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TMI Blog2019 (5) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 80IC of the Act can lead to a situation where there can be more than one initial assessment year within the said period of ten years. Hon'ble Apex Court thereafter concluded that a newly set up undertaking or enterprise in the State of Himachal Pradesh would be entitled to deduction @ 100% of the Act its profits for the first five years and even thereafter in the case of substantial expansion is carried out by it, then the assessment year relevant to the previous year in which substantial expansion is undertaken becoming the initial assessment year. That in any case, the period of deduction u/s 80IC of the Act would not exceed 10 years. It is now settled law that even a new undertaking, which has claimed deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty/operation on 7.1.2005 and was eligible to claim deduction u/s 80IC of the Income Tax Act, 1961 (in short the Act ) w.e.f assessment year 2005-06. The assessee had already claimed deduction u/s 80IC of the Act to the extent of 100% of the eligible profit for five years period. It was noticed by the A.O. that the assessee firm had again claimed 100% deduction against eligible profits in the impugned assessment year, i.e. A.Y 2011-12, which was the 7th year by claiming to have carried out substantial expansion during the year under consideration. The A.O. for the detailed reasons mentioned in the assessment order and following the decision of the ITAT Chandigarh Bench in the case of M/s Hycron Electronics Vs. ITO in ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrive at the conclusion that the definition of initial assessment year contained in clause (v) of sub-section (8) of Section 80-IC can lead to a situation where there can be more than one initial assessment year within the said period of 10 years. As per subsection (6), cap is on the 10 assessment years. It is not on quantum. We have also to keep in mind the purpose for which Section 80-IC was enacted. The purpose was to establish the business of the nature specified in the said provision in the specified States. This provision was, thus, aimed at encouraging the undertakings or enterprises to establish and set up such units in the aforesaid States to make them industrially advanced States as well. Undoubtedly, these are difficult State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears and even thereafter in the case of substantial expansion is carried out by it, then the assessment year relevant to the previous year in which substantial expansion is undertaken becoming the initial assessment year. That in any case, the period of deduction u/s 80IC of the Act would not exceed 10 years. The conclusion of the Hon'ble Apex Court at para 24 of its order is as under: 24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic BindingIndustries case omitted to take note of the definition initial assessment year contained in Section 80-IC itself and instead based its conclusion on the definition contained in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletion of first five years, the assessee would be entitled to 100% deduction again for the next fiveyears. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years. 25. In view of the aforesaid, we affirm the judgment of the High Court on this issue and dismiss all these appeals of the Revenue. Likewise, appeals filed by the assessees are hereby allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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