TaxTMI 
TaxTMI 
2015 (3) TMI 1331
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.... 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 refixed for hearing on merits afresh under notice to the parties....
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....ave 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 allowing the application of the assessee had not caused such prejudice by decided ....
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....d 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 'Gehna vs Income Tax Officer', reported in (2011) 137 TTJ (JP)(UO) 17, relying on 'Honda ....
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....ee 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) had given a finding in para 8 of his order that the argument of the AO was that it was a case of....
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....pplication 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 have been taken earlier. 26. In 'Shaw Wallace And Co. Ltd. vs ITAT', (supra), it was held that a mistake in the reasoning portion of the order canno....
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....partment 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, it is seen that it remains undisputed that the letter sought to be produced by the assessee by way of additional evidence is essential for a just disposal of the ma....
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....na (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, capital had been withdrawn from M/s Dynamech and shifted to M/s Prajna (India). He concluded that Prajna (India) had substituted the firm dynamech in all the aspects of the business, i.e. s....
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....06. 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 29.3.2006. Furniture and fixture purchased was only Rs. 68240/- which was considered by the AO as insufficient for carrying out business from the new premises. The computer was purchased only on 25.3.2006. Office e....
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.... 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 concern had been taken over and the capital of old concern had been taken over and even the building of old concern have been used. The AO therefore, held that Prajna (India) was intrinsically not a newly establish undertaking even though new machinery had been purchased. 2.4.5. The AO also referred to the dec....
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....e 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 variety of machines like turning, milling, drilling etc. It was submitted that these operations could be done on manually operated machines or by CNC [computer and numerically controlled] machines. It was submitted that CNC machines gave higher productivity and better repeatability. Other processes like heat treatment, surface treatment, deburring etc. we....
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....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 the month of Feb. 2006. The wages register also shows payment to some workers. The assessee had obtained electricity connection at its new unit. It ahs also obtained a generator set for generating electricity in the absence of electric power. These evidences, in my opinion, do establish that the assessee was in a position to manufacture goods at its new factory. Even if....
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....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 fine degree by computers. The details of machines used by Dynamech and Prajna (India) submitted by the appellant show that the concerns have CNC machines, though the machines of Prajna (India) are newer and possibly has more advanced features. Since both the concerns were manufacturing similar products and for the same customer, the low usage of consumables and the low wages incurred in Prajna (Ind....
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....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' or 'reconstruction' have not been defined in the I.T. Act, it may be useful to refer to the authorities relied upon by the two parties. 7.3 The AO has first relied on the decision of the Hon'ble Supreme Court in the case of Textile Machinery Corporation 107 ITS 195 (SC) and has stated that the Hon'ble Apex Court have held that if the substantially the same persons are doing the same business, it amounted to reconstruction. Incidentally, the appellant has also placed rel....
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....s 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 scientific and technological developments. There is great scope for expansi0on of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certain, does would not, on that score, deprive him of the benefit under section 15C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it i....
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....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 in such a manner as that the persons now carrying it on will substantially continue to carry it on, it involves, I think, the substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company of resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same." 7.7 The AO has used ....
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....ch 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 the decision was not applicable since new unit had been set up by installing new machinery in a new building at a new place. 7.9. let us examine the decisions relied upon by the appellant. The decision in 107 ITS 95 (SC) has already been discussed above. In 108 ITR 367 (SC) in the case of Indian Aluminium Company Limited, the facts as noted in the judgment are as under : "The Indian aluminium Company Ltd. (hereinafter to be referred to as the respondent") was a manufacturer of aluminium ingots form ore. In the years prior to the assessment year 1960-61 in qu....
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....f 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 and one formed was an integral part of the earlier one and it was only question of breaking up of the same business. It implies a unity of control in regard to two business, i.e, earlier one in existence and a new one which is brought into existence. While cl. (ii) of sub-s. (4) of s. 80j may comprehend transfer of machinery or plant previously used for any purpose and which may belong to an outsider also, cl (i) implies such a transfer and setting up of another business by splitting up of the assets of the earlier one in existence in a case, where the same person carries on business and brings in....
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....ry 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 than 50 lacs. There was also substantial addition to the nature and type of services rendered to clients in the volume of business , and there was a good increase of the number of customers. The Hon'ble ITATA held that to hold that a new business was formed by the splitting up or reconstruction of a business already in existence there must be material to show that either some assets of the exiting business had been diverted or that the two business were the same and the one formed an integral part of the other earlier. On the fact of the case the Hon'ble ITAT held that this was not a case of splitting up or reconstruction of business....
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....f 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 capital in this firm. The capital of the other partner, who is the wife of the assessee, was also obtained by way of gift from the other partner by the assessee. The firm had a single customer. After the new unit of the assesee was set up, the firm stopped supplying to Mitsubishi Corporation and All orders of Mitsubishi Corporation were executed by the assessee's concern Prajna (India). M/s Dynamech's business slowed down considerably in the subsequent year and it manufactured few items for the local India market and did job work for the appellant. Many workers of Dynamech shifted to prajna (India ) in the subsequent year . The sales and profit of the two conc....
