INCOME TAX ACT, 1961

Section 80-IC

Dduction under section 80-IC - Extent of allowability - 100% or 25% - Substantial expansion of eligible unit

Assessee started claiming deduction under section 80-IC from assessment year 2008-09 and claimed 100% deduction for five years. AO noticed that assessee again claimed 100% deduction during 7th year on the basis of substantial expansion made in financial year 2011-12. AO restricted deduction under section 80-IC to 25%. Held: 'Objectives for which section 80-IC was enacted, an irresistible conclusion would be to grant 100% deduction of the profits and gains even from the year when there is substantial expansion in the existing unit. After all, substantial expansion involves great deal of investment which has to be, at least 50% in the plant and machinery, of the book value thereof before taking depreciation in any year. With an expansion of such a nature not only there would be increase in production but generation of more employment as well, which would benefit the local populace. It is for this reason, carrying out substantial expansion by itself is treated as 'initial assessment year'. It would mean that, even when an old unit completes substantial expansion, such a unit also becomes entitled to avail the benefit of section 80-IC. and 100% deduction of profits and gains has to be not allowed to even those units which had availed of this this deduction on setting up of a new unit and invested huge amount with substantial expansion of those units.

REFERRED :

FAVOUR : In assessee's favour.

A.Y. :

INCOME TAX ACT, 1961

Section 68

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