INCOME TAX ACT, 1961

Section 80-IC

Deduction under section 80-IC - Substantial expansion - Deduction at same rate of 100% beyond the period of five years on the ground that assessee had carried out substantial expansion in its manufacturing unit - Computation of

Question arose for consideration was whether an assessee who set up a new industry of a kind mentioned in sub-section (2) of section 80-IC and started availing exemption of 100 per cent tax under sub-section (3) of section 80-IC could start claiming the exemption at the same rate of 100% beyond the period of five years on the ground that assessee had carried out substantial expansion in its manufacturing unit. Held: In case substantial expansion is carried out as defined in clause (ix) of sub-section (8) of section 80-IC within the period of 10 years, as provided in sub-section (6), then the previous year in which substantial expansion is undertaken would become 'initial assessment year', and from that assessment year assessee would be entitled to 100% deductions of the profits and gains. Such deduction, however, would be for a total period of 10 years, as provided in sub-section (6). For example, if expansion is carried out immediately, on the completion of first five years, assessee would be entitled to 100% deduction again for next five years. On the other hand, if substantial expansion is undertaken, say, in 8th year, 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 assesment year' once again. However, this 100% deduction would be for remaining three years, i.e., 8th, 9th and 10th assessment years.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

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