2014 (1) TMI 1689 - AT - Income Tax

Tribunal allows 100% deduction for substantial expansion under Section 80-IC.

Tirupati LPG Industries Ltd. Versus DCIT, Circle 2

The Tribunal allowed the appeal, affirming the assessee's entitlement to a 100% deduction for the substantial expansion undertaken in the Assessment Year ... Exemption u/s 80 IC - interpretation of the term “initial assessment year - Held that:- On a plain reading of the section and interpretation of the term initial Assessment Year, we conclude that the claim of the assessee is admissible. Even if a view is taken that there is some ambiguity in the language of the section, then, being an incentive provisions, the ratio of the decisions of the Hon’ble Supreme Court in the case of Bajaj Tempo (1992 (4) TMI 4 - SUPREME Court ), Gwalior Rayon Silks Mfg.Co.Ltd.(1992 (4) TMI 3 - SUPREME Court ) have to be followed and benefit given to the assessee - Decided in favour of assessee Issues Involved:1. Eligibility for deduction under Section 80-IC.2. Interpretation of 'initial assessment year' under Section 80-IC.3. Legitimacy of claiming 100% deduction for a second substantial expansion.Issue-wise Detailed Analysis:1. Eligibility for Deduction under Section 80-IC:The assessee, a company engaged in manufacturing LPG cylinders, claimed a deduction under Section 80-IC amounting to Rs. 6,47,40,090 for the Assessment Year 2009-10. The company's manufacturing unit, located in Dehradun, completed substantial expansion during the Assessment Year 2004-05 and claimed the initial Assessment Year for deduction under Section 80-IC starting from 2004-05. The deduction was allowed at 100% for the first five years and at 30% for the subsequent years. The dispute arose when the assessee claimed a 100% deduction again in the sixth year, asserting another substantial expansion.2. Interpretation of 'Initial Assessment Year' under Section 80-IC:The Assessing Officer (A.O.) and the CIT(A) contended that the initial Assessment Year could only be set once, and the deduction should be restricted to 30% after the first five years. The CIT(A) upheld the A.O.'s decision, emphasizing that allowing a second initial Assessment Year would lead to 'evergreening of the incentive provision.' The assessee argued that the term 'initial assessment year' should be redefined upon each substantial expansion, allowing for another period of 100% deduction.3. Legitimacy of Claiming 100% Deduction for a Second Substantial Expansion:The Tribunal analyzed the provisions of Section 80-IC and concluded that there is no explicit restriction in the statute against claiming a second initial assessment year upon a subsequent substantial expansion. The Tribunal noted that the definition of 'initial assessment year' includes the year of substantial expansion and that the statute does not limit the number of substantial expansions an entity can undertake. Consequently, the Tribunal ruled that the assessee's claim for a 100% deduction for the second substantial expansion was admissible. However, it clarified that the total period for claiming the deduction cannot exceed ten years from the initial Assessment Year 2004-05.Conclusion:The Tribunal allowed the appeal, affirming that the assessee is entitled to a 100% deduction for the substantial expansion undertaken in the Assessment Year 2009-10. It emphasized that the statute's language supports multiple substantial expansions and corresponding initial assessment years, provided the total deduction period does not exceed ten years.Order Pronounced:The appeal of the assessee was allowed, and the order was pronounced in the Open Court on 29th January 2014.