TMI Blog2010 (12) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... over have been taken over by the assessee-firm with effect from April 1, 2006. - technicality should not come into substantial justice of the assessee which otherwise is eligible for deduction under section 10B. - decided in favor of assessee. - I. T. A. No. 337/JP/2010, - - - Dated:- 24-12-2010 - R. K. Gupta, M. L. Gusia, JJ. Irina Garg and Ram Niwas Yadav for the Appellant R. C. Shah for the Respondent ORDER The order of the Bench was delivered by:- R. K. Gupta, Judicial Member:- This is an appeal by the Department against the order of the learned Commissioner of Income-tax (Appeals) relating to the assessment year 2007-08. The following grounds have been taken by the Department in its appeal:- "(i) Whether, on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in holding that business can be assigned retrospectively by one firm to another firm for the purpose of claiming deduction under section 10B. (ii) Whether, on the facts and in the circumstances of the case and in law the Commissioner of Income-tax (Appeals) was justified in holding that deduction under section 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or recovery of the demand, the Assessing Officer concerned issued a premature notice for recovery of the demand along with interest under section 220(2). Attention of the Bench was drawn on copy of notice issued for recovery of demand. It was further submitted that in the notice issued for making the payment, the Assessing Officer has specifically mentioned that if the payment is not made, then coercive measure will be adopted. Attention of the Bench was drawn on a copy of notice dated January 29, 2010 placed on record at page 216 of the compilation. It was further submitted that the detailed written submissions filed before the learned Commissioner of Income-tax (Appeals) were given to the Assessing Officer on February 3, 2010. Attention of the Bench was drawn on a copy of the letter along with detailed written submissions given to the Assessing Officer which were filed in his office, which are placed on record at page 218 of the compilation. It was also submitted that the assessee moved an application in response to notice of demand dated January 29, 2010 requesting the Assessing Officer that notice issued by him is premature as demand notice along with the assessment order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er who passed the order to file his submissions in regard to the findings given by the learned Commissioner of Income-tax (Appeals), as there is already a finding of the learned Commissioner of Income-tax (Appeals) in detail and it will be beneficial to the Department to object at this point of time. If the matter is sent back to the file of the learned Commissioner of Income-tax (Appeals), then they will not have any benefit of finding of the learned Commissioner of Income-tax (Appeals). Thereafter, the learned Commissioner of Income-tax-Departmental representative agreed to this proposition of the Bench by stating that a suitable direction may be given for calling the Assessing Officer concerned. In this background, an interim order was passed by the Tribunal on October 21, 2010 by which the above reasons were stated and the Department was directed to call the Assessing Officer concerned for filing his reply or submissions in respect to the issue raised before the Tribunal on the merits. Thereafter, the matter was adjourned for November 16, 2010. On this date another Commissioner of Income-tax-Departmental representative Shri Rajeev Sahai along with the present Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer who passed the impugned assessment order appeared on behalf of the Department. The Assessing Officer concerned filed a detailed written submissions comprising 7 pages which was taken on record, copy of the same was given to learned counsel for the assessee. The Assessing Officer read the written submissions filed before the Tribunal. It was submitted that he was not allowed opportunity of being heard by the learned Commissioner of Income-tax (Appeals), therefore, the matter should be restored to the file of the learned Commissioner of Income-tax (Appeals) as there are many issues which are to be explained to the learned Commissioner of Income-tax (Appeals). At this point of time, the Tribunal asked as to why "you are interested in sending the matter back to the file of the learned Commissioner of Income-tax (Appeals) when you are given proper opportunity to file your objections, specifically there is material before you in shape of finding of the learned Commissioner of Income-tax (Appeals) which can be controverted here before the Tribunal. The Tribunal is final fact finding body, therefore, what purpose will be served if the matter is restored to the file of the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has already explained the reasons for advancement of the date of hearing and, therefore, matter should not be sent