Section 10B deduction cannot be denied for one year within the eligible ten-year block after prior acceptance of eligibility.

Section 10B deduction was held to continue for the full ten-year eligible period from the first year of manufacture or production of eligible goods or software, and the Revenue could not deny the claim for one assessment year after accepting the assessee's approval and eligibility in the initial and later years. The Gujarat HC noted that, once the statutory conditions and certification position had been accepted in earlier years, the Revenue could not single out one year within the same ten-year block for different treatment without any explanation. The disallowance was therefore deleted and the Revenue's challenge failed.

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Issues: Whether the Revenue was justified in denying the assessee's deduction under Section 10B of the Income-tax Act, 1961 for the assessment year 2008-09 after the same claim had been accepted in the initial and subsequent assessment years.

Analysis: The deduction under Section 10B is available for ten consecutive years from the first year in which the undertaking begins manufacturing or producing eligible goods or software. The assessee's approval/certification position was accepted in the first year of claim and also in later years. In such circumstances, the Revenue could not single out one year within the ten-year block for different treatment without any explanation, particularly when the statutory scheme contemplates continuity for the full eligible period.

Conclusion: The disallowance was rightly deleted and the Revenue's challenge failed.

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