TaxTMI 
TaxTMI 
2015 (3) TMI 1331
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....dings contained at page 24, para 6 to page 43 of the impugned order, partly allowed the appeal of the assessee. 6. The Tribunal, vide order dated 31.08.2009 dismissed the assessee's appeal against the aforesaid order passed by the ld. CIT(A). 7. The assessee filed M.A. No.98(Asr)/2009 before the Tribunal, pointing out various alleged mistakes apparent from the record in the aforesaid Tribunal order dated 31.08.2009. 8. Vide order dated 04.03.2010, the Tribunal allowed the Miscellaneous Application filed by the assessee, observing as follows: "10. Having considered the rival submissions, we find the grievances of the assessee to be correct. A perusal of the order shows that the case laws cited on behalf of the assessee have not been considered. The aforesaid various arguments, stated to have been made before the Tribunal at the time of hearing of the appeal, have also not been disposed of in their right perspective, as pointed out in the application and argued during the hearing of the appeal. This, in our considered opinion, indeed constitutes a rectifiable mistake apparent from record. Therefore, our order dated 31.8.2009 (supra) is hereby recalled. The matter is....
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....sity, which could not be reviewed by the Tribunal; that the order could have been recalled by invoking the provisions of section 254(2) of the Act only in case the arguments had not been considered at all; that the recalling of the Tribunal's earlier order be treated as vacated; and that thus, there remained nothing to be taken afresh in the appeal, as "when the Tribunal will atone for its wrong, it will only result in restoration of its order dated 31.08.2009 which is humbly prayed for". Further, a para-wise discussion of the order dated 04.03.2010 was made, challenging the observations made therein and it was reiterated that the Tribunal had caused prejudice to the interests of the revenue by recalling its earlier order. Apropos the issue regarding the power of the Tribunal to recall an order in toto, it was contended that the Tribunal does not have any such power. The case laws relied on by the assessee in this behalf were stated to be not applicable. 13. The Ld. DR filed further written submissions dated 03.02.2015, reiterating the request that the prejudice caused to the interests of the revenue be done away with and the issue as to whether the order of the Tribunal allowin....
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....) 327 ITR 267 (All), it was observed that if the mistakes apparent from the record go to the root of the matter, it is the discretion of the Tribunal to correct the mistakes in the facts of the order, or the operative portion of the order, or to hear the appeal denovo. 16. In 'Champa Lal Chopra vs. State of Rajasthan', reported in (2002) 257 ITR 74 (Raj.), it was held that in a given case, where the factual mistake is so apparent that it becomes necessary to correct the same, the Tribunal would be justified in not only correcting the said mistake by way of rectification, but if the judgment has proceeded on the basis of facts, it would be justified in recalling such order. 17. In 'Commissioner of Income Tax vs. Ramesh Chand Modi', 249 ITR 323 (Raj), it was held that where the Tribunal fails to decide some of the questions raised before it, inadvertently or by oversight, the only appropriate method of correcting such mistake is to recall the order and make a fresh order after affording an opportunity of hearing to such party, and that in all such cases, ordinarily, the Tribunal acts ex-debito justitiae to prevent abuse of process, even in the absence of any power. 18. In 'G....
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....ad not been considered. Likewise, in para 4, the Tribunal has observed that though the assessee had distinguished 'Chembra Peak Estate Limited vs. CIT', 85 ITR 401 (Kerala), this distinction had neither been discussed, nor disposed of by the Tribunal. 21. Further, in para 5, it was observed that the decision of the Mumbai Bench of the Tribunal in 'Chenab Information Technologies (P.) Ltd. vs Income-tax Officer', 25 SOT 432 (Mum.), though never relied on by the assessee, was cited by the Tribunal to have been so relied on. In para 6, it was observed that though the decision in 'Income Tax Officer vs. Servion Global Solutions Ltd.', reported in 117 TTJ (Chennai) 380 and that reported in 115 TTJ 469 were distinguishable on facts, but no reason was recorded to arrive at such a finding. In para 7, it has been observed that it was submitted on behalf of the assessee that though the arguments addressed on behalf of the assessee at the time of hearing of the appeal were recorded, they were not either fully recorded, or disposed of. In para 8, it was observed that it had been asserted on behalf of the assessee that though it was brought to the notice of the Tribunal that the ld. CIT(A) h....
