HC explains concept of initial assessment year & substantial expansion U/s. 80-IC

Stovekraft India Vs. CIT (Himachal Pradesh High Court)

The moot issue involved in these appeals, inter alia, is as to whether an “undertaking or an enterprise” (hereinafter referred to as the Unit), established after 7th January, 2003, carrying out “substantial expansion” within the specified window period, i.e. between 7.1.2003 and 1.4.2012, would be entitled to deduction on profits @ 100%, under Section 80-IC of the Income Tax Act. Also, if so, then for what period.

2. Since it is a legal issue, by consent, only brief facts of ITA No. 20 of 2015, titled as M/s Stovekraft India v. Commissioner of Income Tax, are being referred to.

3. Appellant M/s Stovekraft India (hereinafter referred to as the assessee) started its business activity/ came into operation with effect from 6.1.2005 and treating the Financial Year 2005-2006 (Assessment Year 2006- 2007), as initial assessment year, claimed deduction on profits @ 100% under Section 80-IC of the Income Tax Act, 1961 (hereinafter referred to as the Act). Sometime in the Financial Year 2009- 2010, the assessee carried out “substantial expansion”of the “Unit” and by treating the said Financial Year to be the “initial assessment year”, further claimed deduction @ 100%, instead of 25%, under Section 80-IC of the Act.

4. We need not deal with the factual aspect any further, save and except that the assessee’s contention of further claim of deduction @ 100% with effect from Financial Year 2009-2010 after undertaking “substantial expansion”, so carried out in the year 2009-2010, did not find favour with the Assessing Officer, who vide order dated 23.12.2013 (Annexure A-1) (Page-29), disallowed the claim, holding the assessee entitled to deductions not @ 100% but on reduced basis @ 25%, as provided under Section 80-IC.

Please become a Premium member. If you are already a Premium member, login here to access the full content.