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TMI Blog2019 (9) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... lyethylene Water Storage Tank and other plastic articles such as, Dustbin, Traffic Signal Point and injunction moulded Item and moulded filter etc. We note that after implementation of North-East Industries Investment Promotion Policy (NEIIP), 2007, the Assessee undergone modernization of its unit M/s. Charu Engineering Industries, in the year 2008, w.e.f 02.05.2008 by additional capital outlay in plant machinery amounting to 29,85,611/- in comparison to the previous capital outlay in plant machinery (i.e prior to the expansion/ modernization) 22,51,982/-, an increase in capital outlay by 133 % of the initial capital outlay in the financial year 2008-09. Therefore, the Assessee is eligible for income tax exemption from the Financial year 2008-09 and onwards due to modernization in its plant machinery by infusing additional capital investment by more than 25 % of the initial investment in plant machinery as envisaged in clause (iii) of sub-sec. 7 of Sec. 80-IE of the Income Tax Act, 1961, effective from 01.04.2008.We note that the purpose of section 80IE was to establish the business of the nature specified in the said provision in the specified States. This provision was, thus, aim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act, 1961 which is not applicable in this present case. It is submitted that provisions of sec. 801E(5) is not applicable for those units undertaken substantial expansion and modernization. That in case of Charu Innovation Department and Industries, the AO disallowed the benefit allowed u/s 801E due to non- availability of eligibility documents for inspection by the inspector of Income Tax, Guwahati. The Ld. Commissioner of Income Tax (Appeal) failed to appreciate the contentions of the appellant and disallowed the substantial benefit allowed under law on the grounds of procedural lapses by the Assessee's end. The Ld. CIT (A) is legally not justified rejecting the substantial benefit allowed under the law. The impugned Order-in-Appeal is liable to be set aside in the ends of justice. (II) For that the Id. Commissioner of Income Tax (Appeals)-2, Guwahati, failed to appreciate the contentions of the petitioner on wrong interpretation of the provisions of Sec. 801E of the I T Act, 1961.The stand point of the Ld. DCIT, Circle -3, Guwahati, is not legally justified disallowing 100% of the profits and gains derived out of the manufacture activities during the assessment year 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... benefits under the NEIIP, 2007 if the said undertaking availed benefit under Sec. 801E only and not any other previous policies as declared by the Central Govt. The interpretation of sub-sec. 5 of Sec. 801E cannot be interpreted isolate without considering the NEIIP, 2007. The interpretation of the Id. Commissioner Appeals is not sustainable in law and the demand raised for the A.Y 2012-13 is liable to be set aside in the ends of justice. (VI) For that the impugned Order-in-Appeal has been passed by the Appellate authority without giving the appellant an opportunity of personal hearing and order is passed in his absence and thereby causing violation of principles of natural justice. The impugned Order-in-Appeal is not sustainable on this ground and liable to be set aside in the ends of justice. (VII). For that the Ld. Commissioner Appeals fail to consider of brief facts that the Assessing Officer as allow the exemption for the Assessment Year 2015-16 on the basic of the document available on record and allow the exemption on section 801E of the Income Tax Act, 1961 being on eligible in the Industry under the Industrial Policy 2007. However the Ld. Assessing Officer has not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80-IE of the Act. In doing so, assessee has failed to understand a very important condition given in sub section (5) of section80-IE of the Act. The Sub-section (5) of section 80-IE lays down the condition that no deduction shall be allowed to any undertaking under section 80-IE, where the total period of deduction inclusive of the period of deduction under section 80-IE, or under section 80-IC or section 80-IB or section 10-C, as the case may be, exceeds ten assessment years. In the light of the above provisions, the AO noted that in the case of M/s Charu Engineering Industries, a proprietary concern of the assessee undertaking has already claimed deduction u/s 80-IB of the Act for the earlier assessment years for full 10 (Ten) assessment years. M/s Charu Engineering Industries had already exhausted the maximum limit of assessment years in which deduction u/s 80IE/80IC/801B/10C, as the case may be, can be claimed and allowed, if eligible. Therefore, M/s Charu Engineering Industries, having exhausted its claim of tax exemption/deduction, is no longer eligible for claim of deduction u/s 80-IE of the Income Tax Act, 1961 for the assessment year 2012-13, under consideration. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y AO. As per relevant report, the unit has a pucca structure but the concerned persons present on the site were unable to tell ownership status of land & building and extent of area of the unit/premises. The Inspector's Report mentions 3 (Three) principal machines, apart from the transformer. The production process was also explained by the concerned person present at the site. However, copy of DIC Certificate, Factory License, Land Documents etc were not available at the production site. These important documents were also not furnished by the assessee subsequently. The assessee has failed to prove with necessary evidences the set-up of a new unit by the name of M/s Charu Innovation & industries. Such documents or evidences like copy of DIC Certificate, Factory License, Land Documents, ASEB permission, etc has not been produced. The assessee and its group has other proprietary concerns and many sister concerns. In the absence of any concrete evidence, it is not possible to establish as to whether the factory unit shown to the Inspector is of M/s Charu Innovation & Industries or common factory area or of any other group concerns. The ássessee has failed to prove with ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on provision / notification, hence the said judgment should be followed and deduction claimed by the assessee on account of 'substantial expansion' should be denied. 