back to the file of the learned Commissioner of Income-tax (Appeals). On the merits, he submitted that the learned Departmental representative has not argued any new things as whatever points are raised, are on the basis of assessment order passed. These very objections have already been raised by the Assessing Officer in his assessment order while denying deduction under section 10B. The learned Commissioner of Income-tax (Appeals) has already taken all these objections into consideration and then by giving detailed reasoning, has allowed the appeal of the assessee. Accordingly he placed strong reliance on the order of the learned Commissioner of Income-tax (Appeals). We have heard rival submissions and considered them carefully. Before taking into consideration the grounds of the Department raised in its appeal, we would like to discuss the facts of the present case. The facts relating to the issue involved in the appeal of the Department have been discussed by the Commissioner of Income-tax (Appeals) in his order from pages 2 to 6. The facts discussed by the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness the name of the firm was changed from 'V. K. Exports' to 'Veto Electropowers'. Subsequently, as per agreement dated December 30, 2006 Sh. Rajesh Gurnani having 1 per cent. share in the profit and loss retired as a partner and the remaining seven partners continued the same business with effect from December 31, 2006. As a result of retirement the share of Sh. Babulal Gurnani which was 7 per cent. was increased to 8 per cent. and there was no other change. Subsequently, the aforesaid reconstituted firm on January 15, 2007 had acquired the export oriented undertaking through a memorandum of understanding which was being run by M/s. Anjali Exports as 100 per cent. export oriented undertaking unit set up earlier on January 2, 2002 at F-6. Malviya Nagar Industrial Area, Jaipur. The said unit had earlier commenced the operations on July 18, 2004 and it was engaged in exactly same manufacturing and export activity which was being carried upon the appellant-firm. M/s. Anjali Exports before being acquired by the appellant-firm up to the assessment year 2006-07 was claiming exemption/deduction in respect of its income or the unit under section 10B which was also allowed by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed satisfactory. The Assessing Officer had referred the provisions of section 10B(1) and by referring copy of certificate issued by the Joint Development Commissioner, Noida referred three units were mentioned at the bottom of the certificate. According to the Assessing Officer the said certificate is with reference to PAN "AACCV4353N" which was of M/s. Veto Electropowers India P. Ltd. But according to him the appellant has not furnished any certificate in which unit F-6 at Malviya Industrial Area, Jaipur of M/s. Anjali Exports is added with M/s. Veto Electropowers having PAN "AACFV8795P". Thereafter, the Assessing Officer has referred Central Board of Direct Taxes Circular No. 1 dated January 6, 2005 ([2005] 272 ITR (St.) 6) according to which the deduction shall be available only from the year in which unit has got approval as 100 per cent. export oriented undertaking and shall be available only for the remaining period of 10 consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles as a DTA unit. According to the Assessing Officer since the appellant has not taken certificate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pur which was being run by M/s. Anjali Exports with another endorsement for the change of name of unit at S. No. 1. of the certificate as Veto Electropowers India P. Ltd., copy of the appellant-firm letter dated March 15, 2007 to the Development Commissioner, Noida Special Economic Zone about acquisition of 100 per cent. export oriented undertaking unit located at F-6, Malviya Nagar Industrial Area, Jaipur from M/s. Anjali Exports by memorandum of understanding dated January 15, 2007 with effect from April 1, 2006, copy of letter dated January 18, 2007 of the Development Commissioner, Noida Special Economic Zone addressed to M/s. V. K. Exports which was earlier the name of the appellant-firm regarding noting of changes in partnership firm having the names of new partners and regarding change of name of the firm from M/s. V. K. Exports to M/s. Veto Electropowers with an instruction to keep the letter attached with original LOP dated July 23, 2001, copy of memorandum of understanding dated January 15, 2007 between M/s. Veto Electropowers and M/s. Anjali Exports, copy of agreement of assignment of business dated March 24, 2007 between Veto Electropowers (India) P. Ltd. with Anjali Exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r assignment of business dated March 24, 2007 executed by M/s. Anjali Exports (assignor) and M/s. Veto Electropowers (India) P. Ltd. (assignee) industrial unit (export oriented undertaking) of M/s. Anjali Exports as a going concern was assigned to the company with effect from April 1, 2006 on a slump sale basis. It may be stated that this agreement of assignment of business was required to be executed by the company to complete the legal formality for assignment of export oriented undertaking unit for which the firm had signed memorandum of understanding on January 15, 2007 after the due deligence was completed and the slump price was finally fixed by the parties. 