SC : Reverses HC; Mandates 'SSI eligibility condition’ compliance for entire tax-holiday period

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