TaxTMI 
TaxTMI 
2019 (9) TMI 864
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....dentical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in the assessee`s appeal in ITA No. 279/GAU/2018, in the case of M/s Charu Engineering Industries & Charu Innovation Department Industries for AY 2012-13, is taken as the lead case for deciding the above appeals en masse. 3. Grounds of appeals raised the assessee as per its lead case in ITA No. 279/GAU/2018 are as follows: - "(i). For that the ld. Commissioner of Income Tax (Appeals), Guwahati, is not legally justified disallowing 100% of the profits and gains derived out of the manufacture activities during the assessment year 2012-13 holding that the assessee has already availed the exemption u/s 80IB and 10C in the earlier periods prior to Assessment Year 2010-11 for 10 years. Hence, the assessee is not eligible u/s 801E after its expansion/modernization in its plant & machineries by further investing 133 % of its initial capital outlay in plant & machineries in the Financial Year 2008-09. The Id. Commissioner, of Income Tax has wrongly invoked the provisions of Sec. 801E(5) of the Inc....
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....ing which is located in any of the North Eastern States including the state of Sikkim during the period beginning on 1st April,2007 and ending on 31st March, 2017 and the benefit is applicable to existing undertakings undergoing substantial expansion during the prescribed period as mentioned in the said section. The impugned Order-in-Appeal is not sustainable in law as the impugned Assessment Order was not in accordance with the decision of the Hon'ble Apex Court decided in Civil Appeal No. 4765-4766 of 2018 in the case of Mahabir Industries Vs. Principal Commissioner of Income Tax, Shimla, wherein the law has been settled that appellants are allowed exemption u/s. 801C of the IT Act, 1961 from the date of undergoing substantial expansion for a period of 10 years. In the present case in hand the Id. Commissioner Appeals has not considered the law points applying has judicious mind. Hence, the demand for the AY 2012-13 is not sustainable in law and is liable to be set aside in the ends of justice. (V) For that the Ld. Commissioner (Appeals) committed an error in interpreting the provisions of sub-sec. 5 of Sec. 801E which supersedes the other conditions of Sec. 801E onl....
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....under Chapter VI-A includes claim of deduction u/s 80-IE in the case of M/s Charu Engineering Industries at Rs. 1,25,60,390/- and claim of deduction u/s 80-IE in the case of M/s Charu Innovation Department and Industries at Rs. 87,60,893/-. Assessee has furnished copy of Tax Audit Report u/s 44AB in the case off both, M/s Charu Engineering Industries and M/s Charu Innovation Department and Industries, along with audited accounts. However, AO noticed that assessee has not furnished audit reports u/s 80-IC/80-IE in Form No. 10CCB for both proprietary concerns. 5. The AO noticed that M/s Charu Engineering Industries commenced commercial production w.e.f 26.12.1994 and has already exhausted the claim of deduction u/s 80-IB of the Act in the earlier assessment years. Thereafter, on the premise of having infused additional capital investment by more than 25% of theinitial investment in Plant & Machinery of Rs. 22,51,982/- in financial year 2008-09, assessee again claimed deduction under section 80-IE of the Income Tax Act, 1961 from assessment year 2009-10 onwards. The assessee is claiming deduction under section 80-IE on the pretext that it has made a 'substantial expansion' as defin....
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....d that all new units as well as existing units which go in for substantial expansion/modernization, unless otherwise specified and which commercial production within the 10 year period from the date of notification of NEIIPP-2007 will be eligible for incentives for a period of ten years from the date of commencement of commercial production. Here, refer the incentive clause under the NEIIPP-2007 Policy dated New Delhi the 1st April 2007 issued from file No. 10(3)2007-DBE-lI/NER, Government of India, Ministry of Commerce & Industry, Department of Industrial Policy and Promotion, incentives Clause No (VI) of the policy stated hereunder: "100% Income Tax Exemption will continue under NEIIPP-2007" And also refer the said Policy Serial No. 4 for wherein a directives had been, issued to all concern Ministries/Department of the Government of India to amend their, respective Act/Rules/Notification etc and issue necessary instruction giving effect to these decisions" The factory/production unit of M/s Charu Innovation Department & industries located at Thakuria Industrial Area, Chandrapur, Guwahati, had also been visited by the inspector of Income Tax 04.03.201....
