TMI Blog2019 (10) TMI 859X X X X Extracts X X X X X X X X Extracts X X X X ..... nses of ₹ 2000 per month incurred for earning dividend income No error in the order of the learned CIT(A) in upholding the disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules. The ground of the appeal of the assessee is accordingly dismissed. - ITA No.3344/Del/2018 And ITA No.299/Del/2019 - - - Dated:- 18-10-2019 - Shri Sudhanshu Srivastava, Judicial Member And Shri O.P. Kant, Accountant Member For the Appellant : Shri Sanjay Kumar, FCA; Shri Akarsh Garg, Adv. For the Respondent : Shri Kanwaljit Singh, CIT(DR) ORDER PERO.P. KANT, AM: These two appeals by the assessee are directed against two separate orders dated 16.02.2018 and 17.10.2018 passed by the Ld. Commissioner of Income-tax (Appeals)-35, New Delhi [in short the Ld. CIT(A)] for assessment years 2014-15 and 2015-16 respectively. As common issues are involved in both the appeals, we have heard these appeals together and disposed off by way of this consolidated order for convenience. ITA No.3344/Del/2018 for AY: 2014-15 2. First we take ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Briefly stated facts of the case are that the assessee company was incorporated on 13/08/2012 after conversion of the partnership firm, namely, M/s Indian Herbs Specialities. The partnership firm before conversion had set up an industrial undertaking in the Baddi, Himachal Pradesh on notified land and commenced business on 14/06/2006 and claimed deduction under section 80IC of the Income-tax Act, 1961 (in short the Act ) for the assessment years 2007-08 to 2011-12 @ 100%. The assessee carried out substantial expansion during financial year 2011-12 relevant to assessment year 2012-13 in terms of section 80IC(2)(b) read with clause (ix) and section 80IC(8) of the Act and claimed deduction under section 80IC of the Act @ 100 per cent of the profit and gains for the five assessment years, i.e., from assessment AY: 2012-13 to 2016-17, including the assessment year under consideration. 3.2 However, the Assessing Officer restricted the deduction at the rate of 25% by holding that provision of substantial expansion are not applicable to the assessee. The learned CIT(A) upheld the disallowance observing as under: 4.3.3.2. A perusal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in which a new eligible undertaking commences operation or an existing one makes substantial expansion.In the assessment order, the AO has correctly analysed that, nowhere does the section provide for change in the initial assessment year nor is there any provision for continuing claim at 100% beyond five years. It has been rightly observed that the scheme of exemption / deduction under chapter VI-A of the Act is very specific. The argument of the AO that if it is assumed that there is no bar on carrying out any number of substantial expansions in that case, every year of substantial expansion would become initial assessment year, holds true. This liberal interpretation will trivialise the purpose of the Section and lead to wrong interpretation of the Section .The AO has relied upon the recent decision of the Hon'ble 1TAT, Chandigarh in the case of Hycron Electronics vs ITO (ITA no. 798/chd/2012 wherein the Hon'ble ITAT has held that the benefit of substantial expansion is applicable to units which were in existence at the time of announcement of the scheme. Further, if the various sub sections of section 80IC are read, there is clearly no doubt that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. On the other hand, the Ld. DR relied on the order of the lower authorities but could not controvert the submission of the assessee. 6. We have heard the rival submission and perused the relevant material on record. As per the provision of section 80IC(2) of the Act any undertaking or enterprises which has begun or begins to manufacture or produce any article or the thing by setting up a new factory in the area specified therein including the state of the Himachal Pradesh, is eligible for deduction under section 80IC of the Act. Sub-section (3) has prescribed period of 10 years commencing with initial assessment year. Sub-section 3 further prescribed deduction at the rate of 100% of such profit and gains from the undertaking or an enterprise for five assessment years commencing with initial assessment year and thereafter deduction allowable @ 25% (or @ 30% where the assesee is a company) of the profit and gains. Further, sub-section (6) puts a cap of 10 years for claiming deduction under the section. In the case, the assessee has availed 100% of the profit and gains as deduction under section 80IC of the Act f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the profits and gains. (c) However, in case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within the aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become initial assessment year , and from that assessment year the assessee shall been entitled to 100% deductions of the profits and gains. (d) Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if the expansion is carried out immediately, on the completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year by an assessee such an assessee would be entitled to 100% deduction for the first five years, deduction @ 25% of the profits and gains for the next two years and @ 100% again from 8th year as this year becomes initial assessment year once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )]. (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- 1B(5)]. 7. Ld. DR fairly admitted that the issue is squarely covered by the above decision of the Hon'ble jurisdictional High Court. It was, however, submitted that the issue be restored to the file of the Assessing officers for verification as to whether the assessee has actually carried out the substantial expansion to be entitled to claim deduction u/s 80IC of the Act. 8. We do not agree to the above contention raised by the Revenue at this stage. A perusal of the orders of the Assessing officers reveal that the Assessing officers have not disputed that the assessee unit has carried out substantial expansion as provided under clause (b) of sub section (2) read with clause (ix) of sub section (7) of section 80IC of the Act. Almost similar view has also been taken by the Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India vs. Commissioner of Income Tax (supra) in the following concluding para of the order:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een raised by the assessee on the utilization of own funds for investment. 7.3 We have heard the rival submission and perused the relevant material on record. In the grounds raised,the assessee has challenged the disallowance only on the ground that statutory precondition of invoking Rule 8D has not been satisfied by the Assessing Officer. However, we find that the Assessing Officer hasproperly recorded the dissatisfaction on the claim of assessee of expenses of ₹ 2000 per month incurred for earning dividend income of ₹ 1,00,90,882/-. The relevant part of the assessment order is reproduced as under: 26. In view of above, I am not satisfied with the correctness of the claim of the assessee that only an expenditure of ₹ 2000/- per month was incurred for earning dividend income of ₹ 1,00,90,882/-. 7.4 In view of the above, we do not find any error in the order of the learned CIT(A) in upholding the disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules. The ground of the appeal of the assessee is accordingly dismissed. ITA No. 299/Del/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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