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2014 (12) TMI 253 - AT - Income TaxClaim of exemption u/s 10B – Whether the conclusion drawn by AO and CIT(A) that assessee is not eligible for claiming deduction u/s 10B or 10A as it has been established by splitting up or reconstruction of its business already in existence and has been formed by transfer of plant and machinery previously used is correct - Held that:- Even where an assessee has failed to claim relief for which it is legally entitled to within the provisions of the Act, it is the duty of the AO to consider those relief while making the assessment - she has not given any specific decision on this issue apart from observing that the assessee is not eligible for deduction either u/s 10A or 10B - the AO has not allowed deduction u/s 10B to the assessee basically for the reason that assessee has not fulfilled the conditions of subsection (2) of section 10B - ‘splitting up or reconstruction of a business already in existence’ mentioned in clause (ii) of section 10B(2) or for that matter section 10A(2) will mean splitting up or reconstruction of business already in existence of the assessee and not of any other person. AO while denying assessee’s claim of exemption has concluded that assessee company has been formed by splitting up, or reconstruction of CG CoreEL Logic Systems Pvt. Ltd., a business already in existence - Chetan Sanghvi and Crompton Greaves, who are 100% share holders of CG CoreEL Logic Systems P. Ltd. are also holding respectively 29.8% and 28.9% shares in CMS, the parent company of assessee, rest 41.3% shares in CMS are held by others - AO’s conclusion that ultimate shareholders of both the companies are same is without any basis - in the year of formation i.e. AY 2000-01 there is no transfer of assets from CG CoreEL Logic Systems P. Ltd. to assessee - assessee has not violated any of the conditions of section 10B(2) - As the AO has rejected assessee’s claim of exemption only on the ground of violation of clause (ii) and (iii) of section 10B(2), which will not apply to the facts of assessee’s case, it is to be presumed that assessee satisfies all other conditions of the provision - Hence, assessee would be eligible for exemption u/s 10B. Exemption u/s 10B/10A is not granted to Pune Unit, 10A deduction to Bangalore unit should be granted as it is not formed by splitting up or reconstruction of Pune Unit – Held that:- Assessee’s claim for deduction u/s 10A for the Bangalore unit has been basically rejected for two reasons - No separate books of account are maintained for both the units and assessee has not claimed 10A benefit in the original return filed - these cannot be the sole criteria for denying exemption u/s 10A if otherwise it can be proved that the Bangalore unit is not formed by splitting up or reconstruction of existing business of assessee - the assessee has to prove such fact by producing necessary evidence – thus, the matter is remitted back to the AO for fresh adjudication. Computation of book profit u/s 115JB - Provision for expenses disallowed – Held that:-Considering the submissions of the parties and the nature of dispute as to whether provisions made are in the nature of contingent or ascertained liability, thus, the matter is remitted back to the file of the AO for verification – Decided partly in favour of assessee.
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