7. M/s. Veto Electropowers (firm) by its letter No. NEPZ/2006-07 dated March 15, 2007 intimated to the Development Commissioner, Noida Special Economic Zone, Noida about acquisition of the 100 per cent. export oriented undertaking unit located at F-6, Malviya Nagar Industrial Area, Jaipur from M/s. Anjali Exports by memorandum of understanding dated January 15, 2007 with effect from April 1, 2006. By another letter dated March 21, 2007, M/s. Veto Electropowers (India) P. Ltd. addressed to the Development Commissioner, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oth M/s. Anjali Exports and M/s. V. K. Exports were enjoying benefits under section 10B. 11. The final agreement for acquisition of the undertakings of purchase of M/s. Anjali Exports was signed on March 24, 2007. Since the appellant was converted into company on the day of resigning of agreement, the agreement was entered into by the successor corporate entity of the appellant-firm affirming earlier state of affairs. The memorandum of understanding was only for confirmation of the earlier action of erstwhile firm. 12. The return was processed under section 143(1) and subsequently the case was selected from scrutiny by issue of notice under section 143(2) dated September 25, 2008 duly served on the appellant-firm. In response to the same, the authorised representative attended from time to time and filed the hard copies of the return of income along with acknowledgment of ITR, e-filed copy of ITR, computation of income, audited accounts, audit report under the Companies Act, 1956. The tax audit report for both the concerns along with details in Form No. 3CD vide submission dated October 5, 2009. Further details and explanations as required and called for in relation to asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 and not otherwise. 15.6 The appellant-firm has not purchased any asset to liability of M/s. Anjali Exports. In fact, the appellant-firm has purchased the export oriented undertaking of M/s. Anjali Exports. 15.7 Even the learned Assessing Officer on page 5 of the assessment order has agreed that the exemption under section 10B is for undertaking and not for the assessee. The learned Income-tax Officer has observed as under:- 'From the above, it is clear that:- (i) the exemption is for undertaking and not for the assessee; (ii) from section 10B(2)(ii) it is clear that this exemption is not allowable for the undertaking which is formed by reconstruction of business already in existence.' 15.8 The memorandum of understanding entered into between M/s. Anjali Exports and the appellant-firm was not a final agreement. On finalisation of consideration for slump sale, the final agreement was executed on March 24, 2007. Since the appellant-firm was corporatised on March 20, 2007, M/s. Veto Electropowers India P. Ltd. entered into the agreement with M/s. Anjali Exports. It was an agreement of assignment of business made for just confirmation of earlier memorandum of u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undertakings a new concern has come into existence and new concern has used old plant and machinery, therefore, the assessee is not entitled for claiming exemption under section 10B. 16.10 The assessee-firm has not produced certificate of 100 per cent. export oriented undertaking. Therefore, the assessee-firm has not qualified the primary and essential condition of having 100 per cent. export oriented undertaking for F-6, Malviya Industrial Area, Jaipur (M/s. Anjali Exports). 16.11 A new sub-section (7A) in section 10A and a new sub-section (7A) in section 10B have been inserted to provide that where any undertaking of an Indian company is transferred to another company under a scheme of amalgamation or demerger, the deduction shall be allowable in the hands of the amalgamated or the resulting company. Thus the intention of statute is to allow merger or acquisition of only Indian company. Thus the intention of statute is to allow merger or acquisition of only Indian company. No merger is allowable to the assessees other than Indian company such as firm, foreign company, etc. 16.12 After introduction of section 10B(7A) it is clear that deduction is allowable after chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctionary by K. J. Iyer, eighth edition 1980, wherein the word 'reconstruction' is expressed by synonymous to 'rebuild'. Thus, if there is change in ownership from one person to another but the business continues to be the same, it cannot be said that the undertaking is formed as a result of reconstruction. 