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2013 (9) TMI 375 - HC - Income TaxDeduction u/s 10A or 10B - alternative claim - industrial undertaking - transfer of entire business including machinery from old unit to new - Held that - A reading of the order of the Assessing Officer as well as the Commissioner of Income Tax (Appeals) shows that even though the assessee originally claimed relief under Section 10B, it was cautious enough to make an alternative plea under Section 10A in view of the fact that the assessee s vendor had the benefit under Section 10A. It is not denied by the Revenue that the assessee had the whole business transferred to its favour and that the factum of transfer was also intimated to the Software Technology Park of India. Thus, as a Software Technology Park, the assessee is entitled to place his claim under Section 10A. In any event, even assuming for a moment, the assessee had not referred to the Section correctly, the fact remains that if the claim could be favourably be considered under any of those special deduction provisions and on the conditions specified therein being satisfied, we do not think that there exists any justifiable ground for the Revenue to contend that the assessee shall not be entitled to have the benefit of Section 10A. A cursory reading of the above Section shows that where an undertaking is formed by splitting up or reconstruction of business already in existence then the said undertaking would not be entitled to claim deduction under Section 10A. The other conditions is that the industrial undertaking should not be formed by transfer of plant and machinery already used for any purpose. Thus, what is prohibited in Section 10(A)(2)(iii) is that the transfer of used machinery and plant to a new business undertaking and forming of an industrial undertaking by splitting or reconstruction of the existing industrial undertaking. The intention thus under Section 10A being clear and that there is no specific prohibition or even by inference to an industrial unit formed by transfer of entire business, we have no hesitation in rejecting the Revenue s plea that by transfer of machinery, the assessee would be disentitled to the relief under Section 10A. As already pointed out, the fact herein is that the transfer was not that of plant and machinery alone but of sale of whole business unit to the transferor company which was primarily only of export of articles or things. In the circumstances, going by clear provisions of Act, we reject the Revenue s plea - Following decision of CIT v. SONATA SOFTWARE LIMITED 2012 (4) TMI 99 - BOMBAY HIGH COURT - Decided against Revenue.
Issues Involved:
1. Whether the Income Tax Appellate Tribunal was right in sustaining the order of the Commissioner of Income Tax (Appeals) and granting deduction under Section 10A of the Income Tax Act, 1961, even though the assessee claimed deduction under Section 10B of the Income Tax Act, 1961. 2. Whether the Income Tax Appellate Tribunal was right in sustaining the order of the Commissioner of Income Tax (Appeals) even though the assessee does not satisfy the provisions of Section 10A(2)(iii) of the Income Tax Act, 1961. 3. Whether the Income Tax Appellate Tribunal was right in granting deduction under Section 10A of the Income Tax Act, even though the assessee is entitled to deduction under Section 80HHE of the Income Tax Act, 1961, and the same was granted by the Assessing Officer. Issue-wise Detailed Analysis: Issue 1: Deduction under Section 10A vs. Section 10B The assessee, engaged in Medical Transcription Business, initially claimed deduction under Section 10B of the Income Tax Act. However, the Assessing Officer rejected this claim, stating that the approval from the Software Technology Park of India (STPI) was insufficient for Section 10B and that the conditions were not met due to the transfer of business. The Officer granted a 30% deduction under Section 80HHE as an alternative. The Commissioner of Income Tax (Appeals) accepted the assessee's alternative plea for Section 10A, recognizing the transfer of the entire business from the vendor company, which was a 100% EOU approved by STPI. The Tribunal upheld this decision, citing that the assessee's claim under Section 10A was valid as the entire business, not just machinery, was transferred. The Court confirmed that the assessee, having the whole business transferred and recognized by STPI, was entitled to Section 10A benefits, rejecting the Revenue's contention. Issue 2: Satisfaction of Provisions under Section 10A(2)(iii) The Revenue argued that the assessee did not satisfy Section 10A(2)(iii), which prohibits the formation of an undertaking by transferring used machinery. The Tribunal found that the entire business, including assets and liabilities, was transferred, not just machinery. The Court agreed, noting that Section 10A(2)(iii) intends to prevent the formation of a new business by merely transferring used machinery. Since the entire business unit was transferred, the assessee was eligible for Section 10A benefits. The Court referenced the Bombay High Court's decision in CIT v. SONATA SOFTWARE LIMITED, which held that transferring a running business does not constitute reconstruction or splitting up, thus supporting the assessee's eligibility under Section 10A. Issue 3: Deduction under Section 10A vs. Section 80HHE The Tribunal granted the deduction under Section 10A, rendering the question of Section 80HHE moot. The Court affirmed this, stating that since the assessee was entitled to Section 10A benefits, the issue of Section 80HHE did not require further consideration. The Tribunal's decision to grant relief under Section 10A and not under Section 80HHE was upheld. Conclusion: The Court dismissed the Revenue's appeal, confirming that the assessee was entitled to the deduction under Section 10A, having transferred the entire business and satisfied the relevant provisions. The questions of law raised by the Revenue were answered against them, and the Tribunal's order was upheld.
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