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TMI Blog2019 (8) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15 whereas the Revenue seeks to adopt assessment year 2002-03. We go by consistency principle as per hon ble apex court s landmark decision in Union of India vs. Azadi Bachao Andolan Anr. [ 2003 (10) TMI 5 - SUPREME COURT] and direct the Assessing Officer to treat the assessee as entitled for sec. 80IE deduction in issue. We make it clear before parting that the Revenue s reliance on sec. 80IE(5) of the Act in seeking to restore the assessee s deduction claim carries no substance since the latter s relief nowhere exceeds ten assessment years time span since initial assessment year taken is 2008-09 only. The Revenue s arguments to this effect are declined. As during the course of hearing is that CIT(A) has directed the Assessing Officer to treat assessee as not entitled for the impugned deduction in corresponding subsequent assessment years as well.We feel that no further adjudication is required on this issue once we have held the assessee as entitled for sec.80IE in the impugned assessment year. The assessee s corresponding ground is allowed in foregoing terms therefore. Treatment to interest income from bank fixed deposits - HELD THAT:- We find that this very issue regardin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred in not appreciating the fact that the Assessing Officers, his predecessor CIT(A)'s in the appellant's own case, had given a categorical finding that the initial assessment year for claiming the deduction under section 80-IE in respect of the Asbestos Unit, should be the Assessment Year 2008-09 and accordingly, 5. Without prejudice to the validity and the legality of the order as challenged above, on the facts and on the circumstances of the case, the Learned CIT(A) had grossly erred and have acted in excess or without jurisdiction, conferred upon him by the statute, in not following the specific directions of the Hon'ble Income Tax Appellate Tribunal, Guwahati, Bench, decided in the appellant's own case, for the immediately two preceding assessment years - 2011-12 and 2012-13, that the initial assessment year for claiming the deduction under section 80-IE in respect of the Asbestos Unit, should be the Assessment Year 2008-09 6. Without prejudice to the validity and the legality of the order as challenged a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tantial expansion" for the previous year ended 31st March 2014, relevant to the assessment year 2014-15, which is under appeal, as under the provisions of section 80lE, there is no restriction, whatsoever, that the benefit of exemption will be allowed only for one "substantial expansion" or only once, ignoring further "substantial expansion" within the prescribed period as envisaged under section 801 E of the Act. 9. That on the facts and on the circumstances of the case, the Learned ClT(A) had grossly erred and acted beyond or in excess of jurisdiction conferred upon him by the statute in not appreciating and holding the fact that on exactly similar facts and circumstances of the case the Hon'ble Income Tax Appellate Tribunal, Guwahati Bench had for the assessment years 2011-12 had allowed such claim of the appellant and accordingly such action of the CIT(A) is bad in law, illegal, had acted without or in excess of jurisdiction conferred upon him by the statute, on a misconception of law, without proper application of mind to the facts and to the circumstances of the case, showing total violation of judicial discipline and disowning / disregarding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s justified in treating the Asst Year 2011-12 as initial assessment year for claim of deduction u/s 80IE of the Act, in the facts and circumstances of the case. 3. The brief facts of this issue is that the assessee company is engaged in the business of manufacturing of Asbestos Cement Corrugated and Plain Sheets and moulds and galvanized, Plain & Galvanised Corrugated Sheets and accessories. The assessee company has two units namely Asbestos Unit and Steel Unit. The date of commencement of operation was 1.1.1978 for asbestos unit and date of commencement for steel unit was 25.3.1995. On examination of the old assessment records i.e AY 2005-06, the ld AO found that there was substantial expansion of the Asbestos Unit during the FY 2001-02 and the Asbestos Unit became eligible for claiming deduction u/s 80IC of the Act since Asst Year 2002-03. However, in the initial years, the assessee company suffered loss and the assessee company was claiming deduction u/s 80IC of the Act since Asst Year 2004-05. The ld AO observed that 'Initial Assessment Year' is defined in section 80IC(8)(v) as under:- (8) For