2017 (12) TMI 1638 - AT - Income Tax

Disallowing the benefit of substantial expansion u/s 80IC(2) - benefit of substantial expansion is allowable only to the undertaking which were existing as on 07.01.2003 - Held that - A perusal of the order of the Assessing officer reveals that the Assessing officer has not disputed that the assessee unit has carried out substantial expansion as provided under clause (b) of sub section (2) read with clause (ix) of sub section (7) of section 80IC. Almost similar view has also been taken in the case of M/s Stovekraft India vs. Commissioner of Income Tax (2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT) we may clarify that the Revenue has not disputed (a) the units having carried out substantial expansion within the definition of the Section (b) their entitlement and extent of deduction would be dependent upon interpretation of the relevant provisions. We therefore do not find any justification at this stage to give the Assessing officer a second innings to re-examine undisputed facts. - Decided in favour of assessee.

Summary

Issues:
1. Disallowance of benefit of substantial expansion u/s 80IC(2) and confirmation of deduction us 80IC only to the extent of 25%.
2. Interpretation of the relevant provisions regarding substantial expansion for deduction under Section 80IC.

Analysis:
Issue 1: The appellant challenged the order disallowing the benefit of substantial expansion under Section 80IC(2) and confirming the deduction at 25% instead of 100%. The Hon'ble High Court held that new units undertaking substantial expansion are entitled to 100% deduction. The appellant's unit had carried out substantial expansion as per the provisions. The Revenue suggested verification by the Assessing Officer, but the Tribunal disagreed, citing undisputed facts and the High Court's ruling. Consequently, the order of the CIT(A) was set aside, directing the AO to grant the appellant 100% deduction as per the High Court's decision.

Issue 2: The key issue revolved around the interpretation of provisions related to substantial expansion for claiming deduction under Section 80IC. The Hon'ble High Court clarified that undertakings established before 7.1.2003 undertaking substantial expansion between 7.1.2003 and 1.4.2012 are eligible for Section 80-IC benefits. It was emphasized that substantial expansion is not limited to one instance and can occur multiple times as long as the statutory requirements are met. The Court also highlighted that units commencing production after 7.1.2003 and expanding before 1.4.2012 are entitled to deductions at specified rates under Section 80-IC. Additionally, the judgment outlined that within the specified window period, an enterprise can claim 100% deduction for over five years, subject to a ten-year cap. The ruling also clarified that units claiming deduction under Section 80-IC cannot avail deductions under other sections within Chapter VI-A or Section 10A or 10B of the Act.

In conclusion, the Tribunal allowed the appeal, emphasizing the entitlement of the appellant to 100% deduction based on the High Court's decision. The judgment provided clarity on the interpretation of substantial expansion provisions under Section 80IC, ensuring consistent application of tax benefits for eligible undertakings.