18. The objectives of this reorganisation are:- (i) better management; (ii) achieving economies of scale; (iii) revamping of production facilities and diversification; (iv) market expansion; (v) better finance; (vi) operational synergy; (vii) making M/s. Veto Electropowers more competitive; (viii) ensuring better service to customers. Indian businesses are gearing up for global size operations. Sizes of an organisation has acquired central place as a strategy of survival and growth in the competitive economy. There is a move towards a phase where only a few giant organisation will exist in a sector and business activities will be guided by the maxim of 'survival of the fittest'. 19. In the case of Textile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195 hon'ble apex court has dealt with 'reconstruction' and has observed as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch provides as follows:- 'Subject to the provisions of this section, a deduction of such profits and gains as derived by a hundred per cent. export oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee.' Thus, from the reading of the above provision, it is clear that deduction in respect of the profit of the undertaking will be allowed from the income of the assessee. Therefore, the benefit under section 10B is available to an undertaking and not to the assessee. Thus, the deduction under section 10B is qua undertaking and not qua assessee. So far as the requirements as stipulated in the provisions of section 10B are met and complied with by the undertaking, change in the ownership of an undertaking will have no effect on the eligibility of the undertaking to claim deduction under section 10B. Your honour will appreciate that even the learned Assessing Officer o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to be made in the name of M/s. Veto Electropowers P. Ltd. Such application have been made within 90 days as per clause 9.1 of the Foreign Trade Policy for 2004-09 which reads as under:- 'An IEC holder must get the change in name/address/constitution incorporated within 90 days of such change. Provided, however, RA issuing IE code may, condone delay on payment of penalty of Rs. 1,000. Change in constitution, aforesaid, does not include change in directors of public limited company.' Since the undertaking of M/s. Anjali Exports was acquired by the firm converted into private limited company the certificate was issued in the name of the said company. M/s. Veto Electropowers made an application on March 15, 2007 and M/s. Veto Electropowers (India) P. Ltd. made application on March 21, 2007 (copies enclosed) and hence there is nothing lacking as alleged. The appellant has fully and truly complied with requisite formalities. The relevant portion of foreign trade policy is reproduced for perusal. 6.34 (6) 'Authorise change in the name of company or implementing agency and change from a company to another'. 6.34 (10) 'Permit merger of two or more units in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Formerly, M/s. Pinnacle Exports started functioning in the financial year 1993-94. It was hundred per cent. export-oriented unit. The firm was carrying on the business of development and export of software and data processing permission for setting up hundred per cent. export oriented undertaking was granted to the firm by STPI on December 14, 1992. The firm was also granted approval to claim exemption under sections 10A and 10B. The export oriented undertaking was making exports to the American company, namely, M/s. Tech Enterprises. It was working under the control of U. S. A. company, as even funds were provided by this company to the firm. In 1997 the firm converted into company. At this time all the assets and liabilities of firm became the property of the company and all the partners of the firm became shareholders of the company. The capital of the partnership firm became the paid-up capital of the company. In view of the undisputed facts, it is clear that on conversion from firm of company. There was merely a change in the ownership of undertaking. There was no change in the business of the undertaking which was already in existence. Neither the business activity was rearr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the earlier business and that is the reason that sub-clause (iii) says in specific terms that the undertaking to be qualified for exemption under section 10B should not be formed by the transfer to a new business of machinery or plant previously used for any purpose. Thus, the emphasis is on the previous business, business already in existence or old business establishment. However, if the new undertaking has been formed and conditions laid down in various clauses of sub-section (2) are not applicable, then the exemption cannot be denied to the undertaking merely because at subsequent stage there is change in the ownership of undertaking. The business structure and continuity of the business activity has to be seen and not the continuity of the same ownership of the undertaking. Thus, there is a