2021 (11) TMI 633 - AT - Income Tax

Tribunal permits appeal after condoning delay, grants 100% deduction post expansion

Sanjeev Batish Versus The DCIT, Circle Panchkula

Sanjeev Batish Versus The DCIT, Circle Panchkula - TMI Issues Involved:1. Condonation of delay in filing the appeal.2. Eligibility for 100% deduction under Section 80IC of the Income Tax Act post substantial expansion.Issue-wise Detailed Analysis:1. Condonation of Delay in Filing the Appeal:The appeal was time-barred by 879 days. The assessee filed an application for condonation of delay supported by an affidavit, attributing the delay to inadvertent oversight by the accountant, Shri Gajendra Arya. The Department opposed the application. The Tribunal, after examining the affidavit, was satisfied that the delay was due to an unintentional bonafide mistake. Citing the Supreme Court's ruling in Ram Nath Sahu Vs. Gobardhan Sao And Others, which states that acceptance of explanation for condonation of delay should be the rule and refusal an exception, the Tribunal condoned the delay. The Tribunal emphasized that rejecting the application on hyper-technical grounds would cause irreparable injury to the party and defeat the right to a decision on merit. Thus, the appeal was admitted for hearing on merit.2. Eligibility for 100% Deduction under Section 80IC Post Substantial Expansion:The assessee, engaged in manufacturing and trading construction chemicals, claimed a 100% deduction under Section 80IC based on substantial expansion during FY 2009-10. The Assessing Officer (A.O.) restricted the claim to 25%, arguing that 100% deduction is only available for the initial five assessment years. The CIT(A) upheld this view, relying on the decision in Hycron Electronics Vs. ITO.The Tribunal examined whether the assessee is entitled to claim 100% deduction under Section 80IC on profits from the eligible undertaking during the assessment year under appeal. The assessee had set up an undertaking in Himachal Pradesh, starting commercial production on 24/05/2005, and claimed 100% deduction for the initial five years. After substantial expansion in FY 2009-10, the assessee again claimed 100% deduction for AY 2012-13. The A.O. and CIT(A) restricted this to 25%, arguing that the 100% deduction is only for the initial five years.The Tribunal referred to the Supreme Court's decision in Pr. CIT Vs. Aarham Softronics, which addressed whether an assessee can claim 100% deduction beyond the initial five years after substantial expansion. The Supreme Court held that substantial expansion triggers a new 'initial assessment year,' allowing 100% deduction again, provided the total deduction period does not exceed 10 years.The Tribunal noted that the A.O. did not dispute the substantial expansion, as the investment in plant and machinery increased by at least 50% of the existing book value. The Supreme Court's interpretation of 'initial assessment year' under Section 80IC allows for more than one initial assessment year within the 10-year period, triggered by substantial expansion.The Tribunal concluded that the assessee is entitled to 100% deduction post-substantial expansion, aligning with the Supreme Court's ruling. Therefore, the impugned order was set aside, and the appeal of the assessee was allowed.Conclusion:The Tribunal condoned the delay in filing the appeal and ruled that the assessee is eligible for 100% deduction under Section 80IC post-substantial expansion, setting aside the CIT(A)'s order and allowing the appeal. The decision was based on the Supreme Court's interpretation in Pr. CIT Vs. Aarham Softronics, ensuring substantial justice over technical considerations.