Income Tax Appellate Tribunal - Chandigarh
M/S Amit Engineers, Solan vs Dcit, Circle, Parwanoo on 23 May, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ-"ए", च डीगढ़
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I V I SI O N B E NC H , ' A ' , CH A ND I G AR H
ी एन. के. सैनी, उपा य एवं ी संजय गग , या यक सद य
BEFORE SHRI N.K. SAINI, VICE PRESIDENT &
SH SANJAY GARG, JUDICIAL MEMBER
आयकर अपील सं./ ITA No.7 9 5 / C H D / 2 0 1 8
नधा रण वष / Assessment Year : 2015-16
The DCIT, बनाम M/s Amit Engineering,
Circle, Parwanoo Village Juddikalan,
Baddi, Solan
थायी लेखा सं./PAN NO: AAFKA5620L
Appeal against the order of CIT(A), Shimla Dated 27.3.2018
आयकर अपील सं./ ITA No. 8 5 3 / C H D / 2 0 1 8
नधा रण वष / Assessment Year : 2015-16
M/s Amit Engineering, बनाम The DCIT,
Village Juddikalan, Circle, Parwanoo
Baddi, Solan
थायी लेखा सं./PAN NO: AAFKA5620L
Appeal against the order of CIT(A), Shimla Dated 27.3.2018
नधा &रती क( ओर से/Assessee by : Sh. B.M.Monga, Advocate &
Sh. Rohit Kaura, Advocate.
राज व क( ओर से/ Revenue by : Sh. Rajesh Kumar, Sr.DR
सन
ु वाई क( तार,ख/Date of Hearing : 25.04.2019
उदघोषणा क( तार,ख/Date of Pronouncement : 23.05.2019
आदे श/Order
Per Sanjay Garg, Judicial Member:
The captioned cross appeals by the Assessee and Revenue for assessment year 2015-16 are arising out of the order dated 27.3.2018 of ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 2 the Ld. Commissioner of Income Tax (Appeals), Shimla [hereinafter referred to as' CIT(A)'].
2. The Revenue in its appeal has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition of Rs.1,97,50,591/- made by A.O. by restricting the claim of the assesses to 25% as against the 100% claim made in the 10th year, ignoring the fact that units which commenced production after 07-01-2003 can't carry out multiple "substantial expansion" as per provisions of section 80-
lC of the income Tax Act and as explained in CBDT Circular No. 7/2003.
2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in holding that there can be more than one "initial assessment year" for availing the deduction under section 80-IC of the Income Tax Act. In other words, tine assessee can first claim deduction from the initial assessment year, being the year of setting up of the industrial undertaking and, thereafter, once again claim the deduction from another initial assessment year, being the assessment year in which the assessee carries out substantial expansion of its undertaking.
3. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.6,22,693/- disallowance of deduction u/s 80-IC on discount on purchase.
4. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.2,25,850/- on account of disallowance of deduction u/s 80-IC on account rebate and discount.
5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs.61,294/- made on account ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 3 of disallowance of Interest on service tax claimed as business expenditure.
6. It is prayed that the order of the Ld. CIT (A) be set-aside and that of the A.O. restored.
7. The appellant craves leave to add any other ground of appeal which may arise at the time of hearing Lecture.
Whereas the assessee in its appeal has raised the following grounds of appeal:-
1. That the Order of Learned CIT(A), is against the law and facts of the case.
2. That the Learned CIT(A), is not justified in upholding the addition of Rs.1,91,826/- on account of interest on car loan.
3. That the Learned CIT(A), is not justified in upholding the addition of Rs. 25,000/- on account of 'Bad debts written off' and of Rs. 2,55,512/- on account of ' loss from advance'.
4. That the learned CIT(A), has erred in upholding the addition made by the AO on account of 'interest on TDS' amounting to Rs. 29,560/- and Rs. 32,400/- on account of 'late fee expenses'.
5. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off.
3. Ground Nos. 1&2 of Revenue's appeal (ITA No. 795/Chd/2018):
The main issue raised vide these grounds is as to whether the assessee is entitled to deduction at the rate of 100% of the eligible profits u/s 80IC of the Income-tax Act, 1961 (in short 'the Act') for another five years in the case of substantial expansion of unit. In other words, ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 4 whether the year in which the substantial expansion is carried out is to be taken as initial assessment year for the purpose of grant of deduction u/s 80IC of the Act.
4. D uring the co urs e of hearin g be fo re us, the Ld. C ouns el fo r th e ass ess ee, at the outs et its elf, po inted out that the H on'b le A pex Cou rt h as decided th is iss ue in favour o f th e ass ess ee in b unch of cas es w ith the lead cas e bein g P r. CIT, S himla Vs. M/s A arh am S oftronics in Civil N o. 1784 of 20 19 dated 20 .2.20 19.
5. Ld. DR fairly con ceded th at the is sue w as s ettled in fav our o f the ass ess ee by the abo ve decis ion of the Apex co urt.
6. We ha ve gon e thr ough the o rder o f th e H on'ble A pex Court in the case of M /s Aarha m S oftron ics ( su pra) and fin d th at the Ho n'ble A pex Co urt dealt w ith the entire s cheme o f th e Act relating to the r elevant s ection i .e. s ection 80I C of the A ct, and arr ived at the conclus ion that t he definitio n o f the i nitial as s ess ment y ear contained in claus e (v) o f s ub- s ection(8) o f s ection 80I C o f the A ct can le ad to a s itu ation w here th ere can be mo re than one initial ass es smen t year w ithin the s aid p erio d o f ten ye ar s. The relevant fin din g o f the H on'ble Apex Cour t at par a 19 of its ord er is as u nder :
"19. Having examined the scheme in the aforesaid manner, we arrive at the conclusion that the definition of 'initial assessment year' contained in clause (v) of sub-section (8) of Section 80-IC ITA Nos. 795 & 853-c-18-
Amit Engineering, Baddi 5 can lead to a situation where there can be more than one "initial assessment year" within the said period of 10 years. As per sub- section (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 States as most of these States fall in hilly areas. Therefore, cost of production and transportation may also go up.
