In Brief
The Supreme Court examined whether a manufacturing unit in Himachal Pradesh that sets up under Section 80-IC of the Income Tax Act and claims 100% tax exemption for five years can claim the same exemption rate after carrying out substantial expansion. The Court held that the statutory definition of "initial assessment year" in Section 80-IC permits multiple such years within the 10-year deduction ceiling. When an undertaking completes substantial expansion (a 50% increase in plant and machinery), that year becomes a fresh "initial assessment year," entitling it to 100% deduction for five more years. The Court overruled its earlier judgment in Commissioner of Income Tax v. Classic Binding Industries, which had incorrectly applied the definition from Section 80-IB. The Court affirmed the High Court's judgment and dismissed the Revenue's appeals.
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