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2015 (6) TMI 212

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..... ees, new business, new premises etc. would be irrelevant evidences as both for expanding an existing unit or setting up a new unit specific separate bonded premises, assets, employees, separate books of account and bank accounts and business premises would be necessary. Thus reliance placed on decisions rendered in different facts and arguments would be of no relevance. The assessee after setting up Steel Foundry Division and Jute Mill Division started consuming their products instead of procuring them from the market as was done in the past. Rejecting the reasoning of the Revenue their Lordships held that “reconstruction” presupposes that transfer of assets of the existing business took place which was not a fact in that case as fresh capital had been introduced. It was also held that the fact that the product of the two divisions was utilized by the assessee who earlier was purchasing it from outsiders was not a relevant criteria for denying the claim. What was the intention of the assessee at the time of setting up the new unit would be brought out from the application made to the Competent Authority. Introduction of fresh capital is required even for expanding an existing bu .....

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..... gence of a new, physically separate, identifiable, integrated industrial undertaking, viable by itself, separate and distinct in all and every respect from the existing Unit- 1. 4. For that no deduction having been claimed by the appellant company under section 10B of the income Tax Act 1961 in relation to Unit-2. the question of applicability thereto of clause (iv) of Explanation 2 of section 10 B of the Income Tax Act, 1961 simply does not arise and is of no relevance. 5. For that Unit-2 having been established by the appellant company in terms of letter of permission granted by the Government of India, Ministry of industry, Department of Industrial Development Secretariat for Industrial Approvals, EOU section, the same is a hundred percent export-oriented undertaking within the meaning of section 10 B of the Income Tax Act, 1961 and the conclusion of the Commissioner of Income Tax (Appeals) to the contrary is not sustainable. 6. For that the fact that Unit-2 is separate and distinct from Unit-1 is borne out of records and is an accepted fact on record ever since assessment year 1997-98. 7. For that it is prayed that deduction under section 10 B of the income Tax Act, .....

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..... ought out in the said order and considering the judicial precedent on the same, the issue it was submitted is to be decided in favour of the assessee. It was pointed out to the Ld. AR that since as per record, the said order has been set aside by the Hon ble High Court, accordingly instead of referring to facts recorded in the said order, it would be more appropriate to refer to the facts as found recorded in the orders of the authorities below. In view of the same, the Ld. AR drew the attention of the Bench first to the findings recorded in the assessment order. While doing so, it was his stand that full facts have not been discussed in the assessment order as the AO has directly proceeded to reduce the eligible profits of Unit-I by the losses of Unit-II which was not claimed as an eligible unit by the assessee. Accordingly it was his submission that since relevant discussion is missing in the assessment order, he had wanted to refer to the facts recorded by the Co-ordinate Bench. However, since the order stood set aside, it was submitted that the only finding given by the Assessing Officer is at page 3 i.e the last page of the assessment order where instead of allowing the exe .....

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..... s his submission that a perusal of the relevant provisions of the Act which have been considered by the CIT(A) would show that this is a license given by the Competent Authority under the Act to eligible companies. For the said purpose attention was invited to Clause (iv) of Explanation 2 of Section 10B of the Income Tax Act. Based on the facts and the provisions of the Act, it was his submission that the claim of the assessee has rightly been denied. Referring to the copy of the audited balance sheet which was also relied upon by the Ld. AR at page 19, it was his submission that as per assessee s own claim in the Notes to the accounts the assessee has first made a disclosure that the assessee company is a 100 percent Export Oriented Unit claims exemption u/s 10B from the assessment years. Further it was argued that the thereafter narration is given on which reliance is placed upon by the Ld. AR that the assessee does not propose to claim exemption for Unit-II this year. This narration it was submitted is a self-serving note. Thus this self-serving note, it was argued cannot decide the issue in the face of the directions of the Hon ble High Court. The Ld. CIT DR was required .....

