TaxTMI 
TaxTMI 
2008 (11) TMI 663
X X X X Extracts X X X X
X X X X Extracts X X X X
.... asst. yr. 2002-03. 5.The CIT(A) has reproduced the whole submissions of the AO and the appellant. It is submitted that the Hon'ble CIT(A) ought to have come with findings or reasons for rejecting the AO's claim. It is submitted that no such findings or reasons were given in the order of the CIT(A). 6.The appellant and the CIT(A) had relied on decisions of various forums and circulars. It is submitted that the facts and circumstances of the appellant are totally different from that of the decisions/circulars relied upon by the appellant. 7.The CIT(A) has not denied the fact that the appellant company and transferee company are different entities. In the instant case, there is no question of merger of two companies. The CIT(A) ought to have noticed that these two companies are still in existence as two different companies. 8.The CIT(A) has not discussed the meaning of EOU for the purpose of s. 10B. The appellant ought to have obtained approval as prescribed under s. 14 of the IDRA and the appellant company did not obtain the same." 2. The brief facts of the case are that the assessee company had claimed deduction under s. 10B of the IT Act amounting to Rs. 1,09,91,782. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on because the AO's reply dt. 22nd May, 2006 is dealing with this circular. The AO in his reply has mainly stated that the circular was issued in respect of s. 84 and, therefore, not applicable to s. 10A or 10B of the Act. The decision of the Hon'ble Madras High Court in the case of Madras Machine Tools Manufacturers Ltd. v. CIT [1975] 98 ITR 119 (Mad) was distinguishable. It was mainly pointed out by the AO that it was merely a case of transfer of machinery and, therefore, the assessee was not entitled to deduction under s. 10A or 10B of the Act. This detailed reply was forwarded to the assessee and the assessee in response, raised detailed arguments. Ultimately, the CIT(A) has adjudicated the issue vide para 3.4 of his order which is as under : "3.4 M/s KGISL got approval as a 100 per cent EOU in the year 1998 from Software Technology Parks of India and started its new undertaking engaged in the business of medical transcription during financial year 1999-2000. It had also started another undertaking in the same year which was engaged in the business of development of software to be exported outside India. It had imported machinery for the medical transcription business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....micals Industries (P) Ltd. v. CIT [1997] 141 CTR (Mad.) 467 : [1998] 233 ITR 207 (Mad.). According to him in this decision, the High Court has held that the benefit of deduction is not available to the new buyers of the undertaking. He also argued that the decision in the case of Asstt. CIT v . IIS Infotech Ltd. (supra) relied upon by the CIT(A) deals with the case of merger and since KGISL is still an existing company it cannot be said that it is a case of merger. He further submitted that first of all the assessee claimed deduction under s. 10B of the Act, and then under s. 10A and ultimately under s. 80HHE which clearly shows that the assessee was not clear as to which provision of the Act was applicable and the assessee was merely trying its luck with the Department. 5. The learned counsel for the assessee submitted that KGISL was established in the year 1999 and the business undertaking of medical transcription was started in the year 2000-01 for which deduction under s. 10A was claimed and allowed. Next year, a software undertaking of software development was set up against which also the claim under s. 10A was claimed and allowed. The business of the undertaking consisting ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e same decision because in that case the deduction was ultimately denied to the assessee but the reason for the same is that in that case the undertaking was not purchased but it was merely leased out to different concern, whereas in the case of the assessee the undertaking has been purchased by the assessee from its sister concern. 7. It was vehemently argued by the learned counsel for the assessee that the assessee is not located at SEZ is of no consequence because the benefit of s. 10A of the Act is available to an undertaking located in SEZ under s. 10A by virtue of sub-s. (2)(i)( c) whereas the other units are also eligible in view of the provisions of s. 10A(2)(i)( a)/(b) of the Act. Since the provisions of s. 10A(2) are not cumulative they have to be considered independently. He pleaded that it is not disputed by the Department that the assessee's unit was listed with STPL. He also filed copy of the approval granted by STPL vide letter dt. 25th April, 2001. He submitted that the other objection of the learned Departmental Representative is that it is not a case of merger is also of no consequence because once the undertaking has been purchased by the assessee then as pe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aware of any exemption that is available as held by Hon'ble Gujarat High Court in the case of Chokshi Metal Refinery v . CIT (supra). In that case while relying on the CBDT Circular No. 14(XI-35), dt. 11th April, 1955, the High Court has observed in the penultimate para of the decision as under : "Before parting with the case, we must point out that in the light of the decision of the Supreme Court in Navnit Lal C. Javeri v . K.K. Sen, AAC [1965] 56 ITR 198 (SC), it is incumbent on the ITOs to follow the circular of the Central Board of Revenue of 1955 to which we have referred above and to draw the attention of the assessee concerned to all the reliefs and refunds to which the assessee seems to be entitled on the facts of the case even though the assessee might have omitted to claim refund or relief. In the instant case, in view of the findings of facts recorded by the Tribunal, we are helpless and even though if proper materials had been pointed out relief might have been available to the present assessee, since the materials were not pointed out and the Tribunal's findings of facts are what we have stated above, no other conclusion except that there was no error apparen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1) of s. 139. (1B) The deduction under cl. (ii) of sub-s. (1A) shall be allowed only if the following conditions are fulfilled, namely : (a)the amount credited to the special economic zone reinvestment allowance reserve account is to be utilised- (i)for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next following the previous year in which the reserve was created; and (ii)until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b)the particulars, as may be prescribed in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use. (1C) Where any amount credited to the special economic zone reinvestment allowance reserve account under cl. (ii) of sub-s. (1A)- (a)has been utilised for any purpose other than those referred to in sub-s. (I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the units located in any free trade zone or any electronic hardware technology park or software technology park are also eligible for the deduction. This is further clear because after cls. (a) and (b) the word used is 'or' which means every clause would have independent effect. Therefore, we reject the objection raised by the learned Departmental Representative that since the unit is not located in SEZ area, the assessee is not eligible to the deduction. Admittedly, the unit is located in Software Technology Park of India and even copy of the approval letter vide letter dt. 25th April, 2001 has been placed on record. A combined reading of sub-ss. (i), (ii), (iii ), (iv) and (v) would make it abundantly clear that deduction refers to particular undertaking. Though the term 'undertaking' is not defined under s. 10A of the Act but such terms which are not defined in a particular provision would be understood in commercial parlance or business parlance. An undertaking in a normal parlance would have constitute business activity and not just any activities or liabilities or any combination thereof. In fact, the Hon'ble Madras High Court had made the following observ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....customs formalities should be adhered to. This is issued with the approval of the director." The above clearly shows that not only the unit or undertaking itself was transferred to the assessee by KGISPL but also the obligations of exports etc., in view of the exim policy were also taken over by the assessee. Therefore, this is a plain case of purchase of business undertaking. 12. The next serious and main objection of the learned Departmental Representative for allowing deduction was that it is a case of formation of undertaking by using more than 20 per cent assets which has been previously used, in terms of sub-s. (2)(ii) and (iii) of s. 10A of the IT Act. 13. We have already pointed out after referring to the letter dt. 28th May, 2001 from Software Technology Park of India that it is a case of transfer of whole business of the undertaking of the medical transcription. Therefore, it cannot be said that it is case of formation by using assets previously used particularly in view of the Board's Circular No. F. No. 15/5/63-IT(A1), dt. 13th Dec, 1963. Moreover, it was also pointed out by the learned counsel for the assessee that undertaking was purchased in the year 2001 and....