TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 859
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....)-4 allowed the deduction @ 100% U/s 80IC by following the judgments of jurisdiction Hon'ble ITAT Delhi and the stand alone judgement of the Hon'ble Himachal Pradesh High Court and therefore the learned CIT (A) has grossly erred in law by not following the judicial discipline and holding contrary to the findings of the jurisdiction Tribunal and the stand alonejudgement of the Hon'ble High Court and holding that the deduction is allowable @ 30% only against 100% u/s 80IC. 1.2 Because the assessment orders passed by the assessing officers in AY 13-14 & 14-15 were wholly on identical grounds for restricting the deduction to 30% u/s 80IC and therefore the learned CIT(A) was wholly incorrect in confirming the dis-allowance on the ground that the AO has discussed in detail various angles pertaining to the provisions of Section 80IC in AY 2014-15 (which were not there in AY 2013-14). 1.3 Because in view of the documentary evidences placed on record, the Learned CIT (Appeals)-35, New Delhi has not been justified in restricted the claim of the assessee for deduction u/s 8IC @ 30% instead of @ 100% keeping in view of the facts that the appellant fulfills all the prerequisite conditions f....
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....has claimed deduction u/s 80IC at Rs. 14,84,56,974/- which is @ 100% of the profit of the undertaking eligible to claim deduction u/s 80IC of the Act. As per Form 10CCB filed by the appellant, the undertaking had commenced its business from 14.06.2006 and it started claiming deduction u/s 80IC from AY 2007-08. The deduction u/s 80IC was claimed @ 100% of the profit of the undertaking for 5 years beginning from AY 2007-08 and has again been claimed @100% deduction u/s 80IC during the 6thyear, 7 year and 8 year. i.e. AY 2012-13, AY 2013-14 and AY 2014-15. The instant year is the 8th year of claim of deduction u/s 80IC of the Act. The AO has observed that the appellant company came into existence on 13.08.2012 on conversion of the firm namely M/s Indian Herbs Specialties and it has been claimed that the Industrial undertaking of the appellant at Baddi in Himachal Pradesh had undertaken substantial expansion by increasing the value of plant & machinery by more than 50% of it's total block of fixed assets as on 31.03.2011 before conversion into private limited company in the financial year 2011-12 and on the basis of substantial expansion the undertaking had become entitled to claim....
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....en claimed for the first time. Rather, deduction @ 100% on account of substantial expansion was first claimed in the AY 2012-13 and also in AY 2013-14 and as mentioned earlier in this order, having examined the facts of the case, such deduction claimed @100% on account of substantial expansion was denied and restricted @25%. The above discussion fully clarifies that the appellant is not eligible for deduction as a consequence of substantial expansion and hence, cannot claim 100% deduction by the AO after the initial years. Therefore, in law and on facts, the AO has rightly restricted the deduction under section 80 IC of the Act to Rs. 4,45,37,092/- (30% of the profits and gains of eligible undertaking), as against the deduction claimed of Rs. 14,84,56,974/-(100% of profits and gains of eligible undertaking). In view of the above discussion and in accordance with the specific provision of the I.T. Act, the assessment order of the AO on the issue of the restriction of the deduction u/s 80IC on the undertaking to 30% instead of 100% as claimed by the appellant is held to be correct. I find no reason to interfere with the AO's order on this issue and the deduction u/s 80IC clai....
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....at there can be more than one "initial assessment year", first when the assessee begins to manufacture or commences operation and another after completing substantial expansion . 6.2 We find that Hon'ble Supreme Court in the case of Aarham Softronics (supra) has held in case of substantial expansion, the said previous year would become initial assessment year and from that assessment year the assessee shall be entitled to hundred percent deduction of the profit and gains. The relevant finding of the Hon'ble Supreme Court is reproduced as under: "24.The aforesaid discussion leads us to the following conclusions: (a) Judgment dated 20th August, 2018 in Classic Binding Industries case omitted to take note of the definition 'initial assessment year' contained in Section 80-IC itself and instead based its conclusion on the definition contained in Section 80- IB, which does not apply in these cases. The definitions of 'initial assessment year' in the two sections, viz. Sections 80-IB and 80-IC are materially different. The definition of 'initial assessment year' under Section 80-IC has made all the difference. Therefore, we are of the opinion that the aforesaid judgment does not lay....
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....ttention was drawn to the relevant conclusions of the Hon'ble High Court in this regard at para 55 of the order as under: "55.Thus, in view of the above discussion, these appeals are allowed and orders passed by the Assessment Officer as well as the Appellate Authority and the Tribunal, in the case of each one of the Assesses, are quashed and set aside, holding as under: (a) Such of those undertakings or enterprises which were established, became operational and functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto 1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they were not entitled to the benefit of deduction under Section 80-IB. (b) Such of those units which have commenced production after 7.1.2003 and carried out substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different rates of percentage stipulated under Section 80-IC. (c) Substantial expansion cannot be confined to one expansion. As long as requirement of Section 80-lC(8)(ix) is met, there can be number of multiple substantial expansions. (d) Correspondingly, there can be more than one in....
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....80IC of the Act to the assessee's. The Ground No. 1 to 1.4 of the appeal are accordingly allowed. 7. In Ground No. 2.1 the assessee has challenged disallowance of Rs. 40,31,675/-made under section 14A of the Act. 7.1 The main contention of the Ld. counsel of assessee is that the disallowance has been made without satisfying statutory precondition of recording dissatisfaction by the Assessing Officer as to the claim of expenses incurred for earning exempt income. The learned counsel also argued that the assessee has made investment out of own funds and no borrowed funds have been utilized in investment. The learned counsel relied on the decisions of Hon'ble Supreme Court in the case of Pr. CIT, Ahmedabad Vs. Sintex Industries Ltd. (2018) taxmann.com 24 (SC). 7.2 The Ld. DR, on the other hand, submitted that the Assessing Officer recorded dissatisfaction in para 26 of his order specifically after making observation on the claim of the assessee in para 24 &25 of the assessment order. This according to him the disallowance under section 14A read with rule 8D of the Income Tax Rules, 1962 has been made after recording proper dissatisfaction on the claim of the assessee. He further s....