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2019 (7) TMI 665

ARH] Tribunal passed in relation to the eligibility of deduction @ 100% u/s 80IC of the Act was in respect of the 7th year from the start / operation of manufacturing activity of the assessee. The findings given above are applicable for the assessment year under consideration also being the 8th year as it has been held that the assessee will be eligible for deduction @ 100% on account of substantial expansion subject to the condition that the total period of deduction u/s 80IC would not exceed to 10 years.In view of this, this issue is decided in favour of the assessee. Disallowance u/s 14A - disallowance out of interest expenditure u/s 36(1)(iii) - HELD THAT:- The assessee is eligible for claim of 100% deduction on its income from eligible business for the year under consideration. Hence, the aforesaid additions will not have any tax bearing in view of our findings given above. Hence, ground Nos. 2 & 3 of the appeal have become infructuous. Disallowance of deduction u/s 80IC of Misc. Income - HELD THAT:- Assessee has explained before us that out of the misc. income of ₹ 2,81,825/-, a sum of ₹ 1,37,649/- is on account of discounts and deductions which relates to the .....

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eals) gravelly erred in upholding the action of the Id. Assessing Officer who had made addition of ₹ 10,44,833/- by allowing the deduction under section 80IC of the Income Tax Act, 1961 @ 30% as against 100% claimed by the appellant. (b) That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in ignoring the judgment of Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India vs. Commissioner of Income Tax. Even after judgment of Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India, the Ld CIT (Appeals) applied the judgment of Hon'ble Chandigarh Bench in M/s Hycron Electronics vs. Income Tax Officer, which has been reversed by the Hon'ble Himachal Pradesh High Court. 3. A perusal of the above grounds of appeal reveal that vide ground No.5, the assessee has claimed deduction u/s 80IC of the Income Tax Act, 1961 (in short 'the Act') @ 100% of the eligible profits as against 30% allowed by the Assessing Officer. The other grounds relating to disallowance made by the Assessing Officer have the effect of enhancing the income of the assessee, however, if the income of the .....

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went in appeal before the CIT(A) who allowed the assessee s appeal. 5. Aggrieved by the same, the Revenue has come up in appeal before us. 6. During the course of hearing before us, the Ld.Counsel for the assessee, at the outset itself, pointed out that the Hon'ble Apex Court has decided this issue in favour of the assessee in bunch of cases with the lead case being Pr.CIT, Shimla Vs. M/s Aarham Softronics in Civil No.1784 of 2019 dated 20.2.2019. 7. Ld.DR fairly conceded that the issue was settled in favour of the assessee by the above decision of the Apex court. 8. We have gone through the order of the Hon'ble Apex Court in the case of M/s Aarham Softronics (supra) and find that the Hon'ble Apex Court dealt with the entire scheme of the Act relating to the relevant section i.e. section 80IC of the Act, and arrived at the conclusion that the definition of the initial assessment year contained in clause (v) of sub-section(8) of section 80IC of the Act can lead to a situation where there can be more than one initial assessment year within the said period of ten years. The relevant finding of the Hon'ble Apex Court at para 19 of its order is as under: 19. Having exam .....

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substantial expansion is undertaken becoming the initial assessment year. That in any case, the period of deduction u/s 80IC of the Act would not exceed 10 years. The conclusion of the Hon'ble Apex Court at para 24 of its order is as under: 24. The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition initial assessment year contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80-IB, which does not apply in these cases. The definitions of initial assessment year in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of initial assessment year under Section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay down the correct law. (b) An undertaking or an enterprise which had set up a new unit between 7th January, 2003 and 1st April, 2012 in State of HimachalPradesh of the nature mentioned in clause (ii) of sub-section (2) of Section 80-IC, would be entitled to deduction at the rate of 100% of the profits and gains for f .....

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deduction @ 100% u/s 80IC of the Act was in respect of the 7th year from the start / operation of manufacturing activity of the assessee. The findings given above are applicable for the assessment year under consideration also being the 8th year as it has been held that the assessee will be eligible for deduction @ 100% on account of substantial expansion subject to the condition that the total period of deduction u/s 80IC would not exceed to 10 years. In view of this, this issue is decided in favour of the assessee. 6. Ground Nos. 2 & 3: Vide ground No.2, the assessee has agitated the disallowance made by the Assessing Officer of ₹ 84,248/- u/s 14A of the Act, and further vide Ground No.3, the assessee has agitated the disallowance made by the Assessing Officer of ₹ 2,65,573/- by invoking the provisions of section 36(1)(iii) of the Act. The disallowance of expenditure u/s 14A of the Act has the effect of addition into the income of the assessee. Similarly, the disallowance out of interest expenditure u/s 36(1)(iii) of the Act will also have the effect of addition into the business income of the assessee. 7. In view of our findings given above, the assessee is elig .....

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