Law:

Section:

Section 80IB, read with section 80-IA (as it stood prior to 1-4-2000), of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings - Assessment years 2000-01 and 2001-02 - In assessment year 1994-95, assessee had set up a small scale industrial undertaking for purpose of manufacture of photo albums and commenced manufacture on 24-3-1994 - As it continuously suffered losses till assessment year 1997-98, it did not claim any deduction under section 80-IA (as it then stood) - In assessment years 1998-99 and 1999-2000, it, having earned profit, filed returns claiming deduction under said provision and said returns were processed under section 143(1)(a) - Thereafter, by virtue of Finance Act, 1999, with effect from 1-4-2000, section 80-IA was bifurcated into two sections, namely, sections 80-IA and 80-IB and deductions, which were available under section 80-IA(2)(iv)(a), were made available under section 80-IB(3)(i) - Therefore, for assessment years 2000-01 and 2001-02, Assessing Officer examined assessee's claim for deduction under section 80-IB(3)(i) and held that in order to be eligible for deduction, an undertaking, which was a small scale industrial undertaking, had to commence production during period beginning on 1-4-1995 and ending on 31-3-2000 and since in instant case assessee had commenced production on 24-3-1994, it was not entitled to deduction - Whether since initial year for claim of deduction in respect of assessee was assessment year 1994-95, state of law was required to be traced from that year, as deduction was thereafter available for ten consecutive years ending with assessment year 2003-04 - Held, yes - Whether since in assessment year 1994-95, deduction to assessee would have been available under section 80-IA(2)(iv)(a) (as it then stood) and there was no distinction between a small scale undertaking or any other undertaking in that year, assessee was entitled to deduction under section 80-IB(3)(i), provisions of which are pari materia with provisions of section 80-IA(2)(iv) as obtaining in initial year - Held, yes FACTS In the assessment year 1994-95, the…

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