Section 80IB deduction upheld where manufacturing began in time, despite late factory licence under another law.

Deduction under Section 80IB depended on whether the assessee had actually commenced manufacture or production within the prescribed period, and the Court held that this factual requirement was satisfied. Belated procurement of a factory licence under another statute did not, by itself, negate the commencement of production for income-tax purposes. Any breach of factory law had to be dealt with under that law and could not be used as the sole ground to deny the tax deduction where production itself was not in doubt. The Revenue's challenge failed and the deduction was sustained.

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Issues: Whether the assessee was entitled to deduction under Section 80IB of the Income-tax Act, 1961 despite the factory licence being obtained after the cut-off date and whether breach of factory law could justify denial of the tax deduction.

Analysis: The Tribunal's view, as affirmed by the Court, was that the essential requirement for Section 80IB is that the assessee must manufacture or produce an article or thing within the stipulated period. The absence or belated grant of a factory licence under another statute does not, by itself, negate the factual commencement of manufacturing activity for purposes of the deduction. Any breach of the factory law has to be addressed under that law and cannot be used as the sole basis to deny relief under Section 80IB, particularly when the factual indicators of production are not doubted.

Conclusion: The assessee remained eligible for deduction under Section 80IB, and the Revenue's challenge on the licence issue failed.

Final Conclusion: The appeal was rejected and the deduction granted to the assessee was sustained.

Ratio Decidendi: Eligibility for deduction under Section 80IB depends on actual manufacture or production within the prescribed period, and non-compliance with an unrelated licensing requirement under another statute cannot, by itself, disqualify the assessee from the deduction.

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