Assessee wins appeal for 100% deduction under section 80IC after substantial unit expansion

The Tribunal allowed the appeals of the assessee, permitting the 100% deduction under section 80IC for substantial expansion of the unit. This decision was based on a recent Supreme Court judgment clarifying that an assessee carrying out substantial expansion after availing initial exemption becomes entitled to claim 100% exemption again, overruling previous decisions that restricted such deductions.

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Issues: Allowability of 100% deduction under section 80IC of the Income Tax Act after substantial expansion.

Analysis:
1. The appeals were filed by the assessee against separate orders passed by the ld. CIT(A)-12, New Delhi, for Assessment Years 2013-14 and 2014-15.

2. The assessee claimed a deduction of Rs.2,22,05,954/- @ 100% of Profits and gains of the undertaking u/s 80IC of the Income Tax Act, 1961. The firm is located in a notified area for the purpose of 80IC deduction.

3. The issue revolved around whether the assessee, in the 6th year of operation, should be allowed to claim 100% deduction u/s 80IC, as per the Act which allows 100% deduction for the first 5 years and 25% thereafter.

4. The assessee argued that being a partnership firm engaged in manufacturing in a Special Economic Zone (SEZ), all income earned should be allowable as deduction under section 80IC of the Act.

5. The substantial expansion of the unit was completed in the previous year, leading to an increase in installed capacity. This resulted in the refixation of the initial assessment year, allowing for a 100% deduction from the relevant year.

6. The Tribunal referred to a previous case where it was held that completion of a substantial expansion makes the assessee eligible for 100% deduction for the first five years and a reduced deduction for the subsequent five years.

7. Various judgments by different courts were considered, with the Himachal Pradesh High Court allowing re-fixation of the initial assessment year after substantial expansion, contrary to the Revenue's stance based on a Supreme Court decision.

8. The Supreme Court, in a recent judgment, clarified that an assessee carrying out substantial expansion after availing initial exemption becomes entitled to claim 100% exemption again. This overruled previous decisions that restricted such deductions.

9. Considering the latest Supreme Court judgment, the Tribunal allowed the appeals of the assessee, permitting the 100% deduction under section 80IC for substantial expansion of the unit.

10. As a result, the appeals of the assessee were allowed, granting them the desired deduction under section 80IC of the Income Tax Act.

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