Income Tax Appellate Tribunal - Chandigarh
Acit, C-2(1), Chandigarh vs M/S Micro Turners, Chandigarh on 8 March, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ "बी" , च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL,
CHANDIGARH BENCH 'B' , CHANDIGARH
ी संजय गग , याय क सद य एवं ीमती अ नपण
ू ा ग&ु ता, लेखा सद य
BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER
AND SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.1166/Chd/2018
नधा रण वष / Assessment Year : 2014-15
The A.C.I.T., बनाम M/s Micro Turners,
Circle-2(1), SCO 80-81, Sector 17-C,
Chandigarh. Chandigarh.
थायी लेखा सं./PAN NO. AABFM5301M
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Manjit Singh, Sr.DR
राज व क ओर से/ Revenue by : Shri T.N. Singla, CA
सन
ु वाई क तार$ख/Date of Hearing : 06.03.2019
उदघोषणा क तार$ख/Date of Pronouncement: 08.03.2019
आदे श/ORDER
Per Anna pur na Gupta, Account ant Member:
The present ap peal has been fi l ed by the Re venue agai nst the order of the Commi ssi oner of I ncome Ta x ( Appeal s) -1, Chandi garh ( i n short 'CI T( A) ' dated 22.6.2018 passed u/s 250( 6) of the I ncome Ta x At, 1961 ( hereinafter referred to as 'Act') .
2. The sol e i ssue in the present appeal rel ates to al l o wance of cl ai m of deducti on u /s 80I C of the Act @ 100% of profi ts from the el i gi bl e busi ness of the assessee on account of substanti al e xpansi on undertaken, after avai l i ng 100% deducti on of the profi ts for the fi rst fi ve years. 2 ITA No.1166/Chd/2018
A.Y.2014-15
3. Bri ef facts rel ating to the case are that the assessee i s i n the busi ness of manufacturi ng automobi l e components whi ch i ncl udes shafts, shi fti ng rods, rocker arm assembl i es, con rod assembl i es and vari ous transmi ssi on assembli es. The assessee ha d four worki ng u ni ts i ) at Nar yal , Par wanoo; i i ) tractor parts di vi si on ( TPD) at P ar wanoo; i i i ) connecti ng rod di vi si on ( CRD) at Par wanoo and; i v) uni t at Manesar, Gurgaon. Duri ng the i mpugned as sessment year the assessee had cl ai med deducti on u/s 80I C of the Act @ 25% of the profi ts of Nar yal uni t, @ 100% of profi ts of TPD uni t and @ 100% of profi ts of CRD uni t. The A.O. restri cted the assessee's cl ai m of deducti on of 100% of the profi ts of the TDP uni t to 25 % thereof on noti ng that the assessee had al ready cl ai med 100% deducti on of the profi ts for a peri od of fi ve years and t he i mpugned as sessment year w as the 8 t h year and that the assessee had cl ai med 100% deduction on account of substanti al e xpansi on undertaken i n the fi nanci al year 2011-12. The A.O. noted that the I TAT C handi garh Bench i n the case of H ycron El ectroni cs Vs. I TO i n I TA No.798/Chd/2012 had hel d that the benefi t of substanti al e xpansi on was avai l abl e onl y to uni ts whi ch were in e xi stence at the ti me of announcement of scheme and not to ne w uni ts whi ch came i nto the e x i stence thereafter and that there was no pr ovi si on of l a w a l l o wi ng for mul ti pl e i ni ti al assessment years. Accordi ngl y the A.O. restri cted the deducti on cl ai med by the assessee on i ts TDP uni t to 25% of the el i gi bl e uni ts.
3 ITA No.1166/Chd/2018
A.Y.2014-15
4. The matter was carri ed i n appeal before the Ld.C I T( A) . Duri ng the cour se of heari ng be fore hi m i t was brought to hi s noti ce that the Hon'bl e Jurisdi cti onal Hi gh Court had deci ded the i ssue i n favour of the assessee i n the case of Stovecraft I ndi a Vs. CI T, reported i n 160 D TR 378, hol di ng that the benefi t of deducti on u/s 80I C @ 100% of the el i gi bl e profi ts was al l o wabl e even i n t he case a ne w undertaki ng goi ng for substanti al e xpansi on after fi ve years of commencement of producti on. The Ld.CI T( A) fol l o wi ng the aforesai d deci si on of the Hon'bl e Juri sdi cti onal High Court al l o wed the assessee's appeal .
5. Aggri eved by the same, the Revenue has come up in appeal before us, rai si ng fol l o wi ng grounds of appeal :
1. On the facts and in the circumstances of the case, the Ld.CIT(A)has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. On the facts and in the circumstances of the case, the Ld.ClT(A)has erred in deleting the addition of Rs.1,55,47,172 /- (made on account of restricting the claim of deduction u/s 80IC of Income Tax Act, 1961 @ 25%) without discussing the merits of the issue involved and by relying on the decision of Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India.
3. The Ld.CIT(A) has erred in holding that those undertakings or enterprises which commenced production after 07/01/2003 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 section 80IC(8)(ix) are met without appreciating that as per provision of section 80IC of the Income Tax Act and as explained in CBDT Circular No. 7/2003, such enterprise or undertaking cannot carry out any "substantial expansion"
only once.
4. Also, the Hon'ble Supreme Court of India in the civil appeal no 7229 of 2018 of M/s Stovekraft India bunched in the lead case of CIT Vs. M/s Classic Binding Industries vide appeal no. 7208 of 2018 & others has held that after availing deduction at 100% for first 5 years from the initial 4 ITA No.1166/Chd/2018 A.Y.2014-15 assessment year, the assessee would be entitled to deduction for remaining 5 assessment years @ 25% and not @ 100%. Thus, the issue is settled in the favour of Revenue by the Hon'ble Apex Court.
