TaxTMI 
TaxTMI 
2018 (8) TMI 1209
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....nuka Sahu,Adv., Mr. Jasdeep Singh Dhillon,Adv., Mr. Prabhat Chaurasia,Adv. JUDGMENT A.K.SIKRI, J. A neat question of law which arises in these appeals revolve around Section 80-IC of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The High Court by its impugned judgment dated 28th November, 2017 has discussed various aspects and nuances of the aforesaid provisions which had arisen because of varied kinds of issues raised in a batch of appeals filed by the assessees before the High Court. We are not concerned with all those issues. The only question which needs to be answered in these appeals is as follows: "Whether an assessee who sets up a new industry of a kind mentioned in sub-section (2) of Section 80-IC of the Act and starts availing exemption of 100 per cent tax under sub-section (3) of Section 80-IC (which is admissible for five years) can start claiming the exemption at the same rate of 100% beyond the period of five years on the ground that the assessee has now carried out substantial expansion in its manufacturing unit?" 2. To understand the aforesaid question of law in clear terms, it may be mentioned at this stage itself that sub-section (2) of Se....
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....ny business of an industrial undertaking, so specified therein, was entitled to certain deductions for a period commencing from 1st April, 1993. With effect from 1st April, 2000, the said provision was bifurcated with the insertion of another Section, i.e., 80-IB, dealing with "certain industrial undertakings other than infrastructure development undertakings." Thereafter, the Legislator, in its wisdom, enacted a special provision, in respect of "units" established in certain special category States. Thus, Section 80-IC came to be inserted by virtue of Finance Act, 2003, applicable with effect from 1st April, 2004. At this point., It may only be noticed that correspondingly certain provisions of Section 80-IB were also amended/repealed. Deductions under the said Section were discontinued for the Assessment Years commencing from 1st April, 2004 (Sub-section (4) of Section 80- IB). 5. The assessee firm derives income from manufacturing of printed embossed book binding cover material of cotton in sheet from and security fiber of dual coloured combination. The assessee firm comprised of nine partners during the relevant assessment year. The assessee started its business activity/opera....
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....e the ITAT. 11. While observing that both the parties agreed that the issue involved in appeals, was squarely covered against the assessee in view of the decision of the coordinate bench of ITAT in the case of Hycron Electronics, dismissed the appeals by a composite order dated 11th August, 2016 for Assessment Year 2011-12 and Assessment Year 2012-13 by holding that assessee is eligible for deduction under Section 80 of the Act @ 25% of the profit derived from industrial undertaking for these years and not @ 100% of deduction claimed by the assessee. 12. Dissatisfied with the aforesaid order dated 11th August, 2016, assessee filed appeal under Section 260A of the Act, 1961 before the High Court of Himachal Pradesh, Shimla raising therein substantial questions of law. The result of other assessees was also on almost same pattern, who filed their respective appeals as well. The High Court has decided the issue in a composite judgment, in favour of all these assessees. The High Court held that there is no restriction that undertaking or enterprise established after 7th January, 2003 cannot carried out 'Substantial Expansion' cannot be carried out more than once as long as period of ....
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....lause (b), of sub-section (2), one hundred per cent of such profits and gains for five assessment years commencing with the initial assessment year and thereafter, twenty-five per cent. (or thirty per cent where the assessee is a company) of the profits and gains. (6) Notwithstanding anything contained in this Act, no deduction shall be allowed to any undertaking or enterprise under this section, where the total period of deduction inclusive of the period of deduction under this section, or under the second proviso to sub-section (4) of section 80- IB or under section 10C, as the case may be, exceeds ten assessment years..........." 16. The essence of Section 3 as well as Section 6 have already been reproduced above. Whereas the exemption is provided @ 100% of such profits and gains for five assessment years commencing with the initial assessment years and, thereafter, 25% (or 30% where the assessee is a company) of the profits and gains for next five years. The deduction is limited to a period of 10 years. 17. In this backdrop, the question is as to whether these assessees, who had availed deductions @ 100% for first five years on the ground that they had set up a manufactur....
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....r this provision. (b) This deduction is allowable from the initial Assessment Year. "Initial Assessment Year" is defined in Section 80-IB(14)(c) of the Act. (c) The deduction is @ 100% of such profits and gains for first 5 Assessment Years and thereafter a deduction is permissible @ 25% (or 30% where the assessee is a company). (d) Total period of deduction is 10 years, which means 100% deduction for first 5 years from the initial Assessment Year and 25% (or 30% where the assessee is a company) for the next 5 years. 20. When we keep in mind the aforesaid scheme and spirit behind this provision, such a situation cannot be countenanced where an assessee is able to secure deduction @ 100% for the entire period of 10 years. If that is allowed it will amount to doing violence to the provisions of sub-section (3) read with sub-section (6) of Section 80-IC. A pragmatic and reasonable interpretation of Section 80-IC would be to hold that once the initial Assessment Year commences and an assessee, by virtue of fulfilling the conditions laid down in sub-section (2) of Section 80-IC, starts enjoying deduction, there cannot be another "Initial Assessment Year" for the purposes of Sectio....