Pr. Commissioner Of Income Tax v. M/S Amit Engineers

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA ITA No. 19 of 2016 Decided on: 25.06.2019 Pr. Commissioner of Income Tax ...... Appellant. Versus M/s Amit Engineers …...Respondent Coram The Hon’ble Mr. Justice V. Ramasubramanian, Chief Justice. The Hon’ble Mr. Justice Dharam Chand Chaudhary, Judge.Whether approved for reporting?[1] For the appellant: Mr. Vinay Kuthiala, Senior Advocate with Ms. Vadana Kuthiala, Advocate. For the respondents: Mr. Vishal Mohan, Advocate. V. Ramasubramanian, Chief Justice,(Oral) The Revenue has come up with the above appeal under Section 260-A of the Income Tax Act, 1961, raising the following substantial questions of law:- “1. Whether the Hon’ble ITAT has erred in holding the reopening of the case u/s 147 of the I.T. Act, 1961 invalid, by considering the intimation notice u/s 143(1(a) as an assessment. the reopening of the case u/s 147 of the I.T. Act, 1961 invalid, by considering the intimation notice u/s 143(1(a) as an assessment. 2. Whether the Hon’ble ITAT has erred in allowing 100% deduction u/s 80IC of the Act, allowing 100% deduction u/s 80IC of the Act, 1Whether the reporters of Local Papers may be allowed to see the judgment? Yes. consequent to quashing of proceedings u/s 147, despite the fact that Hon’ble ITAT itself has decided the issue of substantial expansion in favour of revenue.” 2. Heard, learned Senior Standing Counsel appearing for the Revenue and Mr. Vishal Mohan, learned Counsel appearing for the respondent-assessee. In Principal Commissioner of Income Tax Shimla V. M/s Aarham Softronics, Civil Appeal No.(s). 1784 of 2019, decided on 20.02.2019, the Supreme Court took up for consideration a question of law which they formulated in para 2 of the judgment, as follows:- “Whether an assessee who sets up a new industry of a kind mentioned in sub-section (2) of Section 80-IC of the Act and starts availing exemption of 100 per cent tax under sub-section (3) of Section 80-IC (which is admissible for five years) can start claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit?” 3. Eventually, the above question of law was answered by the Supreme Court in favour of the assessee. The conclusion reached by the Supreme Court or to be found in para 24 of the judgment, it will be useful to extract the same: “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 Himachal 25 Pradesh 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 five assessment years commencing with the 'initial assessment year'. For the next five years, the admissible deduction would be 25% (or 30% where the assessee is a company) of 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. (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 assessment years. 4. In view of the above, the second question of law has to be answered against the Revenue. That takes us to the first question of law which revolves around the findings of the Tribunal that reopening of the case under Section 147 of the Act was invalid. But once the second question of law is answered against the Revenue, it would not be a case for reopening of assessment under Section 147. Therefore, the first question of law is also answered against the Revenue and the appeal is dismissed. (V. Ramasubramanian) Chief Justice June 25, 2019 (karan/naveen) (Dharam Chand Chaudhary) Judge