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2022 (9) TMI 771 - AT - Income TaxRevision u/s 263 by CIT - Deduction u/s 80-IC - initial year for claiming 100% deduction - substantial expansion undertaken by the assessee within 10 years period the year of substantial expansion - HELD THAT - On perusal of the assessment order passed by the Assessing Officer we notice that the assessee firm is engaged in the business of manufacturing battery components and the assessee had set up its unit on 2.06.2006 relevant to the assessment year 2007-08. The assessee subsequently had undertaken substantial expansion during the financial year 2011-12 and continued to claim deduction at 100% on substantial expansion undertaken by the assessee. The claim of the assessee was denied while passing the order pursuant to the order passed under section 263 of the Act. The ratio of the decision in the case of Pr. CIT Vs. Aarham Softronics 2019 (2) TMI 1285 - SUPREME COURT applies to the facts of the case as it was held that there can be two initial assessment years and the year in which there was substantial expansion that year is the initial assessment year within the period of 10 years for the purpose of claiming deduction under section 80-IC of the Act. Thus respectfully following the decision of the Hon ble Supreme Court we hold that the assessee is entitled for deduction under section 80-IC of the Act for the assessment years 2012-13 and 2015-16 which are under consideration. We reverse the order of the ld. CIT (Appeals) and direct the Assessing Officer to allow the claim of the assessee under section 80-IC - Decided in favour of assessee.
Issues:
Appeals against disallowance of deduction under section 80-IC of the Income Tax Act, 1961 for assessment years 2012-13 and 2015-16. Analysis: The appeals were filed by the assessee against orders of the ld. Commissioner of Income Tax (Appeals) confirming the disallowance of deduction under section 80-IC of the Income Tax Act. The Assessing Officer disallowed the deduction, which was sustained by the ld. CIT (Appeals) following the decision of the Hon'ble Supreme Court in the case of Classic Binding Industries. The Supreme Court in Classic Binding Industries held that once an assessee starts claiming deduction under section 80-IC and the initial assessment year commences within 10 years, there cannot be any initial year, allowing 100% deduction in the next 5 years based on substantial expansion of the unit. However, the Supreme Court in the case of Pr. CIT Vs. Aarham Softronics held that if an assessee avails of 100% deduction for the first 5 years and then at 25% for the next 5 years, and carries out substantial expansion within 10 years, the year of substantial expansion becomes the initial year for claiming 100% deduction. The total period of deduction should not exceed 10 years. The decision in Classic Binding Industries was deemed not good law, and the legal position was clarified regarding the definition of 'initial assessment year' under section 80-IC. The assessee, engaged in manufacturing battery components, set up its unit in 2006 and undertook substantial expansion in 2011-12. The claim for deduction was denied, but following the judgment in Pr. CIT Vs. Aarham Softronics, it was held that the year of substantial expansion is the initial assessment year within the 10-year period for claiming deduction under section 80-IC. Thus, the assessee was entitled to the deduction for the relevant assessment years, and the order of the ld. CIT (Appeals) was reversed to allow the claim under section 80-IC. The appeals of the assessee were allowed, and the Assessing Officer was directed to allow the deduction. This detailed analysis of the legal judgment provides insight into the interpretation of section 80-IC of the Income Tax Act and the implications of substantial expansion on the eligibility for deduction. The clarification provided by the Supreme Court in Pr. CIT Vs. Aarham Softronics regarding the initial assessment year and the total period of deduction is crucial in determining the entitlement of the assessee to claim deductions under section 80-IC.
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