2019 (12) TMI 581 - HC - Income Tax

Deduction u/s 80IC - substantial expansion - exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit - HELD THAT - This appeal is covered by judgment titled Pr. Commissioner of Income Tax versus M/s. Aarham Softronics 2019 (2) TMI 1285 - SUPREME COURT An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of Himachal Pradesh of the nature mentioned in clause (ii) of subsection (2) of Section 80IC, would be entitled to deduction at the rate of 100% of the profits and gains for five assessment years commencing with the 'initial assessment year'. For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of the profits and gains. In case substantial expansion is carried out as defined in clause (ix) of subsection (8) of Section 80IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become 'initial assessment year', and from that assessment year the assessee shall be entitled to 100% deductions of the profits and gains. (d) Such deduction, however, would be for a total period of 10 years, as provided in subsection (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes 'initial assessment year' once again. However, this 100% deduction would be for remaining three years, i.e. 8th, 9th and 10th assessment years.

Summary

Issues:
1. Application under Section 5 of the Limitation Act for condonation of delay in filing an appeal.
2. Interpretation of the judgment passed by the apex Court in Civil Appeal No. 1784 of 2019 regarding deductions under Section 80IC for new units set up in Himachal Pradesh.

Analysis:
1. The judgment delivered by the High Court of Himachal Pradesh involved an application under Section 5 of the Limitation Act seeking condonation of a delay of four months and two days in filing an appeal. The application was allowed, and the delay was condoned based on the reasons stated in the application. The appeal was disposed of accordingly by Chief Justice L. Narayana Swamy. This issue was addressed promptly and resolved by the court.

2. The second issue in the judgment pertained to the interpretation of a judgment passed by the apex Court in Civil Appeal No. 1784 of 2019 regarding deductions under Section 80IC for new units set up in Himachal Pradesh. The court noted that the judgment in the aforementioned case clarified the definitions of 'initial assessment year' under Sections 80IB and 80IC, emphasizing the differences between the two definitions. It was highlighted that for undertakings setting up new units in Himachal Pradesh between specific dates, deductions at different rates were applicable for the initial five years and the subsequent years. The judgment also addressed scenarios involving substantial expansion within the specified period, determining the entitlement to deductions based on the nature and timing of the expansion. The court disposed of the appeal in line with the interpretation provided in the apex Court's judgment, ensuring clarity on the deductions applicable to eligible undertakings in Himachal Pradesh.