TMI Blog2018 (9) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... e Respondent : Shri Jagdeep Goyal, CIT DR ORDER PER ANNAPURNA GUPTA, A.M. : The present appeal has been preferred by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-2, Chandigarh dated 16.10.2017 relating to assessment year 2013-14. It was common ground that the sole issue in the present appeal relates to restriction of deduction claimed by the assessee u/s 80IC of the Income Tax Act,1961,(hereinafter referred to as Act ) to 30% of the eligible profits, as against 100% claimed by the assessee on account of substantial expansion carried out by it. 2. Brief facts relating to the issue are that the assessee is engaged in the manufacturing of pharmaceutical formulations at Baddi in Himachal Pradesh. The industrial undertaking of the assessee was installed and commenced the production in 2005 and was eligible to claim deduction of its profits u/s 80IC of the Act , with the initial assessment year for the said purpose being A.Y. 2008-09. The assessee had claimed 100% deduction from the profits in the first five assessment years between A.Y 2008-09 to A.Y 2012-13. The impugned year was the 6th year of claiming deduction under section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the outset itself ,it was conceded by the Ld. counsel for assessee that the issue had been settled and decided against the assessee by the order of the Hon'ble Apex Court in the case of CIT vs Classic Binding Industries Civil Appeal No.208 of 2018 others dated 20th August 2018. 6. We have gone through the order of the Hon'ble Apex Court in the said case and find that it has been categorically held by the Hon'ble Apex Court that the assessee is eligible to claim deduction under the section for a total period of 10 years, with the deduction being @ 100% of the eligible profits only for the initial five years and thereafter @ 25% or 30%, as provided in section 80IC(3) 80IC(6) of the Act. The Hon ble Apex court has in very clear terms held that in terms of the provisions of the section no claim of deduction @ 100% of profits beyond the stipulated period of five years is allowable. The relevant findings of the Hon'ble Apex Court are as under: 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... @ 100% of such profits and gains for five assessment years commencing with the initial assessment years and, thereafter, 25% (or 30% where the assessee is a company) of the profits and gains for next five years. The deduction is limited to a period of 10 years. 17. In this backdrop, the question is as to whether these assessees, who had availed deductions @ 100% for first five years on the ground that they had set up a manufacturing unit as prescribed under sub-section (2) of the Act, can start claiming deductions @ 100% again for next five years as they had undertaking substantial expansion during the period mentioned in subsection (2)? The answer 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 orenterprises in certain special category States are allowed deduction from such profits and gain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is allowed it will amount to doing violence to the provisions of sub-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. 21. We are conscious of our recent judgment rendered by this very Benchin Mahabir Industries 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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