Incentive deduction for small-scale units survives later machinery-value expansion where the statute does not require continuing threshold compliance.

Section 80IB incentive deduction for a small-scale industrial undertaking is tested at the time the benefit is first availed, and subsequent expansion crossing the plant-and-machinery investment threshold does not by itself terminate the deduction unless the statute expressly requires continuing compliance. The Tribunal treated the provision as an incentive scheme to be construed in favour of industrial growth, and held that the absence of an express continued-limit condition meant later increase in machinery value did not defeat eligibility. The Revenue's objection on the basis of the post-qualification threshold breach therefore failed, and the deduction remained available for the relevant years.

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Issues: Whether the assessee, being a small-scale industrial undertaking, was entitled to deduction under section 80IB notwithstanding the Revenue's objection that the value of plant and machinery had exceeded the prescribed limit during the deduction period.

Analysis: Section 80IB is an incentive provision intended to grant deduction for a specified block of consecutive years once the statutory conditions are satisfied at the inception. The Tribunal followed the view that there is no express requirement that the assessee must continue to satisfy the small-scale industry investment limit throughout the entire deduction period. Where the unit initially qualified and later expanded, the subsequent crossing of the machinery-value threshold does not, by itself, defeat the statutory benefit. The definition of small-scale industrial undertaking under section 11B of the Industries (Development and Regulation) Act, 1951 and the valuation notification were considered in this context, but the provision was construed in favour of promoting industrial growth and giving effect to the incentive scheme.

Conclusion: The assessee was entitled to deduction under section 80IB, and the Revenue's objection based on subsequent increase in the value of plant and machinery failed.

Final Conclusion: The common issue was decided in favour of the assessee on merits, resulting in relief for two years and rejection of the Revenue's challenge, while the assessee also succeeded in the remaining year.

Ratio Decidendi: For an incentive deduction available for consecutive years to a small-scale industrial undertaking, eligibility is to be tested at the time the benefit is first availed, and later expansion crossing the investment threshold does not, by itself, terminate the deduction unless the statute expressly so provides.

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