INCOME TAX OFFICER, WARD-3 (1), HYDERABAD vs. REGENCY CERAMICS LIMITED, HYDERABAD

Facts

The assessee company, engaged in manufacturing ceramic tiles, suffered extensive damage to its factory due to a cyclone in November 1996. This resulted in a complete stoppage of production. The company sought deduction under Section 80IA read with Section 33B of the Income Tax Act, claiming its business was discontinued and subsequently revived.

Held

The Tribunal held that the cyclone caused extensive damage leading to a complete stoppage of production, which constituted a "discontinuance of business" as per Section 33B. Therefore, the reconstruction and revival of the business unit made the assessee eligible for deduction under Section 80IA r.w.s 33B, upholding the CIT(A)'s order.

Key Issues

Whether the extensive damage to the factory due to a cyclone, leading to a complete stoppage of production, amounts to a "discontinuance of business" for the purpose of claiming deduction under Section 80IA r.w.s 33B.