TaxTMI 
TaxTMI 
TaxTMI 
2011 (8) TMI 633
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....whereby the Tribunal set aside the decision of CIT(A) and allowed the appeal of the Assessee allowing deductions under Section 80 IA of the Income Tax Act ("the Act" for short) for the assessment year 2006-07 holding inter alia that the Revenue cannot decline deduction for subsequent year for alleged violation of Section 80 IA(3) of the Act. Claiming of deduction under Section 80IA of the Act can only be considered for the year of formulation of business. The Tribunal also held that the provisions of Section 80IA (4) (i) to Section 80IA (3) of the Act will not apply to the business of the assessee which was formulated and/or commenced prior to the assessment year 2004-05. 4. The Assessee company which was incorporated under the name of C.G. Graphnet Pvt. Limited which was engaged in the business of providing telecommunication services and on 15.11.1996, its name was changed to CG Fax Mail Ltd and the company was converted into a public limited company on 23.09.1997. The Company was acquired by Direct Internet Limited in August, 2000 and its name was changed to Primus Telecommunications Limited with effect from 27.9.2000. The company was stated to be in the business of provi....
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.... the old business with the old assets. According to Section 80IA (3) such undertaking should not be formed by splitting up, or the reconstruction of business already in existence (ii) it should not be formed by a transfer to a new business of machinery or plant previously used for any purposes. The balance sheet for the assessment years 2003-04 and the details furnished in respect of fixed assets, I is evident that old machinery has been used meaning thereby that all the old machinery which was used by the assessee previously has been carried forward. In view of these facts, the assessee has not fulfilled the conditions laid down in section 80IA (3), hence the claim of the assessee under section 80IA is denied. 8. The assessee also claims that the deduction under Section 80IA was allowed in the earlier asstt years. So it should be allowed for the asstt year under consideration, is not tenable. I have perused the asstt record for the asstt year 2005-06. Nothing has been discussed in the said order about merit of the claim regarding deduction u/s 80IA. Simply deduction u/s 80IA has been allowed in computation of income. It appears that deduction u/s 80IA was allowed without e....
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....ffect the claim of relief under Section 80IA and the assessee was entitled to deduction on the principle of rule of consistency for having been allowed deduction for the assessment year 2004-05 and 2005-06 under Section 143(3). 7. The matter was taken in appeal by the assessee to the Tribunal which allowed the appeal and allowed the deductions as claimed by the assessee. The department is in appeal against the impugned order of the Tribunal. 8. It was submitted before us by the learned counsel for the assessee that section 80IA(3) was not applicable inasmuch as the case of the assessee falls within the ambit of section 80IA(4)(ii) of the Act. In this regard, it was submitted that the provisions of section 80IA(3) had been amended with effect from 1.4.2005 by the Finance Act (I)) of 2004 whereby Clause(ii) of sub section (4) of the Act had been brought within the ambit of Section 80-IA. In other words, the claim was that till 1.4.2005 the provisions of Section 80IA(3) of the Act did not apply to the provisions of Section 80IA (4)(ii) of the Act. In this regard reliance was also placed upon the Circular No.5 of 2005 dated 15.7.2005 of CBDT wherein it was clearly mentioned that if a....
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....equently the assessee was not entitled to the benefit of deduction under Section 80IA. With regard to the plea of consistency based on the assessment year 2004-05 and 2005-06 whereby all such deductions were allowed, it was submitted that the AO had not considered different incomes from the fax and email and from internet services and internet telephony for the assessment year 2004-05 and 2005-06 and that cannot be utilized for all time deductions under Section 80IA. 10. There is no dispute with regard to the fact that Clause (ii) of the Section 80IA (4) was inserted in Section 80IA (3) by the Finance Act II of 2004 with effect from 1.4.2005 and that this was not with retrospective effect. It became applicable only after its insertion with effect from 1.4.2005. The Circular issued by CBDT explaining the provisions of Finance Act II of 2004 testifies the fact that this insertion took effect from 1.4.2005 and is to apply in relation to the assessment year 2005-06 and subsequent years. The first claim of the assessee for deduction under Section 80IA indisputably was for assessment year 2004-05. The Tribunal has rightly recorded that the business of fax and email has been started by t....
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....at the assessee could not be said to have been formed by splitting up or reconstruction of the business already in existence as its business had commenced after 1.4.1995 and before 31.3.2005 and the assessee had started its business of fax and email services right from the financial year 2003 and 2005 and it continued to carry on the business of internet telephony. 13. Insofar as the objection of the revenue that there had been change in the name of pattern of shareholding it does not make any difference as it is a well settled rule of law that benefit under Section 80IA of the Act is available to an undertaking and not to the assessee since the undertaking continues to carrying on its business without any reconstruction of business already in existence. 14. Even otherwise, on merits the conditions under Section 80IA(3) of the Act are seen to be fully met by the assessee and on this ground also the assessee is entitled for deduction under Section 80IA of the Act. The first contention is that section 80IA(3) of the Act provides that the eligible business is not formed by splitting up or reconstruction of the business already in existence. Based on the facts discussed above, it may....