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....e 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.Satish U.Pai(supra), the Hon'ble High Court, for holding that there was no splitting up of the earlier business, noted that there was no unity of control in regards to the two business of the firm and that of the proprietorship concern of the assessee partner. It was also noted that there was no transfer of capital or machinery or of any other asset. This decision implies that unity of control between the existing and the new business , even without transfer of machinery or other assets from the through the new business , even without transfer of machinery or other assets from the existing business to the new business are relevant considerations for treating the new business as having been split from the existing business. In case of DSM software(p) Ltd ....
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.... 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 ITAT held that it will bea case of splitting up of Business if either the assets of old unit have been transferred to new unit or in case assets have not been transferred the business itself has been diverted to the new unit and the business of both units remain the same. In this case the assesse had an existing unit which was not entitled to exemption u/s 10A . The assessee has set up anew unit in the STP and calimed exemption u/s 10A . The hin'ble ITAT noted that the business of the assessee continued to be the same that work was done onsite at customers premises that very little new investment was made and the employees in the new unit were also the same . though some of the fact in this case are different from the case of the present appellant the principal of this case will A....
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....ing 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. As available from the above orders and as also contended on behalf of the assessee, the AO observed that since the building of the assessee did not stand completed and since it was not sufficient to house the machinery in order to produce the machined parts which were required for manufacture by the assessee, as per the requirements of Mitsubishi, Japan, the production had not been carried out by the assessee in his new unit, namely, M/s. Prajna (India), but in the factory of M/s. Dynamech, wherein, the assessee was a partner and which was also supplying machined parts to Mitsubishi, Japan. The Ld. CIT(A), having considered the submissions on behalf of the assessee, held that the assessee's building was substantially ready for use during the year under consideration. 38. The AO further held....
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....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 of the new unit, i.e., Prajna (India). Objecting to this, the assessee contends that this finding of the ld. CIT(A) is ill founded, in asmuchas there is no material whatsoever on record to arrive at such a finding. 44. In this regard, it is seen that the partners capital at the end of the first year of operation of M/s. Dynamech was Rs. 20.45 lacs. The assessee and his wife had made withdrawals from time to time out of the profits earned in M/s. Dynamech and the amounts withdrawn were deposited in their personal bank account. A profit of Rs. 4.37 crores stood earned in M/s. Dynamech in the six years from AY 2001-02 to AY 2006-07. Out of this, an amount of Rs. 4.20 crores was withdrawn by the partners of M/s. Dynamech, i.e., the assessee and his wife. The capital account of the partners in M/s. Dynamech, as has been fil....
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....ial 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 material to show that any order of Mitsubishi placed with M/s. Dynamech remained uncomplied, or that any orders of Mitsubishi with M/s. Dynamech were supplied by Prajna (India). Further, in order to prove the splitting up nothing turns on the observation that the business of M/s. Dynamech slowed down considerably in the succeeding years and it manufactured items for the local market and did job work for the assessee. 49. The Ld. CIT(A) has further observed that both M/s. Dynamech and Prajna (India) were being managed by the assessee, which showed that there was unity of control. This observation of the ld. CIT(A) has also been objected to by the assessee, as being a result of mere presumptions and assumptions, without there being any material on record to support the same. 50. The assessee, undisputedly, is an Engineer, having tech....
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....ssessee 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 material to show that any worker was shifted or transferred. Rather, the CIT(A) is himself evidently not sure of any worker of Dynamech having actually shifted to Prajna (India), in the absence of any material on record to this effect, when he employes the expression 'possibly' in his finding. It goes without saying that in the case of transfer of a worker, there is continuity of service, which is absent here. 54. The ld. CIT(A) has observed to the effect that the reason for setting up of the new unit Prajna (India) was but to claim deduction 10B of the Act and thereby to evade tax. This observation/finding of the ld. CIT(A) has also been objected to by the assessee as being baseless. 55. This observation of the ld. CIT(A) accompanies an observation that this has been admitted by the assessee. However, the admission is that the new unit was s....
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.... 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 case, neither of these factors is present. Neither has the integrity of the business of M/s. Dynamech been shown to have been broken up, nor any activities previously conducted by M/s. Dynamech have been established to have been carried on independently by Prajna (India). Prajna (India) has not been proved to be a rehash of M/s. Dynamech. 61. M/s. Dynamech has not been shown to have been either split up, or divided. It continued to independently produce and supply parts. No machinery or firm or section of M/s. Dynamech was transferred or shifted to Prajna (India), as accepted by the ld. CIT(A) also. Rather, the observations of the ld. CIT(A) in para 8.3 of the order under appeal, are mutually contradictory. It was first stated that the work earlier done in M/s. Dynamech was shifted to Prajna (India). Immediately thereafter, it was observed that the busines....
