2016 (11) TMI 74 - AT - Income Tax

Claim of deduction u/s 80IC on account of substantial expansion - Held that - We following the decision of Hycrons Electronics V ITO (2015 (6) TMI 725 - ITAT CHANDIGARH) held that assessee is eligible for deduction @ 25 % only on the profit derived from the industrial undertaking under section 80IC of the act despite substantial expansion undertaken by it. We dismiss the appeal of the assessee for both the Assessment years confirming the finding of lower authorities.

Summary

Issues Involved:
1. Claim of deduction under Section 80IC on account of substantial expansion.
2. Interpretation of statutory provisions related to Section 80IC.
3. Applicability of judicial precedents and principles of statutory interpretation.

Detailed Analysis:

1. Claim of Deduction under Section 80IC on Account of Substantial Expansion:
The assessee, a partnership firm engaged in manufacturing, claimed a 100% deduction of profits under Section 80IC for the assessment years following a substantial expansion of its plant and machinery in the financial year 2009-10. The Revenue contended that the assessee was only entitled to a 25% deduction after the initial five years of claiming 100% deduction. Both lower authorities rejected the assessee's claim, leading to the appeal.

2. Interpretation of Statutory Provisions Related to Section 80IC:
The Tribunal examined the language and intent of Section 80IC, emphasizing the principles of statutory interpretation. It was noted that:
- If the statutory language is clear, it must be enforced as written without resorting to different interpretative principles.
- The provision should be read in its entirety and in the context of the overall scheme of the Act.
- Subsection (2) of Section 80IC applies to both new and existing undertakings that undertake substantial expansion within specified periods.
- Subsection (3) differentiates the rates of deduction based on the location of the undertaking, with 100% deduction for ten years in Sikkim and North-Eastern states, and 100% for five years followed by 25% for the next five years in Himachal Pradesh and Uttaranchal.

3. Applicability of Judicial Precedents and Principles of Statutory Interpretation:
The Tribunal referred to various judicial precedents and principles, including:
- The literal rule of interpretation, as stressed by the Hon'ble Supreme Court in Orissa State Warehousing Corporation Vs. CIT.
- The need to avoid absurd or unintended consequences in statutory interpretation.
- The importance of considering legislative intent and historical context, as highlighted in K.P. Vergese 131 ITR 598.
- The Tribunal found that the decision in Hycron Electronics Vs. ITO, which interpreted similar statutory provisions, was more comprehensive and aligned with legislative intent compared to the Delhi Tribunal's decision in Tirupati LPG Industries Ltd.

Conclusion:
The Tribunal upheld the lower authorities' decision, confirming that the assessee was entitled to only a 25% deduction under Section 80IC after the initial five-year period of claiming 100% deduction. The appeals were dismissed, and the order was pronounced in the open court on 11/08/2016.