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2005 (11) TMI 171 - AT - Income TaxExemption u/s 10B - deletion of addition on account of interest to GSFC - 100% export oriented undertaking (EOU) - non-satisfaction of the prerequisite conditions - HELD THAT:- In the instant case, it is not disputed that the assessee's produce stands sold to another EOU against relevant declaration in Form CT3, sample of which stands also adduced as an exhibit at paper book p. 39. As such, we do not find any merit in this objection of the Revenue. The undertaking, it may be appreciated, stands recognized as an EOU, and thus subject to its qualifying criteria, as well as those stipulated under the Act, only of and from the date on which it stands recognized as such. The assessee may, in a given case, export 100 per cent of its bought out goods, but that would not entitle it for exemption u/s 10B; the export to be reckoned for the purpose being only in respect of goods manufactured/produced by it. Therefore, as long as the profits from the trading activity are not considered for deduction u/s 10B, we do not consider any adverse inference as enuring to the assessee on account of the same. This disqualification is, again, therefore, superfluous. We fail to understand as to how this inference stands drawn in the facts and circumstances of the present case; there being no splitting-up or reconstruction involved or adverted to by the AO himself. The condition apparently is only to prevent claims where an undertaking is formed through a division, reconstruction, and the like, of the resources already in existence, while in the present case the ownership, management and control of the assets of business continued to vest in the same assessee, both prior to and subsequent to its being accorded approval. Rather, the CBDT circular, adverted to earlier, clarifies this matter, if at all one was required, beyond any doubt. And the fact that the exemption period stands curtailed in respect of such units, to the balance unexpired portion of the eligible period, only ensures that no undue advantage is availed by the existing units, which would otherwise qualify for exemption, though only at or with reference to a future date, and not from the first day of their operations. Thus, we find that none of the debilitating defects in the assessee's claim u/s 10B as pointed out by the Revenue survive and hence, there is no infirmity in the order of the learned CIT(A), which is hereby upheld. In the result, the appeals are dismissed.
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