COMMISSIONER OF INCOME TAX Vs. CLASSIC BINDING INDUSTRIES

JUDGEMENT

(1.) A neat question of law which arises in these appeals revolve around Section 80-IC of the Income Tax Act, 1961 (hereinafter referred to as the 'Act'). The High Court by its impugned judgment dated 28th November, 2017 has discussed various aspects and nuances of the aforesaid provisions which had arisen because of varied kinds of issues raised in a batch of appeals filed by the assessees before the High Court. We are not concerned with all those issues. The only question which needs to be answered in these appeals is as follows:

(2.) To understand the aforesaid question of law in clear terms, it may be mentioned at this stage itself that sub-section (2) of Section 80-IC applies to an undertaking or enterprise which has, inter alia, begun or begins to manufacture or produce any article or thing by setting up a new factory in the area specified therein which includes State of Himachal Pradesh as well. Sub-section (3) of Section 80-IC is in two parts: in certain cases, exemption from income is provided at the rate of 100% of such profits and gains earned from the aforesaid undertaking or enterprise for 10 assessment years commencing with the initial assessment year. The present appeals do not fall in that category. Other clause relates to another category of undertakings or enterprises (these cases belong to that category) where the exemption is at the rate of 100% of profits and gains for five assessment years commencing with the initial assessment year and, thereafter, 25% of profits and gains. Total exemption, thus, is for a period of 10 years, namely, @100% for 1st five years and @ 25% for remaining five years. In these cases, all the assessees started claiming exemption @ 100% on profits and gains and availed it for a period of five years. During this period these assessees carried out "substantial expansion" and they claimed that, on that basis, they should be allowed exemption from profits and gains for another five years @ 100% instead of 25% from 6th to 10th year as well. Interestingly, they admit that the total period during which they are entitled to exemption would not exceed 10 years, as per the mandate of sub-section (6). In this backdrop, the question is as to whether the assessees can again start claiming 100% exemption for the next five years from profits and gains after availing the same for first five years on the ground that they have now carried out substantial expansion. The High Court has answered the question in affirmative and for this reason, it is the department which has come up to this Court challenging the said decision by filing these appeals.

(3.) Though, the aforesaid question of law is identical in all the aforesaid cases and arises in the same fact situation mentioned above, for the sake of convenience, we may record the facts of Civil Appeal No. 16851 of 2018 (@ SLP(C) 16851 of 2018).