difference between the ownership of the undertaking and the business activity of the undertaking and if the latter remains unaffected or unchanged by subsequent change in the ownership then it cannot be said that the business of the undertaking has been reconstructed. Finally the hon'ble Members have observed that undertaking acquired by the assessee-company remained the same and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om April 15, 1999, the assessee was entitled to exemption under section 10A only from the assessment year 2000-01. Hence, the assessment was reopened and the exempted income was brought to tax by denying exemption under section 10A. Further, even the deduction under section 80HHE was denied for the reason that the erstwhile partnership firm had filed a return for the assessment year 1999-2000 up to the date of conversion, i.e., February 14, 1999 and claimed deduction under section 80HHE. Aggrieved, the assessee carried the matter in appeal before the Commissioner (Appeals) who confirmed the order of the Assessing Officer. The hon'ble Bench has held that the benefit of section 10A is available to an industrial undertaking which has begun or begins to manufacture or produce articles or things during the previous year relevant to the assessment year 1994-95 or any subsequent assessment year in any Electronic Hardware Technology Park or Software Technology Park as the case may be. The conditions laid down in clauses (ii) and (iii) of section 10A are to be fulfilled. The industrial undertaking is required to be approved by Electronic Hardware Technology Park or Software Technology P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in the assessment year 1999-2000. Since the registration was granted by STPI on October 6, 1998, the assessee was entitled to exemption under section 10A from the assessment year 1999-2000 for a period of ten consecutive assessment years. The question of splitting up or reconstruction did not arise as the lower authorities themselves had admitted that it was not a new business formed by splitting up or reconstruction of existing business and the assessee was entitled to deduction for the assessment year 2000-01. When the lower authorities had admitted that this undertaking was not formed by splitting up or reconstruction, there was no reason for denial of the exemption for the assessment year 1999-2000. Hence, the assessee was entitled to exemption under section 10A though the STPI letter was issued on April 15, 1999. 29. The next allegation of the learned Assessing Officer is that books of account of M/s. Anjali Exports, has not been separately maintained. This is also not correct on record. I may invite your attention to copy of audited balance-sheet dated January 7, 2007 where the balance-sheets of M/s. Anjali Exports and M/s. Veto electropowers have been separately compil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the intention of law is to now allow the buyer of the undertaking of 100 per cent. export oriented undertaking to enjoy the benefits under section 10B. It is pertinent to note by the assessee acquiring the undertaking from the assessment year 2004-05 onwards. In this regard, we wish to bring your kind attention to the explanatory memorandum to the Finance Act, 2003, regarding the above amendments. The relevant extract of the explanatory memorandum are reproduced here:- 'Allowing deduction under sections 10A and 10B in the case of amalgamation or demerger:- Under the existing provisions of sub-section (9) of section 10A and sub-section (9) of section 10B, the deductions under sections 10A and 10B are not allowed to the assessee where the ownership or the beneficial interest in the undertaking is transferred by any means. However, this condition is not applicable where as a result of the reorganisation of the business; a firm or sole proprietary concern is succeeded by a company, due to the provisions of sub-section (9A) of section 10A and sub-section (9A) of section 10B. The Explanation 1 below sub-section (9A) allows the continuance of the benefit where as a result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the remaining period of deduction. Therefore, as explained above, the Legislature is very clear in its intention that the deduction under section 10B is qua undertaking and not qua assessees. Therefore, the deduction under section 10B cannot be denied on the ground that the ownership of the undertaking has changed hands. 31. It may be noted that section 10B was inserted in the Income-tax Act to grant exemption to 100 per cent. export oriented undertaking income by the Finance Act, 1988 with effect from April 1, 1989. The said section was amended from time to time and was replaced by the present section by the Finance Act, 1999 with effect from April 1, 2000. The Central Board of Direct Taxes has issued a Circular No. F-15/5/63 (IT-AI), dated December 13, 1963 clarifying that the benefit of deduction under section 80J/84 (where the wording is the same as in section 10B) is attached to the undertaking and so the transferee of the undertaking can claim the benefit under the said section. The relevant part of the said circular reads as under:- 'The Board agree that benefit of section 84 attaches to the undertaking and not to the owner thereof. The successor will be e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterprises P. Ltd. [2005] 281 ITR (AT) 162 (Jodhpur) ; 95 ITD 1. 