TMI Blog2015 (4) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 10B of the Act. We set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority pertaining to the benefit of exemption under Section 10B of the Income Act. In the case of CIT vs. Heartland Delhi Transcription Services Pvt. Ltd. reported in (2014 (7) TMI 810 - DELHI HIGH COURT) the Hon'ble Delhi High Court has ruled that after removal of sub sections (9) and (9A) from the statute book w.e.f. 1.4.2004 and simultaneous insertion of sub-section (7A) w.e.f. the same date, benefit under section 10B is applicable even where the ownership of the industrial undertaking, in continuity. In arriving at the said conclusion the Hon'ble Delhi Court has referred to and relied upon various case laws as has been referred to in the preceding paragraphs and finally held that sub section (7A) is an 'enabling provision', meant for "continuity" of benefit under section 10 B, even after change in ownership of the 'industrial undertaking'. - Decided in favour of the assessee - Income Tax Appeal Defective No. - 82 of 2015, Income Tax Appeal Defective No. - 81 of 2015, Income Tax Appeal No. - 36 of 2015 - - - Dated:- 18-4-2015 - Hon'ble Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of M/s MKU Pvt. Limited, 30 UPSIDC, Malwan Salempur (Rooma). The seized loose papers i.e. two bills dated 7.3.2005 and 9.3.2005 disclosed engagement of cranes and labours for shifting of Hydraulic Press Machine to Malwan. 8.On the facts of the case, the A.O. opined that the assessee is not 100% manufacturing unit, as maximum machines were installed at another division, doing manufacturing on its behalf. 9. Learned Counsel contended that the survey can have no bearing on the assessment of MKU (Armours) Private Ltd. for the reason that with effect from 1.4.2007, the entire industrial undertaking of the assessee had been transferred to MKU Private Ltd. with the due approval of the authorities concerned. In other words, the manufacturing actually had been out sourced . It is also the submission of the learned counsel that the A.O. has wrongly denied the claim under Section 10B of the Act. The learned counsel further submits that the assessee is 100% export unit . Even if manufacturing of some items has been out sourced and the assembling is done by the assessee even then the assessee is entitled for the benefit under Section 10-B. 10. For the purpose, the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the allegation of splitting up and reconstruction, he placed reliance on the following judicial pronouncements:- (i). CIT Vs. Quality Steel Tubes P. Ltd. [2006] 280 ITR 254 (All); (ii). CIT Vs. Starlight Silk Mills Pvt. Ltd. [2006] 280 ITR 37 (Guj). (iii). Textile Machinery Corporation Ltd. Vs. CIT [1977] 107 ITR 195; (iv). Hindustan Malleables and Forgings Ltd. Vs. Income Tax Officer [1978] 112 ITR 389 (Patna) (v). CIT Vs. Simmonds Marshall Ltd. [1986] 161 ITR 817 13. On the other hand, Sri Dhananjay Awasthi, learned counsel for the department has supported the impugned order. On the strength of the written submission, he submits that earlier, the assessee company was known as A.R. Plimsol. In the year 2004-05 it was renamed as MKU Armor Pvt. The assessee has used old machinery. The assessee was not involved in any manufacturing activity. It had outsourced the manufactuer of the goods and had no direct supervision and control. The assessee is not entitled to the exemption under Section 10-B of the Income Tax Act. In support of his arguments he relied on the ratio laid down in the following cases:- (i). Commissioner of Central Excise, Chenai II Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . assessment years 2005-06 and 2006-07 which were the 1st year and 2nd year respectively of the existence of the '100% EOU'. Copies of the agreements executed for the job works connected with manufacture of Ballistic Helmets and Bullet Proof (bullet resistant) Jackets effecting from 1.4.2006 had been placed before the Tribunal, which form part of paper book before us also. In the said agreements, overall flow chart for manufacturing of Ballistic Helmets and Bullet Proof (bullet resistant) Jackets disclosed. Manufacture of Ballistic Helmets involves 14 stages and the manufacturing of Bullet Proof (bullet resistant) Jackets involves 7 stages. Out of such 14 and 7 stage, only 5th and 3rd stages respectively had been outsourced. Rest of the activities were carried out in the industrial site of the assessee situated at 118E, Shyam Nagar, Kanpur. 17. We have also examined the manufacturing process of the final products with the help of photographs at various stages. During the course of arguments, learned counsel for the assessee points out that 'outsourcing' was limited to certain well defined 'process' and did not cover manufacturing of the entire pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was an industrial undertaking in so far it was engaged in assembling of tractors: In the case of Commissioner of Income Tax Vs. Prabhudas Kishordas Tobacco Products P. Ltd. (2006) ITR 568 (Guj) it was observed that:- that tendu leaves and tobacco, which are used as inputs, do not retain their independent identity after the bidis are rolled after undergoing several process. Commercially, the final product is known in the trade as a distinct commodity and has a separate market. Furthermore, merely because an assessee gets the work done through contract workers, in other words, enters into a contract with the workers and pays them per