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2015 (8) TMI 916 - AT - Income TaxDeduction u/s 10A - non maintaining separate books of account - CIT allowing the deduction - Held that - There is no requirement of maintaining separate books of account u/s 10A and non maintenance of separate books of account cannot be basis for disallowing the claim of deduction u/s 10A of the Act. On this aspect, we do not find any infirmity in the order of learned CIT(A). See IBM India P. Ltd. v. Deputy Commissioner of Income Tax 2011 (6) TMI 735 - ITAT BANGALORE New unit was using the point to point leased lines and the internet leased lines of the existing unit - Held that - The report of the Income Tax Inspector outlines that the new unit was operated on the same place and there was no demarcation between new unit and old unit but as per the CBDT Circular No. 01 of 2013 and as per the Tribunal decision in the case of ACIT Vs Symantec Software India P. Ltd (2011 (11) TMI 631 - ITAT PUNE) it was held that physical demarcation is not a criteria to decide the eligibility of deduction under section 10A of the Act so long as the new unit is independent of the old existing unit. Hence, in our considered opinion, on this aspect also, there is no infirmity in the order of CIT (A). Percentage of old plant & machinery used by new unit was more than 20% - Held that - A clear finding is given by the learned CIT(A) that the Assessing Officer has not correctly appreciated the facts. He has also given a finding that the provision of explanation 2 to section 80I of the Act prohibits transfer of more than 20% of old total plant & machinery to new unit but in the present case, there is no transfer of plant & machinery from old unit to new unit. He has also given a finding that the total assets purchased is separately shown at ₹ 29,20,233/- and therefore, this confusion of the Assessing Officer regarding transfer of more than 20% of the total plant & machinery of old unit to new unit is not correct. Even out of new computers installed in the present year, 8 computers out of 10 computers were put to use on or before 27/09/2008 whereas the STPI approval has been granted on 16/10/2008 - Held that - DTA unit can be converted into STP unit but even if the assessee did not choose to get its DTA unit converted into STP unit, the deduction is allowable to the assessee. In the present case also, the assessee has not chosen to convert its STP unit to DTA unit and some of the machinery were put to use before the registration granted by STPI, but this factor alone cannot be a basis to deny the assessee deduction u/s 10A of the Act. See CIT and ITO Versus Expert Outsource (P) Ltd. 2011 (3) TMI 1428 - Karnataka High Court There is no material brought on record by the Assessing Officer to prove that the new unit was formed by splitting up or reconstruction of an existing business or transfer of old plant and machinery of more than 20% to the new unit and therefore, there is no violation of the provisions contained in section 10A(2)(ii) and 10A(2)(iii) read with explanation 2 to section 80I of the Act and therefore, the assessee is eligible for deduction u/s 10A of the Act. These categorical findings of learned CIT (A) could not be controverted by Learned D. R. of the Revenue and hence, we do not find any reason to interfere in the order of learned CIT(A) in both the years because in assessment year 2010 11, the order of Assessing Officer and CIT(A) are in line with the respective orders in earlier year. Hence, we decline to interfere in the orders of CIT(A) in both the years. - Decided in favour of assessee.
Issues Involved:
1. Eligibility for deduction under Section 10A of the Income Tax Act. 2. Maintenance of separate books of account for the new unit. 3. Use of leased lines and internet lines of the existing unit by the new unit. 4. Transfer of old plant and machinery to the new unit exceeding 20%. Detailed Analysis: 1. Eligibility for Deduction under Section 10A: The primary issue is whether the assessee is eligible for deduction under Section 10A for the assessment years 2009-10 and 2010-11. The Revenue contended that the new unit was created by transferring more than 20% of plant and machinery from the existing unit, violating Section 10A provisions. The CIT(A) examined the claim in light of Section 10A(2)(ii) and 10A(2)(iii) read with Explanation 2 to Section 80I. The CIT(A) found no evidence that the new unit was formed by splitting up or reconstruction of an existing business or by transferring more than 20% of old plant and machinery. The CIT(A) concluded that substantial investments were made in new assets for the new unit, and the business operations of the old and new units were distinct and separate. 2. Maintenance of Separate Books of Account: The Revenue argued that the assessee did not maintain separate books of account for the new unit. The CIT(A) referred to CBDT Circular No. 01/2013 and a Tribunal decision in the case of IBM India P. Ltd. v. Deputy Commissioner of Income Tax, which clarified that there is no legal requirement to maintain separate books of account under Section 10A. The CIT(A) concluded that non-maintenance of separate books of account could not be a basis for disallowing the deduction. 3. Use of Leased Lines and Internet Lines: The Revenue contended that the new unit used the point-to-point leased lines and internet lines of the existing unit. The CIT(A) found that the application for approval of STPI and installation of leased lines was made before the approval date, and separate communication lines were used by the new unit. The CIT(A) also noted that the Income Tax Inspector's report was not confronted to the assessee and was conducted after the period for which the deduction was claimed. The CIT(A) concluded that physical demarcation is not a criterion for eligibility under Section 10A as long as the new unit is independent of the old unit. 4. Transfer of Old Plant and Machinery: The Revenue claimed that the percentage of old plant and machinery used by the new unit exceeded 20%. The CIT(A) found that the Assessing Officer had incorrectly appreciated the facts. The total assets purchased for the new unit were separately shown, and there was no transfer of old plant and machinery exceeding 20%. The CIT(A) referred to the judgment of Hon'ble Karnataka High Court in CIT vs. Expert Outsource (P) Ltd., which supported the assessee's case, stating that even if some machinery was used before the STPI approval, it does not disqualify the unit from claiming deduction under Section 10A. Conclusion: The Tribunal upheld the CIT(A)'s detailed findings and dismissed the Revenue's appeals for both assessment years. The Tribunal agreed that the assessee was eligible for deduction under Section 10A, there was no requirement to maintain separate books of account, the new unit used separate communication lines, and there was no violation of the 20% transfer rule for old plant and machinery. The Tribunal found no reason to interfere with the CIT(A)'s order, confirming the assessee's eligibility for the claimed deductions.
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