Summary
The Court held that an eligible Himachal Pradesh industrial unit undertaking substantial expansion within its deduction period could again claim a hundred per cent deduction under Section 80-IC. Expansion triggers another initial assessment year under that section’s own definition, but does not restart or extend the overall ten-assessment-year ceiling. Classic Binding Industries, which overlooked that definition and relied on Section 80-IB, did not state the correct law.
Issues
- Whether substantial expansion could restore a hundred per cent deduction after the first five assessment years.
- Whether a fresh initial assessment year extended the statutory ten-year ceiling.
Provisions considered
- Section 80-IC(2)(a)(ii), (2)(b)(ii), (3)(ii), (6), (8)(v) and (8)(ix), Income-tax Act, 1961Read eligibility, deduction rates, the ten-year ceiling and the definitions of initial assessment year and substantial expansion together. (¶¶ 7, 14, 16, 17, 18, 19, 20, 21, 24)
Held
- Section 80-IC has its own definition of initial assessment year, covering commencement of manufacture or operations and completion of substantial expansion. The materially different Section 80-IB definition could not control it; Classic Binding Industries overlooked this distinction and did not lay down the correct law. (¶¶ 12, 13, 14, 16, 22, 24)
- Substantial expansion requires the prescribed increase of at least fifty per cent in plant-and-machinery investment measured against the statutory book-value base. Completion of qualifying expansion can trigger a further initial assessment year and restore the hundred per cent rate. (¶¶ 16, 17, 18, 20, 24)
- The ceiling is ten assessment years in total, not a prohibition on a renewed hundred per cent rate within that period. Expansion after the fifth year can yield that rate for the next five years; expansion in the eighth year yields it only for the eighth, ninth and tenth years. (¶¶ 18, 19, 24)
- The Court affirmed the High Court’s interpretation on the issue, dismissed the Revenue’s appeals and allowed the assessees’ appeals. (¶ 25)
Result
Revenue appeals dismissed and assessee appeals allowed; renewed hundred per cent deduction permitted on qualifying substantial expansion, subject to the total ten-assessment-year ceiling.