2019 (8) TMI 1065 - HC - Income Tax

Admissibility of deduction u/s 80IC - review application - HELD THAT - Though the argument raised by the counsel for the revenue can not be said to be technically wrong but in case this plea is accepted it would only lead to multiplicity of litigation and in the circumstances of the case, and in our considered opinion, it would be in the interest of justice to allow the review application. Resultantly, the review applications are allowed in terms of M/s AARHAM Softronics 2019 (2) TMI 1285 - SUPREME COURT and it is held that as regards questions of law claimed regarding claim of 100% deduction under Section 80IC of the IT Act for the relevant assessment years are answered in favour of the Assessee and against the Revenue.

Issues:
1. Interpretation of deduction under Section 80IC of the Income Tax Act, 1961.
2. Review application under Order 47 Rule 1 and 2 of the Code of Civil Procedure (CPC).
3. Impact of subsequent decision by the Supreme Court on the original judgment.
4. Consideration of the definition of 'initial assessment year' in Section 80IC.

Interpretation of deduction under Section 80IC:
The judgment involved review applications concerning the admissibility of deduction under Section 80IC of the Income Tax Act, 1961. The court considered substantial questions of law related to the availability of the deduction for units set up after a specific date and undertaking substantial expansion. The issues included whether units set up after a certain date were entitled to an enlarged deduction under section 80IC even upon substantial expansion and the disallowance of the benefit of substantial expansion for units established post a specified date. The court also examined whether the Income Tax Appellate Tribunal erred in disallowing the deduction and not following decisions of coordinate benches without referring to a larger bench. The definition of the initial assessment year and the ability of undertakings to claim 100% deduction upon substantial expansion were also scrutinized.

Review Application under CPC:
The Assessee filed a review application under Order 47 Rule 1 and 2 of the Code of Civil Procedure seeking a review of the court's previous order. The basis for the review was the subsequent review of the judgment by the Supreme Court in another case. The Revenue argued that a review on the ground of a decision being reversed or modified by a superior court is barred by the explanation to Order 47 CPC. However, the court noted that the original judgment was based on a decision of the Supreme Court that was subsequently clarified in another case, leading to a different interpretation of the law.

Impact of Subsequent Supreme Court Decision:
The Supreme Court's subsequent decision highlighted that the earlier judgment, which formed the basis of the court's decision, did not consider the definition of 'initial assessment year' under Section 80IC. The Supreme Court clarified that the earlier decision did not lay down the correct law. Despite the general principle that a review based on a superior court's subsequent decision is barred, the court found that in the interest of justice and to prevent multiplicity of litigation, it was appropriate to allow the review application.

Consideration of Definition of 'Initial Assessment Year':
The court allowed the review applications based on the subsequent Supreme Court decision and held that the questions of law regarding the claim of 100% deduction under Section 80IC of the IT Act for the relevant assessment years favored the Assessee and went against the Revenue. The decision clarified the interpretation of the law in light of the definition of 'initial assessment year' under Section 80IC, resolving the issues raised in the review applications. Subsequently, the pending CM Applications were also disposed of.

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