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TMI Blog2019 (3) TMI 1917X X X X Extracts X X X X X X X X Extracts X X X X ..... to 01-04-2005. The total value of power plant as on 31st March, 2008 was Rs. 7,66,75,468/- out of which value of old machinery was Rs. 7,11,23,416/-. He was of the view that the power plant set up by the assessee was not a new power plant and it was formed by transfer of old and previously used machinery the value of which was more than 90% of the total value of plant. In view of this he was of the opinion that claim of assessee was not allowable. He was of the view that the power plant in question was already used by Shanti Processing Ltd. which had subsequently amalgamated with the assessee company. The power plant was originally installed by the erstwhile owner during financial year 2005- 06. Original cost of plant was Rs. 7,11,23,416/- and this value represent the cost to the previous owner mainly incurred during financial year 2004-05 and installation of the same was made during financial year 2005-06. He has further stated that as per provisions of section 80IA(12) when any undertaking of an Indian company which is entitled to deduction under this section is transferred before expiry of the period specified in this section to another company then clause (b) the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be a new undertaking > It is set up in any part of India for the generation or generation and distribution of power > It should not be formed by transfer of old plant and machinery with restriction that value of old machinery should not be more than 20% of the total value of the plant. > The activity should commence during the specified period. Before going into the merit of the assessee's case for deduction u/s. 80IA(4) of the Act, it is very important to look at the facts of the case relating to the claim of deduction u/s. 80IA(4) of the Act The assessee was hitherto carrying on the business of manufacturing of trading of yarn, fabrics and garment. The assessee has started the generation of energy in the previous year relevant to A.Y. 2006-07 and started claiming deduction u/s. 80IA(4) of the Act from assessment year 2009-10, which was first year of its claimed the same was allowed meaning thereby the A.O. was satisfied that the appellant had fulfilled all the conditions. As stated above, the plant & machinery valuing Rs. 7,11,23,416/- were installed in the factory of erstwhile Shanti Processor Ltd. which was transferred to Chiripal Industries Ltd. on amalg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of the appellant since the appellant had not purchased it, which is not correct interpretation of law. The AO has nowhere stated that the machinery which was purchased is old meaning thereby that shanti processors ltd had purchased new machinery and all the bills were also submitted before the AO. New machinery cannot be termed as old merely on its transfer due to an amalgamation by the order of the High Court. The appellant has vehemently stated that, if the interpretation is done in this manner then in all the amalgamation cases benefit will not be available to resultant company as there is a transfer of machinery in all the cases. Further, a machinery does not become old on transfer vide order of high court as the existing company gets merged with the new company and the existence of the existing company is no more. The A.O. has not brought on record evidence to substantiate his argument by showing that particulars machinery was purchased by Shanti processor Ltd which was already used. Therefore, new machinery ' purchased by Shanti Processors Ltd cannot be termed as old machinery since due to scheme of amalgamation; appellant is legally entitled to claim deductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased by Shanti Processor Ltd which was amalgamating company and since the same were not used prior to 01/04/2005 and in the assessment order u/s. 143(3) for A.Y.2009-10 & A.Y.2010-11 the assessing officer had allowed the deduction on identical issue and similar facts. The assessee has started the generation of energy in the previous year relevant to A.Y. 2006-07 and started claiming deduction u/s. 80IA(4) of the Act from assessment year 2009-10, which was first year of its claimed and the same was allowed meaning thereby the A.O. was satisfied that the assesseet had fulfilled all the conditions. It is also noticed that the assessee has explained its entitlement for the impugned claim of deduction under section 80IA(12) as under:- "The power plant, in question, was transferred to assessee company under the scheme of Amalgamation of two companies viz Shanti Processors Ltd & Chiripal Petro chemicals Ltd. M/s Shanti Processors Ltd. was amalgamating company & Chiripal Petro Chemicals Ltd. was amalgamated Company under the provisions of the Companies Act, 1956. The scheme of Amalgamation was approved by Hon'ble High Court of Gujarat, vide its order dated 31/03/2006 w.e.f. 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch Section 35(5): (b) Expenditure on acquisition of patent rights or copy rights Section 35A(6): (c) Expenditure of know-how Section 35AB(3): (d) Treatment of preliminary expenses Section 35D(5): (e) Amortization of expenditure in case of amalgamation Section 35DD (f) Treatment of capital expenditure on family planning Section 36(1)(ix): (g) Treatment of Bad debts section 36(1)(vii): (h) Deduction available u/s 80IA & 80IB: (i) Carry forward and set off Business Losses & unabsorbed depreciation of the amalgamating company." We observe the assessing officer has not disproved these material facts and disallowed the claim of deduction on presumption basis without considering the relevant legal provision as elaborated in the findings of the Ld.CIT(A). The relevant legal provision has already been elaborated by the Ld. CIT(A) in his findings that as per the provisions of section 80IA(12) when any undertaking of an Indian Company which is entitled to deduction under this section is transferred before the expiry of the period specified in this section to another Indian Company then as per clause (b) the provision of this section shall apply to the amalgamated Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee. 6. Aggrieved assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee by restricting the disallowance to the extent of Rs. 2,00,000/- 7. We have heard the rival contentions and perused the material on record carefully. The assessing officer has made disallowance of Rs. 9421047/- after invoking the provision for section 14A. The assessee has explained that it had huge balance in share capital and reserves and surplus, therefore no disallowance was required to be made. The assessee has placed in the paper book the audited financial statement along with P & L a/c, copy of income return of the assessee. With the assistance, the ld. representatives, we have gone the material on record and it is noticed that assessee was having share capital and reserves and surplus of Rs. 263.96 crores whereas investment in shares was made only at Rs. 34.26 croes. The assessee had submitted that it had not used borrowed fund for making investment and accordingly no part of interest was required to be disallowed by invoking the provision of section 14A. After consideration of above facts and detailed findings in the order of the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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