TaxTMI 
TaxTMI 
2014 (11) TMI 319
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.... The same was brought to tax and no deduction under Section 80 1C was allowed on it. The assessee filed an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals), allowed the same on 1.8.2011. The Revenue filed an appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal dismissed the Revenue's appeal on 23.11.2012. Hence, this appeal. 3. According to Mr. Gaurav Sharma, Advocate, the Firm i.e. M/S Yash Electrical has formed a unit under the name and style of M/S Yash International having same partners as in the case of M/S Yash Electricals, Baddi. Only the wife was introduced as new partner of erstwhile firm who did not contribute any capital except sharing of profit at the end of the year. The workers of M/S Yash Electricals were also shifted to the new unit and the control and management of the existing and new unit remained the same. He supported the orders passed by the Assessing Officer dated 30.12.2009. He also contended that the new unit was formed by splitting up the existing business. On the other hand, Mr. Vishal Mohan, Advocate, has supported the appellate orders. 4. We have heard the learned Advoca....
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....ysically separate industrial unit. 7. Their lordships of the Hon'ble Supreme Court in Textile Machinery Corp. Ltd. Vrs. CIT (1977) 107 ITR 195 (SC), have held as under: " The principal object of Sec. 15-C is to encourage setting up of new industrial undertakings by offering tax incentive within a period of 13 years from April 1, 1948. Section 15-C provides for a fractional exemption from tax of profits of a newly established undertaking for five assessment years as specified therein. This section was inserted in the Act in the 1949 by Section 13 of the Taxation Laws (Extension to Merged States and Amendment) Act, 1949 (Act 67 of 1949) extending the benefit to the actual manufacture or production of articles commencing from a prior date, namely, April 1, 1948. After the country had gained independence in 1947 it was most essential to give fillip to trade and industry from all quarters. That seems to be the background for insertion of Section 15-C. It is also significant that the limit of the number of years for the purpose of claiming exemption has been progressively raised from the initial 3 years in 1949 to 6 years in 1953, 7 years in 1954, 13 years in 1956 and 18 years i....
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....iming exemption. There must be a new undertaking where substantial investment of fresh capital must be made in order to enable earning of profits attributable to that new capital. The assessee continues to be the same for the purpose of assessment. It has its existing business already liable to tax. It produced in the two concerned undertakings commodities different from those which he has been manufacturing or producing in its existing business. Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in a separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under Sec. 15-C. Sub-section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the assessee claims exemption under Section 15-C. No hard and fast rule can be laid down. Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and indu....
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....its thereon are ascertainable. There is no difficulty to hod that Sec. 15-C is applicable to an absolutely new undertaking for the first time started by an assessee. The cases which give rise to controversy are those where the old business is being carried on by the assessee and a new activity is launched by him by establishing new plants and machinery by investing substantial funds. The new activity may produce the same commodities of the old business or it may produce some other distinct marketable products, even commodities which may feed the old business. These products may be consumed by the assessee in his old business or may be sold in the open market. One thing is certain that the new undertaking must be a integrated unit by itself wherein articles are produced and at least a minimum of ten persons with the aid of power and a minimum of twenty persons without the aid of power have been employed. Such a new industrially recognisable unit of an assessee cannot be said to be reconstruction of his old business since there is no transfer of any assets of the old business to the new undertaking which takes place when there is reconstruction of the old business. For the purpose of....
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....nts, the question has to be left for decision on the peculiar facts of each case. If any undertaking is not formed by reconstruction of the old business that undertaking will not be denied the benefit of Section 15-C simply because it goes to expand the general business of the assessee on some directions. As in the instant case, once the new industrial undertakings are separate and independent production units in the sense that the commodities produced or the results achieved are commercially tangible products and the undertakings can be carried on separately without complete absorption and losing their identity in the old business, they are not to be treated as being formed by reconstruction of the old business." 8. In the case of Commissioner of Income Tax Delhi-I, vrs. Gedore Tools India Pvt. Ltd. (1980) 126 ITR 673 (Delhi), the Division Bench of the Delhi High Court, after relying upon the decision of Textile Machinery Corp. Ltd. (supra) has held as under: "Applying these principles to the present case, it is clear that the new unit has not been formed by the splitting up or reconstruction of the existing business. The second unit has not derived anything from the old ....
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....om the assets employed in the old unit it would not be a case of transfer of assets of the old unit or business to the new undertaking." 9. In the case of Commissioner of Income Tax Bihar, vrs. Ridhkeren Someni (1980) 121 ITR 668 (Pat.), the Division Bench of the Patna High Court, after taking into consideration the decision of Textile Machinery Corp. Ltd. (supra) has held as under: " Section 84 of the Act, which is the same as Section 80J, grants exemption to newly established undertakings as mentioned in Sub-clause (1). Sub-clause (4), so far as it is relevant, states that the section applies to any industrial undertaking which is not formed by the splitting up, or the reconstruction, of a business already in existence. It is thus clear that if the new industrial undertaking could be said to have been formed either by the splitting up or reconstruction of business which was already in existence, the exemption could not be claimed. The meaning of the expression " reconstruction " has now been finally settled by the decision of the Supreme Court in Texile Machinery Corporation Ltd. v. CIT [1977] 107 ITR 195, wherein the observation of Buckley J. in In re South African Supply ....
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.... Income Tax, vrs. Kamani Engineering Corporation Ltd. (1986) 161 ITR 473 (Bom.), the Division Bench of the Bombay High Court, has held as under: " In appeal before the Income-tax Appellate Tribunal, the Revenue contended that the business started at Jaipur was merely an extension of the existing business of the assessee and that it had only shifted a part of its capacity there and so the provisions of section 80J of the Income-tax Act, 1961, were not attracted. The Tribunal held that the new unit at Jaipur was intended to utilise a part of the capacity for which the assessee had a licence and that there was no shifting of machinery or plant already in existence or splitting up or reconstruction of the business already in existence. Following the decision of the Calcutta High Court in CIT v. Indian Aluminium Co. Ltd. , in preference to the earlier decision of the Calcutta High Court in CIT v. Textile Machinery Corporation , the Tribunal granted to the assessee the benefit of the provisions of section 80J. Mr. Jetly, learned counsel for the Revenue, submitted that inasmuch as there was unity of control in regard to the Jaipur plant and inasmuch as there was a shifting of a part....