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2014 (11) TMI 319 - HC - Income TaxEntitlement for claim of deduction u/s 80IC for first year - Whether a new partnership firm which has been formed by the same partners by splitting up the business of an existing partnership by and which utilizes the infrastructure and employees of the existing firm, would be entitled to 1st year of deduction under Section 80 IC – Held that:- In Commissioner of Income Tax Delhi-I, vrs. Gedore Tools India Pvt. Ltd. [1980 (8) TMI 79 - DELHI High Court] it has been held that it is not necessary for the employment of the capital to be formal in the sense of actually raising the captial and putting it into the new industrial undertaking - Employment of capital in a new industrial undertaking is different from the capital belonging to the assessed company. The AO has erred in law by coming to the conclusion that the new undertaking was formed by splitting up of business, already in existence - For all intents and purposes, the assessee firm is a new Unit - The AO has ignored the quantum of fresh capital, investment in plant and machinery, new building, new registration number and PAN number - The new unit cannot be even presumed as reconstruction of the old existing business, much less the formation of the undertaking by splitting up the existing undertaking - The shifting of the employees would not affect the constitution of the new firm to avail the benefit u/s 80IC - If surplus reserve capital is available with the assessed company it can utilize a specific amount of this capital for the purchase of the plant and machinery, buildings and other assets of the new undertaking - it cannot be said that the same persons were carrying on substantially the same business - the business of the assessee could not be said to be reconstruction of a business already in existence - it is not necessary to define as to what the expression " splitting up of a business " means – thus, the assessee was entitled to the benefit of Section 80IC – Decided against revenue.
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