. 2006-07 as the initial assessment year for claim of deduction under section 80IC of the I.T. Act, 1961. According to A.O. the assessee was, therefore, eligible for claiming deduction under section 80IC of the Act for a period of 10 years i.e., at 100% for first 05 years and 30%
7 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. for balance 05 years. He was of the view that the claim of the assessee that it has made substantial expansion and therefore the initial assessment year can be re-fixed again during the period of 10 years was not in conformity with the letter and spirit of the Legislature. He further noted that assessee’s claim of 100% deduction under section 80IC of the Act in the 7th year i.e., A.Y. 2012-13 was disallowed on similar grounds in the assessment framed under section 143(3) of the I.T. Act, 1961. The A.O, therefore, restricted the deduction under section 80IC at 30% of the profits i.e., at Rs.11,03,96,671/- and the excess claim of deduction amounting to Rs.25,75,92,232/- was added to the income of the assessee.
6.1. Aggrieved by the Order of the A.O, assessee carried the matter in appeal before the Ld. CIT(A). The Ld. CIT(A) while deciding the issue in assessee’s favour noted that an identical issue had also arisen in assessee’s own case in A.Y. 2011-12 and his predecessor had allowed the claim of 100% deduction vide order dated 22.03.2016. He also noted that the Hon’ble Himachal High Court in the case
8 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. of Stovekraft India vs., CIT in ITA.No.20 of 2017 dated 28.11.2017, on identical facts had directed the A.O. to allow the claim of deduction under section 80IC of the I.T. Act, 1961. He, therefore, following the order of his predecessor and the decision of Hon’ble Himachal High Court in the case of Stovekraft India (supra) directed the A.O. to allow the deduction at 100% of the profits.
Aggrieved by the order of the Ld. CIT(A), the Revenue now is in appeal before the Tribunal by raising various grounds which has been reproduced in the preceding paragraphs.
Before us, the Ld. D.R. supported the order of the A.O. However, the Ld. D.R. fairly submitted that the issue of deduction at 100% in the case of substantial expansion has been decided in favour of the assessee by the Hon’ble Apex Court in the case of PCIT vs., Arham Softtronics [2019] 102 taxmann.com 343 (SC) and the Hon’ble Himachal Pradesh High Court decision in the case of Stovekraft India vs., CIT which has been upheld by the Hon’ble Supreme Court and 9 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. is reported in [2017] 88 taxmann.com 225 (H.P.). He supported the order of the A.O.
We have heard the Ld. D.R. and perused the material available on record. The issue in the present ground is with respect to claim of deduction at 100% on account of substantial expansion undertaken by the assessee. We find the Ld. CIT(A) while deciding the issue in favour of the assessee had relied on the decision of his predecessor in assessee’s own case for the A.Y. 2011-12 and had followed the decision of Hon’ble Himachal Pradesh High Court in the case of Stovekraft India vs., CIT (supra). We further find the Hon’ble Supreme Court in the case of PCIT vs., Arham Softtronics (supra) has observed as under :
“Assessee having set up a new industry of a kind mentioned in section 80-IC(2) and started availing exemption of 100 per cent tax under section 80-IC(3) (which is admissible for five years) could start claiming exemption at same rate of 100 per cent beyond period of five years if it carried out substantial expansion in its 10 ITA.No.6348/Del./2018 M/s. Naini Tissues Ltd., Kashipur, Distt. Udham Singh Nagar, Uttarakhand. manufacturing unit in terms of section 80-IC(8)(ix) within period of ten years.”
9.1. Before us no contrary binding decision in support of the Revenue contention has been pointed out by the Ld. D.R. We, therefore, find no reason to interfere with the order of the Ld. CIT(A) and thus, the grounds raised by the Revenue are dismissed.
In the result, appeal of the Revenue is 10. dismissed.
Order pronounced in the open court on 13.06.2022.