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....r 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 section 15C the new undertaking must be formed by reconstruction of the old business." 65. This decision has been held by the ld. CIT(A) to go in favour of the assessee, except for transfer of capital, noting that this decision dealt with 're-construction' and not with 'splitting up' of business. Apropos the transfer of capital, we have held above that this is not a case of transfer of capital. 66. In 'Indian Alluminium Co. Ltd.', (supra) the Hon'ble Supreme Court decided the matter on the submission of the counsel for both the parties, that the matter was governed by 'Textile Machinery Corpn. Ltd..', (supra). 67. In 'Orient Paper Mills Ltd.', (supra), 'Textile Machinery Corpn. Ltd.', (supra) and ' Indian Alluminium Co. Ltd.', (supra) were followed. 68. In 'Oswal Woollen Mills Ltd.', (supra), the assessee was manufacturing hosiery goods. A separate export wing was established for manufacture to export, using different raw-material and having separate acco....
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....ld 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 earlier one and that it was only a question of breaking up of the same business. It was, thus, held that transfer of assets, inter-alia, was a decisive factor for holding that there was a splitting up of the earlier business. This has also been noted by the ld. CIT(A) in para 7.7 of his order. 71. It is note-worthy that in the present case, the ld. CIT(A) has held capital to have been transferred for setting up of the new unit. To reiterate, we have disagreed with this observation of the ld. CIT(A). 'Textile Machinery Corpn. Ltd.' (supra), as will be seen in the succeeding pargraphs, has been referred to and followed in numerous cases involving splitting up and reconstruction of existing business. Therefore, 'Textile Machinery Corpn. Ltd.', 'Indian Alluminium Co. Ltd.,' (supra) and 'Oswal Woollen Mills Ltd.,'(supra), are held to be squarely applicable to the facts at hand. 72. In 'Dandeli Ferro Allows Pvt. Ltd.', (supra), while considering the scheme of section 80J of t....
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....duction 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 at hand), it would a case of setting up of a new unit even for carrying out the same business, and that whether the assessee carries on the same business or a different one, is not an essential ingredient to hold it to be a case of splitting up or reconstruction. 76. In 'Quality Steel Tubes', (supra), considering the allowability of deduction u/s 80J of the Act, following 'Textile Machinery Corpn. Ltd.' (supra) again, the matter was decided by the Tribunal in favour of the assessee. This decision of the Tribunal was later confirmed by the Hon'ble High Court in 'CIT vs. Quality Steel Tubes Pvt. Ltd.,' 280 ITR 254 (All.) by upholding the finding that merely because some of the activities were common between the old unit and the new one, that would not mean reconstruction or splitting up. 77. In 'Servion Global Solutions Ltd.,' (supra), it was held that the fact that the new unit also dealt in the same products as that of the old unit, or that there were some employees or custo....
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....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 this proposition. 83. Further, the assessee has placed reliance on 'Bajaj Tempo Ltd. vs. CIT', 196 ITR 199 (SC) and 'CIT vs. Chand Diesels', 216 ITR 639 (Bom.), wherein,it has been held that the incentive provisions of the Act should be construed liberally, in a broad commercial sense, keeping their object in view, so as to obviate defeating the very purpose of the tment thereof. Again, this proposition is trite. 84. Now, for a moment, we revert to the progression of events in the matter of 'Textile Machinery Corporation' (supra). A heavy engineering concern manufacturing boilers, machine parts, wagons, etc., setting up two new units, a Steel Foundry Division and a Jute Mill Division. The Steel Division started manufacturing some castings, which the heavy engineering concern was previously buying from the market. However, the castings were mostly used by other existing Divisions of the engineering concern itself. The raw-materials were supplied to the Jute Mill Division by the Boiler Divi....
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....lcutta 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', (supra), that the Hon'ble Supreme Court decision in 'Textile Machinery Corpn. Ltd.,' (supra) was delievered on 25.01.1977, reversing the High Court order. Hence, obviously the Hon'ble High Court did not have the benefit of the said Supreme Court decision. This position has also been taken note of by the Allahabad Bench of the Tribunal in 'Quality Steel Tubes,' (supra), and as noted, this Tribunal decision was confirmed by the Hon'ble High Court in 'CIT vs. Quality Steel Tubes', 280 ITR 254 (All.) (supra). Therefore, the ld. CIT(A) has erred in placing reliance on 'Chembra Peak Estate Ltd. vs CIT' (supra). 87. The Ld. CIT(A) also relied on 'Chenab Information Technologies (P) Ltd. vs. ITO' 25 SOT 432 (Mum.). The ld. CIT(A) noted that therein, it was held that it would be a case of splitting up of the business, if either the assets of the old unit stand transferred to the new unit, or the business itself has been diverted to the new unit and the business of both the units remains the same. The ld. ....