32. No old plant and machineries were acquired and used. 33. M/s. Anjali Exports continued to hold its existence. There is no restriction in M/s. V. K. Exports changing its name. Change of partner is immaterial for exemption/deduction under section 10B. No new undertaking came into existence. 34. The issue under dispute relates to interpretation of an exemption provision and as held by many judicial pronouncements require liberal interpretation and where two views are possible then the view favouring the assessee is to be taken. When the Legislature brings in the statute an incentive provision for the encouragement or advancement of a specific purpose, activity or objective, then such provision has to be liberally interpreted so as to advance the purpose behind it. In this context, one may rely on the following judgments:- Bajaj Tempo Ltd. v. CIT [1992] 196 ITR 188 (SC) This judgment related to section 15C of the old Act (section 80J of the new Act). The relevant part of the judgment may be summarised as follows (headnote):- 'A provision in a taxing statute granting incentives for promoting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng and then arrived at a conclusion that issue is covered by the decision of the Tribunal in the case of Tech Books Electronics Services P. Ltd. v. Addl.. CIT [2006] 100 ITD 125 (Delhi) and allowed the issue in favour of the assessee. The finding of the learned Commissioner of Income-tax (Appeals) have been recorded at pages 22 to 26 of his order which are as under:- "I have considered the facts of the case and arguments taken by Sh. Shah quite carefully. The basic facts of the case regarding reconstitution of the firm, introduction of the new partners, retirement of the partner, change of name of the firm as M/s. Veto Electropowers (formally known as M/s. V. K. Exports), acquisition of undertaking, namely, M/s. Anjali Exports and 100 per cent. export oriented undertaking unit with effect from April 1, 2006 by the memorandum of understanding dated January 15, 2007 and conversion of M/s. Veto Electropowers into a P. Ltd. Co. with effect from March 20, 2007 as M/s. Veto Electropowers (India) P. Ltd. are already reproduced in the earlier part of this appellant's order and, therefore, it is not considered necessary to reproduce them again. On factual appreciation of development of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Development Commissioner, Noida, Special Economic Zone the 100 per cent. export oriented undertaking of M/s. Anjali Exports is covered through the endorsement and since, by the time of issuing this endorsement the appellant-firm had converted into a P. Ltd. Co. with effect from March 20, 2007, therefore, the name of the unit in the certificate was stated as M/s. Veto Electropowers India P. Ltd. This is a case of the appellant-firm for the accounting year up to March 19, 2007 because, thereafter, it has converted into a P. Ltd. Co. With this factual discussion supported with documentary evidence it is clear that the appellant-firm had acquired all the assets and liabilities for the 100 per cent. export oriented undertaking of M/s. Anjali Exports situated at F-6. Malviya Industrial Area, Jaipur and this fact is evidenced by the endorsement made by the Joint Development Commissioner, Noida, Special Economic Zone to the original certificate issued to M/s. V. K. Exports whose name has been changed as M/s. Veto Electropowers which is the case of the present appellant-firm. It is clear that this not a case of new concern coming into existence but the manufacturing and export activity be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vesting and it could not be said that export oriented undertaking owned by the assessee-company was formed as a result of reconstruction of export oriented undertaking owned by the firm. Further, the permanent account number of prior and post acquisition of the appellant-firm, i.e., M/s. Veto Electropowers is the same and all other registration of M/s. V. K. Exports such as IEC number, registration with Ministry of Commerce and Industry, Excise and Customs authorities, etc. continued to remain in same manner in new name namely M/s. Veto Electropowers. This is a clear case of acquisition of an entity of 100 per cent. export oriented undertaking unit by the another 100 per cent. export oriented undertaking unit through slump sale. It shall not be out of place to analyse that the reorganisation of M/s. Veto Electropowers and M/s. Anjali Exports is complete tax neutral exercise not aimed to gain any undue tax advantage. As per the provisions of section 10B(1) the