TMI Blog2008 (11) TMI 663X X X X Extracts X X X X X X X X Extracts X X X X ..... oval letter has been placed on record. A combined reading of sub-ss. (i), (ii), (iii ), (iv) and (v) would make it abundantly clear that deduction refers to particular undertaking. Though the term 'undertaking' is not defined u/s.10A but such terms which are not defined in a particular provision would be understood in commercial parlance or business parlance. An undertaking in a normal parlance would have constitute business activity and not just any activities or liabilities or any combination thereof. In fact, the High Court had made the observations while considering the meaning of undertaking in the case of A.G.S. Tiber and Chemicals Industries (P) Ltd.[ 1996 (7) TMI 14 - MADRAS HIGH COURT] . The benefit of this deduction attaches to a particular undertaking and not to the whole business. Admittedly, the assessee has taken over the medical transcription unit from K.G. Information Systems (P) Ltd. It clearly shows that not only the unit or undertaking itself was transferred to the assessee by KGISPL but also the obligations of exports etc., in view of the exim policy were also taken over by the assessee. Therefore, this is a plain case of purchase of business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re different entities. In the instant case, there is no question of merger of two companies. The CIT(A) ought to have noticed that these two companies are still in existence as two different companies. 8.The CIT(A) has not discussed the meaning of EOU for the purpose of s. 10B. The appellant ought to have obtained approval as prescribed under s. 14 of the IDRA and the appellant company did not obtain the same. 2. The brief facts of the case are that the assessee company had claimed deduction under s. 10B of the IT Act amounting to ₹ 1,09,91,782. According to the AO the assessee commenced its operations during the year 2001-02 and acquired certain assets valued at ₹ 37,74,824. From the details of acquisition of assets it was further found that the assets to the extent of ₹ 27,30,512 were transferred from another company viz., K.G. Information Systems (P) Ltd., (KGISL). Such assets were previously used by the other company. According to him, therefore, 72 per cent of the total value of the assets were already used and, therefore, the conditions prescribed under s. 10B(b)(3)( ii) and (iii) of the Act were violative. It was further observed that specific approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in response, raised detailed arguments. Ultimately, the CIT(A) has adjudicated the issue vide para 3.4 of his order which is as under : 3.4 M/s KGISL got approval as a 100 per cent EOU in the year 1998 from Software Technology Parks of India and started its new undertaking engaged in the business of medical transcription during financial year 1999-2000. It had also started another undertaking in the same year which was engaged in the business of development of software to be exported outside India. It had imported machinery for the medical transcription business and had also purchased machineries locally. The import of machinery was under Software Technology Park's scheme and so was under the obligation to export goods as contemplated under exim policy. M/s KGISL had made claim of exemption under s. 10A in respect of both these undertakings during asst. yrs. 2000-01 and 2001-02. Separate books of accounts for computing the profits from these two undertakings were being maintained by M/s KGISL. During July, 2001, as per a deed of transfer, the entire undertaking engaged in the business of medical transcription which was functioning in 3rd and 4th floors of M/s KGISL bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which clearly shows that the assessee was not clear as to which provision of the Act was applicable and the assessee was merely trying its luck with the Department. 5. The learned counsel for the assessee submitted that KGISL was established in the year 1999 and the business undertaking of medical transcription was started in the year 2000-01 for which deduction under s. 10A was claimed and allowed. Next year, a software undertaking of software development was set up against which also the claim under s. 10A was claimed and allowed. The business of the undertaking consisting of medical transcription was transferred to the assessee company in July, 2001 and the assets of the undertaking were transferred lock, stock and barrel with the prior permission from the Director, Software Technology Parks of India, Chennai, and in this connection he submitted copies of letters dt. 28th May, 2001 and 28th June, 2001. Then he argued that the benefit of s. 10A is specific to undertaking and not to assessees. In this connection he referred to various clauses of s. 10A of the IT Act. Though the term 'undertaking' is not defined under s. 10A its meaning has to be understood in the commer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er units are also eligible in view of the provisions of s. 10A(2)(i)( a)/(b) of the Act. Since the provisions of s. 10A(2) are not cumulative they have to be considered independently. He pleaded that it is not disputed by the Department that the assessee's unit was listed with STPL. He also filed copy of the approval granted by STPL vide letter dt. 25th April, 2001. He submitted that the