SC reverses Karnataka HC
ruling and rules in favour of Revenue, denies Sec. 80-IB benefit as assessee
ceased to be a small scale industrial undertaking (‘SSI’) in relevant
AY, being 9th year of the tax holiday period (owing to plant and
machinery value exceeding Rs. 1 crore); Considering the
legislative object of encouraging industrial expansion, HC had
allowed Sec. 80-IB benefit and had held that the fulfillment of SSI
condition in the initial year was sufficient; Rejecting HC’s view, SC holds
that incentive meant for small scale industrial undertakings cannot be
availed by industrial undertakings which do not continue as SSIs during the
relevant period; SC remarks that “It does not, in any manner, mean that the
object of permitting industrial expansion is defeated, if benefit is not
allowed to other undertakings.”; SC cites concept of vertical equity, opines
that “Higher slabs of tax or higher tax burden on an assessee having higher
income or higher capacity cannot in any manner, be considered
unreasonable.”; Referring to Sec. 80-IB scheme, SC holds that “The scheme
of the statute does not in any manner indicate that the incentive provided has
to continue for 10 consecutive years irrespective of continuation of
eligibility conditions.”; Rules that if an industrial undertaking does not
remain small scale undertaking, it cannot claim the incentive, even if in
initial year eligibility was satisfied; Distinguishes assessee’s reliance on
co-ordinate bench ruling in Bajaj Tempo Ltd. to contend that
incentive provisions should be construed liberally, remarks that “Construing
liberally does not mean ignoring conditions for exemption.”:SC
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