2018 (3) TMI 1817 - AT - Income Tax

Disallowance of deduction @ 100% us 80IC on account of substantial expansion of the Unit - HELD THAT - A perusal of the orders of the AO reveal that the AO have 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 of the Act. Almost similar view has also been taken by the Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India vs. Commissioner of Income Tax 2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT No justification at this stage to give the Assessing officers a second innings to re-examine undisputed facts. The impugned orders of the CIT(A) are set aside and the Assessing officers are directed to grant to the assessee deduction at the rate of hundred percent of its eligible profits, as per the ruling of the jurisdictional High Court in this regard in the case of M/s Stovekraft India vs. Commissioner of Income Tax (supra). Both the appeals of the assessee, therefore, stands allowed.

Summary

Issues:
- Appeal against orders of CIT(A) for different assessment years
- Disallowance of deduction under section 80IC for substantial expansion

Analysis:
The appeals were filed by the assessee against separate orders of the Commissioner of Income Tax (Appeals) for different assessment years. The issues raised in both appeals were identical, so they were heard together. The counsel for the assessee expressed the desire to withdraw certain grounds, which were subsequently dismissed as withdrawn with no objection from the Departmental Representative. The main issue raised in both appeals related to the disallowance of the claim of deduction under section 80IC of the Income-tax Act, 1961 for substantial expansion of the unit.

During the hearing, it was highlighted that the Hon'ble Himachal Pradesh High Court had already adjudicated on the same issue in favor of the assessee in a related case. The High Court ruled that there is no bar in the section denying the benefit of 100% deduction to new units undertaking substantial expansion. The High Court's decision specified various scenarios where units would be entitled to the deduction under section 80IC. The Departmental Representative acknowledged that the issue was covered by the High Court's decision but requested verification by the Assessing Officers regarding the expansion carried out by the assessee.

The Tribunal disagreed with the Revenue's request for further verification, noting that the Assessing Officers had not disputed the substantial expansion carried out by the assessee. The Tribunal referenced the High Court's clarification that the Revenue had not contested the expansion and entitlement to deduction, emphasizing that there was no need for a re-examination of undisputed facts. Consequently, the impugned orders of the CIT(A) were set aside, directing the Assessing Officers to grant the assessee a deduction at the rate of 100% of its eligible profits in line with the High Court's ruling. As a result, both appeals of the assessee were allowed.