piece the relief could not be denied. The test is whether the outside agency works directly under the supervision and control of the assessee, it being immaterial whether the processing is done by the workers employed by the assessee at a place outside the premises of the assessee. In relation to the additional reason given by the Assessing Officer for denying relief under section 80-I of the Act, both the determining whether a unit is a small scale industrial undertaking or not, while ascertaining the monetary limit laid down in the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assesee that it qualify for relief u/s 80IA has to be accepted. In the case of Orient Longman Ltd. Vs. Commissioner of Income Tax, Delhi-II 130 ITR 477 it was observed that:- That though the assessee as a publisher would not be doing more than the manuscript and preparing the same for printing and book binding, yet the fact that printing and book binding was done by some else did not imply that someone else was the manufacturer. It was the business of the assessee to get the books manufactured by getting the manuscript, designing the nature of the book, finishing the anticipated product and then selling the product after getting it made. Therefore, the assessee was an industrial company within the meaning of s. 2(6)(c) and was entitled to be assessed at the concessional rate of tax in accordance with the provision of the Act. In the case of Addl. Commissioner of Income Tax, West Bengal-III Cultta Vs. A. Mukherjee And Co. (P.) Ltd. (1978) ITR 719 Vol 113 it was observed that:- In order that a publisher of books should be a manufacturer of books it is wholly unnecessary for him to be a book binder himself. A publisher may get the books printed by any printer but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... When totally new product came into existence after the entire process then we are of the view that the assessee is entitled to the benefit of Section 10B of the Act. We set aside the impugned order passed by the Tribunal and restore the order passed by the first appellate authority pertaining to the benefit of exemption under Section 10B of the Income Act. 20. Having answered the core issue in favour of the assessee we proceed to deal with the appeals no. defective 81 of 2015 and 36 of 2015 which relates to MKU Private Ltd. for the assessment years 2008-08 and 2009-10. In these two appeals, the Tribunal has held that, since the benefit under Section 10B had not been allowed to predecessor company i.e. MKU (Armours) Private Ltd. the same cannot be allowed to the successor i.e. MKU Private Ltd. This objection of the Tribunal gets overturned in view of our finding that MKU (Armours) Private Ltd. are entitled for exemption under section 10B of the Income Tax Act. 21. Suffice it to say that the view of the Tribunal is wholly misconceived. It may be mentioned that in terms of the agreement dated 19.3.2007, effective from 1.4.2007, the entire industrial undertaking, lock stock and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consequence, sub-section(9), (9A) and the Explanation below thereto in sections 10A and 10B, become redundant and have been omitted. 21.3 The amendments will take effect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-05 and subsequent years. [Sections 7(e), 7(f), 7(g), 8(b), 8(c) and 8(d)] 23. Needless to mention that a circular, particularly beneficial circular, instruction, press note etc as issued by CBDT have got a binding effect on the tax administration and it is obliged under the law to give effect to the same un-hesitatingly, as per the principle laid down in umpteen number of case laws decided by the Hon'ble Apex Court, for example:- (i) Union of India Another v Azadi Bachao Andolan and another reported in (2003) 263 ITR 706; and (ii) State of Kerla vs. Kurian Abraham Pvt. Ltd. reported in (2008) 303 ITR 284 (SC) 24. Reference may also be had to law laid down in the following judgments:- 1. CIT Vs. Bullet International reported in (2012) 349 ITR 267 (Alld) .....There is no other provision for disallowance of benefit to assessee under section 10-A of the Act. The C.I.T. (A) in his order has quoted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013) 59 SOT 147 (judgment dated 17th May, 2013. The main objection of the Assessing Officer is regarding splitting of the business. The Assessing Officer held that assessee company has been formed and has taken over the assets of the existing business by splitting the business of M/s MSSL. While holding such a finding, the Assessing Officer has ignored the fact that it was not a case where a part of plant machinery or other assets belonging to an undertaking were transferred. The whole undertaking consisting of all assets and liabilities as a going concern was acquired by the assessee company. It cannot be said that the undertaking has been formed by splitting or re-construction of business already in existence. 3. CIT Vs. Heartland KG Information Ltd. reported in (2014) 100 DTR 18 (Madras). Conclusion : The assessee having acquired its undertaking from one M/s KGISL with all the assets and liabilities as a going concern and the said KGISL enjoying the benefits of s.10A, the assessee as a Software Technology Park was entitled to relief under s. 10A even though it claimed relief under s.10B and alternatively u/s 10A; prohibition under section 10A(2)(iii) was not attrac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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