deduction in respect of an undertaking and it is not to the assessee and, therefore, deduction under section 10B is qua undertaking and qua assessee and, therefore, the change in the ownership of an undertaking will have no e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer for filing his comments if he wants to file on or before February 8, 2010. Copy of the notice received by the Assessing Officer was filed on behalf of the Department during the appellate proceedings which is placed on record. Thereafter the assessee vide notice dated January 29, 2010 was informed by the Assessing Officer that the demand raised by the impugned assessment order should be paid immediately along with interest under section 220(2) of the Act otherwise a coercive measure will be taken against him. Copy of this notice is placed in the compilation at page 216. Thereafter the assessee filed letter in the office of the Assessing Officer that the appeal of the assessee has already been fixed for hearing on February 8, 2010. Therefore, the recovery proceedings should be kept in abeyance till the disposal of the appeal. However, as stated by the learned authorised representative that the Assessing Officer has not acceded the request of the assessee and he was going to take coercive measure against the assessee. In these circumstances the assessee filed letter dated February 3, 2010 before the learned Commissioner of Income-tax (Appeals) for preponing the hearing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clined to accept the argument of the Department that matter should be sent back to the learned Commissioner of Income-tax (Appeals) and the ground on the merits should not be decided at this point of time. Various courts have time and again held that if the matter has already been discussed by the learned Commissioner of Income-tax (Appeals) in appeal, then the Tribunal should decide the appeal of either party on the merits instead of remanding the matter back. As stated above, there is evidence on record that the Assessing Officer was informed about the pre-ponment of the date of hearing, therefore, it cannot be said that no opportunity was given to the Assessing Officer by the learned Commissioner of Income-tax (Appeals). The Department could not controvert the fact that the information given to the Assessing Officer vide letter dated February 3, 2010 in regard to preponment of the appeal was not filed on behalf of the assessee in the office of ITO, Ward 6(1), Jaipur. Learned counsel for the assessee has relied upon, in support of his contention that matter should not be restored to the file of the learned Commissioner of Income-tax (Appeals) on various case law. The firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) in whose order the order of the Assessing Officer had merged. The Tribunal committed an error of law in restoring the matter to the Assessing Officer." We have also taken into consideration all other arguments of the learned Departmental representative by which the learned Departmental representative have strongly argued that matter should go back to the file of the learned Commissioner of Income-tax (Appeals). It is not understandable that why they want to go before the learned Commissioner of Income-tax (Appeals). It was stated by the Bench during the course of hearing that there is a material, i.e., in the shape of the order of the learned Commissioner of Income-tax (Appeals) and the Department could easily controvert the finding of the learned Commissioner of Income-tax (Appeals), and if they have some other material which has not taken into consideration at the time of completing the assessment also can be relied upon here before the Tribunal now. For this reason only the opportunity was given to the Department to call for the concerned Assessing Officer with his record for making his submission or placing some other material if he wants. No useful purpose will be se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the learned Commissioner of Income-tax (Appeals) while giving his detailed reasoning which is reproduced somewhere above in this order, it will be a futile exercise to record once again the finding of the learned Commissioner of Income-tax (Appeals). The Assessing Officer has filed 7 pages written submission. In first 2 pages the Assessing Officer has stated that the matter should be sent back to the file of the learned Commissioner of Income-tax (Appeals). From pages 3 to 7 the argument on the merits have been advanced by the Assessing Officer by which it is submitted that apart from reiterating many observations and findings contained in the assessment order which primarily included conditions of section 10B(2) having not been fulfilled as it being a case of reconstruction as an entirely new undertaking has emerged as a result of purchase of M/s. Anjali Exports by the assessee, and (2) in addition to that even under the provisions of sub-section (7A), deduction under section 10B of the Act in case of succession of an