TMI Blog2022 (9) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... from the registered office. The building where Unit-III was being run had been purchased by the assessee-company on 21.01.2008, but the premises was let-out on rent to some other party. Thereafter, the premises was got vacated and the registered office of the company was shifted to the said premises in assessment year 2009-10. Thereafter, Unit-III was started in the premises after completing necessary formalities. The operation of Unit-III, commenced in the assessment year 2010-11. AO was influenced by the fact that since Unit-III was being run by the assessee in its registered office, therefore, activities done in Unit-III were identical in nature to those done by Unit-II. AO had failed to appreciate that the building, where Unit-III had been started, had in fact been given on rent, whereas, Unit-II was being run in a separate building which was at a distance of about 7 kilometers. The building where the registered office was started in the assessment year 2009-10, was got vacated and thereafter Unit-III was started in the said premises in assessment year 2010-11. It was not a case where plant and machinery of Unit-II had been used for Unit-III. The business of the company h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act as Unit-III was not a new Unit and it was reconstruction of an existing Unit-II. 4. Aggrieved against the orders passed by the Assessing Officer, assessee filed appeal before the Commissioner of Income-tax (Appeals), Shimla. 5. The Appellate Authority also came to the conclusion that the assessee was not entitled to claim deduction under Section 80-IC of the Act, as the Unit-III did not have an independent existence. The Appellate Authority held that the Assessing Officer had rightly held that the operation of Unit-III was nothing but an extension of operation of Unit-II. 6. Thereafter, assessee preferred appeal before the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal in short) and the Tribunal vide its impugned order dated 02.11.2018 allowed the appeal. Hence, the present appeal by the appellant-Department. 7. At the time of admission of the appeal, following substantial question of law were framed:- (i) Whether on the facts and in the circumstances of the case, the finding of the Hon ble ITAT is perverse and contrary to the material on record? (ii) Whether on the facts and in the circumstances of the case, the Hon ble ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tween the two there may be various other situations. The difficulty arises in such cases. For instance a new company may be formed, as was in this case a fact which could not be disputed, even by the Income Tax Officer. But tools and implements worth Rs.3,500 were transferred to it of previous firm. Technically speaking it was transfer of material used in previous business. One could say as that vehemently urged by the learned counsel for the department that where the language of statute was clear there was no scope for interpretation. If the submission of the learned counsel is accepted then once it is found that the material used in the undertaking was of a previous business there was an end of enquiry and the assessee was precluded from claiming any benefit. Words of a statute are undoubtedly the best guide. But if their meaning gets clouded then the courts required to clear the haze. Sub-section (2) advances the objective of sub-section (1) by including in it every undertaking except if it is covered by clause (i) for which it is necessary that it should not be formed by transfer of building or machinery. The restriction or denial of benefit arises not by transfer of building o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. The fact that the assessee is carrying on the general business of heavy engineering will not prevent him from setting up new industrial undertakings and from claiming benefit under section 15C if that section is otherwise applicable. However, in order to be entitled to the benefit under section 15C, the following facts have to be established by the assessee, subject always to time-schedule in the section :-- (1) investment of substantial fresh capital in the industrial undertaking set up, (2) employment of requisite labour therein, (3) manufacture or production of articles in the said undertaking, (4) earning of profits clearly attributable to the said new undertaking, and (5) above all, a separate and distinct identity of the industrial unit set up. We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of which exemption of tax under section 15C may be claimed. The legislature has advisedly refrained from inserting a definition of the word 'reconstruction' in the Act. Indeed, in the infinite variety of instances of restructuring of industry in the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Investment in Computers (being primary plant machinery) in A.Y. 2010-11 45,16,158/- 76,15,962/- (100% new purchases with no transfers form Unit-II) Attributable profits 20,85,23,896/- 1,06,90,722/- No. of employees as of date of formation of Unit-3. 175 employees 27 employees UNIT-II Clients Unit II - invoiced amount (Rs.) Bharti Airtel 173825288 Bharti Airtel - Shimla 1108148 Bharti Airtel - Mohali 5820103 Bharti Airtel - Kolkata 125176 Bharti Airtel - Delhi 1428765 Idea Cellular Ltd 11223942 MTNL-Delhi 3865460 RCIL-Mumbai 121567046 Tata Teleservices Ltd., Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate building which was at a distance of about 7 kilometers. The building where the registered office was started in the assessment year 2009-10, was got vacated and thereafter Unit-III was started in the said premises in assessment year 2010-11. It was not a case where plant and machinery of Unit-II had been used for Unit-III. The business of the company had grown and with a view to expand its business, the company started a new Unit by making investment as shown in the Chart reproduced above. New employees were recruited by the assessee for Unit- III. Separate account books were maintained by assessee qua Unit-II Unit-III. 15. In view of the facts and circumstances of the case, the learned Tribunal rightly came to the conclusion that the assessee was entitled to claim benefit under Section 80-IC of the Act by treating Unit-III of the assessee-company as a separate and distinct Unit. 16. In the facts and circumstances of the case, the findings recorded by the Tribunal can neither be said to be perverse or result of misreading of evidence and material on record. The substantial questions of law stand answered accordingly. 17. Consequently, the appeal is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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