2021 (4) TMI 52 - AT - Income Tax

Deduction u/s 80IC - substantial expansion of the Unit - HELD THAT - As decided in own case 2018 (3) TMI 1817 - ITAT CHANDIGARH 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 the issue is already settled in light of the Hon'ble Supreme Court decision in case of Aarham Softronics 2019 (2) TMI 1285 - SUPREME COURT and thus, the issue is squarely covered in favour of the assessee

Summary

Issues:
1. Disallowance of deduction u/s 80IC by restricting deduction to 30% of profits of undertaking.
2. Interpretation of Section 80IC regarding initial assessment year for deduction.
3. Existence of more than one initial assessment year under Section 80IC.

Analysis:
1. The appellant, a private Limited Company, engaged in manufacturing herbal products, challenged the CIT(A)'s order disallowing a deduction u/s 80IC. The CIT(A) restricted the deduction to 30% of the profits of the undertaking instead of the 100% claimed by the assessee. The Assessing Officer had made additions towards deduction u/s 80IC and disallowance u/s 14A read with Rule 8D. The Tribunal referred to past judgments in favor of the assessee on similar issues for other assessment years.

2. The main issue revolved around the interpretation of Section 80IC concerning the initial assessment year for claiming deductions. The appellant argued that there can be more than one initial assessment year for the purpose of deduction u/s 80IC, especially after substantial expansion. The Tribunal cited the Hon'ble Supreme Court's decision in Aarham Softronics case, which clarified that in cases of substantial expansion, the previous year of expansion becomes the new initial assessment year for claiming deductions.

3. The Tribunal, relying on the decision of the Hon'ble jurisdictional High Court, held that there can be more than one initial assessment year under Section 80IC. The Tribunal emphasized that substantial expansion could lead to multiple initial assessment years, entitling the assessee to deductions for an extended period, subject to the overall cap of ten years. The Tribunal directed the Assessing Officer to allow the deduction at 100% of the eligible profits based on the precedent set by the High Court's ruling.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the assessee's entitlement to deduction under Section 80IC at 100% of eligible profits for the relevant assessment year. The decision was based on established legal precedents and interpretations of the provisions under consideration.