Appeal allowed for reconsideration of tax deduction eligibility under section 80IC.

The appeal was allowed for statistical purposes, directing the Ld. AO to reconsider the Supreme Court judgments and issue a fresh order under section 263/143(3) of the Income Tax Act, 1961. The case involved the eligibility of deduction under section 80IC for substantial expansion, with the Ld. AO's failure to examine the issue leading to a revision of the assessment order by the Ld. PCIT. Despite conflicting decisions from different Tribunals and Courts, the Bench emphasized the need for a thorough review and adherence to relevant legal precedents.

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Issues:
The appeal involves the assessment order passed under section 263/143(3) of the Income Tax Act, 1961, regarding the deduction claimed under section 80IC of the Act for substantial expansion undertaken by the assessee.

Issue 1: Failure to Examine Deduction Eligibility under Section 80IC
The appeal was filed against the order of Ld. First Appellate Authority arising from the assessment order passed by the Ld. AO. The assessment order was revised by Ld. PCIT as it was found to be erroneous and prejudicial to the revenue due to the failure of Ld. AO to examine the issue of deduction eligibility under section 80IC of the Act. The expansion of the industrial unit by installing new plant and machinery was considered substantial, exceeding 50% of the existing assets, thus falling under Section 80IC (8)(ix) of the Act.

Issue 2: Disallowance of Deduction
Ld. CIT(A) noted that the benefit of substantial expansion was erroneously granted by Ld. AO without considering a Chandigarh Tribunal decision which stated that a newly established unit cannot claim 100% deduction under section 80IC for substantial expansion simultaneously with an existing unit already claiming the same. Despite the assessee's reference to a favorable judgment by the Himachal Pradesh High Court overturning the Chandigarh Tribunal decision, Ld. AO made a 75% disallowance to protect the revenue's interest.

Issue 3: Interpretation of Supreme Court Judgments
Ld. DR highlighted a subsequent Supreme Court judgment in CIT vs. M/s. Classic Binding Industries, which clarified that the assessee would be entitled to a deduction of 25% for the remaining assessment years, as there cannot be two initial assessment years within a span of 10 years. However, Ld. DR omitted mentioning another Supreme Court judgment in DCIT vs. M/s. Aarhan Softronics, which declared the judgment in the Classic Binding Industries case as not good law.

In conclusion, the Bench decided to allow the appeal for statistical purposes and directed the Ld. AO to reconsider the judgments of the Honorable Supreme Court of India and issue a fresh order under section 263/143(3) of the Act.

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