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TMI Blog2018 (8) TMI 1209X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (3) read with sub-section (6) of Section 80-IC. A pragmatic and reasonable interpretation of Section 80-IC would be to hold that once the initial Assessment Year commences and an assessee, by virtue of fulfilling the conditions laid down in sub-section (2) of Section 80-IC, starts enjoying deduction, there cannot be another “Initial Assessment Year” for the purposes of Section 80-IC within the aforesaid period of 10 years, on the basis that it had carried substantial expansion in its unit. Once the assessees had started claiming deduction under Section 80-IC and the initial Assessment Year has commenced within the aforesaid period of 10 years, there cannot be another initial Assessment Year thereby allowing 100% deduction for the next 5 years also when sub-section (3), in no uncertain terms, provides for deduction @ 25% only for the next 5 years. It may be asserted again that the assessee's accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC. Decided in favor of revenue. - Civil Appeal No(s). 7208 of 2018, 7223 of 2018, 7220 of 2018, 7215 of 2018, 7230 of 2018, 7216 of 2018, 7232 of 2018, 7233 of 2018, 7224 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in certain cases, exemption from income is provided at the rate of 100% of such profits and gains earned from the aforesaid undertaking or enterprise for 10 assessment years commencing with the initial assessment year. The present appeals do not fall in that category. Other clause relates to another category of undertakings or enterprises (these cases belong to that category) where the exemption is at the rate of 100% of profits and gains for five assessment years commencing with the initial assessment year and, thereafter, 25% of profits and gains. Total exemption, thus, is for a period of 10 years, namely, @100% for 1st five years and @ 25% for remaining five years. In these cases, all the assessees started claiming exemption @ 100% on profits and gains and availed it for a period of five years. During this period these assessees carried out substantial expansion and they claimed that, on that basis, they should be allowed exemption from profits and gains for another five years @ 100% instead of 25% from 6th to 10th year as well. Interestingly, they admit that the total period during which they are entitled to exemption would not exceed 10 years, as per the mandate of sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2010-11. However, it was noticed that the assessee firm had again claimed 100% deduction against eligible profits in the relevant Assessment Year 2012-13 which is seventh year of production for the firm by claiming substantial expansion in Financial Year 2010-11. 6. Return declaring income of ₹ 27,93,410/- after claiming deduction under Section 80-IC of ₹ 12,62,77,168/- was e-filed by the assessee firm on 28th September, 2012. The case was selected from scrutiny through CAS and accordingly, statutory notices under Section 143(2)/142(1) were issued by Income Tax Office (ITO) Ward-I, Solan. 7. The assessee was asked to furnish the reasons and justification for the said claim of 100% as against the eligible norm of 25%. the assessee vide letter dated 12th January, 2015 submitted its reasons for claim stating that the assessee fulfills all the conditions for the claim of 100% deduction. 8. The Assessing Officer found that in view of the provisions of Section 80-IC of the Act assessee firm had already claimed deduction under Section 80-IC of the Act at the rate of 100% for five years from Assessment Year 2006-07 to Assessment Year 2010-11, i.e., from the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law were answered in favour of assessee and appeals were allowed with direction that with respect to each of the assessees the Assessing Officer shall carry out fresh assessment and pass appropriate orders. 13. With the aforesaid factual background, we now proceed to answer the question of law formulated above. 14. A gist of the legislative history and purpose behind the insertion of Section 80-IA, 80-IB and 80-IC has already been mentioned above. We have to keep in mind that these cases are confined to Section 80-IC alone. As mentioned above, sub-section (2) of Section 80-IC provides for tax benefit to those undertakings or enterprises which had set up their manufacturing units in certain specified areas including State of Himachal Pradesh to which this case is belonged. 15. It also gives benefit to these undertakings and enterprises which have undertaken substantial expansion during the periods mentioned therein. As there is no dispute that all these assessees are covered by the provisions of sub-section (2), that aspect need not be stated in detail. We, thus, reproduce those portions of the provision which are relevant for our discussion: S.80-IC. Special Provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has to be in the negative for the following the reasons: 18. We are dealing with the deductions in respect of profits and gains under Section 80-IC of the Act. No other provision is involved. This section makes special provisions in respect of certain undertakings or enterprises in certain special category States. Section 80-IC was inserted by the Finance Act, 2003 w.e.f. April 1, 2004. As per this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in sub-section (3) of Section 80-IC. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Pradesh and Uttaranchal and North-Eastern States. The deduction was provided to new units established in the aforesaid States, and also to existing units in those States if substantial expansion was carried out. The deduction was available @ 100% for ten Assessment Years for the units located in North-Eastern and in the State of Sikkim and for the units located in Himachal Pradesh, the deduction was available @ 100% for five years and @ 25% for next five years. 19. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries v. Principal Commissioner of Income Tax (Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018). However, a fine distinction needs to be noted between the two sets of cases. In Mahabir Industries , the assessees had availed the initial deduction under a different provision, namely, Section 80-IA of the Act, i.e. by fulfilling the conditions mentioned in sub-section (4) of Section 80-IA. Those conditions are altogether different. Deduction in respect of profits and gains under the said provision is admissible when these profits and gains are from industrial undertakings or enterprises engaged in infrastructure development etc. Even this availment started at a time when Section 80-IC was not even on the statute book. As mentioned above, Section 80-IC was inserted by the Finance Act, 2003 with effect from April 01, 2004. The assessees in those cases had started claiming and were allowed deductions from the Assessment Years 1998-99 and 1999-2000 under Section 80-IA and from the Assessment Year 2000-01 to Assessment Year 2005-06 under Section 80-IB of the Act. The deduction was, thus, claimed by the assessees in those appeals under the new provision i.e. Section 80- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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