other objection of the learned Departmental Representative is that it is not a case of merger is also of no consequence because once the undertaking has been purchased by the assessee then as per Board's Circular dt. 13th Dec, 1963 (supra) the successor of the undertaking is also eligible to the benefit of the deduction. He submitted that the deduction has been granted to the assessee on the basis of this circular in the case of ITO v . Hindustan Petroleum Corporation Ltd. [1986] 25 TTJ (Bom) 28 . While referring to the argument that the assessee is not sure as to under which provision of the Act the assessee was entitled to deduction, the learned counsel for the assessee referred to the decision of Gujarat High Court in the case of Chokshi Metal Refinery v . CIT [1977] 107 ITR 63 (Guj.) wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw the attention of the assessee concerned to all the reliefs and refunds to which the assessee seems to be entitled on the facts of the case even though the assessee might have omitted to claim refund or relief. In the instant case, in view of the findings of facts recorded by the Tribunal, we are helpless and even though if proper materials had been pointed out relief might have been available to the present assessee, since the materials were not pointed out and the Tribunal's findings of facts are what we have stated above, no other conclusion except that there was no error apparent from the record can be reached in the instant case. In fact, even the decision of the Hon'ble Supreme Court in the case of Goetze (India ) Ltd. v . CIT [2006] 204 CTR (SC) 182 : [2006] 284 ITR 323 (SC) cannot be applied here because the assessee had already made a claim for deduction under s. 10B of the Act before the AO. Therefore, it cannot be said that no claim was made before the AO. 10. Relevant portions of s. 10A of the IT Act are reproduced below : 10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b)the particulars, as may be prescribed in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use. (1C) Where any amount credited to the special economic zone reinvestment allowance reserve account under cl. (ii) of sub-s. (1A)- (a)has been utilised for any purpose other than those referred to in sub-s. (IB), the amount so utilised; or (b)has not been utilised before the expiry of the period specified in sub-cl. (i) of cl. ( a) of sub-s. (IB), the amount not so utilised, shall be deemed to be the profits,- (i)in a case referred to in cl. (a), in the year in which the amount was so utilised; or (ii)in a case referred to in cl. (b), in the year immediately following the period of three years specified in sub-cl. (i) of cl. (a) of sub-s. (1B), and shall be charged to tax accordingly. (2) This section applies to any undertaking which fulfils all the following co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval letter vide letter dt. 25th April, 2001 has been placed on record. A combined reading of sub-ss. (i), (ii), (iii ), (iv) and (v) would make it abundantly clear that deduction refers to particular undertaking. Though the term 'undertaking' is not defined under s. 10A of the Act but such terms which are not defined in a particular provision would be understood in commercial parlance or business parlance. An undertaking in a normal parlance would have constitute business activity and not just any activities or liabilities or any combination thereof. In fact, the Hon'ble Madras High Court had made the following observations at p. 211 of the decision while considering the meaning of undertaking in the case of A.G.S. Tiber and Chemicals Industries (P) Ltd. (supra) which is reproduced below : Learned counsel appearing for the assessee also relied upon the decision in Madras Machine Tools Manufacturers Ltd. v . CIT [1975] 98 ITR 119 (Mad.), wherein this Court has drawn a distinction between the company and its undertaking, in the following manner : A company may own or run many undertakings some of which may be entitled to the benefit of s. 84 and others may not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f undertaking by using more than 20 per cent assets which has been previously used, in terms of sub-s. (2)(ii) and (iii) of s. 10A of the IT Act. 13. We have already pointed out after referring to the letter dt. 28th May, 2001 from Software Technology Park of India that it is a case of transfer of whole business of the undertaking of the medical transcription. Therefore, it cannot be said that it is case of formation by using assets previously used particularly in view of the Board's Circular No. F. No. 15/5/63-IT(A1), dt. 13th Dec, 1963. Moreover, it was also pointed out by the learned counsel for the assessee that undertaking was purchased in the year 2001 and deduction has already been allowed to the assessee company for the asst. yrs. 2002-03 and 2003-04, Though the deduction has been allowed under s. 143(1) of the Act, i.e., without examining all the facts in detail we are of the view that it is too late in the day to examine the question of formation of the undertaking after a lapse of more than two years. 14. The last objection of the learned Departmental Representative was that Circular No. F. No. 15/5/63-IT(Al), dt. 13th Dec, 1963 was issued in connection with s. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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