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....and undisputed facts in the instant appeals are that the assessee had set up its proprietorship M/s. Charu Engineering Industries on 26.12.1994[A.Y. 1995-96] and subsequently undergone 1st and 2nd substantial expansions on 10.12.2001 [A. Y .2002- 03] and on 02.05.2008 [A. Y .2009-10] respectively. A second proprietorship concern, M/s. Charu Engineering Innovation Department & Industries was further set up as a new industrial undertaking on 23.11.2011 [A. Y .2012-13]. On the above facts, it was held by the AO and CIT(A) that the period of deduction available for a span of 10yrs starting from the initial assessment year, being A Y .1995-96 was exhausted in A.Y.2004-05 and hence the assessee was ineligible for further deductions U/s.80IC/80IE beyond that period. The assessee on the other hand claimed further deduction of 10yrs from the date of 1st substantial expansion i.e. 10.12.2001 [A. Y .2002-03] U/s.80IC and was also under the impression that it would be eligible for deduction U/s.80IE for another span of 10yrs following its 2nd substantial expansion on 02.05.2008[A.Y.2009- 10). Before proceeding further, it is relevant to mention that the Hon'ble Apex Court judgment in ....
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....ssessment year, the Ld. AOs has disallowed the claims of deduction of the Assessee on the grounds which, inter-alia, include the fact that the Assessee is not entitled to the deduction beyond the prescribed cap of 10 years and, in the case of the Assessee, more so when the assessee had already availed deduction under section 80IB/10C earlier. We note that the contention of the assessee, before the Ld AO was that since its industrial undertaking had undergone substantial expansion during AY 2009-10 and therefore the said AY 2009-10 should be taken as the first year for claim of deduction under section 801E of the Act. However, ld DR submitted before us that assessee cannot claim deduction for more than 10 Years, in view of the bar/capping provided under section 80lE of the Act. The ld DR further submitted before us that the assessee shall not be entitled to claim deduction u/s 80IC and 80lE taken together for more than ten assessment years from the initial assessment year howsoever whether by way of commencement of the undertaking or the substantial expansion thereof taken together. Any other interpretation of this incentive section would only render the provisions of section 80I....
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....ast Industrial Policy, 1997. The assessee availed exemption as per the Industrial Policy, 1997. The assessee unit subsequently undergone substantial expansion in terms of North East Industrial & Investment Promotion Policy, 2007 (NEIIP, 2007) and commenced its commercial production w.e.f. 02.05.2008 after undergoing substantial expansion in its plant & machinery. Copy of the North East Industrial Policy, 1997 and NEIIP, 2007 is enclosed in paper book page 29.The assessee availed benefit of Income Tax exemption in terms of Sec. 80-IA and 80IB and 10C in the earlier assessment years and availed benefit of exemption under Chapter VIA of the Income Tax Act 1961 and after undergoing substantial expansion of its existing plant and machinery and production capacity by investing more than 25 % of its existing capital investment in terms of NEIIP,2007 in the Financial Year 2008-09 . The other one M/s. Charu Innovation Department and Industries, a new Industrial Undertaking, established in the year 2011-12 and commenced its commercial production w.e.f 23.11.2011, engaged in production of polyethylene Water Storage Tank and other plastic articles such as, Dustbin, Traffic Signal Point and inj....
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.... years commencing with the initial assessment year. Sub-section (6) puts a cap of ten years, which is the maximum period for which the deduction can be allowed to any undertaking or enterprise under this section, starting from the initial assessment year. According to the definition of "initial assessment year" contained in section 80- IC(8)(c) , there can be an "initial assessment year", relevant to a previous year, in any of the following contingencies : (i) the previous year in which the undertaking or the enterprise begins to manufacture or produce article or things, or (ii) commences operation, or (iii) completes substantial expansion. The benefit of section 80-IC is, thus, admissible not only when an undertaking or enterprise sets up a new unit and starts manufacturing or producing articles or things. The advantage of this provision also accrues to existing units, if they carry out "substantial expansion" of their units by investing the required capital, in the previous year relevant to the assessment year. "Substantial expansion" is defined in section 80-IC(8)(ix) as increase in the investment in the plant and machinery by at least fifty per cent. of the book value ....
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....ed out by such an undertaking or enterprise, within the period of ten years, the assessment year corresponding to the previous year in which the substantial expansion is undertaken would become the "initial assessment year", and from that assessment year the assessee shall be entitled to 100 per cent. deductions of the profits and gains. (iii) That such deduction, however, would be for a total period of ten years, as provided in section 80-IC(6) . For example, if the expansion is carried out immediately, on the completion of the first five years, the assessee would be entitled to 100 per cent. deduction again for the next five years. On the other hand, if substantial expansion is undertaken, say, in the eighth year by an assessee such an assessee would be entitled to 100 per cent. deduction for the first five years, deduction at 25 per cent. of the profits and gains for the next two years and at 100 per cent. again from eighth year as this year becomes the "initial assessment year" once again. However, this 100 per cent. deduction would be for the remaining three years, i.e., the eighth, ninth and tenth assessment years. Decision of the Himachal Pradesh High Court....
