Law:

Section:

Section 80HHA of the Income-tax Act, 1961 - Deductions - Profits and gains from newly established small-scale industrial undertakings - Assessment years 1991-92 and 1992-93 - For purpose of determining assessee-company's eligibility as to benefit of deduction as small-scale industrial unit, Assessing Officer as well as two appellate authorities had only considered question as to whether cost of generator would form part of plant and machinery of said unit - Whether, therefore, matter was to be remanded back to Assessing Officer for deciding assessee's status afresh in light of Explanation (b) to section 80HHA inserted by Finance Act, 1999, with retrospective effect from 1-4-1978 - Held, yes FACTS The assessee was a private limited company. The assessee's claim to be treated as a small-scale industrial unit for availing the benefit of deduction under section 80HHA was rejected by the Assessing Officer on the ground that the investment in plant and machinery exceeded the limit provided in the said section. The Commissioner (Appeals) confirmed the assessment. On further appeal, the Tribunal allowed the assessee's claim made under section 80HHA relying on a press note issued by the industries department under which cost of generating sets, and extra transformer installed at the direction of the State Electricity Board would be excluded. On reference : HELD The Assessing Officer and the two appellate authorities had considered the question as to whether the cost of generator would form part of the plant and machinery of the said unit since the Explanation (b) to section 80HHA was not in the statute. Under the then existing provisions if the value of the plant and machinery exceeded a particular limit, the unit would not be treated as a small-scale industrial undertaking. However, by the new Explanation (b) inserted by the Finance Act, 1999, with retrospective effect from 1-4-1978, an industrial undertaking shall be deemed to be a small-scale industrial undertaking which is, on the last date of the previous year, regarded as a small scale industrial unit under section 11B of the Industries (Development and Regulation) Act, 1951. Thus, the very basis for determining…

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