Section 10B deduction sustained on slump sale transfer of an existing 100% EOU as a going concern.

Deduction under section 10B remained available where an existing 100% Export Oriented Unit was acquired as a going concern through slump sale. The transfer was of the entire undertaking, not a split-up or reconstruction of business, so the statutory condition against such restructuring was not breached. The objection based on previously used machinery also failed because the transaction involved transfer of the whole unit, not selected old assets into a new business. The unit's 100% EOU approval had not been shown to be withdrawn by the competent authority, and the domestic turnover objection did not defeat the claim. The assessee was therefore entitled to section 10B deduction for the relevant years.

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Issues: Whether the assessee was entitled to deduction under section 10B after takeover of an existing 100% Export Oriented Unit by way of slump sale, and whether the transfer violated the conditions relating to splitting up of business, use of previously used machinery, or loss of 100% EOU status.

Analysis: The undertaking taken over by the assessee was held to be the same existing unit transferred as a whole along with its assets and liabilities as a going concern. On the facts, there was no splitting up or reconstruction of an existing business, because the transfer was not of a part of the undertaking but of the entire undertaking that had already been enjoying section 10B benefit. The objection based on domestic turnover did not defeat the claim, since the undertaking had continued to hold approval as a 100% EOU and the status was not shown to have been withdrawn by the competent authority. Likewise, the objection regarding old machinery was rejected because it was not a case of transfer of selected used machinery into a new business, but of transfer of the whole undertaking.

Conclusion: The assessee was entitled to deduction under section 10B for the years under consideration, and the disallowance was unsustainable.

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