TaxTMI 
TaxTMI 
2024 (12) TMI 900
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.... prescribed under the section was not complied by the assessee, without considering the facts and circumstances of the case. 2. The appellant craves leave to add, amend, alter or delete the said ground of appeal". 3. The solitary common issue arises in these appeals is, as to whether in the facts and circumstances of the case, the learned CIT (A) has erred in confirming the disallowance of claim of deduction u/s 80IA of the I.T. Act, 1961. Since common issues has been raised in both these appeals arises from the same facts and circumstances, therefore, for the sake of convenience, these two appeals are consolidated for the purpose of hearing and are being disposed of by this composite order. 4. The brief facts leading to the controversies are that the assessee company is engaged in the business of generation and distribution of power. During the financial year 2016-17, the assessee purchased a solar division from its holding company i.e. M/s. Lanco Infratech Ltd under slump sale transfer vide business transfer agreement dated 23/02/2017. The assessee filed its return of income for the A.Y 2017-18 on 17/10/2017 declaring loss of Rs. 138,87,12,930/-. Later on, noticing a mistake ....
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....there is no change in the undertaking in the process of slump sale except the change of ownership, then the claim of deduction u/s 80IA cannot be denied merely on the ground of change of ownership. He has relied upon the decision of the Hon'ble Allahabad High Court in the case of CIT vs. Prisma Electronics reported in (2014) 51 Taxmann.com 77 (Allahabad) and submitted that the Hon'ble High Court has considered an identical issue as to whether transfer of undertaking under slump sale would amount to formation of undertaking by splitting or reconstruction of existing business and held that the change of ownership of business from proprietorship concern to a partnership firm is not a case of forming undertaking by spilling up of or reconstruction of existing business. Only transfer of industrial undertaking as a whole along with assets and liabilities would not constitute formation of undertaking by splitting up or reconstruction of existing business. He has also relied upon the decision of the Hon'ble Madras High Court in the case of CIT vs. Heartland KV Information Ltd, reported in 359 ITR 1 (Mad.) as well as the judgment of the Hon'ble Delhi High Court in the case o....
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....The assessee has claimed deduction u/s 80IA(4)(iv) in respect of the income of its undertaking acquired from Lanco Infratech Ltd vide business transfer agreement dated 23/02/2017. As per clause (2) and (2.1) of the said agreement, the nature of the transfer is specified as slump sale and is an ongoing concern basis. For ready reference, clause 2 and 2.1 of the said agreement is reproduced as under: "2. TRANSACTION 2.1 Subject to the provisions of this agreement, LSGPL hereby agrees and undertakes to purchase from LITL and LITL hereby agrees and undertakes to sell to LSGPL, on the closing date, the business undertaking on a going concern basis by way of a slump sale, such that: (a) The business undertaking shall be deemed to have been transferred and vested in LSGPL; (b) LSGPL will be entitled, subject to the terms & conditions of this Agreement, to all rights, title and interest in the Business Undertaking; (c) LSGPL shall have the full ability, right, power and authority necessary for conducting and carrying on the business and operations in respect of the business undertaking; (d) LITL shall have transferred all the business assets to LSGPL (e) The business contract....
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....ility of disallowance on account of sub- section (3) of Section 80-IA of the act in its reply dated 16.12.2019. At this juncture, it is very appropriate to refer the orders of Hon'ble ITAT, Chennai in ITA No.113/Mds/2012 dated 04.01.2013 in the case of M/s.Armstrong Knitting Mills Private Limited Vs. DCIT wherein the Hon'ble ITAT dismissed the appeal of the assessee and the facts of which similar to the present case. 7. In view of the above discussion, the deduction of Rs. 1,10,28,713 claimed by the assessee under section 80-IA(4)(iv) of the Act for the assessment year 2017- 18 is not allowable and accordingly the same is added to the total income of the assessee. (Addition: Rs. 1,10,28,713) 9. Thus, the Assessing Officer has given the emphasis to the maximum limit of 20% of the total value of machinery or plant as given in Explanation 2 to section 80IA(3). The Assessing Officer has not disputed the fact that the business undertaking under consideration has been acquired by the assessee as a going concern basis by way of slump sale and under the said transaction of transfer of the business liabilities and obligations as well as assets have been transferred by the seller....
