Section 10A deduction for a transferred undertaking turns on continuity of the business unit and statutory eligibility conditions.

Section 10A deduction is discussed as attaching to the undertaking rather than to the assessee personally, in the context of a medical transcription unit acquired as a going concern with used machinery and STPI approval. The transfer documents are noted as covering employees, contracts, records, permits and export obligations, supporting the view that the unit retained its identity after takeover. The commentary also refers to the prohibition on formation by transfer of previously used machinery, the successor's entitlement under pari materia relief provisions, and the relevance of the Board circular on existing undertakings.

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Issues: Whether the assessee was entitled to deduction under section 10A despite the medical transcription unit having been transferred from another company as a running concern with used machinery and STP approval.

Analysis: Deduction under section 10A is attached to the particular undertaking and not to the assessee as such. The provisions of section 10A apply to units in a software technology park as well as other eligible zones, and the unit in question had STPI approval. The transfer documents showed that the entire medical transcription undertaking, together with its employees, contracts, records, permits and export obligations, had been transferred to the assessee as a going concern. The prohibition against formation by transfer of previously used machinery was not attracted in a case of acquisition of an existing undertaking, and the Board circular dealing with the successor's entitlement under the pari materia provisions was applicable. The relied upon authorities supported the view that the benefit is available where a running undertaking is taken over, and the contrary distinction based on lease rather than purchase did not assist the assessee.

Conclusion: The assessee was not entitled to the claimed deduction under section 10A, and the Revenue's appeal failed to show any error in the order of the CIT(A).

Ratio Decidendi: Deduction under section 10A is available with reference to the undertaking as a going concern, but acquisition of a transferred undertaking does not defeat the benefit where the statutory conditions are otherwise satisfied and the provision is construed in light of pari materia relief provisions and the governing Board circular.

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