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2006 (7) TMI 283 - AT - Income TaxAllowability of 10A exemption - letter issued by STPI on 15th April, 1999 covers the assessment year period under consideration or not - Entitlement of section 10A exemption to the erstwhile firm. Allowability of 10A exemption - main reason for which the exemption was denied by the lower authorities was that the assessee was not approved by STPI for the assessment year. under consideration and it was approved only on 15th Feb., 1999 which falls under the asst. yr. 2000-01 - HELD THAT:- There is force in the contention of the assessee that the assessee is not a new unit and it was carrying on the business which entitles deduction under s. 10A vide STPI recognition dt. 6th Oct., 1998 which was in the name of M/s Kumaran Software and the firm was re-named as Kumaran Systems on 20th Oct., 1998 which was converted into a private limited company in the name and style of Kumaran Systems (P) Ltd., due to operation of law as per Part IX of Companies Act, 1956 and all the properties and liabilities of the firm were vested with the limited company. There was a mere change of name and the composition in the ownership of the undertaking and the business of the undertaking have not changed as the same partners have become directors of the company. The business activities of the newly constituted company remains the same. The business of the assessee was not formed by splitting of the old business or reconstruction. The undertaking of the assessee company remained the same. Whether the letter issued by STPI on 15th April, 1999 covers the assessment year period under consideration? - HELD THAT:- The letter clearly states that all the approval issued by their office like permission, IE Code, Green Card etc. stand valid under new name. Thus, it means that the authorities of STPI substituted the name of Kumaran Software with Kumaran Systems (P) Ltd. - As held in the case of Valli Patabhirama Rao & Anr. vs. Sr. Ramanuja Ginning & Rice Factory (P) Ltd. & Ors. [.....................................], there shall be statutory vesting of all the properties of the previous firm in the newly incorporated company without any need for separate conveyance. In view of this, if the firm, Kumaran Software/Kumaran Systems (P) Ltd., is entitled for 10A exemption, the assessee is also entitled for this exemption, because the assessee company has stepped into the shoes of Kumaran Systems (P) Ltd. Entitlement of section 10A exemption to the erstwhile firm - HELD THAT:- The erstwhile firm is entitled for s. 10A exemption for ten consecutive assessment years beginning from the assessment year relevant to the previous year in which the industrial undertaking begins to manufacture articles or things. The period of ten years commences from the financial year relevant to the assessment year in which the undertaking begins to manufacture or produce articles or things - In the instant case, the firm started to manufacture in the asst. yr. 1999-2000. Since the registration was granted by STPI on 6th Oct., 1998, the assessee is entitled for exemption under s. 10A from the asst. yr. 1999-2000 for a period of ten consecutive assessment years. The question of splitting up or reconstitution does not arise as the authorities below, themselves have admitted that it is not a new business formed by splitting up or reconstitution of existing business and the assessee is entitled for deduction for the asst. yr. 2000-01. When the lower authorities have admitted that this undertaking was not formed by splitting up or reconstitution, there are no reason for denial of the exemption for the asst. yr. 1999-2000 - the assessee is entitled for exemption under s. 10A of the IT Act though the STPI letter was issue on 15th April, 1999. Appeal of assessee allowed.
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