The Income Tax Appellate Tribunal, Chandigarh in its recent order ruled that deduction under Section 80IC of the Income Tax Act, 1961 for units set up in specified areas in the State of Himachal Pradesh cannot be claimed beyond the period of 5 years.
The bench comprising of Judicial Member Bhavnesh Saini and Accountant Member Ms. Annapurna Gupta were ruled so while dismissing the appeal filed by assessee against the order of CIT (A), Shimla for assessment year 2012-13.
The assessee firm derives income from manufacturing and sale of herbal medicines and has a unit at Kishanpura, Baddi which was eligible for deduction u/s 80IC of the Act and commenced its operation during the assessment year.
The assessee had already claimed deduction u/s 80IC of the Act to the extent of 100% of the eligible profits for 5 years period from assessment years 2006-07 to AY 2010-11. During the next assessment year the assessee had again claimed 100% deduction on its eligible profits on account of substantial expansion undertaken by it in financial year.
After thorough observation, the assessing officer restricted the claim of deduction u/s 80IC @ 25% as against 100% claimed by the assessee from sixth year onward.
When this matter carried on to the lower appellate authority, they upheld the decision of AO by following the decision of Chandigarh ITAT in the case of M/s Hycron Electronics vs. ITO.
Aggrieved assessee challenged the order of CIT (A) and carried the matter to the tribunal and pressed the decision was solely based on the Chandigarh Bench of the ITAT in the case of M/s Hycron Electronics vs. ITO (supra).
The tribunal bench in aforementioned case observed that an identical issue was happened and held that the benefit of deduction u/s 80IC of the Act @ 100% was available to new units, only on the setting up of the unit and not on account of substantial expansion undertaken by it.
The tribunal bench further ruled that there can be only one initial assessment year for claiming 100% deduction of profits therefrom, for the purpose of section 80 IC of the Act and that in any case the benefit of 100% deduction, for units set up in specified areas in the state of Himachal Pradesh, cannot be claimed beyond the period of 5 years.
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