Section 80IA/80IB deduction continues in later years once allowed initially, absent withdrawal or changed eligibility facts.

Section 80IA/80IB deduction, once allowed in the initial assessment year, continues for the prescribed period for subsequent eligible years unless that initial allowance is withdrawn or the factual basis for eligibility changes. The Bombay High Court treated the fact that the first allowance was granted under Section 143(1) as immaterial because the decisive question was whether the initial-year relief had been displaced. As there was no change in the manufacturing activity and no withdrawal of the earlier benefit, the Revenue could not deny the deduction in later years. The issue was therefore answered in favour of the assessee.

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Issues: Whether the assessee was entitled to continue deduction under Section 80IA / Section 80IB of the Income-tax Act, 1961 for the subsequent assessment years once the deduction had been allowed in the initial assessment year and had not been withdrawn.

Analysis: The deduction under Section 80IB was held to be a continuation of the benefit first allowed in the initial year. The Court held that the fact that the initial allowance had been made under Section 143(1) did not alter the position, because the controlling consideration was whether the first year's allowance had been withdrawn or displaced. In the absence of any change in the manufacturing activity or any withdrawal of the initial-year relief, the Revenue could not deny the deduction in the later years. The Court followed its earlier decisions holding that the benefit under Chapter VI-A, once granted for the initial year, continues for the prescribed period unless the initial allowance is set aside.

Conclusion: The issue was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: Once deduction under Section 80IA / Section 80IB is allowed in the initial assessment year, the Revenue cannot deny the deduction for subsequent eligible years unless the initial allowance is withdrawn or the factual basis for eligibility changes.

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