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TMI Blog2014 (1) TMI 1689X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Year of claiming deduction u/s 80 IC of the Act. The assessee has claimed deduction @ 100% of the profits in the sixth Assessment Year while it was eligible for deduction @ 30% of its profit during the instant year." 3. The A.O. in his order u/s 143(3) rejected the claim of the assessee after analyzing the provision of S.80-IC and the government policy for the State of Uttaranchal and the State of Himachal Pradesh. The Assessing Officer held as follows. "3.8. Now the instant case is being examined in the light of discussion above. The assessee falls in the second category i.e. an already existing unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Year' and a single stream of deduction for 10 AYs with reference to the former, there is no scope for having a second initial Assessment Year for it. If that were allowed, it would amount to ever greening of the incentive provision. Looked either way, there is no scope for allowing deduction @ 100% after the end of the five AYs from the initial Assessment Year. The substantial expansion undertaken by the assessee during the PY under consideration is immaterial as far as deduction u/s 80 IC is concerned. Law has recognized only one 'initial Assessment Year' for an undertaking/enterprise. The assessee's attempt to abuse of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 80(IC), despite the fact that the unit was set up earlier and deduction u/s 80-IB was allowed, was decided in favour of the assesse. He further submitted that there is no ambiguity in the provisions and that on a plain reading the claim of the assessee has to be allowed. Without prejudice he argued that an interpretation in favour of the assessee has to be taken when there are two possible interpretations to a Section. He relied on the following case laws. (a) Vegetable Products Ltd., 88 ITR 192 (S.C.) (b) Bajaj Tempo Ltd. vs. CIT (1992) 196 ITR 188 (S.C.) (c ) CIT vs. Gwalior Rayon Silk Mfg.Co.Ltd. (1992) 196 ITR 149, 153 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 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 Himachal Pradesh or the State of Uttaranchal; or (iii) on the 24th day of December, 1997 and ending before the 1st day of April, 2007, 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 notified59 by the Board in accordance with the scheme framed and notified by the Central Government in this regard, in any of the North-E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. (7) The provisions contained in sub-section (5) and sub-sections (7) to (12) of section 80- IA shall, so far as may be, apply to the eligible undertaking or enterprise under this section59a. (8) For the purposes of this section,- (i) "Industrial Area" means such areas, which the Board, may, by notification in the Official Gazette, specify in accordance with the scheme framed and notified by the Central Government; (ii) "Industrial Estate" means such estates, which the Board, may, by notification in the Official Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 7.1.2003 to 1.4.2012." 10.3. There is no dispute on the fact that (a) the assessee is entitled to exemption u/s 80 IC of the Act i.e. that the assessee has satisfied all the conditions specified in the section; (b) that there is substantial expansion during the year as per requirement of the section. 10.4. The only dispute that arises for our consideration is the interpretation of the term "initial assessment year" and whether the same comes with any restriction. The Revenue seeks to take the color from the object of introducing Section 80-IC. The A.O. referred to policy of the government for giving incentives to the State of Uttaranchal and Himachal Pradesh. It is well settled that external aids should not be taken for the purpose of interpreting the Statute, when the lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ything 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 years for claiming the deduction in question, irrespective of the fact whether the deduction is claimed u/s 80-IC or u/s 80-IB or u/s 10C as the case may be. Thus there is no evergreening of the provisions. The assessee cannot claim the said deduction for a total period exceeding 10 years. The deduction could be allowable only for the balance period of 5 years including this Assessment Year 2009-10. Only the rate of deduction goes up. 10.7. The Chandigarh "B" Bench of the Tribunal in the case of M/s S.R.Paryavaran Engineers P.Ltd. (supra) was considering a case where the assessee originally claiming deduction u/s 80 IB(iv) of the Act from the A.Y. 1999-2000. For the first 5 years it had claimed exemption of 100%. Thereafter it undertook substantial expansion and claimed deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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