TaxTMI 
TaxTMI 
2019 (3) TMI 13
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.... following substantial questions of law:- "i) Whether on the facts and in the circumstances of this case, the Hon'ble ITAT has erred in deleting the addition of Rs. 2,10,51,286/- (made on account of restricting the claim of deduction under Section 80IC of Income Tax Act, 1951 @ 25%) without discussing the merits of the issue involved and by relying on the decision of Hon'ble Himachal Pradesh High Court in the case of M/s Stovekraft India, when this judgment has not been accepted by the department on merits? ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT (by relying on the judgments discussed above) has erred in holding that those undertakings or enterprises which commenced production after 07/01/2003 can carry out multiple "substantial expansion" as long as provisions of Section 80IC(8)(ix) are met without appreciating that as per provision of Section 80IC of the Income Tax Act and as explained in CBDT Circular No. 7/2003, such enterprise or undertaking cannot carry out any "substantial expansion"? iii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT (by relying on the judgments discussed above)....
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.... in terms of Section 80IB (4), the third proviso makes clear that after 31.03.2004, this deduction will be available only under Section 80IC, and deduction would be @ 100% for the first five years and there after @ 30%? v) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in ignoring the explicit statutory provision of the Second proviso that clarifies that in the case of states of North-Eastern regions, the deduction would be @ 100% was allowable for 10 years whereas in the case of States of Himachal Pradesh, the deduction was allowable @ 100% for first five years and 30% for the next five years? vi) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT by relying on the judgments in the case of M/s Stovekraft India (supra), has erred in holding that those undertakings or enterprises which commenced production after 07.01.2003 can carry out multiple "substantial expansion" prior to 01.04.2012 and there will be initial year for each "substantial expansion" as long as provisions of Section 80IC(ix) are met without appreciating that as per provisions of Section 80IC(2)(ii) of the Income ....
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....'ble ITAT has erred in failing to adjudicate the issue of depreciation on merits holding that in view of allowance of 80IC, the matter was academic? xi) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in failing to adjudicate the issue of depreciation which would have substantial ramification for taxable income of 80IC is restricted to 30% per scheme and deserves to be adjudicated, Hon'ble ITAT being final fact finding authority? xii) Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has erred in failing to adjudicate the admissible depreciation which had been correctly restricted by AO based on finding of facts that rates claimed were incorrect and appellant had not supported its claim with relevant bills of assets either before AO or before Ld. CIT(A)?" 4. A few facts relevant for the decision of the controversy involved as narrated in ITA No. 289 of 2018 may be noticed. The respondent-assessee is in the business of production of pharmaceutical products. It has unit located in Baddi. It has been claiming deduction under Section 80IC of the Act since the financial year 2005-0....
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....avour of the appellant-revenue, in a recent judgment of this Court dated 06.09.2018 in M/s Admac Formulations Vs. Commissioner of Income Tax, Panchkula in ITA No. 332 of 2015. In the said case, the statutory provision of Section 80IC of the Act was discussed in detail. The decision rendered by the Himachal Pradesh High Court in M/s Stovekraft India's case (supra) was also considered. The issue therein was as to whether "undertaking or an enterprise" established after 7th January 2003 carrying out "substantial expansion" within the window period between 07.01.2003 to 01.04.2012 would be entitled to deduction on profits at the rate of 100% under Section 80IC of the Act and if so then for what period. The relevant paras of the judgment in M/s Admac Formulations' case (supra) read thus:- "Section 80-IC was inserted by Finance Act, 2003 w.e.f. April 1, 2004. It makes special provisions in respect of certain undertakings or enterprises in certain special category States. According to this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in sub-section (3) of Section 80-IC of the Act.....
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....as requirement of Section 80-IC(8)(ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one initial Assessment Years. (e) Within the window period of 07.01.2003 to 01.04.2012, an undertaking or an enterprise can be entitled to deduction @ 100% for a period of more than five years. (f) All this, of course, is subject to a cap of ten years. [Section 80-IC(6)] (g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [Section 80- IB(5)]." 8. The view of the Himachal Pradesh High Court in Stovekraft India's case (supra) and other appeals was not approved by the Supreme Court. The Apex Court in Commissioner of Income Tax vs. M/s Classic Binding Industries, Civil Appeal No(s) 7208 of 2018 decided on 20.8.2018, dealing with the issue whether the assessee who had availed deductions at the rate of 100% for first five years on the ground that they had set up a manufacturing unit as prescribed under sub section (2) of Section 80IC of the Act can start claiming deduction at the rate ....
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....vour of the revenue. The relevant observations read thus:- "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 manufacturing unit as prescribed under sub-section (2) of Section 80IC of the Act, can start claiming deductions @ 100% again for next five years as they had undertaken "substantial expansion" during the period mentioned in sub-section (2) thereof? The answer has to be in the negative for the following reasons: 18. We are dealing with the deductions in respect of profits and gains under Section 80-IC of the Act. No other provision is involved. This section makes special provisions in respect of certain undertakings or enterprises in certain special category States. Section 80-IC was inserted by the Finance Act, 2003 w.e.f. April 1, 2004. As per this provision, certain undertakings or enterprises in certain special category States are allowed deduction from such profits and gains, as specified in subsection (3) of Section 80-IC. The provisions of Section 80-IC provided deduction to manufacturing units situated in the State of Sikkim, Himachal Prade....
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....at 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 Section 80-IC within the aforesaid period of 10 years, on the basis that it had carried substantial expansion in its unit." 9. While the Apex Court adjudicated the issue in favour of the revenue, it specifically distinguished its earlier pronouncement in Mahabir Industries vs. Principal Commissioner of Income Tax (Civil Appeal Nos.4765-4766 of 2018 decided on May 18, 2018 in the following terms:- "21. We are conscious of our recent judgment rendered by this very Bench in Mahabir Industries vs. Principal Commissioner of Income Tax (Civil Appeal Nos. 4765-4766 of 2018 decided on May 18, 2018). However, a fine distinction needs to be noted between the two sets of cases. In Mahabir Industries, the assessees had availed the initial deduction under a different provision, namely, Section 80-IA of the Act, i.e. by fulfilling the conditions mentioned in sub-section (4) of Section 80-IA. Those conditions are altogether different. De....