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TMI Blog2009 (5) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act." 3. Brief facts of the case are that during the assessment proceedings, the Assessing Officer noticed that the assessee did not fulfil the conditions as laid down under the provisions of section 80-IB of the Act as the assessee has merely relocated its existing business to a new place. The Assessing Officer further noted that it is not a case that the assessee has expanded its existing business by setting up a new industrial unit. The assessee contended that it has set up a new unit by installing new plant and machinery, which is worth more than 80 per cent of the total cost and the same was rejected by the Assessing Officer on the ground that the assessee has not fulfilled the condition as laid down under section 80-IB(2)(i) of the Act. Hence, the Assessing Officer rejected the assessee's claim of deduction under section 80-IB. 4. The CIT(A), after considering the assessee's submissions and after examining each and every condition as laid down in section 80-IB, found that the assessee has installed new plant and machinery with a cost of more than 80 per cent, i.e., 83.79 per cent. The CIT(A) has also examined the Explanation 2 to section 80-IB wherein it is provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kar.); (5)CIT v. Indian Aluminum Co. Ltd. [1977] 108 ITR 367 (SC); (6)Textile Machinery Corpn. Ltd. v. CIT [1977] 107 ITR 195 (SC); (7)Oswal Wollen Mills Ltd. v. CIT [1982] 138 ITR 338 (Punj. & Har.); (8)CIT v. Premier Cotton Mills Ltd. [1999] 240 ITR 434 (Mad.). 7. We have heard the learned representatives of the parties and perused the record as well as gone through the decisions cited. The assessee engaged in the business of manufacture and export of Knitted Garments. Controversy revolves around sub-section 2(i) of section 80-IB which read as under :- "2( i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that . . . .;" 7.1 The objection of revenue for non-granting claim under section 80-IB is that the assessee has failed to establish the fact that the industrial undertaking has not been formed by the splitting up or reconstruction of a business already in existence. The assessee failed to give reasons for relocating the factory to its new place. To appreciate case of the revenue we reproduce the following finding of the Assessing Officer from the assessment order page 4 :- "the intention with which the said section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be substantially the same old existing business. The third excluded category mentioned above is significant. Even if a new business is carried on but by piercing the veil of the new business, it is found that there is employment of the assets of the old business, the benefit will not be available. From this it clearly follows that substantial investment of new capital is imperative. The words 'the capital employed' in the principal clause of section 15C are significant, for fresh capital must be employed in the new undertaking claiming exemption. There must be a new undertaking where substantial investment of fresh capital must be made in order to enable earning of profits attributable to that new capital...... Manufacture or production of articles yielding additional profit attributable to the new outlay of capital in separate and distinct unit is the heart of the matter, to earn benefit from the exemption of tax liability under section 15C. Sub-section (6) of the section also points to the same effect, namely, production of articles. The answer, in every particular case, depends upon the peculiar facts and conditions of the new industrial undertaking on account of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuation of the same business in some altered form. This alteration may assume the form of changing the manner or method of carrying on the same business; it may involve change or rationalisation of the administrative set up or business organisation. But when its basic nature changes, it cannot be said that the business is 'reconstructed'. It is not every alternation in the mode, method or scope of the activities of a business and it is not every transfer of assets from one unit to another that will involve reconstruction. The expression is no doubt very wide but it does not take in a case of company setting up or establishing a totally independent and viable industrial unit for carrying on the same or similar business even though it might be so set up by way of expanding the already existing business. The expression 'reconstruction', in the context in which it is used denotes that the original business or undertaking continues to exist without its identity being. In the reconstruction of a business, as in the lost or abandoned reconstruction of a company, there is an element of transfer of assets and of some change, however, partial or restricted it may be, of ownership of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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