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TMI Blog2019 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessee accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. See COMMISSIONER OF INCOME TAX VERSUS M/S. CLASSIC BINDING INDUSTRIES [2018 (8) TMI 1209 - SUPREME COURT OF INDIA] - Decided against the assessee - ITA No. 289 of 2018 - - - Dated:- 14-1-2019 - MR AJAY KUMAR MITTAL AND MRS MANJARI NEHRU KAUL, JJ. For The Appellant (s) : Ms. Urvashi Dhugga, Sr. Standing Counsel For The Respondent (s) : Mr. Saurav Verma, Advocate with Mr. Ahosh Soni, Advocate And Mr. Akash Garg, Advocate for respondent in ITA Nos. 402 478 of 2018 ORDER Ajay Kumar Mittal,J. 1. This order shall dispose of ITA Nos. 289, 402 and 478 of 2018 as learned counsel for the parties are agreed that the issue involved in all three appeals is identical. However, the facts are being extracted from ITA No. 289 of 2018. 2. ITA No. 289 of 2018 has been preferred by the appellantrevenue against the order dated 15.02.2018, Annexure A.4, passed by the Income Tax Appellate Tribunal, Chandigarh Bench B (in short, the Tribunal ) in ITA No.586/Chd/2017 dated 15.02.2018, for the assessment year 2013-14, claiming following subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and by relying on the decision of Hon ble Himachal Pradesh High Court in the case of M/s Stovekraft India when this judgment has not been accepted by the department on merits? iii) Whether on the facts and in the circumstances of the case and in law, the Hon ble ITAT has erred in allowing the deduction under Section 80IC @ 100% to the assesseee 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 in the circumstances of the case and in law, the Hon ble ITAT has erred in allowing the deduction under Section 80IC @ 100% to the assessee for 6th year 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 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t? viii) Whether on the facts and in the circumstances of the case and in law, the Hon ble ITAT is justified in holding that an undertaking which has carried 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 under Section 80IC(3) of the Income Tax Act without appreciating the fact that an undertaking like this set up after 07.01.2003, i.e. in F.Y. 2006-07 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) Whether on the facts and in the circumstances of the case and in law, the Hon ble ITAT has erred in not allowing the AO to examine, whether substantial expansion has taken place, holding that they do not find any justification for allowing a second innings to AO to reexamine facts, even though this is a violation of natural justice and a perverse order, since Hon ble ITAT is the final fact finding authority? x) Whether on the facts and in the circumstances of the case and in law, the Hon ble ITAT has erred in failing to adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x (Appeals), [CIT(A)]. Vide order dated 17.01.2017, Annexure A.2, the CIT(A) confirmed the addition and dismissed the appeal. Still not satisfied, the assessee filed appeal before the Tribunal. Vide order dated 24.07.2017, Annexure A.3, the Tribunal dismissed the appeal on the ground that the respondent-assessee did not appear for any hearing. Thereafter, the assessee filed a miscellaneous application before the Tribunal which was accepted vide order dated 15.02.2018, in view of the decision of the Himachal Pradesh in the case of M/s Stovekraft India Vs. Commissioner of Income Tax in ITA No. 20 of 2018 deleting the addition. Hence the instant three appeals by the appellant-revenue before this Court. 5. We have heard learned counsel for the parties. 6. The issue that arises for consideration in these appeals is whether the assessee who had availed deduction at the rate of 100% for first 5 years could start claiming deduction at the rate of 100% again for the next five years as they had undertaken substantial expansion under Section 80IC of the Act. The matter is no longer res integra. The issue involved in the present appeals has already been decided in favour of the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in favour of the assessee. 7. The issue before the Himachal Pradesh High Court in Stovekraft India s case (supra) was as to whether undertaking or an enterprise established after 7th January 2003 carrying out substantial expansion within the window period between 07.01.2003 to 01.04.2012 would be entitled to deduction on profits at the rate of 100% under Section 80IC of the Act and if so then for what period. The answer was given in the affirmative. It was held as under: ( a) Such of those undertakings or enterprises which were established, became operational and functional prior to 07.01.2003 and have undertaken substantial expansion between 07.01.2003 upto 01.04.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. ( b) Such of those units which have commenced production after 07.01.2003 and carried out substantial expansion prior to 01.04.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. ( c) Substantial expansion cannot be confined to one expansion. As long as require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 80IC of the Act, starts enjoying deduction, there cannot be another assessment year for the purposes of Section 80IC of the Act within the aforesaid period of ten years, on the basis that it had carried substantial expansion in its unit. It was further recorded that Section 80IC of the Act makes special provisions in respect of certain undertakings or enterprises in certain special category States. The provisions of Section 80IC provided deduction to manufacturing units situated in the States of Sikkim, Himachal Pradesh, Arunachal Pradesh 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 at the rate of 100% for ten assessment years for the units located in North-Eastern and in the State of Sikkim and for the units located in Himachal Pradesh, the deduction was available at the rate of 100% for five years and at the rate of 25% for next five years. Consequently, relying upon the law laid down by the Apex Court in M/s Stovekraft India s case (supra), the issue was decided against the assessee and in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is a company) of the profits and gains. Cumulative reading of these provisions brings out the following aspects: ( a) Those undertakings or enterprises fulfilling the conditions mentioned in sub-section (2) of Section 80-IC become entitled to deduction under this provision. ( b) This deduction is allowable from the initial Assessment Year. Initial Assessment Year is defined in Section 80- IB(14)(c) of the Act. ( c) The deduction is @ 100% of such profits and gains for first 5 Assessment Years and thereafter a deduction is permissible @ 25% (or 30% where the assessee is a company). ( d) Total period of deduction is 10 years, which means 100% deduction for first 5 years from the initial Assessment Year and 25% (or 30% where the assessee is a company) for the next 5 years. 20. When we keep in mind the aforesaid scheme and spirit behind this provision, such a situation cannot be countenanced where an period of 10 years. If that is allowed it will amount to doing violence to the provisions of sub-section (3) read with subsection (6) of Section 80-IC. A pragmatic and reasonable interpretation of Section 80-IC would be to hold that once the initial As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in the State of Himachal Pradesh and after availing the deduction @ 100% they want continuation of this rate of 100% for the next 5 years also under the same provision on the ground that they have made substantial expansion. As pointed out above, once the assessees had started claiming deduction under Section 80-IC and the initial Assessment Year has commenced within the aforesaid period of 10 years, there cannot be another initial Assessment Year thereby allowing 100% deduction for the next 5 years also when sub-section (3), in no uncertain terms, provides for deduction @ 25% only for the next 5 years. It may be asserted again that the assessees accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. 10. In view of the law laid down by the Apex Court in M/s Classic Binding Industries s case (supra), the substantial questions of law are answered against the assessee and in favour of the revenue. 7. In view of the above, the substantial questions of law in all the three appeals are decided against the assessee and in favour of the revenue. Consequently, all three appeals are allowed. The impugned orders passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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