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....sing from the above mentioned provisions are giving rise to disputes between them and the Income-tax authorities leading to denial of tax benefits and consequent litigation and, therefore, require clarification. Various issues highlighted by the Software Industry have been examined by the Board and the following clarifications are hereby issued - xxxxxxxxxxxxx 2(i) xx 2(ii)xxxx (2(iii) xxxxxx 2 (iv) Whether tax Benefits under sections 10A, 10AA and 10B would continue to Remain available in case of a slump Sale of a Unit/Undertaking. The vital factor in determining the above issue would be facts such as how a slump-sale is made and what is its nature. It will also be important to ensure that the slump sale would not result into any splitting or reconstruction of existing business. These are factual issues requiring verification of facts. It is, however, clarified that on the sole ground of change in ownership of an undertaking, the claim of exemption cannot be denied to an otherwise eligible undertaking and the tax holiday can be availed of for the unexpired period at the rates as applicable for the remaining years, subject to fulfilment of prescribed conditions." 10. Thus,....
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....e successor would be entitled to the benefit for the unexpired period of 5 years provided the undertaking is taken over as a running concern. 12. The same principle is applicable in the instant case. Admittedly, the undertaking was in existence since 2002. The proprietorship concern changed into a partnership firm. The benefit under Section 80IB of the Act is available to the partnership firm and the conditions imposed under Section 80IB(2)(ii) does not come in the way. 13. In CIT v. Bullet International. [2012| 349 |TR 267/2014|44 taxmann.com 354 (All.) a Division Bench of this Court held that the exemption granted to a proprietorship concern, which converted from a proprietorship into a partnership concern was still entitled for exemption under Section l0A of the Act. 14. In the light of the aforesaid. we hold that the Tribunal was justified in dismissing the appeals of the revenue holding that the assessee was entitled lor deduction under Section 80-IB of the Act and was not hit by the provisions of Section 80-IB(i) of the Act. The Tribunal was also justified in holding that upon conversion of the proprietorship concern to a partnership concern there was no transfer of pla....
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....n 80IA(3) of the Act are seen to be fully met by the assessee and on this ground also the assessee is entitled for deduction under Section 80IA of the Act. The first contention is that section 80IA(3) of the Act provides that the eligible business is not formed by splitting up or reconstruction of the business already in existence. Based on the facts discussed above, it may be noticed that the assessee started its new business in the existing company and the said business could not be said to have been formed either by splitting up or reconstruction of the existing business. It is to be noted herein that the business of providing internet services was awarded by the government to the assessee in the year 1999. The second contention of applicability of section 80IA (3) regarding use of old plants and machinery is also not relevant in the case of the present assessee as the business of assessee had not come into existence or formed by transfer of any old plants and machinery. The license was granted to the assessee on 5.1.1999 and it purchased new plants and machinery worth Rs. 5.65 crore during the financial year 2000-01 for this telecommunication business." 12. The Hon'ble Hig....
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....was formed satisfied and duly fulfilled the requirement of the Clauses of section 10B(2) or Clause (2) & (3) as it was not formed by splitting up of reconstruction of business already in existence and there was no factual finding that at the time of establishment of formation of undertaking business already in existence was split or reconstructed. There was no bar in section 10B on transfer or sale of undertaking by assessee which has formed sister concerned. 10. The Hon'ble Punjab & Haryana High Court in case of CIT vs. Mega Packages (supra) held that the benefit admissible to an undertaking could not be denied to the assessee for remaining period on the ground that sub- section (12) of section 80IA empresses only in case of amalgamation or demerger of an Indian company and therefore, such benefit would not be available in case of change from proprietorship to partnership. 11. The Hon'ble Bombay High Court in case of CIT vs. Sonata Software Ltd. [343 ITR 397] while discussing the condition precedent for exemption under section 10A held that there are two condition cast in negative term; (i) Industrial undertaking is not firmed by splitting up reconstruction of busine....