5. It is prayed that the order of the Ld.CIT(A) be cancelled and that of the assessing officer may be restored.
6. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or is disposed off."
6. A bare perusal of the above gro unds reveal s tha t the Revenue has chal l enged the order of the Ld.CI T( A) rel yi ng upon the deci si on of the Hon'b l e Ape x Court i n bunch of cases wi th the l ead case bei ng CI T Vs. M/s Cl assi c Bi ndi ng I ndustri es i n Civi l Appeal No.7208 of 2018 & Others. The sai d order was dated 20 t h August 2018.
7. Duri ng the cour se of heari ng be fore us the Ld. DR at the outset i tsel f poi nted out that the Hon'bl e Ape x Court had thereafter deci de d thi s i ssue aga i n i n bunch of cases wi th the l ead case bei ng Pr.CI T, Shi ml a Vs. M/s Aarham Softroni cs in Ci vi l No.1784 of 2019 dated 20.2.2019, deci di ng the i ssue i n favour of the assessee and further hol di ng that the deci si on i n the c ase of M/s Cl ass ic Bi ndi ng I ndustri es ( supra) di d not l a y do wn the correct l a w.
8. We have gone through the order of the Hon'bl e Ape x Court i n the cas e of M/s Aarham Softroni cs ( supra) and fi nd that the Hon'bl e Ape x Court had noted that these appeal s were earl i er heard and deci ded by i ts judgment dated 20.8.2018 reversi ng the judgment of the Hon'bl e Juri sdi cti onal Hi gh Court on the i ssue but i n some of the appeal s the assessees who were respondents were not served wi th noti ces and the y remai ned unrepresented and on thei r 5 ITA No.1166/Chd/2018 A.Y.2014-15 Mi scel l aneous Appl i cati on fi l ed for recal l of the order, whi ch was al l o wed by the Hon'bl e Ape x Court, the appeal s were restored and wer e heard afresh. That th ereafter t he Hon'bl e Ape x Court deal t wi th the enti re scheme of the Act rel ati ng to the rel evant secti on i .e. secti on 80I C of the Act, and arri ved at the c oncl usi on that t he defi ni ti on of the i ni ti al assessment year contai ned i n cl ause ( v) of sub-secti on( 8) of secti on 80I C of the Act can l ead to a si tuati on w here there can be more than one assessment year wi thi n the s aid peri od of ten years. The rel evant fi ndi ng of the Hon'bl e A pe x Court at para 19 of i ts order i s as under:
"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 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 6 ITA No.1166/Chd/2018 A.Y.2014-15 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'bl e Ape x Court thereafter noted that in i ts judgment i n the case of M/s Cl assi c Bi ndi ng I ndustri es ( supra) the observati on of the Hon'bl e Court that al l o wi ng deducti on @ 100 % for the enti re peri od of ten yea rs woul d be doi ng vi ol ence to the l anguage of sec 80I C of the Act, was made wi thout noti ci ng the defi ni ti on of i ni ti al assessment year contai ned i n secti on 80I C of the Act. The fi n di ng of the Hon'bl e Ape x Court at para 22 of i ts order i s as under:
"22. It would be pertinent to point out that in Para 20 of the judgment in Classic Binding Industries, this Court observed that if deduction @ 100% for the entire period of 10 years, it would be doing violence to the language of sub-section (6) of Section 80-IC. However, this observation came without noticing the definition of 'initial assessment year' contained in the same very provision."
10. The Hon'bl e Ape x Court thereafter concl uded that thi s deci si on in the case of M/s Cl assi c Bi ndi ng I ndustri es ( supra) di d not la y do wn the correct l a w and that a ne wl y set up undertaki ng or enterpri se in the State of Hi machal Pradesh woul d b e enti tl ed to ded ucti on @ 100% of the Act i t s profi ts for the fi rst fi ve years and even thereafter i n the case of substanti al e xpansi on is carri ed out by it wi th the previ ous year i n whi ch substanti al e xpansi on i s undertaken becomi ng the i ni ti al assessment year. That i n an y case the peri od of deducti on u/s 80I C of t he Act woul d not exceed 10 years. The concl usi on of the Hon'bl e Ape x Court at para 24 of i ts order i s as under:
7 ITA No.1166/Chd/2018
A.Y.2014-15 "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 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."
11. I n vi e w of the above, i t i s no w s ettl ed l a w that e ven a ne w undertaki ng whi ch has cl ai med deducti on of its el i gi bl e profi ts @ 100% thereof for the fi rst fi ve years i s enti tl ed to 8 ITA No.1166/Chd/2018 A.Y.2014-15 cl ai m deducti on @ 100% of i ts profi ts thereafter on account of substanti al e xpansi on undertaken by i t. We, therefore, see no reason to i nt erfere i n the ord er of the Ld.CI T( A) and the appeal of the Revenue i s, therefore, di smi ssed. 1 2. I n t h e r es u l t , t h e a p p e a l of t h e R ev e n u e i s d i s m i sse d .
O r d e r p r on o u n c ed i n t h e O p e n Cou r t .
Sd/- Sd/-
संजय गग अ नपण
ू ा ग&ु ता
(SANJAY GARG ) (ANNAPURNA GUPTA)
याय क सद य/ Judicial Member लेखा सद य/ Accountant Member
*दनांक /Dated: 8th March, 2019
*रती*
आदे श क त*ल+प अ,े+षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आयु-त/ CIT
4. आयकर आयु-त (अपील)/ The CIT(A)
5. +वभागीय त न0ध, आयकर अपील$य आ0धकरण, च2डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File
आदे शानस
ु ार/ By order,
सहायक पंजीकार/ Assistant Registrar