industrial undertaking is allowable only in the case of a transfer of the undertaking of an Indian company in the scheme of amalgamation of demerger, and (3) i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther stated that the assessee-firm is claiming that the business of M/s. Anjali Exports has been taken over retrospectively with effect from April 1, 2006 through a memorandum of understanding signed on January 15, 2007 and the assessee is also submitting that business of M/s. Anjali Exports have been taken over retrospectively by M/s. Veto Electropower P. Ltd. successor company of the assessee-firm which has been incorporated on March 20, 2007 through an agreement of assignment of business dated March 24, 2007 entered into with M/s. Anjali Exports through its partner Shri Babu Lal Gurnard. It is submitted that both the submissions mentioned above are contradictory to each other and, therefore, there is no question of allowing deduction to the assessee and if deduction can be allowed that can be allowed in case of the successor company M/s. Veto Electropower P. Ltd. It is further submitted that the copies of the income-tax return of M/s. Anjali Exports for the assessment years 2006-07 and 2007-08 along with copy of the Income-tax return of M/s. Veto Electropower P. Ltd. for the assessment year 2007-08 should be called and should be examined. We have gone through the above submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been filed and in respective column no amount of income or deduction has been mentioned or claimed. This copy of return was filed on behalf of the assessee as required by the Bench. We have also seen the copes of returns for the assessment years 2005-06 and 2006-07 in the case of M/s. Anjali Exports which is placed on record and found that the Assessing Officer concerned has allowed deduction under section 10B in the case of M/s. Anjali Exports, for the assessment year 2007-08 there is no return of income filed by M/s. Anjali Exports as the same has been taken over by the assessee-firm with effect from April 1, 2006. The contention in this respect, therefore, does not hold good. Accordingly, we hold that there was no question of claiming deduction by the company who is a successor of the assessee-firm. The assessee-firm has filed its return of income from April 1, 2006 to March 19, 2007 the period for which it was existed. The assessee-firm has filed the return taking into consideration the income of M/s. Anjali Exports and of itself. We further find that on one hand the Assessing Officer has stated that this is a reconstruction of business and on the other hand, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company, therefore, the company was held eligible for deduction under section 10B. The facts are similar in the present case also as business of another partnership concern were taken over by another partnership concern having common partner and, therefore, in our considered view the learned Commissioner of Income-tax (Appeals) has rightly held that the assessee is eligible for deduction under section 10B on the profits of both the concerns, i.e., of the assessee and M/s. Anjali Exports. The other objection of the Assessing Officer is that an agreement of assignment of business was also entered by M/s. Anjali Exports and M/s. Veto Electropower P. Ltd., therefore, there was a contradiction in memorandum of understanding entered into by the assessee and the successor company. This is a technical objection of the Assessing Officer. There will be no impact on the Revenue either M/s. Anjali Exports is taken over by the assessee-firm or by its successor company. The successor company is not a new entity as the same was converted from partnership firm to private limited company. All its partners were taken as director or shareholder of the successor company. Up to March 19, 2007 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction claimed on the profit of M/s. Anjali Exports. From this act of the Assessing Officer again it is clearly established that separate books of accounts were maintained. We further noted that if there was some deficiency that was only on technical issues that two memorandum of understandings are entered into, that the business of a concern was taken over with retrospective effect. The hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji [1987] 167 ITR 471, while disposing of the appeal though on account of condonation of delay in filing appeal have held (headnote):- "When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have a vested right in injustice being done because of a non-deliberate delay." Therefore, in view of the decision of the hon'ble apex court, technicality should not come into substantial justice of the assessee which otherwise is eligible for deduction under section 10B. In view of these facts and circumstances and in view of detailed reasons given by the learned Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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