TMI Blog2019 (9) TMI 864X X X X Extracts X X X X X X X X Extracts X X X X ..... of North-East Industries Investment Promotion Policy (NEIIP), 2007, the Assessee undergone modernization of its unit M/s. Charu Engineering Industries, in the year 2008, w.e.f 02.05.2008 by additional capital outlay in plant machinery amounting to ₹ 29,85,611/- in comparison to the previous capital outlay in plant machinery (i.e prior to the expansion/ modernization) ₹ 22,51,982/-, an increase in capital outlay by 133 % of the initial capital outlay in the financial year 2008-09. Therefore, the Assessee is eligible for income tax exemption from the Financial year 2008-09 and onwards due to modernization in its plant machinery by infusing additional capital investment by more than 25 % of the initial investment in plant machinery as envisaged in clause (iii) of sub-sec. 7 of Sec. 80-IE of the Income Tax Act, 1961, effective from 01.04.2008.We note that the purpose of section 80IE was to establish the business of the nature specified in the said provision in the specified States. This provision was, thus, aimed at encouraging the undertakings or enterprises to establish and set up such units in the aforesaid States to make them industrially advanced States as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Financial Year 2008-09. The Id. Commissioner, of Income Tax has wrongly invoked the provisions of Sec. 801E(5) of the Income Tax Act, 1961 which is not applicable in this present case. It is submitted that provisions of sec. 801E(5) is not applicable for those units undertaken substantial expansion and modernization. That in case of Charu Innovation Department and Industries, the AO disallowed the benefit allowed u/s 801E due to non- availability of eligibility documents for inspection by the inspector of Income Tax, Guwahati. The Ld. Commissioner of Income Tax (Appeal) failed to appreciate the contentions of the appellant and disallowed the substantial benefit allowed under law on the grounds of procedural lapses by the Assessee's end. The Ld. CIT (A) is legally not justified rejecting the substantial benefit allowed under the law. The impugned Order-in-Appeal is liable to be set aside in the ends of justice. (II) For that the Id. Commissioner of Income Tax (Appeals)-2, Guwahati, failed to appreciate the contentions of the petitioner on wrong interpretation of the provisions of Sec. 801E of the I T Act, 1961.The stand point of the Ld. DCIT, Circle -3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Ld. Commissioner (Appeals) committed an error in interpreting the provisions of sub-sec. 5 of Sec. 801E which supersedes the other conditions of Sec. 801E only for those undertakings availed benefits under the NEIIP, 2007 if the said undertaking availed benefit under Sec. 801E only and not any other previous policies as declared by the Central Govt. The interpretation of sub-sec. 5 of Sec. 801E cannot be interpreted isolate without considering the NEIIP, 2007. The interpretation of the Id. Commissioner Appeals is not sustainable in law and the demand raised for the A.Y 2012-13 is liable to be set aside in the ends of justice. (VI) For that the impugned Order-in-Appeal has been passed by the Appellate authority without giving the appellant an opportunity of personal hearing and order is passed in his absence and thereby causing violation of principles of natural justice. The impugned Order-in-Appeal is not sustainable on this ground and liable to be set aside in the ends of justice. (VII). For that the Ld. Commissioner Appeals fail to consider of brief facts that the Assessing Officer as allow the exemption for the Assessment Year 2015- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,982/- in financial year 2008-09, assessee again claimed deduction under section 80-IE of the Income Tax Act, 1961 from assessment year 2009-10 onwards. The assessee is claiming deduction under section 80-IE on the pretext that it has made a substantial expansion as defined in clause (iii) of sub-section (7) of section 80-IE of the Act. In doing so, assessee has failed to understand a very important condition given in sub section (5) of section80-IE of the Act. The Sub-section (5) of section 80-IE lays down the condition that no deduction shall be allowed to any undertaking under section 80-IE, where the total period of deduction inclusive of the period of deduction under section 80-IE, or under section 80-IC or section 80-IB or section 10-C, as the case may be, exceeds ten assessment years. In the light of the above provisions, the AO noted that in the case of M/s Charu Engineering Industries, a proprietary concern of the assessee undertaking has already claimed deduction u/s 80-IB of the Act for the earlier assessment years for full 10 (Ten) assessment years. M/s Charu Engineering Industries had already exhausted the maximum limit of assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been, issued to all concern Ministries/Department of the Government of India to amend their, respective Act/Rules/Notification etc and issue necessary instruction giving effect to these decisions The factory/production unit of M/s Charu Innovation Department industries located at Thakuria Industrial Area, Chandrapur, Guwahati, had also been visited by the inspector of Income Tax 04.03.2015. The Inspector's Report dated 04.03.2015 had also been examined by AO. As per relevant report, the unit has a pucca structure but the concerned persons present on the site were unable to tell ownership status of land building and extent of area of the unit/premises. The Inspector's Report mentions 3 (Three) principal machines, apart from the transformer. The production process was also explained by the concerned person present at the site. However, copy of DIC Certificate, Factory License, Land Documents etc were not available at the production site. These important documents were also not furnished by the assessee subsequently. The assessee has failed to prove with necessary evidences the set-up of a new unit by the name of M/s Charu Innovation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or further deductions U/s.80IC/80IE beyond that period. The assessee on the other hand claimed further deduction of 10yrs from the date of 1st substantial expansion i.e. 10.12.2001 [A. Y .2002-03] U/s.80IC and was also under the impression that it would be eligible for deduction U/s.80IE for another span of 10yrs following its 2nd substantial expansion on 02.05.2008[A.Y.2009- 10). Before proceeding further, it is relevant to mention that the Hon ble Apex Court judgment in M/s Dilip Kr. And company Others lays down the rules of interpretation of a tax exemption provision / notification, hence the said judgment should be followed and deduction claimed by the assessee on account of substantial expansion should be denied. 