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....s by dealing with the said two decisions. The appeal of the assessee was not dismissed only on technical grounds. However, while dealing with the application u/s 254(2) of the Act the Tribunal virtually reconsidered the entire matter and came to the conclusion that deduction u/s 80HHC of the Act was allowable in view of these decisions. The Hon'ble Bombay High Court held that this amounted to re-appreciation of the correctness of the earlier decision on merits, which was not permissible. It was held that power u/s 254(2) of the Act is confined to rectification of mistakes apparent from the record and that section 254(2) is not a carte blanche for the Tribunal to change its own view by substituting a view which it believes should have been taken in the first instance. Now, again, these are not facts in pari-materia with those of the present case. In the present case, the earlier order was recalled since mistakes apparent from the record, calling for rectification, were found to exist in the earlier order of the Tribunal and it was as such that the entire earlier order was ordered to be recalled. It is not a case of substitution of an earlier view with a fresh one thought ought to ha....
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....rd, it amounted to a review. Thus, this decision is of no aid to the Department. 29. Besides the above, it has already been discussed that since the department never felt aggrieved of the rectification order of the Tribunal and did not ever agitate this issue, it is precluded from doing so at this stage. Accordingly, the objections of the Department in this regard are hereby rejected. 30. The assessee has filed an application for additional evidence before us, seeking to produce on record, as additional evidence, a letter dated 14.12.2009 of Mitusuvhishi Heavy Industries Limited, Japan. It has been contended that this letter is crucial for a just disposal of the dispute at hand; that this letter was not available at the time of hearing, either before the AO, or before the ld. CIT(A) and it was received by the assessee subsequently, after the order of the ld. CIT(A) was passed; and that as such, the assessee had no opportunity to produce this evidence before the taxing authorities. 31. The Ld. DR, on the other hand, has contended that this evidence cannot be allowed to be produced on record at this belated stage. 32. Having heard the rival contentions on this issue, i....
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....me. The AO noted that the assessee Sh. Rohit Tandon had been Associated with M/s Mitsubishi Corpn as partner in M/s Dynamech and M/s Asutecs Alloys and row as prop. Of M/s Prajna (India) and that he was involved in running of the business of both M/s Dynamech and M/s Prajna (India). He analyzed the turnover of M/s Dynamech and M/s Prajna (India) and noticed that the business of M/s Prajna (India) had gained solely at the cost of M/s Dyanemech and that, in fact the business of M/s Dynamech from Mitsubishi Corpn had shifted to Prajna (India). The AO was of the opinion that this had been done since deduction u/s 10B of 100% profits was available to Prajna (India) and such deduction was no longer available to M/s dynamech. 2.2 The AO further noted that source of the assessee's capital in Prajna (India) was a gift of Rs. 95 lacs from his Mrs Mala Tandon who had made this gift after withdrawing from her capital amount with M/s Dynamech. The assessee had also withdraw Rs. 96.70 lac from M/s Dynamech. Almost the entire capital balance of the two partners, without considering the current year's profit, was withdrawn and invested in M/s Prajna (India). Thus, the AP concluded, capita....
