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TMI Blog2019 (8) TMI 982X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80IC of the Act, ,to 25% of the eligible profits ,by the Assessing Officer, as against 100% claimed by the assessee on account of substantial expansion undertaken, after having claimed 100% deduction of eligible profits for the stipulated period of 5 years.It was pointed out that in appeal, the Ld. CIT(A) had allowed the assessee's claim on merits, while the legal ground raised before him, challenging the validity of the assessment framed under section 147 of the Act, was not adjudicated. 4. Aggrieved by the same, the assessee before us has challenged the non adjudication of the legal ground by the Ld. CIT(A) in its appeal in ITA No's.780,781 & 782/Chd/2018, raising the following identical grounds: 1. That the order passed by Ld. Commissioner of Income Tax (Appeals)-II, Chandigarh vide appeal No. 1/10448/16-17 dated 26.03.2018 is contrary to law and facts of the case. 2. That in the facts and circumstances of the case, the ld. Commissioner of Income Tax (Appeals) gravelly erred in not adjudicating Ground No.2 which is regarding initiation of proceedings under section 147 of the Income Tax Act, 1961 which were invalid, void abinitio and based on mere change of opinion. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 80IC, and deduction would be @ 100% for the first five years that there after @ 25%. (v) Whether on the facts and circumstances of the case and in law the CIT(A) has not ignored the explicit statutory provision of the Second proviso that clarifies that in the case of states of North-Eastern regions, the deduction would be @100% was allowable for 10 years whereas in the case of States of Himachal Pradesh, the deduction was allowable @ 100% for first five years and 25% for the next five years. (vi) Whether on the facts and circumstances of the case, the CIT(A) (by relying on the judgments in the case of M/s STovekraft India (supra), Nirmal Singh Prop. K.N. Paper & Packages (supra), in the case of M/s Eurolinks in ITA No. 1049/Chd/2017 ) has not erred in holding that those undertakings or enterprises which commenced production after 07.01.2013 can carry out multiple "substantial expansion" prior to 01.04.2012 and there will be initial year for each "substantial expansion" as long as provision of sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction @ 100% of the eligible profits for the initial 5 years beginning from Assessment Year 2005-06 to A.Y 2009-10.Thereafter, in Assessment Year 2010-11,it undertook substantial expansion and on that basis again claimed deduction @100% of its eligible profits for the impugned years before us, i.e A.Y. 2010-11,2011-12 & 2012-13 which were the 6th ,7th & 8th year of its operation . Keeping in view the above stated facts, proceedings in the impugned cases were initiated u/s 147 of the Act, after recording reasons and obtaining necessary approval. In response, the counsel of the assessee filed various objections w.r.t initiation of proceedings u/s 147. The objections raised by the assessee were duly disposed off by passing a speaking order by Assessing Officer( AO). The assessee also made various submissions to justify the claim of 100% deduction u/s 80IC on the basis of the "substantial expansion" carried out by it. The submissions of the assessee were considered but not found acceptable by the AO. Placing reliance on the decision of the Hon'ble ITAT, Chandigarh in the case of Hycron Electronics vs ITO (ITA No. 798/Chd/2012), the AO held that the assessee was not eligible for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p in mind these objectives for which Section 80-IC was enacted, an irresistible conclusion would be to grant 100% deduction of the profits and gains even from the year when there is substantial expansion in the existing unit. After all, this substantial expansion involves great deal of investment which has to be, at least 50% in the plant and machinery, of the book value thereof before taking depreciation in any year. With an expansion of such a nature not only there would be increase in production but generation of more employment as well, which would benefit the local populace. It is for this reason, carrying out substantial expansion by itself is treated as 'initial assessment year'. It would mean that even when an old unit completes substantial expansion, such a unit also becomes entitled to avail the benefit of Section 80-IC. If that is the purpose of the legislature, we see no reason as to why 100% deduction of the profits and gains be not allowed to even those units who had availed this deduction on setting up of a new unit and have now invested huge amount with substantial expansion of those units." 9. The Hon'ble Apex Court thereafter concluded that a newly set up und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." 10. In view of the above, it is now settled law that even a new undertaking, which has claimed deduction of its eligible profits @ 100% thereof for the first five years, is entitled to claim deduction @ 100% of its profits thereafter on account of substantial expansion undertaken by it. 11. Since in the present case, the fact that the assessee had undertaken substantial expansion in A.Y. 2010-11 ,is not disputed, the assessee, we hold, is entitled to claim deduction @ 100% of its eligible profits even if it has already cla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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