20. When we keep 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."
7. The H on'ble A pex Co urt thereaft er conclu ded tha t a new ly set u p und ertak ing or enter prise in the S tate o f H im achal P radesh w ould b e en titled to ded uction @ 10 0% o f the A ct its profits for the firs t five ye ar s an d even th ereafter in the cas e of su bs tantial expans io n is car ried out by it, then th e as s ess ment year relevan t to the previo us y ear in w hich subs tantial expans io n is undertaken b eco ming the ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 6 initial as s ess ment year. That in an y cas e, th e p eriod of dedu ction u/s 8 0IC o f the Act w ould not exceed 10 year s. The con clus ion of the H on'ble Apex Cour t at par a 24 of its ord er is as u nder :
"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 Section 80-IB, which does not apply in these cases. The definitions of 'initial assessment year' in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of 'initial assessment year' under Section 80-IC has made all the difference.
Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law.
(b) An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of HimachalPradesh of the nature mentioned in clause (ii) of sub- section (2) of Section 80-IC, would be entitled to deduction at the rate of 100% of the profits and gains for five assessment years commencing with the 'initial assessment year'. For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of the profits and gains.
(c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become 'initial assessment year', and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains.
(d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion 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 ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 7 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."
8. In view of the abov e, it is n ow settled law that even a new u nder takin g, wh ich has claimed ded u ction o f its eligible pro fits @ 1 00% thereo f for t he firs t five year s , is entitled to clai m d eduction @ 1 00% o f its pr ofi ts ther eafter on accoun t o f s ub stantial expan sion u nder taken by it. Ho wever, s uch dedu ction w ould be fo r a total per iod o f 10 years as provided in s ub- section (6) to s ection 80IC of the A ct.
9. S ince in the pre sent cas e the fac t that the as sessee had u nder taken su bs tantial expan sion in the i mpu gned year is n ot d is puted , the assess ee, w e h old , is entitled to clai m deduction @ 1 00% o f its eligib le pro fits even i f it has already claimed d educ tion o f its profits at the s aid rate for firs t five years , in view of the law laid dow n by the A pex court in this regard i n its d ecis ion in the cas e o f M/s A arham So ftr onics (s upra).
We, there fore, do not fin d any mer it in gro und Nos. 1 & 2 of the Revenue' s appeal and the s ame are, therefor e, dis mis s ed.
10. Ground Nos. 3 to 7 of Revenue's appeal ITA No. 795/Chd/2018 and Ground Nos 1 to 5 of Assessee's appeal ITA No. 853/Chd/2018 :
ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 8 A perusal of the above grounds of appeal reveal that the Revenue has agitated the action of the CIT(A) in deleting the certain additions made by the Assessing officer into the income of the assessee whereas the assessee in its appeal has contested the confirmation of certain disallowances.
11. The Ld. Counsel for the assessee has submitted that the aforesaid various disallowance made by the Assessing officer would go on to enhance the income of the assessee, however, on such enhanced income, the assessee is entitled to deduction @ 100% in the light of the decision of the Hon'ble Supreme Court in 'Pr. CIT Vs. M/s Aarham Softronics' in ITA No. 1784 of 2019 vide order dated 20.02.2019. He, therefore, has submitted that if the issue raised ground No.1 is decided in favour of the assessee, then, the other grounds of appeal will become infructuous as the disallowance made by the Assessing officer on the expenditure including the specific disallowance under the provisions of sections 32, 40(a)(ia) 43B etc., would result in enhancement of the profits of the eligible business in the light of the circular of the CBDT bearing No. 37/2016 dated 2.11.2016 the assessee would be entitled to deduction@ 100% on such enhanced income. He, therefore, has submitted that the ground Nos. 3 to 7 of the Revenue's appeal be dismissed having become infructuous in the light of the CBDT Circular ITA Nos. 795 & 853-c-18- Amit Engineering, Baddi 9 No. 37/2016 dated 2.11.2016. Similarly, the grounds taken by the assessee in its appeal have also lost their relevancy.
12. In view of the above submissions, ground Nos. 3 to 7 of the Revenue's appeal as well as grounds taken by the assessee in its appeal, since having become infructuous are accordingly dismissed. The Assessing officer is directed to compute the income of the assessee in view of the above findings given on issue No.1 and also in the light of the Circular of CBDT No. 37/2016.
Subject to the observations made above, the appeal of the Revenue as well as of the assessee is dismissed.
Order pronounced in the Open Court on 23/05/2019.
Sd/- Sd/- (एन. के. सैनी / N.K. SAINI) (संजय गग! / SANJAY GARG) उपा#य$/ Vice President या%यक सद&य /Judicial Member 'दनांक/Date: 23. 05.2019 "आर.के."
आदे श क( 0 त1ल2प अ3े2षत/ Copy of the order forwarded to :
1. अपीलाथ4/ The Appellant
2. 05यथ4/ The Respondent
3. आयकर आयु6त/ CIT
4. आयकर आयु6त (अपील)/ The CIT(A)
5. 2वभागीय 0 त न8ध, आयकर अपील,य आ8धकरण, च:डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File