Principal Commissioner Of Income Tax, Panchkula v. M/S Virgo Industries, Panchkula

ITA-453-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-453-2018 (O&M) Date of Decision: 2.4.2019 Principal Commissioner of Income Tax, Panchkula Versus ....Appellant. M/s Virgo Industries, Panchkula ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Yogesh Putney, Senior Standing Counsel for the appellant.*** AJAY KUMAR MITTAL, J. 1.This appeal has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated4.4.2018 (Annexure A-3) passed by the Income Tax Appellate Tribunal,Chandigarh Bench 'B', Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 1356/CHD/2017, for the assessment year 2014-15,claiming the following substantial questions of law:- a)Whether on the facts and in the circumstances ofthe case the Ld. ITAT is right in law in holdingthat the Assessee is eligible for deduction underSection 80IC of the Income Tax Act, 1961 @100% against the eligible profits for theAssessment Year 2014-15 being 9[th] Year ofproduction on account of undertaking substantialexpansion during the Financial Year 2010-11relevant to the Assessment Year 2011-12 bythe case the Ld. ITAT is right in law in holdingthat the Assessee is eligible for deduction underSection 80IC of the Income Tax Act, 1961 @100% against the eligible profits for theAssessment Year 2014-15 being 9[th] Year ofproduction on account of undertaking substantialexpansion during the Financial Year 2010-11relevant to the Assessment Year 2011-12 by ITA-453-2018 treading the Assessment Year 2011-12 as initialAssessment Year? b) Whether on the facts and in the circumstances ofthe case, the Ld. ITAT is right in law in allowingthe Appeal of the Assessee by following the orderdated 28.11.2017 passed by the Hon'ble HimachalPradesh High Court in the matter of M/sStoverkraft India Vs. Commissioner of IncomeTax reported as (2018) 400 ITR 225 (HP) byholding the order in the matter of Stoverkraft India(supra) to be passed by the jurisdictional HighCourt ignoring the doctrine that orders of the HighCourts are binding on the subordinate Courts andauthorities or Tribunals under its superintendencethroughout the territory in relation to which itexercises jurisdiction which does not extendbeyond its territorial jurisdiction? c) Whether on the facts and in the circumstances ofthe case, the order passed by the Ld. ITAT islegally sustainable in view of the judgment dated20.08.2018 delivered by the Hon'ble Apex Court inthe matter of Commissioner of Income Tax Vs. M/s Classic Binding Industries (supra)answering the question in favour of the Revenue?2.Put shortly, the facts necessary for adjudication of the instantappeal as narrated therein are that the assessee is engaged in the business of ITA-453-2018 -3- c) Whether on the facts and in the circumstances ofthe case, the order passed by the Ld. ITAT islegally sustainable in view of the judgment dated20.08.2018 delivered by the Hon'ble Apex Court inthe matter of Commissioner of Income Tax Vs. M/s Classic Binding Industries (supra)answering the question in favour of the Revenue?2.Put shortly, the facts necessary for adjudication of the instantappeal as narrated therein are that the assessee is engaged in the business of ITA-453-2018 -3- manufacturing of Laminates and Pre-Laminated Boards at Kala Amb,District Sirmour, Himachal Pradesh. It filed its return of income on27.11.2017 declaring the income at ` 16,800/-. The case of the assesseewas selected for scrutiny under CASS and a notice dated 28.8.2015 underSection 143(2) of the Act was issued. The assessee had claimed deductionunder Section 80IC of the Act @ 100% for the year under consideration, i.e.9[th] year on account of substantial expansion. The said deduction was basedon substantial expansion carried out by the assessee during the financialyear 2010-11 relevant to the assessment year 2011-12. The AssessingOfficer vide order dated 5.5.2016 (Annexure A-1) framed the assessmentunder Section 143(3) of the Act disallowing the claim of the assessee underSection 80IC of the Act by restricting the same to 25% against the claimmade at the rate of 100%. Feeling aggrieved by the order, Annexure A-1,the assessee filed an appeal before the Commissioner of Income Tax(Appeals) [for brevity “the CIT(A)”]. The CIT(A) vide order dated4.7.2017 (Annexure A-2) dismissed the appeal of the assessee and upheldthe disallowance made by the Assessing Officer. Still dissatisfied, theassessee filed an appeal before the Tribunal. The Tribunal vide order dated4.4.2018 (Annexure A-3) allowed the appeal of the assessee in view of theorder dated 28.11.2017 passed by the Himachal Pradesh High Court in M/s.Stoverkraft India v. Commissioner of Income Tax (2018) 400 ITR 225(HP). Hence, the present appeal. 3.We have heard learned counsel for the revenue. 4.It was not disputed by the learned counsel for the revenue thatthe issue involved herein is covered by the decision of the Apex Court in Commissioner of Income Tax v. Aarham Softronics, Civil Appeal No. ITA-453-2018 1784 of 2019 decided on 20.02.2019. The Apex Court while dismissing allthe appeals of the revenue, had in para 24, held as under:- “24.The aforesaid discussion leads us to the followingconclusions: conclusions: (a) Judgment dated 20th August, 2018 in ClassicBinding Industries case omitted to take note of thedefinition ‘initial assessment year’ contained in Section80-IC itself and instead based its conclusion on thedefinition contained in Section 80-IB, which does applyin these cases. The definitions of ‘initial assessmentyear’ in the two sections, viz. Sections 80-IB and 80-ICare materially different. The definition of ‘initialassessment year’ under Section 80-IC has made all thedifference. Therefore, we are of the opinion that theaforesaid judgment does not lay down the correct law. (b) An undertaking or an enterprise which had set up anew unit between 7th January, 2003 and 1st April, 2012in State of Himachal Pradesh of the nature mentioned inclause (ii) of sub-section (2) of Section 80-IC, would beentitled to deduction at the rate of 100% of the profitsand gains for five assessment years commencing with the‘initial assessment year’. For the next five years, theadmissible deduction would be 25% (or 30% where theassessee is a company) of the profits and gains. (c) However, in case substantial expansion is carriedout as defined in clause (ix) of sub-section (8) of Section (c) However, in case substantial expansion is carriedout as defined in clause (ix) of sub-section (8) of Section 80-IC by such an undertaking or enterprise, within theaforesaid period of 10 years, the said previous year inwhich the substantial expansion is undertaken wouldbecome ‘initial assessment year’, and from thatassessment year the assessee shall be entitled to 100%deductions of the profits and gains. (d) Such deduction, however, would be for a totalperiod of 10 years, as provided in sub-section (6). Forexample, if the expansion is carried out immediately, onthe completion of first five years, the assessee would beentitled 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 beentitled to 100% deduction for the first five years,deduction @ 25% of the profits and gains for the nexttwo years and @ 100% again from 8th year as this yearbecomes ‘initial assessment year’ once again. However,this 100% deduction would be for remaining three years,i.e., 8th, 9th and 10th assessment years.” 5. In view of the above, the present appeal is also dismissed. (AJAY KUMAR MITTAL) JUDGE April 2, 2019gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/ReasonedWhether Reportable YesYes