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2015 (3) TMI 1331 - AT - Income TaxDeduction claimed u/s 10B denied - claim disallowed by the AO by holding that Prajna (India) was formed by a splitting up of the business of M/s. Dynamech - rectification petition - Held that:- As already held that for splitting up to be effective, transfer of assets needs must be there from the old unit, to the new unit, which is entirely absent here. Then, the facts of the present case are not in pari materia with those of ‘Chenab Information Technologies (P) Ltd.’ [2008 (8) TMI 597 - ITAT MUMBAI] in as much as it has been observed therein that the new unit carried on the existing business of the old unit, using the same employees. Herein, as noted, the employees of M/s. Dynamech have not been proved to have carried on the business of Prajna (India). In ‘Chenab Information Techonologies (P) Ltd.’ (supra), some of the existing staff was found to have been shifted to the new office in the same area taken on lease by making a small investment of about ₹ 2 lakhs in furniture and equipment. These, evidently, are not the facts of the present assessee. In ‘Chenab Information Technologies (P) Ltd.’ (supra) itself, it has been observed that each case has to be evaluated on its own facts to determine whether it is a case of splitting up of existing business or not. In assessee’s case, as discussed, the facts do not lead to a conclusion of Prajana (India) having been formed by a splitting up of the business of M/s. Dynamech. To sum up, we hold that: a) The Tribunal rightly recalled its order dated 31.08.2009 in its entirety, for hearing afresh and no prejudice was caused to any interest of the Revenue thereby. b) The ld. CIT(A) went wrong in holding it to be a case of transfer of capital from the existing business to the new one. c) The ld. CIT(A) has erred in holding that orders for manufacture were shifted from the existing business to the new one. d) The ld. CIT(A) has fallen into error in holding that there was a unity of control in the two businesses. e) The ld. CIT(A) has wrongly held that there was a shifting of staff from the existing unit to the one newly set up. f) The ld. CIT(A) has erroneously held that tax evasion was the sole reason for setting up the new unit. f) The ld. CIT(A) has, on the basis of the above misplaced findings, incorrectly held it to be a case of splitting up of existing business. Thus we hold that the ld. CIT(A) has misdirected himself in sustaining the disallowance of deduction claimed by the assessee u/s 10B of the Act. - Decided in favour of assessee.
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