Section 80-IC - Substantial Expansion - Initial Assessment Year

[vdboss]

As per section 80-IC, deduction shall be available to an existing undertaking which begins to manufacture things or articles and undertakes substantial expansion during the specified period.

Such deduction under section 80-IC would be available from the assessment year relevant to FY in which substantial expansion is completed. 

However, for fulfilling condition of 'substantial expansion", gross block of plant and machinery as on 1st day of FY is required to be compared with purchase of new plant and machinery during such FY in which the substantial expansion is undertaken.

Query -
Whether substantial expansion started in the relevant FY should ideally be completed in the same FY so as to fulfill threshold limit of 50% and claim deduction under section 80-IC? This is because if the expansion falls beyond a particular FY, a situation may arise where threshold limit of 50% is achieved in a particular FY and in subsequent FY, though the substantial expansion is completed, the threshold limit of 50% is not achieved.

[drabesh]

  In the matter  of substantial expansion ,  you are very clear about  Increase in Investment in Plant & machinery by at least 50% of the book value .  Now  your query is .in case the 50% is achieved in two or more Financial Year whether it is will be considered under substantial expansion.  Yes only in case Deprecation were not claimed on  the addition/ investment in plant & machinery . It is  held in following ITAT  judgment
1.Income Tax Appellate Tribunal – Chandigarh S.R. Paryavaran Enginers (P) ... vs Department Of Income Tax on 30 August, 2010