2023 (7) TMI 698 - SCH - Income Tax

Exemption u/s 80-IC - Availability of exemption to the appellants herein having regard to the decision of Classic Binding Industries 2018 (8) TMI 1209 - SUPREME COURT - 100% or 25% - whether Assessees were entitled to 100% exemption and this Court in the case of Aarham Softronics 2019 (2) TMI 1285 - SUPREME COURT has held that the judgment in Classic Binding Industries case had omitted to take note of the definition of Initial Assessment Year contained in Section 80-IC and had instead based its conclusion on the definition contained in Section 80-IB, which did not apply to the case at all? HELD THAT - We find that the judgment referred to above, squarely applies to the case at hand and therefore, the High Court, which has stated that the substantial questions of law were answered against the Assessees and in favour of the Revenue on the basis of Classic Binding Industries case, will have to be now set aside. Consequently, the Assessees succeed and are entitled to 100% exemption. In this regard, it is relevant to notice that in the case of Tejpal Chaudhary, the Assessing Officer has clearly held that the Assessee was entitled to exemption under Section 80-IC but to the extent of 25% only which is now held to be 100%. The finding that the Assessee was entitled to deduction has attained finality. In so far as the case of M/s. Friends Alloys is concerned, the Revenue has conceded to the fact that the said Assessee is entitled to exemption.

Summary

Issues involved:
The judgment involves the availability of exemption to the appellants under Section 80-IC of the Income Tax Act, 1961, and the applicability of the decision in the case of Commissioner of Income Tax V/s. Classic Binding Industries (2018) 9 SCC 753.

Availability of 100% exemption under Section 80-IC:
The appellants challenged the order passed by the High Court of Punjab and Haryana regarding the availability of exemption under Section 80-IC. The Supreme Court referred to its decision in Principal Commissioner of Income Tax, Shimla V/s Aarham Softronics (2020) 11 SCC 551, which clarified that the judgment in Classic Binding Industries case did not consider the definition of "Initial Assessment Year" under Section 80-IC. The Court held that 100% exemption is permissible under certain paragraphs of the judgment. The respondent did not dispute this proposition, leading to the conclusion that the Assessees are entitled to 100% exemption, overturning the High Court's decision.

Specific cases:
In the case of Tejpal Chaudhary, the Assessing Officer initially granted only 25% exemption under Section 80-IC, which is now corrected to be 100% based on the Supreme Court's ruling. The finding of entitlement to deduction for the Assessee is now final. Regarding M/s. Friends Alloys, the Revenue accepted that the Assessee is entitled to exemption. Consequently, the Appeals were allowed, and the Assessees are entitled to 100% exemption under Section 80-IC. The High Court's decision, which was based on Classic Binding Industries case, is set aside in favor of the Assessees.

Conclusion:
The Supreme Court granted leave and allowed the Appeals, disposing of them in favor of the Assessees, who are now entitled to 100% exemption under Section 80-IC of the Income Tax Act, 1961. The judgment clarified the applicability of the law and overruled the High Court's decision based on the previous case law.