INCOME TAX ACT, 1961

Deduction under section 80IA- Profits and gains derived from industrial undertaking-Fulfillment of conditions

Main object of assessee-company was extraction of seeds for obtaining edible oils and refining thereof, set up a new industrial undertaking for the extraction and refining of edible oil. It claimed to have temporarily commenced the activity on a trial run and the systematic activity of refining commenced only in the relevent assessment year. It applied for permanent registration certificate to get status of small scale industry (SSI) under section 11B of the Industrial Development Regulation Act, 1951 (IRDA) to prescribed authority directly after final completion of project. Assessee got status of small scale industry which was conclusive under provisions of IRDA. Assessee claimed deduction under section 80-IA by filing revised return. AO disallowed deduction by stating that assessee failed to fulfil condition of section 80-IA in initial year. CIT(A) allowed the claim of assessee. Held:It had to be determined at end of relevant previous year that assessee was registered as small scale Industry (SSI) or not to claim deduction under section 80-IA.There was no such condition that an industrial undertaking should fulfil all conditions as laid down under section 80-IA(2) in very initial year and not thereafter for claiming deduction under section 80-IA, Since prescribed authority had declared assessee as an industrial undertaking and moreover assessees investment in plant and machinery was below Rs. 3 crores, it could be said that assessee fulfilled conditions of a small scale industry during relevent assessment year. Therefore, deduction under section 80-IA was allowed to assessee, even though it was not a SSI in initial year

Income Tax Act, 1961 Section 80IA