Summary
The Court held that initial eligibility for the small-scale undertaking deduction did not guarantee relief for all ten years. An assessee that ceased to qualify as small-scale in a later assessment year could not claim that year’s incentive merely because growth caused the change. Continuing eligibility conditions remained enforceable.
Issues
- Whether small-scale status needed to continue in each year of the section80IB deduction period.
- Whether liberal construction of an incentive could dispense with an unmet eligibility condition.
Provisions considered
- Section80IB(1)–(3) and(14)(g), Income-tax Act, 1961The deduction period remained subject to eligibility, including small-scale status determined as at the last day of the previous year; initial qualifying status did not override later loss of that status. (¶¶ 4, 10–14, 22–25)
Held
- The statutory scheme distinguishes initial-constitution conditions from continuing qualifications. Small-scale status and other continuing requirements must be satisfied for the relevant assessment year; each year is a separate unit of assessment. (¶¶ 10–14, 16, 23)
- An incentive confined to a specified class cannot be retained after leaving that class on the theory that expansion should always be rewarded. Denial after loss of small-scale status accords with the purpose of that targeted incentive. (¶¶ 14, 22–23)
- Liberal interpretation of promotional provisions does not authorize ignoring eligibility conditions. The cited authorities did not justify relief where the clear small-scale qualification was no longer met. (¶ 15–22)
Result
Revenue appeals disposed of on the basis that deduction is unavailable for a year in which small-scale eligibility is lost despite initial eligibility. Assessing authority permitted to pass compliance orders applying that principle to the individual cases.