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..... ear relevant to A.Y 1997-98. The appellant company had opted for non application of the provisions of Section 10(B) to its unit for the A.Y 1997-98 and thereafter. Unit 2 is a separate independent production unit. 5.2. Further relying on the decision of the Apex Court in the case of Textile Machinery Corporation Ltd 107, ITR 195 (SC) ors it was claimed that Unit II is not an expansion of the existing unit but in fact it was a distinct and separate identifiable unit. 5.3. The CIT(A) held the said claim contrary to record and as per assessee s own submissions qua the availability of the necessary approval of the competent authority as per the mandate of Clause (iv) of Expln 2, Section 10B of the Income Tax Act, 1961. For ready reference we extract the specific statutory portion as it stood at the relevant time from the impugned order itself:- 3.3.5. The relevant provisions of Section 10(B) are note below: 10B. Special provisions in respect of newly established hundred per cent, export oriented undertakings. Explanation 2.------ for the purposes of this section,--- (i) Computer software means,--- (a) any computer programme recorded of any disc, tape, perforat .....

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..... Ld. AR that the CIT(A) misdirected himself by discussing an irrelevant issue of Green Card on facts is found to be not tenable we find that the discussion on green card was a valid discussion and it was introduced by the assessee itself before the CIT(A) in support of its claim. It is further seen that the CIT(A) took into consideration the information given that the Dy. Development Commission vide letter dated 22/8/1997 as per record informed the assessee that the earlier green card no. 037 dated 25/8/1992 is cancelled and the new green card no. 377 dated 22/8/1997 valid up 21/8/1992 had been issued. Thereafter as per record reference is also made to the letter dated 14/8/20002 of the Assistant Development Commissioner which informed the assessee that the green card No. 377 dated 22/8/1997 is also cancelled and a new green card no. 000971 dated 14/8/2002 valid upto 31/3/2006 was being issued. On the basis of this information the CIT(A) concluded that the green card issued is in respect of the unit set up in 1992. A copy of certificate issued by Ministry of Commerce was also made available to the CIT(A) as per record by the assessee and on considering the same, it was noticed th .....

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..... assessment year. (ii) The Unit-II of the assessee company which commenced business is year 1997-98 is an 100% of export Oriented Unit and its income Tax u/s 10B of the Income Tax Act, 1961, the assessee do not propose to avail the exemption this year in respect of its Unit-II. 5.6. A perusal of the above shows that not only there is a contradiction in Note (i) and Note (ii) in the above extract even otherwise the Note (ii) relied upon is unsupported by any evidence. The principle of consistency on the issue relied upon by the Ld. AR and accepted by the Co-ordinate Bench has not been approved of by the Hon ble High Court accordingly in the absence of any direct evidence on record the issue needs to be restored. As observed, the direct evidence in the facts of the case would be the letter/application addressed by the assessee to the Competent Authority at the time of setting up Unit II as that is the evidence which would demonstrate whether the assessee intended to start a new independent undertaking or did the assessee intend to expand the existing unit as for both the eventualities permission/approval of the Competent Authority was necessary. The permission evidently having .....

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..... ing of section 15C(i); but the Appellate Tribunal, on appeal, held that the appellant was entitled to the relief u/s 15C because the two divisions were new industrial undertakings and that they were not formed by reconstruction of the existing business. The Tribunal found that the machinery in the two divisions were new, they were housed in a separate building and that industrial licenses had to be obtained for manufacturing the parts; that the existing business of the appellant consisted of manufacturing boilers, wagons, etc., and for that purpose the appellant was purchasing the parts, forgings and castings from outside; and that the business of the new units was to manufacture these very parts; and that, therefore, it could not be said that the new undertakings were formed out of the existing business to come within the mischief of section 15C (2)(i). On a reference, the High Court held that the change of producing one s own goods systematically used in the existing business instead of buying them from outside would only be a reconstruction of an existing business within the meaning of section 15C (2)(i). On appeal to the Supreme Court: Held, reversing the decision of the Hig .....

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