In Brief
The case deals with Section 80-IC of the Income Tax Act, which provides tax deductions to manufacturing units established in special category States like Himachal Pradesh. The assessees claimed 100% deduction on their profits for the first five years (as entitled), but then sought to continue 100% deduction for the next five years by claiming they had undertaken substantial expansion. The Supreme Court held that once the initial assessment year commences and an assessee starts claiming deduction under Section 80-IC, there cannot be another initial assessment year within the 10-year eligibility period. Therefore, after five years at 100%, the remaining five years permit only 25% (or 30% for companies) deduction, not 100%. The statutory scheme does not allow resetting of deduction rates based on subsequent business events.
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