The Principal Commissioner Of Income Tax-2, Ludhiana v. M/S Raj Industries, Pawa, Ludhiana

ITA-8530-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-8530-2018 (O&M) Date of Decision: 29.4.2019 The Principal Commissioner of Income Tax-2, Ludhiana ....Appellant. Versus M/s Raj Industries, Pawa, Ludhiana ...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.Mr. Amrinder Singh, Advocate for the respondent.***Mr. Amrinder Singh, Advocate for the respondent.*** 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 dated2.7.2018 (Annexure A-III) passed by the Income Tax Appellate Tribunal,Chandigarh Bench 'B', Chandigarh (hereinafter referred to as “theTribunal”) in ITA No. 1617/Chd/2017, for the assessment year 2014-15,claiming the following substantial questions of law:- (i)Whether an assessee who sets up a new industry ofa kind mentioned in sub-section (2) of Section80IC of the Income Tax Act, 1961 and startsavailing exemption of 100 per cent tax under sub-section (3) of Section 80IC of the Act (which isadmissible for five years) can start claiming thea kind mentioned in sub-section (2) of Section80IC of the Income Tax Act, 1961 and startsavailing exemption of 100 per cent tax under sub-section (3) of Section 80IC of the Act (which isadmissible for five years) can start claiming the exemption at the same rate of 100% beyond theperiod of five years on the grounds that theassessee has now carried out substantial expansionin its manufacture unit? (ii)Whether there can be more than one 'initialassessment year' for availing the deduction u/s80IC of the Income Tax Act?assessment year' for availing the deduction u/s80IC of the Income Tax Act? (iii)Whether the order of the Income Tax AppellateTribunal, which is in favour of the assessee, isliable to be set aside, in view of the judgment ofHon'ble Supreme Court, dated 20.8.2018, in CivilAppeal No. 7208 of 2018 in the case ofCommissioner of Income Tax Vs. M/s ClassicBinding Industries, wherein the issue has beendecided against the assessee in favour of theRevenue? Tribunal, which is in favour of the assessee, isliable to be set aside, in view of the judgment ofHon'ble Supreme Court, dated 20.8.2018, in CivilAppeal No. 7208 of 2018 in the case ofCommissioner of Income Tax Vs. M/s ClassicBinding Industries, wherein the issue has beendecided against the assessee in favour of theRevenue? (iv)Whether the order of the Income Tax AppellateTribunal, which is in favour of the assessee, isliable to be set aside, as this Hon'ble Court in thecase of the same assessee, in ITA No. 217 of 2017for the assessment year 2013-14, in the decisiondated 6.9.2018, has adjudicated the identical issueagainst the assessee and in favour of the revenue?Tribunal, which is in favour of the assessee, isliable to be set aside, as this Hon'ble Court in thecase of the same assessee, in ITA No. 217 of 2017for the assessment year 2013-14, in the decisiondated 6.9.2018, has adjudicated the identical issueagainst the assessee and in favour of the revenue? 2.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee filed its return of income forthe assessment year 2014-15 on 27.11.2014 at an income of ` 56,76,670/-.narrated therein may be noticed. The assessee filed its return of income forthe assessment year 2014-15 on 27.11.2014 at an income of ` 56,76,670/-. ITA-8530-2018 2.A few facts necessary for adjudication of the instant appeal asnarrated therein may be noticed. The assessee filed its return of income forthe assessment year 2014-15 on 27.11.2014 at an income of ` 56,76,670/-.narrated therein may be noticed. The assessee filed its return of income forthe assessment year 2014-15 on 27.11.2014 at an income of ` 56,76,670/-. ITA-8530-2018 The case was selected for scrutiny and notice dated 28.8.2015 under Section143(2) of the Act was issued to the assessee. The Assessing Officer videorder dated 12.5.2016 (Annexure A-I) framed the assessment at an incomeof ` 19,12,69,129/- against the returned income of ` 56,76,670/- by makingaddition on account of disallowance under Section 80IC of the Act. Feelingaggrieved by the order, Annexure A-I, the assessee filed an appeal beforethe Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”]. TheCIT(A) vide order dated 24.10.2017 (Annexure A-II) dismissed the appealof the assessee and upheld the disallowance made by the Assessing Officer. Still dissatisfied, the assessee filed an appeal before the Tribunal. TheTribunal vide order dated 2.7.2018 (Annexure A-III) allowed the appeal ofthe assessee in view of the order dated 28.11.2017 passed by the HimachalPradesh High Court in M/s. Stoverkraft India v. Commissioner of IncomeTax (2018) 400 ITR 225 (HP). Hence, the present appeal. 3.We have heard learned counsel for the parties. 4.It was not disputed by the learned counsel for the parties thatthe issue involved herein is covered by the decision of the Apex Court inCommissioner of Income Tax v. Aarham Softronics, Civil Appeal No.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: (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 the definition 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 Section80-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). For ITA-8530-2018 -5- (c) However, in case substantial expansion is carriedout as defined in clause (ix) of sub-section (8) of Section80-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). For ITA-8530-2018 -5- example, 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 29, 2019gbs (MANJARI NEHRU KAUL)JUDGE Whether Speaking/ReasonedYes/NoWhether ReportableYes/No