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TMI Blog2010 (12) TMI 857X X X X Extracts X X X X X X X X Extracts X X X X ..... ntially erred in law in holding that the assessee shifted/transferred her existing business from 'Non-SEZ Area' to 'Falta Free Trade Zone', and that the same amounted to "splitting up or reconstruction of a business already in existence" within the meaning of section 10A (2) (ii) of the said Act, and, therefore, the findings of the Tribunal to this effect were illegal, invalid, unreasonable, based on irrelevant considerations, and, therefore, otherwise perverse?" By the said order it was made clear that appeal is not required to be heard with formality which was dispensed with. The above appeal is directed against the judgment and order of the learned Tribunal dated 12th June 2009 passed by the Income Tax Appellate Tribunal. By the impugned judgment and order the learned Tribunal allowed the appeal filed by the Revenue, in relation to assessment year 2005-06, thereby reversed the judgment and order of CIT (Appeal) disallowing exemption under Section 10A of the Income Tax Act, 1961 (hereinafter referred to as the said Act). The fact of the case as it appears from the record is shortly put hereunder. The appellant, an individual at the relevant point of time has been carrying on busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Rs.6,65,421/- as on 31st December 2004 of the earlier business had been carried over to the new business as opening stock as on 2005. The business was merely shifted to new location. The appellant does not fulfil the conditions laid down in Section 10A (2) (i) because she did not bring nor used any new machinery to the new business hence she had not manufactured nor produced anything during the period of 1st January 2003 to 31st March 2005 in FSEZ." "On receipt of the said notice the assessee furnished detailed explanation by letter dated 27th December 2007 answering all the queries made by the Assessing Officer as above. However, this explanation do not find favour of the said officials and the same was rejected on various grounds. Accordingly claim of exemption under Section 10A of the said Act in respect of income amounting to Rs. 19,99,084 was held to be inadmissible under provisions of Section10A (5) , 10A(2) (i), 10A(2) (ii) of the said Act. The appellant therefore carried the matter to the Commissioner of Income Tax (Appeal) against the aforesaid rejection of claim of exemption of the said amount. The CIT (Appeal) after going into great details of the fact of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d even in the course of appellate proceedings. His further contention is that the activity involving assembling of different parts or components whether manually or mechanically to bring into existence of different marketable products like electronic and engineering equipments is new venture. The appellant startedmanufacturing articles or things within the meaning of section 10A(2) (ii) of the said Act. Mere use of the stock inputs and raw materials of old business in the newly set up business for manufacturing the finished products cannot be treated to be splitting up of the business. The learned Counsel for the Revenue submits while relying on the decision of the Assessing Officer as well as the learned Tribunal that the appellant has not been able to fulfil the conditions for getting exemption under Section 10A of the said Act. It has been factually found and even going by the Auditor's report of the Assessee that the said business was an existing business and the same was simply split up and/or reconstructed at the SEZ from non-SEZ area. His further contention is that the case of the appellant is to be found within the mischief of clause (ii) sub-section (2) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant at SEZ was formed by reconstruction of a business already in existence. Thus, the appellant is not entitled to deduction as her case falls within the mischief of clause (ii). We notice also that the Assessing Officer came to conclusion on fact that the business was shifted from non SEZ to SEZ at Falta. Then, again he has said the assessee has merely reconstructed her own old business after shifting it to Falta SEZ. This finding in our view really helps the assessee for legally there is no prohibition of the shifting of business with lock, stock and barrel in order to get the benefit of deduction under the aforesaid section. The said Clause (ii) merely mention the splitting up or the reconstruction. The Assessing Officer seems to be of the opinion that shifting of business is tantamount to reconstruction. We think that this interpretation appears to be patently wrong even going by etymological meaning of the word "reconstruction". As we have already observed that the provision of the statute does not prohibit shifting of business but does split up of business. The words "split up" is plainly understandable that division of the original establishment into two or more unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Court has accepted is as follows:- "What does 'reconstruction' mean? To my mind it means this, an undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on--that would be a mere sale - but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves, I think, that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve all the assets shall pass, to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same". The Supreme Court has been pleased to observe at page 204 of the report as follows:- " that one thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced and at least a min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion evidently must be - and this is brought out by the section itself - of a "business already in existence". There must be continuation of the activities and business of the same industrial undertaking. The undertaking must continue to carry on the same business though in some altered or varied form. If the alterations and changes are substantial, there would be little scope for describing what emerges as a reconstruction of the business. Thus, for instance the ownership of a business or an undertaking changes hands not ostensibly but in reality and effectively, that would not be reconstruction or if the very nature of the business is changed, that again would not be reconstruction. On the other hand, reorganization of the business on sounder lines or alterations in the mode or method or scope of type activities of the business or in its personnel or infusion of new blood in the management or control of the business which may even be by some changes in the constitution of persons interested in the undertaking would certainly be no more than reconstruction of the business of it is substantially the same business carried on by substantially the same persons." In vie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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