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TMI Blog2019 (2) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... arned AO, during the scrutiny, found from Form 10CCB that the date of substantial expansion was 31.3.2005 and, therefore, the initial year for claiming deduction u/s 80IC of the Act was 2005-06 but not 2006-07. On this premise, learned AO restricted the disallowance u/s 80IC to 30% as against 100% claimed by the assessee and made an addition of Rs. 56,00,278/-, Rs. 18,46,013/- on account of disallowance of AMC, Repair charges and job work, Rs. 1,21,531/- on account of disallowance of interest income, thereby assessed the income of the assessee at Rs. 75,67,820/-. 3. Assessee challenged the same before the CIT(A). Ld. CIT(A) by way of impugned order held that Section 80IC does not say that the income must be derived from the manufacturing only, but it states that the profit and gains must be derived by the industrial undertaking and enterprise. Learned CIT(A) held that for newly established manufacturing units, the initial year for the purpose of 80IC would be the year in which they commence production whereas for the units undertaking other operations, it is the year of commencement of the operation and for the units undergoing substantial expansion, it is the year of substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day only and for all practical purposes, the assessee would be able to commence his business in the AY 2006-07 to start claiming the benefit u/s 80IC. He submitted that in the information furnished to the Customs and Excise department also, it was stated that the date on which the operation commenced was mentioned as 26.4.2005; so also at column no.9 of Form No.10CCB, it was mentioned that the initial assessment year from when the deduction is being claimed was AY 2006-07. It is further brought to our notice by the learned AR that in the order dated 31.12.2008 u/s 143(3) of the Act for the AY 2006-07, it was clearly mentioned that the assessee had claimed deduction u/s 80IC for the first time on account of substantial expansion in that year only. Basing on all these things, it is submitted on behalf of the assessee that there is consistency in the case of the assessee but whereas having accepted the initial assessment year for the purpose of benefits u/s 80IC of the Act as 2006-07 consistently for four years, for the first time the revenue had taken a contrary view in the AY 2010-11, which is untenable either on facts or on law. 6. Per contra, it is the submission on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirteenth 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. Sub section (3) specifies that the deduction shall be 100% of such profits and gains for five assessment years commencing with the initial assessment year thereafter 25% (or 30% where the assessee is a company) of the profits and gains. 9. In this context, it is necessary to examine the expression "initial assessment year" and "substantial expansion". Clause (v) of sub section (8) thereof defines "initial assessment year" to mean,"Initial assessment year" means the assessment year relevant to the previous year in which the undertaking or the enterprise begins to manufacture or produce articles or things, or commences operation or completes substantial expansion; whereas clause (ix) defines "Substantial expansion" means increase in the investment in the plant and machinery by at least fifty per cent of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the previous year in which the substantial expansion is undertaken. 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduce articles or things or commences operations or completes substantial expansion. Here the completion of substantial expansion has to be read with reference to the expression in the company of which this particular expression happens to be. Having regard to the facts and circumstances of the case, we are of the considered opinion that completing the substantial expansion for the purpose of claiming benefit u/s 80IC for the first time shall be read in the context of the proviso as a whole and it shall mean that the completing of substantial expansion would be equivalent to the commencement of the operation. 14. With this view of the matter, we are of the considered opinion that undertaking of substantial expansion would be complete only when substantial expansion is capable of producing the desired results. We, therefore, find it difficult to agree with the interpretation given by the authorities below. 15. The learned AO observed that from Form No.10CCB of this year and earlier years, it is found that the date of the substantial expansion was 31.3.2005 which indicates that the assessee has been consistently mentioning 31.3.2005 at Column No.25(d)(i) and the AY 2006-07 as the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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