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TMI Blog2018 (12) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s/ Eurolinks, when these judgments have not been accepted by the department on merits and SLP has been filed in such cases ? (iii) Whether on the facts and circumstances of the case, the CIT(A) has not erred in allowing the deduction u/s 80IC @ 100% to the assessee for 10 years without appreciating and ignoring the real intent and purpose of insertion of section of 80IC and the CBDT circular No. 7 of 2003 dated 05.09.2003 and circular No. 49 of 2003 of Central Excise Department and the subsidy scheme issued by Ministry of Commerce and Industry, DIPP, GOI, which are binding in law on authorities and anything which is legally relevant, is to be considered for implementation as laid down by SC in 131 ITR 597(SC). (iv) Whether on the facts and circumstances of the case, the CIT(A) has not erred in allowing the deduction u/s 80IC @ 100% to the assessee for 10 years without appreciating and ignoring the fact that a Perusal of the proviso would show that before the introduction of section 80IC, the deduction to the backward states was available in terms of section 80IB (4), the third proviso makes clear that after 31.03.2004, this deduction will be available only under section 80I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out substantial expansion in any assessment year prior to 01.04.2012 can opt for that assessment year as initial assessment year for the purpose of claiming deduction u/s 80IC(3) of the Income Tax Act without appreciating the fact that an undertaking set up after 07.01.2003 is not entitled to benefit of "substantial expansion" in view of the provisions of Section 80IC(2)(a)(ii) and 80IC(2)(b)(ii) and as clarified in CBDT circular No. 7 of 2003?" (ix) It is prayed that the order of Ld. CIT(A) be set aside and that of the Assessing officer may be restored. 3. Brief facts of the case are that the assessee was engaged in business of manufacturing of corrugated boxes in the name of proprietorship concern M/s. Shree Bhagwati Industries at Baddi. Besides this, the assessee is also a partner in the firm namely M/s. Shimla Kinnaur Fruit Agency from which he received remuneration during the year under consideration. The assessee was claiming 100% deduction of Rs. 1,14,12,659/- u/s 80IC of the I.T Act. As per form 10CCB, the date of commencement of operation is 10.07.2007 and initial assessment year was 2008-09. During assessment proceedings AO noticed that A.Y 2014 - 15 was the 7th year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned above, sub-section (2) of Section 80-IC provides for tax benefit to those undertakings or enterprises which had set up their manufacturing units in certain specified areas including State of Himachal Pradesh to which this case is belonged. 15. It also gives benefit to these undertakings and enterprises which have undertaken substantial expansion during the periods mentioned therein. As there is no dispute that all these assessees are covered by the provisions of subsection (2), that aspect need not be stated in detail. We, thus, reproduce those portions of the provision which are relevant for our discussion: "S. 80-IC. Special Provisions in respect of certain undertakings or enterprises in certain special category States. - (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (2), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). ** &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing unit as prescribed under sub-section (2) of the Act, can start claiming deductions @ 100% again for next five years as they had undertaking "substantial expansion" during the period mentioned in sub-section (2)? The answer has to be in the negative for the following the reasons: 18. We are dealing with the deductions in respect of profits and gains under Section 80-IC of the Act. No other provision is involved. This section makes special provisions in respect of certain undertakings or enterprises in certain special category States. Section 80-IC was inserted by the Finance Act, 2003 w.e.f. April 1, 2004. As per this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in sub-section (3) of Section 80-IC. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. The deduction was provided to new units established in the aforesaid States, and also to existing units in those States if substantial expansion was carried out. The deduction was available @ 100% for ten Assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of Section 80-IC within the aforesaid period of 10 years, on the basis that it had carried substantial expansion in its unit. 21. We are conscious of our recent judgment rendered by this very Bench in Mahabir Industries v. Principal Commissioner of Income Tax (Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018). However, a fine distinction needs to be noted between the two sets of cases. In Mahabir Industries, the assessees had availed the initial deduction under a different provision, namely, Section 80-IA of the Act, i.e. by fulfilling the conditions mentioned in sub-section (4) of Section 80-IA. Those conditions are altogether different. Deduction in respect of profits and gains under the said provision is admissible when these profits and gains are from industrial undertakings or enterprises engaged in infrastructure development etc. Even this availment started at a time when Section 80-IC was not even on the statute book. As mentioned above, Section 80-IC was inserted by the Finance Act, 2003 with effect from April 01, 2004. The assessees in those cases had started claiming and were allowed deductions from the Assessment Years 1998-99 and 1999-2000 under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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