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TMI Blog2016 (1) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... were heard together and are being disposed of by this consolidated order, for the sake of convenience. 2. The revenue is assailing the decision of ld. CIT(A) in holding that the assessee is eligible for deduction u/s 10AA of the Income Tax Act, 1961 without considering following aspects:- a) The ld. CIT(A) has ignored the fact that the undertaking has been formed by reconstruction of business already in existence; b) The ld. CIT(A) has accepted the plea that the earlier undertaking did not carry on any business without examining the said claim. c) The ld. CIT(A) has ignored the fact that the assessee has purchased old machinery, which is in violation of provision of section 10AA(4) of the Act. 3. The facts relating to the issue und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment proceedings, the AO noticed that the assessee had purchased all the materials in the name of M/s H K Jewels. Further the AO noticed that the plant and machinery worth Rs. 40,26,308/- was purchased by the assessee from the old firm M/s H K Jewels. The AO also noticed from the Form 56F filed by the assessee that it has commenced production on 27.3.2006. 7. Under the provision of section 10AA of the Act, the assessee is required to commence production after 1.4.2006 in order to claim deduction under that section. Further, the deduction u/s 10AA will not be available if the undertaking is formed by splitting up or reconstruction of business already in existence, and also if any plant and machinery used for any purpose is transfe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2). .............. (4) This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or provide services during the previous year relevant to the assessment year commencing on or after the 1st day of April, 2006 in any Special Economic Zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking, being the Unit, which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be presumed to be reconstruction of erstwhile business. Since the assessee has purchased entire project, it was a case of sale and hence the same cannot be regarded as reconstruction of the business. (e) As per the terms and conditions of LOP issued by the Development Commissioner, SEEPZ, LOP cannot be transferred by such authorities in case of reconstruction of any business. (f) Though the purchases were made in the name of M/s H.K.Jewels, the payment for the purchases has been made by the assessee only. (g) The labour charges received from M/s Vaibhav Gems Ltd is also eligible for deduction u/s 10AA of the Act, since the manufacturing work has been done under the supervision of the concerned person. Aggrieved by the order of Ld CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... H.K. Jewels (old), even though the LOP was in the name of the later. This explanation was offered before Ld CIT(A) only and the effect of this explanation could not be examined by the AO. Further, it is not clear as to whether the person who is not holding LOP, i.e., H.K. Jewels (new) could implement a project in SEEPZ without letter of permission from Development Commissioner, SEEPZ. (b) It is stated that the deed of assignment took effect from 1.4.2006 only even though the agreement was reached on 7.10.2005. It was further stated that the M/s H.K.Jewels (new) has incurred expenses to the tune of Rs. 40,26,308/-. We notice the details of these expenses have not been examined by Ld CIT(A) or the assessing officer. It is also not clear as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the said observations of the Ld CIT(A) require examination. (f) The Ld CIT(A) has also observed that M/s H.K. Jewels (it is not clear whether it was old firm or new firm) did not use the machineries purchased by it. The Ld D.R contended that the said observations have been made without carrying out any examination. (g) Unless the details and value of machineries purchased from M/s H.K. Jewels and the details and value of machineries available with the assessee were examined, one cannot come to the finding that the machineries purchased constitutes less than the prescribed limit of 20%. 13. The foregoing discussions would show that it is required to examine many factual aspects relating to the claim of the assessee by duly consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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