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Benefit Of Deduction Can’t Be Given To An Industry If It Ceases To Be A Small Scale Industry

The Supreme Court, in Deputy Commissioner Of Income-Tax vs M/S Ace Multi Axes Systems Ltd, has held that an assessee is not entitled to benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular assessment year, even if in the initial year, eligibility was satisfied.

Before the apex court, the revenue had questioned the Karnataka High Court view that when once the eligible business of an assessee is given the benefit of deduction under Section 80 IB on the assessee satisfying the conditions mentioned in sub-section. (2) of Section 80 IB, cannot the assessee be denied the benefit of the said deduction on the ground that during the said 10 consecutive years, it ceases to be a small scale industry.

A three-judge bench of Justice Ranjan Gogoi, Justice AK Goel and Justice Navin Sinha observed that the assessee, having not retained the character of ‘small scale industrial undertaking’, is not eligible to the incentive meant for that category and permitting incentive in such case will be against the object of law.

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