Case Law Details
Brief of the Case
Section 80 IC – 100% deduction allowed on every substantial expansion, in a total period of 10 Years
ITAT Delhi held in the case of M/s Tirupati LPG Industries Ltd. vs. JCIT that a plain reading of Sec.80-IC (8)(v) which defines the term “initial assessment year” read with Sec.80-IC(8)(ix) which defines the term “substantial expansion” makes it clear that there is no restriction on more than one substantial expansion being undertaken by an assessee. In our view, a unit can undertake any number of substantial expansions, in the absence of any specific restriction in the section. Substantial expansion requires additional investment and results in higher production employment etc. Industrialists have to be encouraged to undertake substantial expansion. The section recognizes this fact and provides for an incentive, if an assessee undertakes “substantial expansion”. Hence, assessee is allowed full deduction @ 100 % from the year of substantial expansion. However, total period of deduction is restricted to 10 years i.e. u/s 80-IC or u/s 80-IB or u/s 10C as the case may be, deduction can be claimed for a total period of 10 years only.
Facts of the Case
The company is engaged in manufacturing and selling of new LPG cylinders and conductor wires. The assessee company manufactures domestic LPG cylinders for various Government Oil companies. The manufacturing unit of the company is located at Khasra no. 235,237,238/1 and 238/2, Industrial area, Selaqui, Dehradun. This unit completed substantial expansion during the Assessment Year 2004-05 and claimed deduction u/s 80 IC from the Assessment Year 2004-05 by declaring it to be its initial Assessment Year for the claim of deduction. Claim of deduction u/s 80 IC was allowed by the Assessing Officer for the Assessment Year 2004-05. The claim has been allowed u/s 143(3) for the Assessment Years 2004-05 to 2008-09 @ 100% and for the AY 2009-10 @30%.
During the instant year which is seventh assessment year of claiming deduction, the assessee has claimed deduction @ 100% of the profits u/s 80IC amounting to Rs.9,26,57,160/-, while it was eligible for deduction @ 30%. The assessee is claiming that substantial expansion has been completed again during the A.Y. 2009-10 resulting in increase of installed capacity of the unit. Since the substantial expansion is completed again, therefore, the initial Assessment Year is being refixed at Assessment Year 2009-10. The A.O. in his order u/s 143(3) rejected the claim of the assessee after analyzing the provision of S.80-IC and the government policy for the State of Uttaranchal and the State of Himachal Pradesh. AO held that the assessee made the claim of deduction @ 100% of profits in the seventh year while it knew fully well that it was eligible for deduction @ 30% of the profits. Therefore, I have reasons to believe that the assessee furnished inaccurate particulars of income. Accordingly proceedings u/s 271(1) (c) are being initiated separately for furnishing inaccurate particulars of income.
Contention of the Assessee
The ld counsel of the assessee submitted that the issues involved are squarely covered by the Order dated 29/1/2014 of the Coordinate Bench of Tribunal decided in the assessee’s own case in ITA No. 991/Del/2013 for the assessment year 2009-10. Accordingly, he requested that the issue in the present case may be decided in favour of the assessee by following the Tribunal’s order in assessee’s own case.
Contention of the Revenue
The ld counsel of the revenue supported the order of AO & CIT (A).
Held by CIT (A)
The CIT (A) upheld the order of AO.
Held by ITAT
ITAT held that in the case of Tirupati LPG Industries Ltd. vs. DCIT in ITA No. 991/Del/2013 (AY 2009-10) in assessee’s own case, it was held that a plain reading of Sec.80-IC(8)(v) which defines the term “initial assessment year” read with Sec.80-IC(8)(ix) which defines the term “substantial expansion” makes it clear that there is no restriction or bar on more than one substantial expansion being undertaken by an assessee. In our view, a unit can undertake any number of substantial expansions, in the absence of any specific restriction in the Section. There is no suggestion in the language of the section that incentive u/s 80 IC is not available if the assessee substantially expands for a second or third time. Substantial expansion requires additional investment and results in higher production employment etc. Industrialists have to be encouraged to undertake substantial expansion. The section recognizes this fact and provides for an incentive, if an assessee undertakes “substantial expansion”.
Further, the term “initial year” has been defined, as a year in which substantial expansion is completed. There is nothing to suggest that there cannot be a second initial year if a second substantial expansion is completed. Even if an existing unit which is claiming 80 IC undertakes first substantial expansion then also the year of completion of the substantial expansion will be the “initial year”. If the literal meaning of the term “initial assessment year” is to be taken, then there is no requirement of defining this term in the section.
Further, the CIT (A) denies the deduction on the ground that it would amount to ever greening of an incentive provision is not correct. As per section (6) of Section 80-IC, deduction is available for a total period of 10 years irrespective of the fact whether the deduction is claimed u/s 80-IC or u/s 80-IB or u/s 10C as the case may be. Thus there is no ever greening of the provisions. The assessee cannot claim the said deduction for a total period exceeding 10 years. The deduction could be allowable only for the balance period of 5 years including this Assessment Year 2009-10. Only the rate of deduction goes up.
The facts & circumstances of the present case is squarely covered by the above Tribunal’s Order dated 29.01.2014 in assessee’s own case. Therefore, respectfully following the precedent, as aforesaid, we delete the addition.
Accordingly appeal of the assessee allowed.
ITAT Chd Bench not accepted the above decision of Delhi Bench and disallowed the benefit of substantial expansion u/s 80IC in the case of Hycron Electronics vs ITO, Baddi : ITA NO. 798/CHD/2012.
ITAT Chd findings :- Benefit of substantial expansion u/s 80IC would be available only to those units which were in existence as on 07.01.2003