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....ning Commission to concretise the initiatives. Subsequently, the Inter Departmental Meetings were held under the Chairmanship of Member Secretary (Planning Commission) to consider the recommendations and finalise the proposals. Based on these proposal government approved the New Industrial Policy and other concession in the North Eastern Region which inter alia envisage the following: A. Development of Industrial Infrastructure: 1. Currently the funding pattern for the Growth centres envisages a central Assistance of Rs.10 crores for each centre and balance amount to be raised by the State Government. Government has approved that entire expenditure on the growth centre would be as Central Assistance subject to a ceiling of Rs.15 crores. 2. In respect of IID centres, the funding pattern would be changed from 2:3 between GOI and SIDBI to 4:1 and the GOI would be a grant. B. Transport Subsidy Scheme: The transport subsidy scheme will be extended further in so far as N.E. States are concerned for period of another 7 years i.e. upto 31st March 2007 being coterminous with the Tenth Five year Plan on the same te....
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.... ceiling of Rs. 15, 000. The margin money may vary from 5% to 12.5 % of the project cost to make the subsidy and margin money at 20% of the project cost. PMRY would continue to have Entrepreneurship Training component as per the existing rate. E. Other Incentives Proposed: i. ii. iii. iv. vi. A comprehensive insurance scheme for industrial units in the North East will be designed in consultation with General Insurance Corporation of India Ltd and 100 % premium for a period of 10 years would be subsidised by Central Government. A one time grant of Rs.20 crores will be provided to the North East Development Financial corporation Ltd. (NEDFI) by the Central Government through NEC to fund techno economic studies for industries and infrastructures best suited to this region. State Government may consider setting up of a "Debt Purchase Window" by the NEDFi, which buys the debt of the manufacturing units particularly in respect of the supplies made to the government departments so as to reduce the problem of blocking of funds for these units. For development of markets in North East possibilities of exports of products of N.E.....
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....ustrial and Investment Promotion Policy (NEIIPP), 2007 The Government has approved a package of fiscal incentives and other concessions for the North East Region namely the 'North East Industrial and Investment Promotion Policy (NEIIPP), 2007', effective from 1.4.2007, which, inter- alia, envisages the following: (i) Coverage: The North East Industrial Policy (NEIP), 1997 announced on 24.12.1997 covered the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. Under NEIIPP, 2007, Sikkim will also be included. Consequently, the 'New Industrial Policy and other concessions for the State of Sikkim' announced vide O.M. No.14(2)/2002-SPS dated 23.12.2002 and the Schemes thereunder i.e. Central Capital Investment Subsidy Scheme, 2002, Central Interest Subsidy Scheme, 2002 and Central Comprehensive Insurance Scheme, 2002, notified vide Notifications No. F.No.14(2)/2002-SPS dated the 24.12.2002 will be discontinued from 1.4.2007. (ii) Duration: All new units as well as existing units which go in for substantial expansion, unless otherwise specified and which commence commercial production within the 10 y....
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....cretary of the concerned Ministries of the Government of India dealing with the subject matter of that industry as its members as also the concerned Chief Secretary/Secretary (Industry) of the North Eastern State where the claiming unit is to be located. Proposals which are eligible for a subsidy higher than Rs.30 crores, will be placed by Department of Industrial Policy and Promotion before the Union Cabinet for its consideration and approval. (viii) Interest Subsidy: Interest Subsidy will be made available @ 3% on working capital loan under NEIIPP, 2007 as was available under NEIP, 1997. Comprehensive Insurance: New industrial units as well as the existing units on their substantial expansion will be eligible for reimbursement of 100% insurance premium. Negative List: The following industries will not be eligible for benefits under NEIIPP, 2007:- All goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) which pertains to tobacco and manufactured tobacco substitutes. (ii) Pan Masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of....
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....ip of Secretary, Department of Industrial Policy and Promotion and comprising Secretaries of the Ministries/Departments of Revenue, Department of Development of North Eastern Region (DONER), Banking and Insurance, Representative of Planning Commission, CMD, NEDFi as well as major stakeholders including the industry associations of the North Eastern region would be constituted. In addition, an 'Oversight Committee' will be constituted under the Chairmanship of the Union Commerce and Industry Minister with Industry Ministers of NE States as its members. (xiii) Value Addition In order to ensure genuine industrial activities in the North Eastern Region, benefits under NEIIPP, 2007 will not be admissible to goods in respect of which only peripheral activities like preservation during storage, cleaning operations, packing, re- packing, labelling or re-labelling, sorting, alteration of retail sale price etc. take place. (xiv) Transport Subsidy Scheme The Transport Subsidy Scheme would continue beyond 31.3.2007, on the same terms and conditions. However, an early evaluation of the scheme will be carried out with a view to introducing necessar....