2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT

Entitlement to deduction under Section 80-IC - whether an “undertaking or an enterprise” (Unit) established after 7th January, 2003, carrying out “substantial expansion” within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC? - Held that:- Both the authorities have misconstrued the definition of “Initial Assessment Year”. The Assessment Officer as well as the Appellate Authority have held that there cannot be two “Initial Assessment Years” between 07.01.2003 and 01.04.2012, which conclusion, in our considered view, is totally perverse. We reiterate that Sub clause (v) of Sub section (8) of Section 80 IC itself contemplates more than one “Initial Assessment Years”. The said Clause envisages that for a “Unit”, which begins to manufacture or produce any article or things or commences operation, the Initial Assessment Year means Assessment Year relevant to the previous year, in which, it begins to manufacture and produce article or thing or commences operation and for a “Unit”, which completes substantial expansion, Initial Assessment Year means Assessment Year relevant to the previous year, in which it completes substantial expansion. This very important aspect of the matter has been completely overlooked by the Assessment Officer as well as the Appellate Authority. Therefore, the conclusion arrived at by all the authorities below, that new industrial Units cannot carry out substantial expansion to claim benefits envisaged under Section 80 IC is perverse and not sustainable in law.

Thus held

(a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto 1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB.

(b) Such of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC.

(c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions.

(d) Correspondingly, there can be more than one initial Assessment Years.

(e) Within the window period of 7.1.20013 upto 1.4.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years.

(f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)].

(g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- IB(5)].