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2008 (5) TMI 661 - AT - Income TaxEligibility for deduction u/s 10B - business of export of computer software - shifted its business to new office - 100 per cent EOU - Jurisdiction of order passed by CIT u/s 263 - HELD THAT:- It is pertinent to note here that the plant and machinery which was brought by the assessee at the new place of business was bearing charge of the bank and financial institution against the loan already availed by the assessee. Therefore the assessee could not dispose of these plant and machinery till the repayment of the earlier loan and consequently discharge of charge. This is a case where the assessee has shifted its ongoing business of export of computer software to a new place located in Software Technology Park of India notified by the Government of India. Whether the shifting of the business place from a domestic tariff area to a Software Technology Park of India notified by Government of India amounts to formation of business by splitting up or reconstruction of business already in existence as well as by transfer of all plant and machinery previously used to a new business for any purpose as contained in cls. (ii) and (iii) of sub-s. (2) to s. 10A? - HELD THAT:- The shifting of existing business from one place to another place does not amount to forming a business by splitting or reconstruction or by transfer of plant and machinery previously used. In the facts and circumstances of the case formation of new business by splitting up a business already existing is totally ruled out. As far as reconstruction is concerned, it is not a case of transfer of asset and ownership of assets. Moreover, it is only shifting of existing business from a domestic area to STPI and getting approval as 100 per cent export-oriented undertaking. Therefore it is not establishing a new business by transfer of plant and machinery used previously for any purpose. We are of the considered view that this is not a case of setting up of a new business but only transfer of business place of existing business to a new place located in STPI area and thereafter getting the approval from the authorities and thereby the assessee becomes entitled to deduction u/s 10A. Merely because by shifting the business from one place to another and also keeping some of the plant and machinery as those are bearing charge of financial institution does not violate cls. (ii) and (iii) of sub-s. (2) to s. 10A of the IT Act. Board in Circular No. 1 of 2005, dt. 6th Jan., 2005 has clarified that the existing undertaking set up in the DTA and drawing profit from export of article shall be eligible for deduction under s. 10B on conversion of the area into EOU on getting approval as 100 per cent export-oriented undertaking. The only instruction (sic-restriction) is that the deduction shall be available only for the remaining period of 10 years beginning with the year in which it got the approval as 100 per cent EOU - Moreover when the claim of the assessee regarding deduction u/s 10A was considered and decided by the AO in the regular assessment and the same issue was taken by the assessee to the CIT(A), the order of assessment was merged with the order of the CIT(A), the order passed u/s. 263 is not sustainable as the CIT has exceeded the jurisdiction in invoking the provisions of s. 263 when assessment order as regards the claim of deduction u/s 10A has been merged with the order of the CIT(A). Therefore, the order passed u/s 263 is not sustainable and liable to be set aside. Accordingly we set aside the impugned order - In the result, the appeal is allowed.
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