Section 80-IB deduction requires continued small scale industry status throughout the relevant assessment year.

A deduction under Section 80-IB for a small scale industrial undertaking depends on the undertaking continuing to satisfy the statutory eligibility conditions in the relevant assessment year. Because each assessment year is a separate unit, the benefit cannot be carried forward once the undertaking ceases to fall within the defined class, even if it qualified in the initial year. Liberal construction of an incentive provision cannot override clear statutory requirements. The assessee was therefore not entitled to claim the deduction for a year in which the qualifying status had been lost.

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Issues: Whether an assessee claiming deduction under Section 80-IB for a small scale industrial undertaking can continue to avail the deduction for the full block of 10 consecutive assessment years even after ceasing to satisfy the definition of a small scale industrial undertaking in a later assessment year.

Analysis: Section 80-IB grants an incentive deduction to eligible industrial undertakings, and the deduction under sub-section (3) is linked to the profits of such undertaking for 10 consecutive assessment years beginning with the initial assessment year. The definition of a small scale industrial undertaking in clause (14)(g) refers to Section 11B of the Industries (Development and Regulation) Act, 1951, so eligibility depends on the undertaking continuing to fall within that class. The scheme of the provision does not indicate that once eligibility is satisfied in the initial year, the benefit must continue irrespective of later loss of the qualifying character. Since each assessment year is a separate unit, the assessee must retain the status required for the deduction in the relevant year. Liberal construction of incentive provisions cannot override clear eligibility conditions.

Conclusion: The assessee is not entitled to the deduction in a year in which it ceases to be a small scale industrial undertaking, even if the initial year's eligibility was satisfied.

Final Conclusion: The entitlement to deduction under Section 80-IB is conditional on continued satisfaction of the statutory eligibility criteria in the relevant assessment year, and the benefit cannot be claimed after the undertaking loses the qualifying status.

Ratio Decidendi: A fiscal incentive tied to a specified class of undertaking can be claimed only so long as the assessee continues to satisfy the statutory conditions for that class in the relevant assessment year; liberal interpretation cannot dispense with clear eligibility requirements.

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