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....from this building with fractional construction. 2.4.1. In respect of machinery purchased, the AO noted that the assessee has purchased machinery of value of only Rs. 14,36,128/- upto 6th Feb. 2006. The CNC machines were imported and received in India and 22-2- 2006 and received at Noida on 2.3.2006. On the other hand, the assessee had issued sales invoices of substantial value right from 10-2-2006. The AO was of the opinion that in the absence of CNC Machine, the assessee could not have carried out its production since these machines were vital to the production process for making precision parts. The AO was of the opinion that the actual manufacturing was done by M/s Dynamech, in this period. 2.4.2. The AO also noted that the assessee had purchased milling machines for Rs. 9,14,600/- in the last week of March, 2006. He was also of the opinion that sinceh the assessee's production work was of sophisticated nature, the number of skilled and semi skilled workers employed was not sufficient to use the CNC machines the assessee could, therefore, have used the workers of M/s Dynamech. The AO noted that the fire protection system has been purchased on 24.3.2006 and 29.....
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.... 317.16 ???? 177.93 He, based on the above analysis came to the conclusions that new concern was made up or constructed by splitting up the old concern, by diversification of sales of the old firm to the new concern. 2.4.4. The AO, based on his aforesaid analysis held that the new firm ciated manufactured the same items made by the earlier firm, utilized the capital that lay in the earlier firm, made sales to the same buyer as in the old firms and that this was a calculated and conscious act to earn profits and avail deduction u/s 10B to escape levy of tax. The AO relied on the judgment of Hon'ble Supreme Court in the case of Textile Machinery Corpn Ltd 107 1TR 195 for this proposition. As per the AO, in this decision, the Apex Court have held that if substantially the same person were doing the same business it amounted to reconstruction and this portion of the judgment of Apex Court was squarely applicable to the case of the assess, The AO also held that the new business was physically not an independent business, since it was doing the same business as was being done by him along with his wife, the only buyer of the old c....
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....CNC machines were required to production of separate category of finished goods, whether any personal employed by M/s. Dynamech had been shifted to assessee's unit, whether any machinery used by M/s Dynamech had been transferred to assessee's unit directly or indirectly, whether same goods as were sold by Dynamech has also sold by the assessee reason for starting new unit, whether any machinery of Dynamech had been sold in this or subsequent year and month wise production of Dynamech and the assessee's unit. The assessee of the submitted replies to the queries which have also been forwarded to the AO. Most of the hearings were held in the presence of the AO' who has also taken note and commented on some of the observations. 6.2. The assessee, in respect of aforesaid queries, has submitted that the total amount invested in plant and machinery during the year was Rs. 91, 17, 949/-, Which included used machines of Rs. 8,79,318/-. Our of the used machines, Rs. 3, 92, 068/- was stated to be an imported machine on which no depreciation had been claimed in India and certificate in this regard was submitted. The production process was stated to consists of machining done by variet....
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....ne, vertical milling machine, milling machine and grinder. The also much machine has been received by the assessee on 21- 1.2006. Other machines including CNC machines have been received by the assessee in Feb., 2006. The transport receipt for delivery of CNC shows that they were dispatched on 3.2.2006 from the port and reached the assessee's promise on 7.2.06 and 8.2.06 respectively. A milling machine was received by the appellant on 24.3.2006 used generating set was received by the assessee on 28.3.2006. 6.4. The power and fuel account of the assessee shows payment of rent for generator set from the month of Dec. 2005 to March, 2006, as well as payment of fuel for the generator set. In addition the assessee had paid electricity charges in the month of March, 2006. The copy of electricity bill shows that date of connection as 13.1.2006. Two bills have been raised, as per which the electricity meter have not been read but charges on the basis of installed capacity have apparently been levied on provisional basis. 6.5. The details of receipt of the machinery show that the assessee had in hand manually operated machines in the month of Jan. 2006 and CNC Machines in ....
