TMI Blog2019 (7) TMI 665X X X X Extracts X X X X X X X X Extracts X X X X ..... iven above. Hence, ground Nos. 2 3 of the appeal have become infructuous. Disallowance of deduction u/s 80IC of Misc. Income - HELD THAT:- Assessee has explained before us that out of the misc. income of ₹ 2,81,825/-, a sum of ₹ 1,37,649/- is on account of discounts and deductions which relates to the business activity of the assessee and was part of the business income. A sum of ₹ 53,229/- was received on account of insurance claim, the expenditure related to which was debited in the earlier years. The insurance claim received by the assessee to indemnify the losses would go on to enhance the business income of the assessee. Further, the balance sum of ₹ 90,945/- was received by the assessee on account of return of cheques of membership subscription paid to the association. It was nothing but the refund of the amount already paid and claimed as expenditure. In view of this, the misc. receipt of ₹ 2,81,825/- is held to be income relating to the business activity of the assessee and thus eligible for deduction u/s 80IC of the Act. - ITA No. 1184/CHD/2018 - - - Dated:- 10-7-2019 - Shri N.K. Saini, Vice President And Shri Sanjay Garg, Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hon'ble Chandigarh Bench in M/s Hycron Electronics vs. Income Tax Officer, which has been reversed by the Hon'ble Himachal Pradesh High Court. 3. A perusal of the above grounds of appeal reveal that vide ground No.5, the assessee has claimed deduction u/s 80IC of the Income Tax Act, 1961 (in short 'the Act') @ 100% of the eligible profits as against 30% allowed by the Assessing Officer. The other grounds relating to disallowance made by the Assessing Officer have the effect of enhancing the income of the assessee, however, if the income of the assessee is found to be eligible for deduction @ 100% u/s 80IC of the Act, the consequential addition made on these issues by the Assessing Officer and further contested by the assessee vide ground Nos. 2 to 4 of the appeal will otherwise become eligible for deduction @ 100%, hence, the ground Nos. 2 to 4 of the appeal will become infructuous. So, we take up firstly the ground No.5 for adjudication. 4. Ground No.5: Both the Ld. Representatives of the parties have submitted that the facts and issue relating to ground No.5 are covered by the decision of the Tribunal in the own case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the issue was settled in favour of the assessee by the above decision of the Apex court. 8. We have gone through the order of the Hon'ble Apex Court in the case of M/s Aarham Softronics (supra) and find that the Hon'ble Apex Court dealt with the entire scheme of the Act relating to the relevant section i.e. section 80IC of the Act, and arrived at the conclusion that the definition of the initial assessment year contained in clause (v) of sub-section(8) of section 80IC of the Act can lead to a situation where there can be more than one initial assessment year within the said period of ten years. The relevant finding of the Hon'ble Apex Court at para 19 of its order is 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 subsection (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gust, 2018 in Classic Binding Industries 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-sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for the assessment year under consideration also being the 8th year as it has been held that the assessee will be eligible for deduction @ 100% on account of substantial expansion subject to the condition that the total period of deduction u/s 80IC would not exceed to 10 years. In view of this, this issue is decided in favour of the assessee. 6. Ground Nos. 2 3: Vide ground No.2, the assessee has agitated the disallowance made by the Assessing Officer of ₹ 84,248/- u/s 14A of the Act, and further vide Ground No.3, the assessee has agitated the disallowance made by the Assessing Officer of ₹ 2,65,573/- by invoking the provisions of section 36(1)(iii) of the Act. The disallowance of expenditure u/s 14A of the Act has the effect of addition into the income of the assessee. Similarly, the disallowance out of interest expenditure u/s 36(1)(iii) of the Act will also have the effect of addition into the business income of the assessee. 7. In view of our findings given above, the assessee is eligible for claim of 100% deduction on its income from eligible business for the year under consideration. Hence, the aforesaid addi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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