TMI Blog2007 (6) TMI 265X X X X Extracts X X X X X X X X Extracts X X X X ..... nue is that the ld CIT (A) failed to note that in the earlier year the assessee had claimed relief u/s 80HHE which profits/receipts from Trichy Unit also and hence, as per section 80HHE(5), the assessee is not permitted to claim relief u/s 10A. In this regard the learned counsel of the assessee submitted that this is factually wrong. He referred to Assessing Officer's finding in the assessment order where it is clearly mentioned that the STPI Unit commenced its commercial operation from April, 2001. The ld DR did not dispute this finding. In this regard, we further find that Hon'ble jurisdictional High Court in the case of L.G. Balakrishnan Bros. Ltd. v. CIT[ 1983 (9) TMI 32 - MADRAS HIGH COURT] held that a new undertaking can be said to have been formed only when it is ready to commence the production of article for which the undertaking was established and the formation of company will not include the initial steps taken for its establishment. Thus, we find that this objection by the revenue is unfounded. - Member(s) : N. VIJAYAKUMARAN., SHAMIM YAHYA. ORDER Per Shamim Yahya, Accountant Member.-This appeal by the revenue is directed against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rts in addition to CAD services which have been rendered in earlier years as well." 5. On the basis of above, the learned Commissioner of Income-tax (Appeals) concluded that there was substantial force in the contention of the assessee that STPI Unit at Trichy was not formed by splitting up or reconstruction of its earlier business. Aggrieved by this order of the Commissioner of Income-tax (Appeals), the revenue is in appeal before us. 6. We have heard the rival contentions and perused the relevant records. We find that section 10A which provides for special provision in respect of newly established undertakings in free trade zones provides vide clause (2) the conditions which are to be satisfied by the undertakings in order to claim exemption granted by the section as under:- "(2) This section applies to any undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year- (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or (b) commencing on or after the 1st day of April, 1994, in any electro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r relevant to assessment year 2001-02." 9. Another objection of the Assessing Officer in this regard was that less skilled and inexperienced new employees of the STPI Unit at Trichy would not be competent to develop highly complicated software as required by foreign clients of the assessee. In this regard, assessee submitted before the learned Commissioner of Income-tax (Appeals) that all the newly recruited employees were technically competent holding ITI certificates and were duly trained by the company. 10. The next objection of the Assessing Officer is regarding the transfer of old clients to the new unit. In this regard, it is the submission of the assessee that out of total ten export clients, six were old clients and four new clients were added during the assessment year. While in the previous unit assessee provided only Computer Aided Design (CAD) services for the current assessment year, the STPI Unit has rendered new technological services even to the old clients, namely, Geological Information Systems (GIS), Photogrammatary and Software Services. Out of the total turnover of Rs. 2,69,57,499, only Rs. 65,57,765 were from CAD services. 11. Another objection by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chy but were incurred at Chennai. The assessee has furnished the details of such expenses. Thus, after considering this, the actual expenses relating to STPI Unit at Trichy worked out to Rs. 7,57,563 whereas the domestic unit at Chennai had incurred an amount of Rs. 3,12,991 on telephone, fax, internet and e-mail charges during the year under consideration. 13. The learned Commissioner of Income-tax (Appeals) further noted that assessee's claim is further strengthened by the fact that new Plant and Machinery at Trichy was procured at a cost of more than Rs. 50 lakhs. It was in the background of aforesaid analysis and fact finding whereby all the objections of Assessing Officer were cogently rebutted that Commissioner of Income-tax (Appeals) decided the issue in favour of assessee. 14. It is well settled that in order to hold that a business was formed by splitting up of a business already in existence, there must be some material to hold that either some assets of the existing business is diverted and another business is set up from such splitting up of assets or that the two businesses are same and the one formed was an integral part of the earlier one. Admittedly, in this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdictional High Court in the case of CIT v. Metropolitan Springs (P.) Ltd. [1991] 191 ITR 288 (Bom.) has held in the context of provisions of section 80J that, even if some members of the staff were common to the old and new unit, it will not be a bar on the eligibility or deduction under section 80J. (ii) Hon'ble Apex Court decision in the case of CIT v. Indian Aluminium Company Ltd. [1977] 108 ITR 367 has held that, even if the new undertaking was involved in manufacturing the same commodity as manufactured by the old unit, it will still be treated eligible undertaking for section 80J. (iii) Hon'ble jurisdictional High Court decision in the case of CIT v. Premier Cotton Mills Ltd. [1999] 240 ITR 434 (Mad.) has held that, it was not required for deciding the question of splitting up or reconstruction of the existing business that the new undertaking should produce different article to that produced by the old unit. 17. On the anvil of aforesaid discussion and case laws, we find that in this case there is a clear establishment of new unit by substantial investment in Plant and Machinery. The new unit though, took some of the old unit's employees but during the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