10. We have heard both the parties and perused the material available on record. The solitary issue before us to examine the allowability of deduction with respect to M/s. Charu Engineering Industries, ₹ 1,25,60,390/- and amounting to ₹ 87,60,893/- for its proprietary concern, namely, M/s Charu Innovation & Industries. We note that the moot question involved qua the claim of the deduction under section 801E of the Act by the assessee with respect to the above undertaking is as to whether an assessee who had earlier claimed deduction under sections 801B and also under section 10C of the Act can still claim the deduction under section 80IE beyond the 10 years?The undisputed fact is that the assessee is proprietor of an industrial undertaking namely, M/s Charu engineering Industries and had commenced its industrial production w.e.f. 26/12/1994. The assessee accordingly claimed deduction under section 10C and 801B in the earlier assessment years. The said industrial undertaking of the assessee had further cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was the proprietor of the above undertaking, which was newly set up during the above assessment year w.e.f. 23/11/2011 and had new plant and machinery, new building, new manpower, new electricity with new concept. 11. First of all let us examine the old industrial policy issued by the Government of India, dated 24.12.1997, which is reproduced below for ready reference: 12. Let us also examine the new industrial policy issued by the Government of India, dated 01.04.2007, which is reproduced below for ready reference: 13. We note that assessee under consideration falls in the ambit of new industrial police of Government of India dated 01.04.2007, mentioned above. We note that new industrial policy is applicable to all the new units as well as existing units which go in for substantial expansion and commence commercial production within 10 years period from the date of notification of NEIIPP,2007. That is, the incentives will be available to all industrial units, new as well as existing units on their 'substantial expansion' located anywhere in the North Eastern Region. The term 'substantial expansion, has also been defined by the new Industrial Policy as follows: (iv) Substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndustries Investment Promotion Policy (NEIIP), 2007, the Assessee undergone modernization of its unit M/s. Charu Engineering Industries, in the year 2008, w.e.f 02.05.2008 by additional capital outlay in plant & machinery amounting to ₹ 29,85,611/- in comparison to the previous capital outlay in plant & machinery (i.e prior to the expansion/ modernization) ₹ 22,51,982/-, an increase in capital outlay by 133 % of the initial capital outlay in the financial year 2008-09. Therefore, the Assessee is eligible for income tax exemption from the Financial year 2008-09 and onwards due to modernization in its plant & machinery by infusing additional capital investment by more than 25 % of the initial investment in plant & machinery as envisaged in clause (iii) of sub-sec. 7 of Sec. 80-IE of the Income Tax Act, 1961, effective from 01.04.2008.We note that the purpose of section 80IE 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.Hence, we note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as on the first day of the previous year in which the substantial expansion is undertaken. There can thus be another "initial assessment year" on the fulfilment of the condition mentioned in the definition, namely, completion of substantial expansion of the existing unit. This new event entitles that unit to start getting deduction at 100 per cent. of the profits and gains. At the same time, a new period of ten years does not start. This is because the total period for which deduction can be allowed is capped at ten years, inasmuch as section 80-IC(6) in no uncertain terms stipulates that deduction shall not be allowed for a period exceeding ten assessment years. In fact, this period of ten years relates not only in respect of deduction under section 80-IC but under the second proviso to section 80-IB(4) as well. This would mean that the total deduction under section 80-IB as well as section 80-IC is for a period of ten years. The cap under section 80-IC(6) is on the ten assessment years. It is not on quantum. The purpose for which section 80-IC was enacted was to encourage undertakings or enterprises to establish and set up such units in specified States to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Haryana High Court in ADMAC FORMULATIONS v. CIT [2018] 409 ITR 661 (P&H) reversed. In Classic Binding Industries' case [2018] 407 ITR 429 (SC) the court, on the basis of section 80-IB(14)(c) of the Act, took the view that once the "initial assessment year" starts on the assessee fulfilling the conditions laid down in section 80-IC(2) , there cannot be another "initial assessment year" for the purposes of section 80-IC within this period of 10 years. Section 80-IB is materially different from section 80- IC of the Act. Therefore, the definition of "initial assessment year" mentioned in section 80-IB could not have been the basis of finding out the definition of "initial assessment year". The observation in CLASSIC BINDING INDUSTRIES [2018] 407 ITR 429 (SC) that if deduction is allowed at 100 per cent. for the entire period of ten years, it would be doing violence to the language of sub-section (6) of section 80-IC was without noticing the definition of "initial assessment year" contained in the very same provision. CIT v. CLASSIC BINDING INDUSTRIES [2018] 407 ITR 429 (SC) overruled." Considering the facts narrated above a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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