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11.05.2019 - Voice of CA presents - Latest Updates
Saturday, May 11, 2019

  I. Headlines Today:   

  1. MCA prescribes norms for determining requisite number of members to file class action suit  (Click for detail)
  2. CBIC has extended the due date for filing ER-1 and ER-2 for the month of April, 2019  (Click for detail)
  3. Employers will now have to download full Form16 from TRACES portal only  (Click for detail)
  4. MCA: Inviting Public Comments On Insolvency and Bankruptcy, Rule, 2019  (Click for detail)
  5. MCA: Companies(Removal of Names of Companies from the Register of Companies) Amendment Rules, 2019  (Click for detail)

  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

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.

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)    

Golden Rules:

  "Well wishers are like beautiful street lamps
they cannot make the distance shorter,
but they can lighten your path and 
make the Journey easier" 


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Voice of CA 

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