Deduction under Section 80IB upheld for unit acquired through slump sale

The Tribunal held that the deduction under Section 80IB should not be denied solely because the unit was acquired through a slump sale instead of amalgamation or demerger. The Tribunal emphasized that the benefit is linked to the undertaking, not the ownership. Citing relevant case laws, the Tribunal ruled in favor of the assessee, allowing the deduction. The appeal by the Revenue was dismissed, and the order of the CIT(A) was upheld.

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Issues Involved:
1. Disallowance of deduction under Section 80IB of the Income Tax Act.
2. Eligibility of deduction under Section 80IB for a unit acquired through slump sale versus amalgamation or demerger.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB:

The primary issue revolves around the disallowance of the deduction under Section 80IB amounting to Rs. 4,68,67,102/-. The Revenue argued that the assessee did not fulfill the conditions laid down under Section 80IB, particularly because the unit was acquired through a slump sale and not through amalgamation or demerger. The AO also noted that the previous owner, M/s Hiren Aluminium Ltd., was denied the deduction for the assessment years 2004-05 to 2009-10.

2. Eligibility of Deduction for Unit Acquired Through Slump Sale:

The assessee argued that the deduction under Section 80IB was claimed for Unit-2 situated in Silvasa, which was acquired from M/s Hiren Aluminium Ltd. through a slump sale agreement dated 30.11.2007. The AO disallowed the deduction on two grounds: the previous owner was denied the deduction, and the acquisition was through a slump sale rather than amalgamation or demerger. The assessee contended that the benefits of Section 80IB are connected to the undertaking and not the owner, and thus, the change of ownership should not affect the deduction.

Tribunal's Findings:

1. Previous Owner's Deduction:

The Tribunal noted that the previous owner, M/s Hiren Aluminium Ltd., was granted the deduction under Section 80IB by the CIT(A)-VIII, Ahmedabad, and this decision was upheld by the ITAT, Ahmedabad. Therefore, the objection regarding the previous owner's disallowance became meritless.

2. Slump Sale versus Amalgamation or Demerger:

The Tribunal found that the entire undertaking was transferred to the assessee, and the deduction under Section 80IB should not be denied merely because the ownership changed hands through a slump sale. The Tribunal referred to Circular No. 1/2013 issued by the CBDT, which clarified that the tax benefits under Sections 10A, 10AA, and 10B would continue in case of a slump sale, provided the conditions are met.

Supporting Case Laws:

The Tribunal cited several judicial precedents supporting the assessee's claim:
- CIT vs. Heartland Delhi Transcription Services Pvt. Ltd. (366 ITR 523): The Delhi High Court held that the exemption under Section 10B is attached to the undertaking, not the owner.
- CIT vs. Mega Packages (203 Taxman 236): The Punjab & Haryana High Court held that the benefit of deduction continues even after a change in ownership.
- CIT vs. Sonata Software Ltd. (343 ITR 397): The Bombay High Court emphasized that the conditions for exemption are related to the undertaking, not the ownership.
- ACIT vs. IIS Infotech Ltd. (82 TTJ 174): The Delhi High Court held that the exemption under Section 10B continues post-merger if the undertaking remains eligible.

Conclusion:

The Tribunal concluded that the benefit of Section 80IB is attached to the undertaking and not affected by the change of ownership through a slump sale. The conditions under Section 80IB(2) were met, and thus, the deduction should be allowed. The appeal by the Revenue was dismissed, and the order of the CIT(A) was upheld.

Order Pronouncement:

The appeal filed by the Revenue was dismissed, and the order was pronounced in the open court on February 23, 2018.

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