TMI Blog2015 (8) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... d and it was running as an independent unit. Because it is an undertaking belonging to the assessee, only single account is maintained by the assessee. In the light of the aforesaid undisputed facts, it cannot be said that the assessee is not entitled for the benefit under Section 10A of the Act in respect of these two newly established undertakings which it satisfies all the conditions stipulated in Subsection 2 of Section 10A of the Act. - Decided in favour of assessee. - IT Appeal Nos. 391 & 392 of 200 - - - Dated:- 10-6-2014 - N. KUMAR AND B. MANOHAR, JJ. K.V. Aravind, Advocate for the Appellant S.R. Anuradha, Advocate for the Respondent JUDGMENT N. Kumar, J. The common question of law that arises for our consideration in these two appeals is:- 'Whether the assessee is entitled to the benefit under Section 10A of the Income Tax Act, 1961, in respect of two undertakings which they have commenced in second and sixth floors of Golden Enclave situate in Software Technology Park?' 2. The assessee is carrying on the business of manufacturing and trading of diagnostic medical systems. The assessee filed returns for the assessment years 1997-9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year 1995-96 before the Tribunal and the Tribunal by its order dated 08.07.2002 in ITA Nos. 322-328 (B)/2001 approved the method followed by the assessee. The issue relating to the reallocation came up before the learned CIT (A) for the assessment year 1999-2000, who decided the issue in favour of the assessee and upheld by the ITAT by dismissing the revenue's appeal. The reasons recorded by the assessing officer do not indicate any new material or information which came to its possession subsequent to the original assessment. The assessee has provided a detailed break up at the time of original proceedings. The CIT Central had issued a notice under Section 263 of the Act, subsequently the proceedings were dropped and therefore, the order passed by the appellate authority was legal and do not call for any interference. Accordingly, the appeal came to be dismissed. Aggrieved by the same, the revenue preferred an appeal before the first Appellate Authority. The first Appellate Authority has dismissed the appeal upholding that there is no justification to interfere with the well considered order passed by the Tribunal. It is against this order the revenue has preferred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfies all the requirements contemplated under Sub-section 2 of Section 10A, the assessing authority earlier were justified in granting the benefit. Without any justification, without any fresh material being made available, the Assessing Authority had no jurisdiction to initiate the proceedings under Section 147 of the Act. 5. The substantial questions of law that arise in the light of the aforesaid facts and rival contentions are:- a. Whether the appellate authorities were correct in holding that the reopening of assessment is bad in law as the Commissioner exercising jurisdiction under Section 263 of the Act for the assessment year 1997 - 98 on the same grounds has dropped proceedings? b. Whether the assessee is entitled to the benefit under Section 10A in respect of the two units which were commenced as expansion? 6. Re. Point No 1: Section 263 of the Act deals with the powers of the Commissioner to revise the orders which are prejudicial to the interests of the revenue, which reads as under:- 263. Revision of orders Prejudicial to revenue.-(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evious year of any person, any income falling within any of the following clauses shall not be included. Therefore, all incomes which are mentioned in the clauses are not included in the total income of any person. Section 10A of the Act is a special provision in respect of newly established undertaking in free trade zone etc. It provides a deduction of such profits and gains as derived by an undertaking for export of articles, things or computer software which is 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 such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee. It is a provision which was introduced with the object of encouraging export outside the country. The benefit is extended to a ten consecutive assessment years. This is to boost earning of foreign exchange. Before an assessee can claim benefit under this provision, he has to fulfill the conditions stipulated in sub-section (2) of Section 10A. The first condition to be satisfied is, such an assessee should begin or begins to manufactu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A of the Act. Similarly if he wants to form an undertaking by splitting up or by reconstruction of a business already in existence, then also the assessee is not entitled to the benefit under Section 10A. An assessee who is carrying on business by setting up an undertaking if he sets up an independent undertaking to manufacture or produce articles, it is already producing or manufacturing in the existing undertaking in the software technology park, the profits and gains derived from that undertaking from export of articles, things or computer software, the assessee is entitled to the benefit under Section 10A of the Act. In fact, in one of the similar situation, the Apex Court in the case of Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 held as under: 10. The assessee continues to be the same for the purpose of assessment. It has its existing business already liable to tax. It produced in the two concerned undertakings commodities different from those which it has been manufacturing or producing in its existing business. Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be an integrated unit by itself wherein articles are produced and at least a minimum of ten persons with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognizable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. For the purpose of s.15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of s.15C the new undertaking must be formed by reconstruction of the old business. Now, in the instant case, there is no formation of any industrial undertaking out of the existing business since that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. What the law requires for an assessee to be entitled to the benefit under Section 10A of the Act, is the assessee has begun or begins to manufacture or produce articles or things or computer software by setting up a new undertaking, an undertaking, which is independent of the old, undertaking. Such a new undertaking should not be commenced with the machinery or plant previously used by the assessee in the existing business. Similarly, such a new undertaking should not be found by building up or reconstruction of an undertaking already in existence. If a new undertaking is established as a separate entity, new machineries are purchased and installed and if the same business is carried on by the assessee namely manufacture or production of articles or things or computer software meant for exporting and other requirements provided under law, then the assessee would be entitled for the benefit under Section 10A. Newly established undertaking does not mean a new company or a partnership. The newly established und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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