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2020 (7) TMI 21 - HC - Income TaxDeduction u/s 10A - slump sale - whether purchase of plant and machinery cannot be termed as new in the hands of the purchaser and accordingly, failed to satisfy the condition that not more than 20% of plant and machinery should have been previously used by any other person? - Whether the Tribunal is justified in allowing deduction under Section 10A of I.T. Act ignoring the provisions of sub Section 7A of Section 10A, which provides for continuance of benefit under Section 10A in the hands of a transferee company only in situation of demerger or amalgamation but not in a situation of slump sale? - HELD THAT - Substantial questions of law No.1 to 3 have already been answered in favour of the assessee and against the Revenue vide judgments dated 14.11.2018 passed by a Division Bench of this Court in 2018 (11) TMI 1787 - KARNATAKA HIGH COURT Computation of deduction u/s 10A - foreign currency expenditure to be excluded from total turnover as well for computation of deduction - Whether the Income Tax Appellate Tribunal is correct in law in holding that the deduction under Section 10A should be computed in the above manner following the judgment of jurisdictional High Court in the case of CIT Vs. Tata Elxsi Ltd. 2011 (8) TMI 782 - KARNATAKA HIGH COURT - HELD THAT - Substantial questions of law No.4 and 5 have already been answered by the Hon ble Supreme Court in the case of Commissioner of Income Tax, Central III VS. HCL Technologies LIMITED 2018 (5) TMI 357 - SUPREME COURT in favour of the assessee and against the Revenue.
Issues:
1. Deduction under Section 10A for purchase of plant and machinery. 2. Continuance of benefit under Section 10A in case of a slump sale. 3. Reliance on previous tribunal orders for granting relief. 4. Treatment of foreign currency expenditure for deduction under Section 10A. 5. Computation of deduction under Section 10A following a specific judgment. Analysis: 1. The first issue pertains to the deduction under Section 10A for the purchase of plant and machinery. The Tribunal allowed the deduction even though more than 20% of the machinery had been previously used. The Court found in favor of the assessee, stating that the condition was not satisfied. This decision was based on the law and the specific circumstances of the case. 2. The second issue concerns the continuance of benefit under Section 10A in a slump sale situation. The Tribunal allowed the deduction, ignoring the provision that limits such benefits to demerger or amalgamation scenarios. The Court ruled in favor of the assessee, citing a Supreme Court judgment that supported the assessee's position. 3. The third issue revolves around the reliance on previous tribunal orders for granting relief. The Tribunal's decision was challenged as perverse due to reliance on non-final orders in other cases. The Court upheld the Tribunal's decision, emphasizing the legal validity of such reliance. 4. The treatment of foreign currency expenditure for deduction under Section 10A is the fourth issue. The Tribunal excluded a significant expenditure from the total turnover for computing the deduction. The Court clarified that such exclusion should only apply to export turnover, not total turnover. The decision was based on the specific definitions in Section 10A of the Income Tax Act. 5. The final issue involves the computation of deduction under Section 10A following a specific judgment. The Tribunal's computation method was challenged, citing a pending appeal and non-finality of the judgment. However, the Court upheld the Tribunal's decision, aligning with the judgment of the jurisdictional High Court. The decision was also supported by a Supreme Court ruling in favor of the assessee. In conclusion, the High Court dismissed the appeal, finding no merit in the arguments presented by the Revenue. The Court's decision was based on the legal interpretations of the Income Tax Act, relevant case law, and the specific circumstances of the case.
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