TMI Blog2018 (12) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... and gains from the 'units', the assessees would be entitled to deduction for remaining 5 Assessment Years. @ 25% (or 30% where the assessee is a company), as the case may be, and not @ 100%. The question of law is, thus, answered in favour of the Revenue thereby allowing all these appeals. See case of M/s Stovekraft India [2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT] - Decided in favour of assessee. - ITA NO. 860/Chd/2018 - - - Dated:- 27-11-2018 - Sh. SANJAY GARG, JM AND DR. B.R.R. KUMAR, AM For The Assessee : None For The Revenue : Shri. Manjit Singh Order PER DR. B.R.R. KUMAR, A.M: The present appeal has been filed by the Revenue against the order of the Ld. CIT(A)-2, Chandigarh dt. 29/03/2018. 2. In the present appeal Revenue has raised the following grounds: (i) Whether in the facts and circumstances of the case and in law, the Ld.CIT(A) has not erred in partly allowing the appeal of the assessee without appreciating the facts of the case ? (ii) Whether on the facts and circumstances of the case, the Ld.CIT(A) has not erred in law and fact in deleting the addition of ₹ 85,31,403/-(made on account of restricting the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion prior to 01.04.2012 and there will be initial year for each substantial expansion as long as provision of section 80IC(ix) are met without appreciating that as per provision of section 80IC(2)(ii) of the Income Tax Act and as explained in CBDT Circular No. 7/2003, read with circular No. 49/2003 issued by Central Excise Department that benefit of substantial expansion was available only to units that existed and were operational as on 07.01.2003 and substantial expansion could have been carried out only on or after 07.01.2003 by an undertaking that existed prior to 07.01.2003. (vii) Whether on the facts and circumstances of the case, the CIT(A) has not erred in allowing the deduction u/s 80IC @ 100% to the assessee for 10 years without appreciating and ignoring the fact that the expression substantial expansion has been used in both section 80IC(2)(a) and 80IC(2)(b) however 80IC(2)(a)(ii) and 80IC(2)(b)(ii) is applicable to H.P. or Uttrakhand and 80IC(a)(iii) and 80IC(b)(iii) are applicable to the north eastern states when compared with rate of deduction provided u/s 80IC(3)(ii), the rate given is 100% for five years, and 25% for next five years, whereas under sub secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se titled CIT Vs Classic Binding Industries (2018) 96 taxmann.com 405 (SC): 12.Dissatisfied with the aforesaid order dated 11th August, 2016, assessee filed appeal under Section 260A of the Act, 1961 before the High Court of Himachal Pradesh, Shimla raising therein substantial questions of law. The result of other assessees was also on almost same pattern, who filed their respective appeals as well. The High Court has decided the issue in a composite judgment, in favour of all these assessees. The High Court held that there is no restriction that undertaking or enterprise established after 7th January, 2003 cannot carried out 'Substantial Expansion' cannot be carried out more than once as long as period of eligibility for claiming deduction under Section 80-IC of the Act. The High Court further held hat since the language of Section is very clear, reliance cannot be placed on Circular No. 7 of 2003 issued y CBDT on this issue substantial questions of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his 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 IOC, as the case may be, exceeds ten assessment years 16. The essence of Section 3 as well as Section 6 have already been reproduced above. Whereas the exemption is provided @ 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 sub-section (2)? The answer has to be in the negative for the following the reasons: 18. We are dealing w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% (or 30% where the assessee is a company). (d) Total period of deduction is 10 years, which means 100% deduction for first 5 years from the initial Assessment Year and 25% (or 30% where the assessee is a company) for the next 5 years. 20. When we keep in mind the aforesaid scheme and spirit behind this provision, such a situation cannot be countenanced where an assessee is able to secure deduction @ 100%o for the entire period of 10 years. If that is allowed it will amount to doing violence to the provisions of sub-section (3) read with subsection (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 Bench in Mahabir Industries v. Principal Commissioner of Income Tax (Civil Appeal Nos. 476 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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