U.K. ENTERPRISES,PARWANOO vs. DCIT, CIRCLE, PARWANOO

It was a stand of the parties before the Bench that the points at issue are identical in both the appeals and are covered by the decision of the jurisdictional High Court dated 28/11/2017 in the case of M/s Stove Craft India Versus CIT-V and others in ITA 20 to 24/2015 except for the distinction that in ITA 1207/CHD/2017 in the case of U.K. Enterprises, year under consideration is the 7th year of claim taking 2007-08 as the first year of claim and in Usaka Electricals i.e. ITA 1208/CHD/2017, it is the 9th year. In the light of the said facts, it was the submission that the issues may be remanded to the AO for grant of necessary relief.

I have heard the rival submissions and perused the material on record. Addressing the facts in ITA 1207/CHD/2017, first it is seen that the assessee A.Y. 2013-14 is engaged in manufacturing of sheet metal components and submersible pumps and 100% deduction on the eligible profits therefrom was claimed u/s 80IC. In view of the fact that 100% deduction of the eligible profits for the five years period starting from 2007-08 to 2011-12 stood allowed, the claim of having carried substantial expansion in the 2012-13 assessment year was not accepted relying upon the decision of the ITAT dated 27.05.2015 in the case of Hycron Electronics V ITO. The said view in terms of the decision of the jurisdictional High Court is no longer good law. It is seen that the Hon'ble High Court in the aforesaid decision after considering the claim of carrying out substantial expansion where the claim of 100% deduction of the eligible profit stood allowed in the initial five years held after examining the facts of the cases before it that :

Thus, in view of the above discussion, these appeals are allowed and orders passed by the Assessment Officer as well as the Appellate Authority and the Tribunal in the case of each one of the assessees, are quashed and set aside, holding as under: (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 07/01/2003 and have undertaken substantial expansion between 07/01/2003 upto 01/04/2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. (b) Such of those units which have commenced production after 07/01/2003 and carried out substantial expansion prior to 01/04/2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC (8) (ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 07/01/2013 upto 01/04/2012, an undertaking or an enterprise can be entitled to deduction @100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)]. (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80-IB(5)].

1 Since the claim of carrying out the substantial expansion in the respective years has not been examined by the tax authorities, the issues are restored back to the file of the AO for granting necessary relief in accordance with law. Said order was pronounced in the Open Court at the time of hearing itself.

In ITA 1208/CHD/2017, it is seen that herein the assessee is engaged in manufacturing of electrical goods and components. The claim of having carried out substantial expansion in 2010-11 assessment year was similarly for the purpose of grant of 100% deduction u/s 80IC was rejected by the Tax A.Y. 2013-14 Authorities for similar reasons in view of the fact that 100% deduction of the eligible profits u/s 80IC stood granted in the fifth year period starting from 2005-06 to 2009-10 assessment year. Accordingly, for reasons identical as in ITA 1207/CHD/2017 with identical directions, the issues are restored back to the file of the AO with the direction to grant necessary relief. Said order was pronounced in the Open Court at the time of hearing itself.

In the result, appeals of the assessees are allowed for statistical purposes.