The Tax Publishers2020 TaxPub(DT) 0879 (Chd-Trib)

INCOME TAX ACT, 1961

Section 80-IC

In case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC within the period of 10 years, as provided in sub-section (6), the previous year in which substantial expansion is undertaken would become 'initial assessment year', and from that assessment year assessee would be entitled to 100% deduction of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6).

Deduction under section 80-IC - Allowability - Deduction claimed @ 100% on account of substantial expansion - Assessee already claimed 100% deduction for first five assessment years

Assessee set up a new Industrial unit and already claimed 100% deduction under section 80-IC for first five assessment years. However, the assessee in the 6th year, claimed deduction @100% on account of substantial expansion of the unit. AO held that the benefit of deduction @100% on account of substantial expansion was not available to the units, which had already claimed deduction @100% for first five years after setting up of the unit after 1-1-2003. Accordingly, the AO restricted the claim of deduction @25%. Held:In case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC within the period of 10 years, as provided in sub-section (6), the previous year in which substantial expansion is undertaken would become 'initial assessment year', and from that assessment year assessee would be entitled to 100% deduction of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example- if substantial expansion is undertaken, in 8th year, 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. In instant case, as expansion was carried out immediately on completion of first five years, the assessee would be entitled to 100% deduction again for the next five years. Hence, the assessee would be entitled to claim deduction @100% in the 6th year.

REFERRED : Pr. CIT v. Aarham Softronics Civil Appeal No. 1784 of 2019: 2019 TaxPub(DT) 1345 (SC), Hycron Electronics v. ITO & Others ITA No. 798/Chd/2012 dated 27-5-2015: 2015 TaxPub(DT) 2810 (Chd-Trib)

FAVOUR : In assessee's favour

A.Y. : 2012-13 & 2015-16

INCOME TAX ACT, 1961

Section 271(1)(c)

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT