Industrially backward area deduction upheld where production began in time and urban agglomeration exclusion did not apply.

Jodhpur was treated as an industrially backward area for income-tax deduction purposes because the production had commenced within the relevant period and that factual basis was not disputed. On those facts, section 80HH(2) of the Income-tax Act, 1961 applied, and the Eighth Schedule under section 80-IA(2)(iv)(b) also recognised Rajasthan as containing industrially backward districts, with Jodhpur included in the list. The notified exclusion for urban agglomerations did not defeat the benefit, as the commencement of production pre-dated the relevant exclusion. The assessee therefore remained entitled to the deduction.

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Issues: Whether Jodhpur was an industrially backward area for purposes of deduction under the Income-tax Act, and whether the exclusion notified for urban agglomerations could deny the benefit in the facts of the case.

Analysis: The decisive factual position was that the production had commenced within the relevant period, and the factual basis for treating the area as industrially backward was not disputed. Under section 80HH(2) of the Income-tax Act, 1961, that factual position attracted the statutory benefit. The Eighth Schedule under section 80-IA(2)(iv)(b) also treated Rajasthan as a State containing industrially backward districts, and Jodhpur was included in that list. The reliance on Notification No. S.O. 165 dated 19.12.1986 excluding an urban agglomeration could not assist the appellant because the commencement of production was prior to the relevant exclusion in any event.

Conclusion: Jodhpur was treated as an industrially backward area on the facts proved, and the assessee remained entitled to the benefit; the appeals failed.

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