Section 80IC deduction and expense allocation turn on prior findings and factual verification of entitlement conditions.

Expense reallocation reducing the section 80IC deduction was rejected because the assessee's allocation had already been accepted in earlier Tribunal orders on identical facts, with no new material or falsity shown to justify departure. On the second issue, continuation of 100% deduction under section 80IC, after a prior section 80IB claim, depended on the correct initial year and proof of substantial expansion; because the record lacked a clear factual finding on those entitlement conditions, the matter was remitted to the Assessing Officer for verification and reconsideration in accordance with law.

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Issues: (i) Whether the disallowance made by reallocating expenses to the taxable unit and reducing the deduction under section 80IC was sustainable. (ii) Whether deduction under section 80IC could continue at 100% where the assessee had earlier claimed deduction under section 80IB and the claim depended on substantial expansion and the initial year of entitlement.

Issue (i): Whether the disallowance made by reallocating expenses to the taxable unit and reducing the deduction under section 80IC was sustainable.

Analysis: The claim was found to be covered by earlier Tribunal orders in the assessee's own case for several assessment years. The record did not show any new factual material, any investigation establishing falsity in the allocation of expenses, or any reason to depart from the settled view already applied on identical facts.

Conclusion: The disallowance on this issue was not sustained and the assessee succeeded.

Issue (ii): Whether deduction under section 80IC could continue at 100% where the assessee had earlier claimed deduction under section 80IB and the claim depended on substantial expansion and the initial year of entitlement.

Analysis: The legal position emerging from the Supreme Court decisions was that the entitlement under section 80IC depends on the correct initial year and on whether substantial expansion was actually carried out. The appellate record did not contain a clear factual finding on the date and manner of substantial expansion, so the legal issue could not be finally resolved without verification.

Conclusion: The matter on this issue was restored to the Assessing Officer for factual verification and reconsideration in accordance with law.

Final Conclusion: The appeal succeeded only in part, with one ground rejected on merits and the other sent back for factual verification, leaving the Revenue with a partial procedural success.

Ratio Decidendi: A deduction claim under section 80IC cannot be altered on conjecture or without factual verification of the relevant entitlement conditions, and prior consistent appellate findings on identical facts ordinarily govern the expense-allocation dispute.

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