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....oinder the appellant has stated that the cost was low since most of the work was being done on CNC machines. This explanation does not appear to be convincing since Dynamech has also used CNC machines. The appellant has harped on the fact that sales worth Rs. 51,15,550/- were made during March, 2006 after all the machines were in place. The average monthly sales of Dynamech during FY 20-04-05 is Rs. 22.39 lacs. And and in FY 2005-06 is Rs. 18.42 lacs. The average sales of Prajna (India) during FY 2006-07 (the first full year of operation) is Rs. 26.43 lacs. Hence, the high sales of Rs. 51.15 lacs made by a newly set up unit in its first full month of operation does appear to be on the high side. 6.9. It is noted that the appellant was manufacturing machines components for Mitsubishi Corpn., an engineering company of Japan. The components are manufactured as per the given designs and drawings. The relevant designs need to be fed into the CNC machines, if done through them. CNC machines, besides giving repeatable outputs-as contended by the appellant also give higher precision than manually operated machine since the movements of the CNC machine can be controlled to a very f....
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....ter software (2) It is not formed by the splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section ; (iii) It is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation --- The provisions of Explanation 1 and Explanation 2 to subsection (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. 7.2. In the assessment order the AO has contended that the manufacturing unit of Prajna (India) was formed by splitting up of the business of Dynamech. During the appellate proceedings the AO has contended that the new unit was formed by the reconstruction of business already in existence. The rival contentions have been noted above in this regard. Since the terms 'splitting up'....
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....ss, the benefit would not be available. It was held that substantial investment of new capital was imperative and the words "the capital employed" in the principal clause of section 15C were significant, for fresh capital must be employed in the new undertaking claiming exemption. 7.5 It was further noted that the assessee continued to be the same for the purpose of assessment. It had its existing business already liable to tax. It produced in the two concerned undertakings commodities different from those which it 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 was the heart of the matter, to earn benefit from the exemption of tax liability under section 15C. The Hon'ble Apex Court noted : "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 15C. 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 scientif....
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.... place when there is reconstruction of the old business (emphasis supplied). For the purpose of section 15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or same distinct commodities. In order to deny the benefit of section 15C the new undertaking must be formed by reconstruction of the old business. 7.6 The Hon'ble Apex Court hen explained the meaning of the term "reconstruction" as under : The word "reconstruction" is not defined in the act but has received judicial interpretation. In In re South African Supply and Cold Storage Co. (1904) 2 Ch 268 (Ch D) Buckley J., dealing with the meaning of the world "reconstruction" in a company matter, observed as follows : "What does 'reconstruction' means ? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking , but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on -that would be a mere sale -but in come altered form to continue the undertaking ....
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.... Peak division for the manufacture of tea. After the establishment of the factory in Elstone division the factory in Chembra Peak division continued to manufacture tea from the green leaves brought from divisions other than Elstone division and the factory in the Elstone division was being fed only by the tea estates in what division. The Hon'ble High Court held as under : "It is enough for the purpose of this case to hold that in view of the facts admitted the new factory in the Elstone division was formed by the splitting up of the business which was already in existence. If so, the assessee will not be entitled to the exemption under section 84(1) read with section 84 (2) (i) of the act. We, therefore, answer the question in the affirmative, that is, against the assessee and in favour of the department. In this case it has been held that even if a new manufacturing unit was set up to carry out the work done earlier by another division of the assessee, it would amount to "splitting up" of the existing business of the assessee. Interestingly, the appellant had not commented on this decision in this original submission. In the rejoinder the ld. AR has stated that ....
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....oted in this case while allowing the assessee's claim. In Ridhkeran Someni 121 ITR 668 (Pat) the Hon'ble High Court held that the construction of thee saw mill which came to the share of the assessee partner on dissolution of the firm and been completed after the firm was dissolved and was not working on the date of dissolution. Under the circumstances, it was held that there could be no splitting up an existing business since an entirely new business unconnected with the earlier business or of the bus ness being carried on by the other partners was newly set up. 7.9 In the case of T. Satish U.Pai 119 ITR 877 (Kar), assessee, partner of the firm M/S Manipal Power press, Manipal started his own book-binding business in the Name and style of "Compack" at Udupi. Firm was carrying on the business of printing and also carrying on business in book-binding. The Hon'ble High Court held as under: "In order to hold that there it a splitting up of a business already in existence, there must be some material to hold that either some asset of an existing business is divided and another business is set up from such splitting up of assets, or that the two business are the same a....
