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2019 (1) TMI 598 - HC - Income TaxExemption u/s 10AA - eligibility - satisfaction of conditions mentioned in clause (ii) to sub-section (4) to Section 10AA - 'splitting up’ or ‘reconstruction’ of the business already in existence - Held that:- Negative stipulation in Clause (ii) to sub-section (4) of Section 10AA mandates that to claim exemption the unit should not be formed by ‘splitting up’ or ‘reconstruction’ of a business already in existence. The words and terms ‘splitting up’ or ‘re-construction’ used in clause (ii) to sub-section (4) to Section 10AA reflect a deliberate forethought in the choice of words. The increase in revenue in the new unit was 1166% higher. Obviously the existing business was not transferred and the new unit had generated revenue almost equal to the revenue earned by the existing business. Assessee had also carried out the expansion of the non-exempt EOU unit by adding additional area of 21817 sq. feet. There has been increase of 33%, 47%, 38% and 13% in the revenue earned by the exempt unit during the period relevant to the assessment years 2013-14 to 2016-17 respectively. However, the revenue earned by the non-exempt unit/business has not deceased and has shown increase as noted above between the financial years 2012-13 to 2015-16. Tribunal had also examined technical manpower employed in the new unit and has noted that percentage of new employees in the SEZ unit was 83% and 64% during the period relevant to the assessment years 2011-12 and 2013-14. Clearly new employment opportunities and jobs were created. Business had grown and increased substantially on setting up of the new unit, which was a legitimate and wise business decision and not subterfuge and an illegal act. Tribunal has accepted that the new unit was a separate identity for its income to qualify for exemption under Section 10AA for it was not formed and created by ‘splitting up’ or ‘reconstructing’ the existing business. The new unit was also not formed by transferring any machinery or plant previously used. Fresh investment was made in the new unit. The revenue earning and profits generated were clearly attributable to the new unit. No substantial question of law arises for consideration - Decided against revenue
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