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II. Direct Taxes Case Law:
1. Pr. CIT Vs. M/s Aarham Softronics, Civil Appeal No. 1784 of 2019, Date of Order: 20.02.2019, Supreme Court of India
Issue:
Whether an assessee who sets up a new industry of a kind mentioned
in Section 80-IC(2) of the Act and starts availing exemption of 100 %
tax u/s 80-IC(3) (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?
Held: Yes
Brief facts:
Origin of theappeal can be traced to the judgment dated 28thNovember,
2017 rendered by High Court of Himachal Pradesh in a batch of
appeals.The High Court held that when the assessee started availing
exemption of 100% tax on the setting up of a new industry as mentioned
in section 80IC(2), which is admissible for 5 years, and either on the
expiry of 5 years or thereafter (but within 10 years) from the date when
the assessee started availing exemption, they carried out substantial
expansion of its industry, from that year the assessee become entitled
to claim exemption @ 100% again.Being aggrieved with the same, the
department has challenged the said decision by filing the appeal.
Held:
It was held that an undertaking or an enterprise which had set up a
new unitbetween 07.01.2003 and 01.04.2012 in State of Himachal Pradesh
as per Section 80-IC(2)(ii), would be entitled to deduction at the rate
of 100% of the profits and gains for 5 assessment years commencing with
the ‘initial assessment year’. For the next five years, the admissible
deduction would be 25% (or 30% where the assessee is a company) of the
profits and gains.However, in case substantial expansion is carried out
as defined in Section 80-IC(8)(ix) by such an undertaking or enterprise,
within the aforesaid period of 10 years, the said previous year in
which the substantial expansion is undertakenwould become ‘initial
assessment year’, and from that assessment year the assessee shall been
entitled to 100% deductions of the profits and gains. However, such
deduction would be for a total period of 10 years, as provided in
sub-section (6). For example, if the expansion is carried out
immediately, on the completion of first five years, the assessee would
be entitled to 100% deduction again for the next five years. On the
other hand, if substantial expansion is undertaken, say, in 8th year by
an assessee such an assessee would be entitled to 100% deduction for the
first five years, deduction @ 25% of the profits and gains for the next
two years and @ 100% again from 8th year as this year becomes ‘initial
assessment year’ once again.However, this 100% deduction would be for
remaining three years, i.e., 8th, 9th and 10th assessment years. For
these reasons, the question is answered in favour of the assessee and
against the revenue.
Hence, the appeal was held in favour of the assessee and against the revenue.
Cases Referred:
• CIT vs. M/s. Classic Binding Industries, SLP(C) 7208/2018, Date of Judgement: 20.08.2018 (SC)
• Mahabir Industries vs. Pr.CIT, SLP(C) 4765-4766/2018, Date of Judgement: 18.05.2018 (SC)
(Please click here for judgment)
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