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....no splitting up of the earlier business. 7.10 In the case of Cit vs Orient Paper Mills Ltd. 176 ITR 110 (SC) the assessee owing a paper mill set up a plant for manufacturing caustic soda. The Hon'ble Apex Court held in favour of the assessee by relying on their decisions I the cases of Textiles Machinery Corporation Ltd. V CUT 107 ITR 195 and CIT v Indian Aluminnium Co. Ltd 108 ITR 367. In this case a new factory for producing a new product was formed. 7.11 In the case of CIT vs Dandeli Ferro Alloys Pvt Ltd. 212 ITR 1 (Bob) the matter was with reference to amalgamation and the issue was transfer of machinery from the old concern to the new concern. The facts and the issues are quits different than the present case. 7.12 In the case of ITO vs DSM software (p) Ltd 115 TTJ (Chennai) 469, the Hon'ble ITAT noted that it was not the case of the Revenue that the new business involved diversion of assets from the old unit. Though the new unit tool some employees of the old unit, there was substantial expansion during the relevant year which led to almost three fold increase in the number of employees. New unit was established by procuring machinery worth more tha....
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....f business. They all pertain to "reconstruction" of business. "Splitting up" and "reconstruction" obviously do not mean the same thing since the same thing since the Legislature has used both the words in section 10B(2)(ii) and other analogous provisions of the 1922 Act as well as well as the 1961 Act and there is the use of "or" between the two terms implying that they operate in different realms. It is well accepted that the decisions of the Courts have to be read in the context of the question before them, and in view of this the decisions with reference to "reconstruction" cannot be held to apply directly to the issues relating to "Splitting up" of business. In light of this conclusion, out of the decisions discussed above, those relating to "splitting up" are held to be relevant to deciding the issue at hand. 8.2. To recapitulate, the facts are that the assessee is a partner in the firm M/s Dynamech. This firm manufactures machine components for M/s Mitsubishi Corporation. The assessee set up a new unit at a new place. New building was constructed and new machinery was installed therein. Capital for setting up the new unit was obtained by withdrawing the assessee's ca....
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....has shifted to Prajna(India) has this shifting resulted in creation of additional capacities or sales or new products? Evidently not, since the customer remains the same, there is no evidence or even claim of higher capacity, dynamech's business has almost slowed down to a crawl and no new types of products are shown to be manufactured. 8.4 in the case of chembra peak estates ltd.(supra), the Hon'ble High Court held it to be a case of splitting up because the work of processing the tea leaves of the Elstone Division, being earlier done by the unite at Wynad district, was done by the newly set unit at Elstone. This was new unit with new machines at anew location. The Hon'ble High court, on appreciation of the fact that the new unit did the work being already done at an existing unit and the work had only shifted to the new unit , held it to be case of splitting up of business. In the case of Ridhkeran Seoni(supra), there was no business with the earlier unit. In fact there was no earlier unit since the unit under construction had come to the assessee's share. This decision does not help the case of the appellant since the facts are quite different. In the case of T.Sati....
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....sole customer Mitsubishi Corp. to whom all the sales of the existing firm M/s Dynamech were made was an integral part and the raison detre for the business of M/s Dynamech. This integral part of the business of M/s Dynamech was shifted to M/s Prajna (India) when this new unit was settled. Hence in my opinion even without the transfer of machinery or plant from M/s Dynamech to M/s Prajna (India) by virtue of the shifting of the sole business of M/s Dynamech to M/s Prajna(India) a split up of the business of M/s Dynamech so as to from a new business of M/s Prajna(India) took place. This is also fortified by the fact that almost the entire capital of M/s Dynamech was used in setting up M/s Prajna(India) The control had the management of existing and new unit remained with the appellant. The workers of Ms/ Dynamech shifted to M/s Prajna(India) at least paper in the subsequent year, and were possibly used in the present year also due to the circumstances discussed earlier. In my opinion M/s Prajna(India) has been formed by shifting up of the existing business of M/s Dynamech. 8.6 in the case of M/s Chenab information Technology (p) Ltd. 25 SOT 432 (Mum) The Hon'ble ITA....
