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Issues involved: The judgment involves the issue of allowing exemption u/s. 10A of the IT Act to the assessee company for the assessment years 2002-03 to 2004-05.
Details of the judgment: 1. Background and Assessment: The company, engaged in exporting software, claimed 100% exemption u/s. 10A of the IT Act. The Assessing Officer disallowed the exemption on grounds including the undertaking not being a new unit and lack of new plant and machinery usage. The CIT(A) later allowed relief to the assessee, leading to the revenue's appeal. 2. Applicability of Section 10A: The revenue argued that the company was not a newly established undertaking eligible for section 10A benefits due to its prior existence as a partnership firm. The company's assets were already in use in India before conversion, not meeting section 10A(2) requirements. 3. Legal Arguments: The company contended that the conversion from a firm to a company did not constitute a transfer, citing a Bombay High Court case. They also referenced Board Circulars supporting conversion of existing units for IT Act benefits. 4. Decision and Rationale: The Tribunal upheld the CIT(A)'s decision, emphasizing that the company's conversion and claim of exemption were in line with Board Circulars. The judgment highlighted that the conversion did not violate section 10A(2) as it was not a reconstruction of an existing business. The Circulars were deemed binding, justifying the company's entitlement to exemption u/s. 10A. 5. Conclusion: The appeals were dismissed, affirming the company's eligibility for exemption u/s. 10A based on the conversion from a firm to a company and compliance with relevant Circulars. *Note: The judgment was delivered by Gopal Chowdhury, J.M., and N.L. Kalra, A.M.*
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