the purposes of this section,- (v) "Initial assessment year" means th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld CITA observed that the main assertions of the ld AO in disallowing the claim of deduction are as under:- a) The initial year for claiming such deduction u/s 80IE would have been the year when the 'substantial expansion' first took place and not assessment year when such claim was first made. b) The case of the assessee has been hit by the provisions of section 80IE(5) of the Act. 4.1. It was stated by the assessee before the ld CITA that the ld AO while framing the assessment for the Asst Year 2011-12 , which incidentally was the first year for claiming the deduction u/s 80IE of the Act, had allowed the deduction u/s 80IE of the Act for both the units - i. e Steel as well as Asbestos Unit, considering the said assessment year to be 'Initial Assessment Year'. The relevant observations of the ld AO in the scrutiny assessment order for Asst Year 2011-12 u/s 143(3) dated 20.2.2014 are reproduced below for the sake of convenience :- 4. The assessee company is engaged in the business of manufacturing of steel and asbestos. Date of commencement of operation was 1.1.1978 for Asbestos unit and date of commencement for steel unit was 25.3.1995. The assessee company was claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld AO had himself while passing the assessment order for assessment year 2011-12 had considered the assessment year 2011-12 to be the 'Initial assessment year' as envisaged in sub-section (7) to section 80IE of the Act. Accordingly by applying the principles laid down by the Hon'ble Supreme Court in the case of Radhasoami Satsang vs CIT reported in 193 ITR 321 (SC) wherein it was held that although res judicata is not applicable to IT proceedings, in the absence of any material change, a different view than that taken in earlier years, could not be taken. The ld CIT(A) accordingly directed the ld AO to allow deduction u/s 80IE of the Act for both Asbestos as well as Steel Unit considering the same to be the 2nd and 3rd consecutive assessment year commencing from the 'Initial assessment year' of AY 2011-12 and allowed the grounds of the assessee. Aggrieved, the revenue is in appeal before us on the following common ground:- a) For that the Ld. CIT(A) was not justified in law as well as in facts in allowing the assessment year 2011-12 as initial assessment for claim of deduction u/s 80IE of the Income Tax Act, 1961 in respect of the asbestos unit of assessee undertaking without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deciding the 'Initial Assessment Year' for the entire Asbestos Unit. We find lot of force in the argument of the ld AR that substantial expansion was also carried out earlier in Asbestos Unit for which deduction was first allowed to the assessee by the ld AO in Asst Year 2008- 09. Hence Asst Year 2008-09 shall become the 'Initial Assessment Year'. Even though substantial expansion was further made in Asst Year 2011-12 as stated supra in Asbestos Unit, the total deduction u/s 80IE of the Act could be given only for 10 consecutive assessment years commencing from 'Initial Assessment Year' in terms of specific restriction provided in section 80IE(5) of the Act. For the sake of convenience, the relevant provisions of section 80IE(5) of the Act are reproduced below:- (5) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking under this section, where the total period of deduction inclusive of the period of deduction under this section, or under section 80-IC or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. 5.1. We also deem it necessary to reproduce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e than 25% as compared to the earlier year. For example, if an assessee had commenced the manufacturing of eligible articles say in Asst Year 2009-10 , deduction u/s 80IE of the Act is also allowed to him in that year treating Asst Year 2009-10 as the 'Initial Assessment Year'. Thereafter in Asst Year 2013-14, the undertaking carries out substantial expansion, then more liberal interpretation of the meaning of 'Initial Assessment Year' in section 80IE of the Act would confer fresh lease of 10 years for the undertaking for claiming deduction u/s 80IE of the Act in view of substantial expansion carried out in Asst Year 2013-14 treating Asst Year 2013-14 as the 'Initial Assessment Year' for the expanded portion alone. 