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....new undertakings . both the conditions are important, i.e. there should be a new unit involving fresh investments in plant and machinery leading to additional capacities in the national economy , as well as enhancement in the exports. If only one condition is satisfied, I.e. a new unit is set up, but there is no additional export or business generated or expansion, the objectives are not likely to be served. It appears that is the reason that the prohibition on the new unit being formed by splitting up of business of an existing unit has been incorporated in section 10b and several other deduction/exemption provisions in the I.T.Act. in the case of appellant , while new investment has been made, it has merely resulted in diverting business from an old unit to the new unit without leading to enhancement in business of export. 8.8 Based on the discussion above, I agree with the AO's conclusion in the assessment order that the new unit of Prajna (India) have been formed by splitting up of the existing business of M/s Dynamech. Deduction u/s 10B is therefore no allowable in respect of the income of this new unit. These grounds of appeals are therefore rejected. 37....
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.... by installing new machinery; that though the sole customer of M/s. Prajna (India) and M/s. Dynamech is the same, i.e., Mitsubishi, Japan, the products manufactured by both are different, even though they come under the general category of machined parts; and that, therefore, it cannot at all be said that the new unit, i.e., Prajna (India) has been set up by a splitting up of the business of M/s. Dynamech. 42. As mentioned, the AO had relied on 'Textile Machinery Corpn. Ltd. vs. CIT', (supra) and 'Chembra Peak Estate Ltd. vs. CIT', (supra). The ld,. CIT(A) held 'Textile Machinery Corpn. Ltd.', (supra) to go in favour of the assessee. However, 'Chembra Peak Estate Ltd.', (supra) was relied on by the ld. CIT(A) to hold against the assessee. 43. The Ld. CIT(A) has held that the capital for setting up the new unit was obtained by withdrawing the assessee's capital in M/s. Dynamech; and that the capital of the other partner of M/s. Dynamech, i.e., the wife of the assessee, was obtained by way of gift from her by the assessee. The ld. CIT(A) thus held that the capital was transferred from the existing business to the new unit and it was this capital which was used in the setting up....
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.... supplying the orders of Mitsubishi and all orders of Mitsubishi were executed by Prajna (India); and that the business of Dynamech slowed down considerably in the subsequent year and it manufactured a few items for the local market and did job work for the assessee. Referring to the table depicting the turnover and net profit of M/s. Dynamech vis-à-vis those of Prajna (India) for AYs 2002-03 to 2007-08, the ld. CIT(A) has observed that the work earlier being done by M/s. Dynamech was shifted to Prajna (India). In this regard, the assessee contends that again, this finding is not based on any material on record. 48. We find this objection of the assessee to be correct. The ld. CIT(A) has not referred to any material showing that M/s. Dynamech had any orders from M/s. Mitsubishi, Japan, which remained unsupplied. No material has also been referred to to show that any orders placed by Mitsubishi, Japan with M/s. Dynamech were, in fact, supplied by M/s. Prajna (India) and not by M/s. Dynamech. The observation of the ld. CIT(A) that after Prajna (India) was set up, M/s. Dynamech stopped supplying the orders of Mitsubishi cannot be taken to go against the assessee sans any mat....
