Appeal granted for substantial expansion deduction under section 80IC

The appeal was allowed for statistical purposes, and the case was remitted back to the Assessing Officer to grant necessary relief in accordance with the law following a High Court decision clarifying the interpretation of substantial expansion for claiming deduction under section 80IC. The appellant's challenge against the disallowance of the benefit of substantial expansion under section 80IC(2) and the restriction of deduction to 25% was successful, with the Tribunal directing a fair hearing and compliance with the High Court's ruling.

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Issues:
1. Disallowance of benefit of substantial expansion u/s 80IC(2) and confirmation of deduction u/s 80IC limited to 25%.
2. Interpretation of substantial expansion for claiming deduction u/s 80IC.

Analysis:

Issue 1: Disallowance of benefit of substantial expansion u/s 80IC(2) and confirmation of deduction u/s 80IC limited to 25%.

The appellant challenged the order of CIT(A)-2 Gurgaon dated 29.09.2016, disputing the disallowance of the benefit of substantial expansion under section 80IC(2) and the restriction of deduction to 25% instead of 100%. The appellant argued that the Assessing Officer (AO) had acknowledged the substantial expansion in the 2011-12 assessment year. The appellant relied on a High Court decision in the case of M/s Stove Craft India to support their claim. The Senior Departmental Representative (Sr.DR) supported the impugned order.

Issue 2: Interpretation of substantial expansion for claiming deduction u/s 80IC.

The Appellate Tribunal noted that the appellant, engaged in manufacturing laminated boards, claimed a 100% deduction under section 80IC, which was reduced to 25% by the AO and CIT(A) based on a previous ITAT decision in the case of Hycron Electronics. The tax authorities considered the commencement of business in July 2005 and the 2006-07 assessment year as the initial year for the deduction claim. The denial of the 100% deduction was based on the view that substantial expansion in the 2010-11 financial year, being the 9th year of production, did not entitle the appellant to the full deduction.

The Tribunal observed that post the High Court judgment in the case of M/s Stove Craft India, the issue was clarified, leading to the remittance of the case back to the AO for granting necessary relief in accordance with the law and providing the appellant with a fair hearing as per the High Court's decision.

In conclusion, the appeal of the assessee was allowed for statistical purposes, and the order was pronounced in open court on 04.04.2018.

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