ITAT Chandigarh Bench grants full deduction under section 80IC, rejects 25% cap

The ITAT Chandigarh Bench allowed the appeals related to the restriction of deduction claimed under section 80IC by assessees. The court rejected the limitation of deduction to 25% of eligible profits and directed the Assessing Officer to grant 100% deduction for units undertaking substantial expansion before 7.1.2003. The delay in filing one of the appeals was condoned due to the hospitalization of the Accounts Manager, supported by a medical certificate. The decision provided clarity on the entitlement of deduction under section 80IC for new units with substantial expansion.

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Issues:
- Condonation of delay in filing appeal
- Restriction of deduction claimed under section 80IC

Condonation of Delay in Filing Appeal:
The appeals related to two different assessees against separate orders passed by the Ld. Commissioner of Income Tax(Appeals). The appeal in ITA No. 1654/Chd/2017 was time-barred by 358 days due to the absence of the Accounts Manager, who was hospitalized. An application for condonation of delay was filed, supported by a medical certificate. The delay was condoned as the ld. DR did not object to it.

Restriction of Deduction Claimed under Section 80IC:
The common issue in all appeals was the restriction of deduction claimed by the assessees under section 80IC to 25% of eligible profits instead of 100% due to 'substantial expansion'. The Assessing Officer denied the 100% deduction, limiting it to 25% for units not operational before 01.07.2003. The ld. CIT(A) upheld this decision following a previous ITAT Chandigarh Bench case. The assessees appealed, citing the Himachal Pradesh High Court's decision in favor of allowing 100% deduction for new units with substantial expansion. The High Court's decision clarified that units operational before 7.1.2003 undertaking substantial expansion were entitled to 100% deduction under section 80IC.

Decision and Analysis:
The ITAT Chandigarh Bench considered the High Court's decision and rejected the ld. DR's request to verify substantial expansion, as it was not disputed in the assessment orders. The ITAT set aside the ld. CIT(A)'s order and directed the Assessing Officer to grant the assessees' 100% deduction of eligible profit. The appeals were allowed based on the High Court's ruling, providing clarity on the entitlement of deduction under section 80IC for new units with substantial expansion.

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