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Commissioner of Income Tax, Jaipur Versus M/s Veto Electropowers

2017 (11) TMI 726 - RAJASTHAN HIGH COURT

Entitlement to benefit of deduction u/s. 10B - ITAT justification in allowing the benefit of deduction u/s. 10B even to the acquired unit of M/S. Anjali Exports despite of the facts the same was not having certificate of Export Oriented Unit which was mandatory requirement - agreement of assignment of business - Held that:- In our considered opinion, MOU was entered on 24.03.2007 in that view of the matter any benefit will be taken from the date of MOU and the effect will be given in the relevan .....

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case of M/s. Veto Electric Powers or in case of M/s. Veto Electric Power Pvt. Ltd. - The view taken by the Tribunal is required to be confirmed. The issue is answered in favour of assessee - D. B. Income Tax Appeal No. 314 / 2011 - Dated:- 11-9-2017 - K. S. Jhaveri And Vijay Kumar Vyas, JJ. For the Appellant : Mr. R.B. Mathur For the Respondent : Mr. Mahendra Gargieya JUDGMENT 1. By way of this appeal, the Department has challenged the judgment and order of the Tribunal whereby the Tribunal .....

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rship concern and was established in the year 2000. The assessee was claiming deduction u/s 10B of 100% of EOU. The firm earlier was known as M/s. V.K. Exports. On 30.12.2006, reconstitution of business was made and new partner has introduced & Old partner retired. After reconstitution of business, the name is changed to M/s Veto Electro Power. On 15.01.2007, the assessee firm has purhcased another undertaking named M/s Anjali Exports through MOU. M/s Anjali Exports was established in the ye .....

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6. The books of accounts of M/s Anjali Exports are not maintained separately. The books of accounts of M/s Anjali Exports and M/s Veto Electro Power are merged. No separate audit of these accounts was made. In case of assessee following points have emerged- 1. M/s Veto Electro Power is formed after reconstitution of M/s V.K. Exports on 30.12.2006. 2. M/s Veto Electro Power has purchased M/s Anjali Exports through slump sales amounting to ₹ 3 crores. 3. The partners and name of assessee fir .....

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ali Exports have changed. The assessee firm has claimed deduction u/s 10B of Income Tax Act, 1961 for both the undertakings, M/s Anjali Exports & M/s Veto Electro Power in its return. 4. The counsel for the appellant has taken us to the order of AO and CIT (A) and contended that CIT(A) has seriously committed an error taking into consideration that income of Anjali Exports is of the previous year therefore, he cannot be allowed benefit for the whole year. He particularly invited our attentio .....

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ctro Powers into a Pvt.Ltd.Co. w.e.f. 20.3.2007 as M/s Veto Electro Powers (india) Pvt.Ltd. are already reproduced in earlier part of this appellate order and therefore, it is not considered necessary to reproduce them again. On factual appreciation of development of the events it is undisputedly clear that M/s V.K. Exports after reconstitution of the firm had changed its name to Veto Electro Powers w.e.f 6.12.2006 and thereafter, by a MOU dt.15.1.2007 M/s Veto Electro Powers acquired the export .....

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eement of assignment of business with Anjali Exports according to which M/s Anjali Exports was having a manufacturing unit at F-6, Malviya industrial Area, Jaipur and w.e.f 1.4.2006 all the assets and liabilities of said unit said business as on 1.4.2006 becomes the assets and liability of the appellant firm. It is clear that the appellant firm had acquired on slump sale basis the aforesaid 100% EOU unit set up by M/s Anjali Exports at F-6, Malviya Nagar Ind. Area, Jaipur. Thereafter, the appell .....

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regarding change in the name from M/s V.K Exports to M/s Veto Electro Powers. Further, from the perusal of copy of certificate of Importer Exporter Code (IEC) Number dated 22.8.2001 with endorsement having mention of different 3 units which includes one unit at F-6, Malviya Ind. Area, Jaipur earlier owned by M/s Anjali Exports which makes it clear that in the certificate issued by Jt. Development Commissioner, Noida Special Economic Zone the 100% EOU of M/s Anjali Exports is covered through the .....

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ilities for the 100% EOU of M/s Anjali Exports situated at F-6, Malviya Ind. Area, Jaipur and this fact is evidenced by the endorsement made by Jt. Development Commissioner, Noida Special Economic zone to the original certificate issued to M/s V.K. Exports whose name has been changed as M/s Veto Electro Powers which is the case of present appellant firm. It is clear that this is not a case of new concern coming into existence but the manufacturing and export activity being run in 100% EOU by M/s .....

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finding that there were no separate books of accounts and separate audit of M/s Anjali Exports and M/s Veto Electro Powers. In fact, with such separate audited figures only the assessing officer could come to know about the exemption claimed u/s 10B pertaining to 100% EOU of M/s Anjali Export which was disallowed at ₹ 8,25,38,959/-. The assessing officer is also not correct in his observation that M/s Anjali Export has completely merged with M/s Veto Electro Power because as per MOU M/s A .....

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dicial dictionary by K.J.Iyer where the word reconstruction is expressed by synonymous "re- build". Thus, if there is change of ownership from one person to another person but the business continuous to be the same it cannot be said that the undertaking is formed as a result of reconstruction. Further, by referring the conversion of the firm into company Hon'ble ITAT has observed that it could not be said that there was any transfer. On incorporation of a company consequences as pe .....

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ities etc. continued to remain in same manner in new name namely M/s Veto Electro Powers. This is a clear case of acquisition of an entity of 100% EOU unit by the another 100% EOU unit through slump sale. It shall not be out of place to analyze that the re-organization of M/s Veto Electro Powers and M/s Anjali Exports is complete tax neutral exercise not aimed to gain any undue tax advantage. As per provisions of S.10B(1) the deduction in respect of an undertaking and it is not to the assessee a .....

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on exemption on the ground that as per this provision the benefit is available to only Indian Companies and not to other entity is far from correct. The said sub section only prohibits the companies other than Indian companies but the AO has conveniently ignored the provisions of sub Section 9 and 9A of 10B which were omitted w.e.f. 1.4.2004 by Finance Act,2003 and with such omission it makes prominently clear that there is no such ban now on the availability of such deductions in case of the fi .....

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so pointed out the finding of the Tribunal which reads as under:- 37. The other objection of the AO is that an agreement of assignment of business was also entered by Ms. Anjali Exports and M/s. Veto Electric Power Pvt. Ltd.. therefore there was a contradiction in MOUs entered into by assessee and the successor company. This is a technical objection of the AO. There will be no impact on the revenue either M/s. Anjali Exports is taken over by assessee firm or by its successor company. The success .....

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