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....Therefore also, even as per 'T. Satish U. Pai' (supra), unity of control does not stand established. 51. The ld. CIT(A) has further observed that many workers of M/s. Dynamech admittedly shifted to Prajna (India) in the subsequent year, at least on paper. The ld. CIT(A) observed that these workers were possibly used in the year under consideration, thereby indicating a splitting up of the business. Again, the assessee contends that this finding of the ld. CIT(A) is without any basis. 52. Again, this finding of the ld. CIT(A) does not accompany any basis thereof. In para 8.5 of the order, the ld. CIT(A) observed that "workers of M/s. Dynamech shifted to Prajna (India) at least on paper in the subsequent year, and were possibly used in the present year also due to the circumstances discussed earlier." This, despite the fact that the assessee claimed that during the year under consideration, all the manufacturing was done by different workers. The ld. CIT(A) has based his finding on the observation ( para 8.3 of the impugned order) that "the large volume of the production in a short time does raise doubt on this score." 53. Now, the order under appeal does not evince any mate....
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.... written submission dated 02.01.2015 that the rate of increase of annual sales of M/s. Dynamech, which was between 21% to 28% for each of the three preceding years, fell to 3% in the year under consideration. This also stands noted at page 3 of the assessment order. As against this, during assessment year 2007-08, the annual sales of Prajna (India), in its first full year of operations, was 15%. These figures also remained oblivious to the ld. CIT(A). 59. To wit, exemption u/s 10B of the Act was available only upto 31.03.2009. That being so, the investment of over Rs. 2.6 crores in land, building and machinery would not make any business sense. This fact has also gone unnoticed by the ld. CIT(A). 60. Thus, it can be seen that none of the reasons for which the ld. CIT(A) has held that Prajna (India) was formed by splitting up of the business of M/s. Dynamech holds good. In 'CIT vs. Hindustan General Industries Ltd.', 137 ITR 851 (Delhi), it has been held that the expression "split up" indicates a case where the integrity of a business earlier in existence is broken up and different sections of the activities previously conducted are carried on independently. In the present cas....
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....y Corpn. Ltd.', (supra), it has been held by the Hon'ble Supreme Court that "A new activity launched by the assessee, by establishing new plants and machinery by investing substantial funds 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 an 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 recognizable 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 in the new undertaking which takes place when there is reconstruction of the old business. For the purpose of section 15C the industrial units set up must be new in the sense that new plants and machinery are erected for producing either the same commodities or some distinct commodities. In order to deny the benefit of ....
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.... up'). This, despite the fact that the ld. CIT(A) has observed in para 8 of the impugned order that to attract the charge of 'reconstruction' of an existing business, there must be transfer of assets, including machinery, from the existing undertaking to the new undertaking, following 'Textile Machinery Corpn. Ltd.' (supra), 'Indian Alluminium Co. Ltd.,' (supra) and 'Oswal Woollen Mills Ltd.,'(supra). The distinction sought to be made out by the ld. CIT(A), in our considered opinion, is non-existent. It was held in 'CIT vs. Hindustan General Industries Pvt. Ltd.', 137 ITR 185 (Delhi) that the expression 'splitting up' indicates a case where the integrity of a business earlier in existence is broken up and different sections of the activities previously conducted are carried out independently. 70. In 'T.Satish U. Pai' (supra), it has been observed that in order to hold that there is a splitting up of a business already in existence, there must be some material to hold that either some asset of the existing business is divided and another business is set up from such splitting up of assets, or that the two businesses are the same and the one formed was an integral part of the earl....
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....ent case) and also the payments sometimes received were composite for both the units. The Tribunal upheld the ld. CIT(A)'s finding that merely because the products were the same and the buyer of the product was also the same, it could not be held that the assessee was not entitled to the benefit claimed, since there was no evidence to suggest (again, as in the present case), that the new unit had been set up by splitting up the existing unit, nor was there any proof to indicate transfer of plant and machinery. 74. In 'Computer Force', (supra), considering the allowability of deduction u/s 80IB of the Act, it was held, following, inter-alia, 'Textile Machinery Corpn. Ltd.' (supra), that the assets and liabilities of the old unit remained undisturbed and that so, the preumption that the old unit had given birth to the new unit, had no legal basis or sanctity and was not supported by any cogent evidence. 75. In 'Abbas Nabi Sheikh', (supra), considering the allowability of deduction u/s 80IB of the Act, it was held that where at a new location independent of the earlier existing unit, new plant and machinery are purchased and installed and new capital is invested ( as in the case....