5.1.2. The provisions also make it clear that the deduction shall be allowed to the eligible undertaking by treating the said undertaking as the only source and as if that is the only undertaking of the assessee. But , in our considered opinion, it would result in accounting confusion , in as much as, it would be very difficult to ascertain the profits derived by the undertaking out of expanded activities alone so as to warrant deduction for the same commencing from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 28.2.2011. It is not in dispute that the assessee has already been allowed deduction u/s 80IE of the Act from Asst Year 2008-09 onwards treating the same as 'Initial Assessment Year' for its Asbestos Unit. The substantial expansion carried out in Asbestos Unit in Asst Year 2011-12 makes the assessee eligible for fresh claim of 10 years treating AY 2011-12 as 'Initial Assessment Year', but in the absence of breakup of profits of the original unit and expanded unit separately, the same would not be eligible for the assessee herein. It is also not the claim of the assessee either before the lower authorities or before us. 5.3. Hence by applying the provisions of section 80IE(5) of the Act and taking into account the overlapping years, we hold that for Asbestos Unit, the 'Initial Assessment Year' would be Asst Year 2008-09 and would be eligible for deduction u/s 80IE of the Act 10 consecutive assessment years thereon. Accordingly, the Asst Years 2012- 13 and 2013-14 would be the 5th and 6th year of deduction u/s 80IE of the Act for the Asbestos Unit. It is not in dispute that the assessee had complied with all the provisions of section 80IC / 80IE of the Act in order to make itself e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made". In the above sub-section, which prescribes the manner of determining the quantum of deduction, a reference has been made to the term 'initial assessment year'. It has been represented that some Assessing Officers are interpreting the term 'initial assessment year' as the year in which the eligible business/ manufacturing activity had commenced and are considering such first year of commencement/operation etc. itself as the first year for granting deduction, ignoring the clear mandate provided under sub-section (2) which allows a choice to the assessee for deciding the year from which it desires to claim deduction out of the applicable slab of fifteen (or twenty) years. The matter has been examined by the Board. It is abundantly clear from subsection (2) that an assessee who is eligible to claim deduction u/s 80-IA has the option to choose the initial/ first year from which it may desire the claim of deduction for ten consecutive years, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Sengupta at this stage seeks to crave out an exception in facts of the instant case. He submits that the assessee's asbestors unit started its business operation on 01.01.1978 followed by first, second and third expansions in assessment year 2002-03, 2008-09 and 2011-12; respectively. He then quotes hon'ble apex court's decision in PCIT vs. Aarham Softronics (2019) 102 taxmann.com 343 (SC) settling the law as under:- "3.Having examined the matter in the aforesaid perspective, judgment in the case of Mahabir Industries v. Principal Commissioner of Income Tax2 would, in fact, help the assessee. The fine distinction pointed out in Classic Binding Industries elopes thereby. To recapitulate, in Mahabir Industries, it was held that if an assessee get 100% 2 Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018 exemption under Section 80-IB of the Act for five years and thereafter carries out the substantial expansion because of which said assessee becomes entitled to exemption under the new provision i.e. Section 80-IC of the Act, the assessee would be entitled to deduction @ 100% even after five years. This ruling was predicated on the ground that there can be two init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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." 5. Mr. Bhardwaj as well as Mr. Sengupta have taken a lot of pains to refer to sec. 80IE(5) of the Act in the nature of a non obstante clause that notwithstanding the corresponding deduction provision, an assessee is not entitled for the impugned relief beyond ten years and therefore, the lower authorities have rightly concluded that initial assessment year in facts of the instant case has to be taken as assessment year 2002-03. Their further argument is that the impugned assessment year 2014-15; if takes from assessment year 2002-03, falls very well beyond ten years deduction period. They further inform us that Revenue has filed its tax appeal before hon'ble jurisdictional high court against the tribunal's earlier decision taking an erroneous view in assessee's favour. 6. We have given our thoughtful consideration to rival pleadings as well as judicial precedent(s) quoted hereinabove. We make it clear that the assessee's very unit's production of asbesto ..... 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