10. We have heard both the parties and perused the material available on record. The solitary issue before us to examine the allowability of deduction with respect to M/s. Charu Engineering Industries, ₹ 1,25,60,390/- and amounting to ₹ 87,60,893/- for its proprietary concern, namely, M/s Charu Innovation Industries. We note that the moot question involved qua the claim of the deduction under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted before us that assessee cannot claim deduction for more than 10 Years, in view of the bar/capping provided under section 80lE of the Act. The ld DR further submitted before us that the assessee shall not be entitled to claim deduction u/s 80IC and 80lE taken together for more than ten assessment years from the initial assessment year howsoever whether by way of commencement of the undertaking or the substantial expansion thereof taken together. Any other interpretation of this incentive section would only render the provisions of section 80IE(5) to be otiose.On the other hand, the contention of the Counsel is that the assessee was the proprietor of the above undertaking, which was newly set up during the above assessment year w.e.f. 23/11/2011 and had new plant and machinery, new building, new manpower, new electricity with new concept. 11. First of all let us examine the old industrial policy issued by the Government of India, dated 24.12.1997, which is reproduced below for ready reference: 12. Let us also examine the new industrial policy issued by the Government of India, dated 01.04.2007, which is reproduced below for r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of Sec. 80-IA and 80IB and 10C in the earlier assessment years and availed benefit of exemption under Chapter VIA of the Income Tax Act 1961 and after undergoing substantial expansion of its existing plant and machinery and production capacity by investing more than 25 % of its existing capital investment in terms of NEIIP,2007 in the Financial Year 2008-09 . The other one M/s. Charu Innovation Department and Industries, a new Industrial Undertaking, established in the year 2011-12 and commenced its commercial production w.e.f 23.11.2011, engaged in production of polyethylene Water Storage Tank and other plastic articles such as, Dustbin, Traffic Signal Point and injunction moulded Item and moulded filter etc. We note that after implementation of North-East Industries Investment Promotion Policy (NEIIP), 2007, the Assessee undergone modernization of its unit M/s. Charu Engineering Industries, in the year 2008, w.e.f 02.05.2008 by additional capital outlay in plant machinery amounting to ₹ 29,85,611/- in comparison to the previous capital outlay in plant machinery (i.e prior to the expansion/ modernization) ₹ 22,51,982/-, an increase in capital out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ious year in which the undertaking or the enterprise begins to manufacture or produce article or things, or (ii) commences operation, or (iii) completes substantial expansion. The benefit of section 80-IC is, thus, admissible not only when an undertaking or enterprise sets up a new unit and starts manufacturing or producing articles or things. The advantage of this provision also accrues to existing units, if they carry out substantial expansion of their units by investing the required capital, in the previous year relevant to the assessment year. Substantial expansion is defined in section 80-IC(8)(ix) as 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. There can thus be another initial assessment year on the fulfilment of the condition mentioned in the definition, namely, completion of substantial expansion of the existing unit. This new event entitles that unit to start getting deduction at 100 per cent. of the profits and gains. At the same time, a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal period of ten years, as provided in section 80-IC(6) . For example, if the expansion is carried out immediately, on the completion of the first five years, the assessee would be entitled to 100 per cent. deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in the eighth year by an assessee such an assessee would be entitled to 100 per cent. deduction for the first five years, deduction at 25 per cent. of the profits and gains for the next two years and at 100 per cent. again from eighth year as this year becomes the initial assessment year once again. However, this 100 per cent. deduction would be for the remaining three years, i.e., the eighth, ninth and tenth assessment years. Decision of the Himachal Pradesh High Court in STOVEKRAFT INDIA v. CIT [2018] 400 ITR 225 (HP) affirmed . Decision of the Punjab and Haryana High Court in ADMAC FORMULATIONS v. CIT [2018] 409 ITR 661 (P H) reversed . In Classic Binding Industries' case [2018] 407 ITR 429 (SC) the court, on the basis of section 80-IB(14)(c) of the Act, took the view that once the initial assessment year starts on the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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