Section 80-IC deduction on substantial expansion cannot be reduced by earlier 80-IA and 80-IB claims outside the North-Eastern Region.

Section 80-IC operates as a distinct deduction regime for eligible units, and the "initial assessment year" is the year in which substantial expansion is completed. The ten-year ceiling in Section 80-IC(6) does not require earlier deductions under Sections 80-IA and 80-IB to be clubbed against a unit outside the North-Eastern Region, because that aggregation language is tied to the special North-Eastern provisions in the statute. The Revenue's reliance on Section 15C of the 1922 Act was treated as inapposite to this statutory scheme. On that reasoning, deduction under Section 80-IC remained available for the relevant years, and the disallowance based on prior deductions was unsustainable.

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Issues: Whether, on substantial expansion of a unit eligible under Section 80-IC, the ten-year ceiling in Section 80-IC(6) requires prior deductions claimed under Sections 80-IA and 80-IB to be counted against the assessee, and whether that ceiling applies outside the North-Eastern Region.

Analysis: The deduction scheme under Sections 80-IA, 80-IB and 80-IC operates in distinct fields. Section 80-IC grants deduction to units set up or substantially expanded in specified States, and the expression "initial assessment year" refers to the year in which substantial expansion is completed. Section 80-IC(6) bars deduction beyond ten assessment years only where the total period of deduction under Section 80-IC is combined with deduction under the second proviso to Section 80-IB(4) or under Section 10C, which are special provisions directed to units in the North-Eastern Region. The earlier deductions allowed under Sections 80-IA and 80-IB to this assessee, whose unit was not in the North-Eastern Region, could not be added to the Section 80-IC period for computing the ten-year cap. The Revenue's reliance on Section 15C of the Income-tax Act, 1922 was held inapposite because the present controversy turned on substantial expansion and the statutory design of Section 80-IC.

Conclusion: The assessee was entitled to claim deduction under Section 80-IC for the assessment years in question, and the disallowance for Assessment Years 2008-09 and 2009-10 was unsustainable.

Final Conclusion: The appeals were allowed and the denial of Section 80-IC deduction based on clubbing earlier deductions under Sections 80-IA and 80-IB was set aside.

Ratio Decidendi: For a unit outside the North-Eastern Region, the ten-year limit in Section 80-IC(6) does not permit prior deductions under Sections 80-IA or 80-IB to be counted against the assessee when the unit becomes eligible to claim deduction under Section 80-IC upon substantial expansion.

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