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....B of the Act, holding that the assessee had restarted its old business activity of export of the same items and had merely reconstructed the existing business to avail of the deduction claimed u/s 10B of the Act. It was held by the Tribunal, inter-alia, that the provisions of section 10B of the Act did not place any bar on the assessee having a separate new undertaking for the manufacture and production of the same or similar goods, as done earlier, similar to one of the activities carried on in the existing undertaking. 81. Therefore, as considered in the preceding paragraphs, there is a plethora of case laws supporting the stand taken by the assessee and on the basis thereof, the case of splitting up of the earlier business to form a new unit, as made out by the ld. CIT(A), carries no force. 82. The assessee has also relied on 'ITO vs. vs. DSM Soft (P) Ltd.', 115 TTJ 469 (Chennai) (supra), wherein, 'CIT vs. Poddar Cements Ltd', 26 ITR 625 (SC) and 'Mysore Minerals Ltd.', 39 ITR 775 (SC) have been followed. In that case, it has, inter-alia, been that where two views are possible, the one in favour of the assessee should be adopted. There can possibly be no two opinions about....
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....22. On a reference, the Hon'ble Calcutta High Court, in 'CIT vs. Textile Machinery Corpn.', 80 ITR 428 (Cal.), held that change of producing one's own goods systematically used in the existing business instead of buying them from outside would only be a reconstruction of an existing business within the meaning of section 15C(2)(i) of the I.T. Act, 1922. 85. The judgment of the Hon'ble Calcutta High Court, was reversed by the Hon'ble Supreme Court in 'Textile Machinery Corpn. Ltd. vs. CIT, West Bengal', 105 ITR 195 (SC), vide judgment dated 25.01.1977. The ld. CIT(A) herein held this judgment of the Hon'ble Supreme Court to go in favour of the assessee, as noted hereinabove. 86. The ld. CIT(A) relied on 'Chembra Peak Estate Ltd. vs. CIT', (supra), to hold in favour of the department , that this was a case of splitting up of the business of M/s. Dynamech. While deciding 'Chembra Peak Estate Ltd. vs. CIT', (supra), it is seen, the Hon'ble Kerala High Court relied on the decision of the Hon'ble Calcutta High Court in the case of 'Textile Machinery Corpn. Ltd.,' (supra). 'Chembra Peak Estate Ltd. vs. CIT', (supra) is dated 18.11.1971. It was post 'Chembra Peak Estate Ltd. vs. CIT'....
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....se has to be evaluated on its own facts to determine whether it is a case of splitting up of existing business or not. In assessee's case, as discussed, the facts do not lead to a conclusion of Prajana (India) having been formed by a splitting up of the business of M/s. Dynamech. 89. No other argument was raised before us. 90. To sum up, we hold that: a) The Tribunal rightly recalled its order dated 31.08.2009 in its entirety, for hearing afresh and no prejudice was caused to any interest of the Revenue thereby. b) The ld. CIT(A) went wrong in holding it to be a case of transfer of capital from the existing business to the new one. c) The ld. CIT(A) has erred in holding that orders for manufacture were shifted from the existing business to the new one. d) The ld. CIT(A) has fallen into error in holding that there was a unity of control in the two businesses. e) The ld. CIT(A) has wrongly held that there was a shifting of staff from the existing unit to the one newly set up. f) The ld. CIT(A) has erroneously held that tax evasion was the sole reason for setting up the new unit. f) The ld. CIT(A) has, on the basis o....