Law:

Section:

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings - Assessment year 2005-06 - Whether basic requirement for setting up of a factory is obtaining a license without which legally it would not be permissible to set up a factory and to commence manufacturing activity - Held, yes - Whether therefore, deduction under section 80-IB cannot be granted if factory license is not obtained before setting up an industrial undertaking - Held, yes - Whether to qualify for deduction under section 80-IB(4) one of essential requirement is that industrial undertaking concerned should have begun to manufacture or produce articles or things on or before 31-3-2004 - Held, yes - Whether in cases where application for license to set up an industrial undertaking was made before 31-3-2004 but obtained shortly thereafter, such lapse must be viewed as purely technical and it would not come in way of grant of deduction under section 80-IB - Held, yes [Partly in favour of assessee] FACTS The assessee was engaged in the business of manufacturing polyrolls; plastic bags and pouches, etc. Such manufacturing was being carried out at the factory of the assessee at Daman which premises were obtained by the assessee on rental basis. Necessary machinery was purchased on 16-3-2004. The assessee produced evidence of purchase of raw material and production as also consumption of electricity for manufacturing activity. The assessee also contended that excise registration was granted on 1-3-2004 and sales tax registration was granted on 7-1-2004 and SSI registration was granted on 21-3-2004. No objection certificate from pollution control board was also obtained on 7-1-2004. With respect to non-availability of factory license, the assessee contended that by oversight factory license was left out to be applied on the date of commencement of production in March, 2004. The license was eventually applied in Jan. 2005 and was issued by authority on 3-5-2005. In above circumstances, assessee claimed deduction under section 80-IB. The Assessing Officer, however, disallowed the claim. He was of the opinion…

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