2018 (2) TMI 258 - AT - Income Tax

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 ... Claim of deduction u/s 80IC - entitlement of the deduction at the rate of 100% of the eligible profit to new units on undertaking substantial expansion - Held that:- The contention of the Ld.DR of restoring the issue to the AO for verification of the fact of having undertaken substantial expansion has also been dealt by the ITAT in its decision in the case of one of the assessees, M/s Security products Pvt. Ltd.(2018 (2) TMI 163 - ITAT CHANDIGARH) rejecting the contention on account of the specific finding of the Jurisdictional High Court while deciding the issue in favour of the assessee in the case of Stove Craft (2017 (12) TMI 69 - HIMACHAL PRADESH HIGH COURT) that the Revenue has not disputed this fact and which in the case of the present assessee is evident from the assessment orders also. We therefore reject this contention of the ld. DR. Thus the order of the ld. CIT(A) is set aside and the Assessing Officer is directed to grant the assessee's deduction of 100% of its eligible profit. - Decided in favour of assessee Issues:- Condonation of delay in filing appeal- Restriction of deduction claimed under section 80ICCondonation 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.