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2021 (1) TMI 843 - HC - Income TaxClaim of deduction made u/s 10A and 10B - Denial of claim on the ground that an undertaking was formed by splitting up/reconstruction of the business already in existence - Reopening of assessment u/s 147 for AY 2000-01 and 2001-02 - For the Assessment Year 2002-03, the CIT, Chennai-II, passed an order under Section 263, setting aside the issue of deduction under Section 10A and directed the Assessing Officer to decide the issue de novo - HELD THAT:- For the Assessment Year 2000-01, the assessee had filed its return of income on 29.11.2000. The assessee claimed that it was eligible for deduction under Section 10B. The return was processed on 28.03.2002. Subsequently, the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment on account of the assessee Company being ineligible for deduction under Section 10A. Subsequently, a notice dated 22.03.2007 was issued under Section 148 and after giving an opportunity of hearing, the scrutiny assessment order was passed on 17.12.2007, disallowing the entire claim of deduction under Section 10B - expenditure incurred for the renovation and repairs of the rented premises of the assessee Company was disallowed by AO on the ground that such expenses were in the nature of capital expenditure. AO in his re-assessment order noted that in terms of Section 10B(ii) an undertaking in order to be eligible for deduction under Section 10B must not be formed by splitting up or reconstruction of a business already in existence. Further, the Assessing Officer held that deduction under Section 10B was not available to the assessee Company in view of the provisions of Section 10B(iii) which stipulate that eligible business is not formed by transfer to a new business of plant and machinery previously used for any purpose. AO found that the assessee had not complied with both these conditions, hence, it was not entitled to any deduction under Section 10B. In view of the judgment of the Hon'ble Division Bench of this Court [2019 (2) TMI 57 - MADRAS HIGH COURT] it is clear that the applicability of Clauses (ii) and (iii) of Sub Clause (2) to Section 10B of the Act, the impugned order passed by the Income Tax Appellate Tribunal is proper. As the assessee Company would be entitled to deduction under Section 10A and disallowance made by the Assessing Officer was not correct. Since the order passed under Section 263 itself has been set aside, the cause of action for re-assessment does not survive. Levy of interest under Section 234D - Scope of amendment - HELD THAT:- The amended provision shall come into force only after the commencement of the Assessment Year and cannot be applied retrospectively unless it is specifically mentioned. Therefore, the law to be applied is the law as on the date of commencement of the Assessment Year and not the change in law amended subsequent to that date. Section 234D having come into force only on 01.06.2003 (i.e.) after the commencement of the Assessment Year, interest could be levied only from 01.04.2004 (i.e.) from the Assessment Year 2004-05 and no interest under Section 234D could be chargeable prior to the Assessment Year 2004-05. Since all the three Assessment Years are prior to the Assessment Year 2004-05, the provisions of Section 234D cannot be applied. Following the judgment in Karimthuravi Tea Estate Ltd. Vs. State of Kerala [1965 (12) TMI 35 - SUPREME COURT] we are of the considered view that the provisions of Section 234D cannot be applied to the case of the assessee in respect of the Assessment Years 2000-01, 2001-02 and 2002-03 which are prior to the insertion of Section 234D.
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