TMI Blog2014 (1) TMI 1689X X X X Extracts X X X X X X X X Extracts X X X X ..... of Assessing Officer s order is extracted hereunder for ready reference. The assessee is a Limited company incorporated in the year 2000. Its registered office is at D-14, IInd floor, Preet Vihar, Delhi. It has three directors, Shri GC Goyal AAFPG 5331 F, Shri Arun Goyal AAIPG 7139 G and Shri Ankit Garg AFYPG8199 R. The company is engaged in manufacturing and selling of new LPG cylinders and conductor wires. The assessee company manufactures domestic LPG cylinders for various Government Oil companies. During the instant eyar, the assessee has claimed deduction u/s 80 IC amounting to ₹ 6,47,40,090/-. The manufacturing unit of the company is located at Khasra no. 235,237,238/1 and 238/2, Industrial area, Selaqui, Dehradun. This unit compelted substantial expansion during the Assessment Year 2004-05 and claimed deduction u/s 80 IC from the Assessment Year 2004-05 by declaring it to be its initial Assessment Year for the claim of deduction. Claim of deduction u/s 80 IC was allowed by the Assessing Officer for the Assessment Year 2004- 05. The claim has been allowed u/s 143(3) for the Assessment Year 2004-05 to 2008-09. Instant Assessment Year is the sixth Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year while it knew fully well that it was eligible for deduction @ 30% of the profits. Therefore, I have reasons to believe that the assessee furnished inaccurate particulars of income. Accordingly proceedings u/s 271(1)(c ) of the Act are ;being initiated separately for furnishing inaccurate particulars of income. 4. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority upheld the order of the A.O. by observing as follows. 1.5. As noted above, the provision applies to an undertaking or an enterprise existing as on 7.1.2013 and achieving substantial expansion during the PY which is reckoned as the initial Assessment Year and deduction is to be allowed for 10 years beginning from the said Assessment Year. If the assessee s contention were accepted, it would amount to re writing the provision of law so as to allow the deduction to an undertaking existing as on 1.4.2009 and achieving substantial expansion during the PY. Clearly, if the assessee s existence as on 7.1.2013 is kept in mind, the initial Assessment Year would be Assessment Year 2004-05 (when it achieved substantial expansion). Since the law provides for only one initial Assessment Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereas, if it is held as a second substantial expansion is not covered within the definition of the term initial assessment year , then the assessee company would be entitled to only 30% deduction. Mr.Amit Goel submitted that a bare reading of the provisions of Sub Section (2) reveal that the deduction is independently allowed for two categories i.e. (a) undertaking or enterprise which manufactures or produces article or thing during 1.7.2003 to 1.4.2012 or (b) an undertaking which manufactures or produces an article or thing and undertakes substantial explanation during the period 1.7.2003 to 1.4.2012. He referred to the definition of substantial expansion and submitted that there is no bar direct or indirect in this section if a second substantial expansion is undertaken by the assessee. He submits that the overall deductions is available only for the period of 10 years and this is the only restriction. He referred to the decision in the case of DCIT vs. M/s S.R.Paryavaran Engineers Circle 5(1) Pvt.Ltd. in ITA 340/Ch./2010 Chandigarh B Bench judgement dt. 30.8.2010 and submitted that the issue as to whether, an initial year would once again be reckoned for the purpose of Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uting the total income of the assessee, a deduction from such profits and gains, as specified in sub-section (3). (2) This section applies to any undertaking or enterprise,- (a) which has begun or begins to manufacture or produce any article or thing, not being any article or thing specified in the Thirteenth Schedule, or which manufactures or produces any article or thing, not being any article or thing specified in the Thirteenth Schedule and undertakes substantial expansion during the period beginning- (i) on the 23rd day of December, 2002 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Park or Software Technology Park or Industrial Area or Theme Park, as notified by the Board in accordance with the scheme framed and notified59 by the Central Government in this regard, in the State of Sikkim; or (ii) on the 7th day of January, 2003 and ending before the 1st day of April, 2012, in any Export Processing Zone or Integrated Infrastructure Development Centre or Industrial Growth Centre or Industrial Estate or Industrial Par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.-The provisions of Explanations 1 and 2 to sub-section (3) of section 80-IA shall apply for the purposes of clause (ii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (5) Notwithstanding anything contained in any other provision of this Act, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in Chapter VIA or in section 10A or section 10B, in relation to the profits and gains of the undertaking or enterprise. (6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of dedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government.] (Emphasis ours). 10.1. As per sub-section (2) of section 80 IC deduction under this section is available to any undertaking or enterprises in the following two categories:- i. The undertaking or enterprises has begun or begins to manufacture or produce any article or thing during the period 7.1.2003 to 1.4.2012; OR ii. The undertaking which manufacture or produce any article or thing and undertakes substantial expansion during the period 7.1.2003 to 1.4.2012. 10.2. A bare reading of provisions of sub section (2) would reveal that the deduction under the aforesaid two categories are independent. In the first category the deduction is being given to the undertaking which has begun or begins manufacturing or production of article and thing during the specified period of 7.1.2003 to 1.4.2012. Thus under the first category the deduction is available to newly set-up units. 10.2.1. In the second category, the deduction is allowed in case of expansion by the existing units which undertake substantial expansion during the specified period of 7.1.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts come down. The term initial year has been defined, as a year in which substantial expansion is completed. There is nothing to suggest that there cannot be a second initial year if a second substantial expansion is completed. Even if an existing unit which is claiming 80 IC, undertakes first substantial expansion then also the year of completion of the substantial expansion will be the initial year . If the literal meaning of the term initial assessment year is to be taken, then there is no requirement of defining this term in the section. We have to go by the language of the section. 10.6. The CIT(A) denies the deduction on the ground that it would amount to evergreening of an incentive provision. Sub section (6) of S.80-IC reads as follows. 6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80-IB or under section 10C, as the case may be, exceeds ten assessment years. This section imposes a restriction for a total period of 10 yea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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