Section 80-IC – No 100% exemption for all 10 years

The Supreme Court has set aside a judgment of the Himachal Pradesh High Court and stated that industries in the state, which had set up units, cannot claim total income tax exemption for 10 years on the ground that they had expanded the industry during the period. The court interpreted Section 80-IC of the Income Tax Act introduced in 2004 to attract industries to hilly states like Himachal Pradesh, and Sikkim and other northeastern states. Different provisions apply to different states.

In Himachal, the industries could get a total exemption for five years and for the next five years 25 per cent. The industries claimed a total exemption for all 10 years on the ground that they had expanded their units. The tribunals and the high court granted it. However, on appeal the Supreme Court ruled in its judgment, CIT vs Classic Binding Industries, that units in the state cannot claim 100 per cent exemption for all 10 years but must be satisfied with 25 per cent for the second half of the 10-year period.