Industrial undertaking : Deduction u/s.80-IA of Income-tax Act, 1961 : A.Y. 2003-04 : Trial production in A.Y. 1998-99 and commercial production in A.Y. 1999-00 : Therefore initial assessment year is the A.Y. 1999-00 in which there was commercial producti

[CIT v. Nestor Pharmaceuticals Ltd., 231 CTR 337
(Del.)]

In the Goa unit of the assessee’s industrial undertaking
there was trial production in the A.Y. 1998-99 and the commercial production
commenced in the A.Y. 1999-00. Therefore, the assessee claimed that the initial
assessment year is the A.Y. 1999-00 and accordingly claimed 100% deduction
u/s.80-IA of the Income-tax Act, 1961 in the A.Y. 2003-04. The Assessing Officer
was of the view that the initial assessment year is the A.Y. 1998-99 in which
there was trial production and accordingly restricted the deduction to 30%. The
Tribunal allowed the assessee’s claim.

On appeal by the Revenue, the Delhi High Court upheld the
decision of the Tribunal and held as under :

“(i) Initial assessment year for the purpose of S. 80-IA is
the assessment year relevant to the previous year in which the commercial
production is started and not the A.Y. in which there was only a trial
production.

(ii) There was only a trial production in the A.Y. 1998-99
and commercial and full-fledged production commenced only in the A.Y. 1999-00.
Merely the trial production will not be regarded as beginning to manufacture
or produce articles. The Tribunal was therefore justified in holding that the
benefit of Section would be allowed in the year in which commercial production
started i.e., A.Y. 1999-00 and, therefore, would be extendable up to the A.Y.
2003-04.”