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TMI Blog2010 (6) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... rn of income on 28-10-2002 declaring nil income. It was incorporated on 2-8-2000 and it is engaged in the business of export of digitized medical transcription. This business was earlier carried on by Heartland Information Consultancy Services (P.) Ltd. ("HICS" for short), a sister concern. All the assets now used by the assessee were received on transfer from the HICS. The details of these assets have been furnished on page Nos. 2, 3 and 4 of the assessment order. 2.1 The assessee had claimed deduction under section 10B of the Act. In view of me fact that the machinery used by the assessee had been earlier used by HICS, it was required to explain as to why the deduction may not be disallowed in view of the provision contained in sub-section (2) of this section. It was submitted that the new computers were purchased by the HICS in the period 29-9-1998 to 29-7-2000. These computers were transferred to the assessee-company. A no objection certificate regarding takeover of the operations of the HICS by the assessee, issued by the STPL, was also filed. The assessee also moved an alternative claim that if deduction under section 10B is not admissible, it may be granted deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a company as a going concern. The partners of the firm became the shareholders of the company. However, in this case the business of one company has been transferred to another company. The deduction is admissible to an assessee. Therefore, the assessee is not entitled to deduction as it has used assets for its business which were already used by a totally different assessee and who also claimed the deduction of depreciation of the machinery. 3. In reply, the learned counsel submitted that the HICS had set up the business in the financial year 1998-99. The undertaking was formed with new computers. This business was transferred as a going concern to the assessee in the previous year relevant to assessment year 2001-02. Therefore, it cannot be said that the undertaking was formed with the assets used previously by any other undertaking. The deduction is given to an undertaking and if the undertaking satisfies all the conditions mentioned in sub-section (2) of section 10B, the deduction shall continue to be available to the new owner, if there is any change in the ownership, in the unexpired period of deduction. 3.1 In order to support the aforesaid contention, reliance ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w owner continues to get this deduction from its total income for such unexpired period. On the other hand, the case of the Revenue is that the benefit is given to an assessee as the deduction is made from its gross total income. Therefore, if there is change in ownership, the benefit is not available to the new owner. In the alternative, the argument is that such deduction is not available with the assessee for assessment years 2002-03 and 2003-04 in view of the provision contained in sub-section (9) of section 10B. 5.1 Sub-section (1) of section 10B reads as under : "(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee." 5.2 Sub-section (2) of section 10B reads as under : "This section applies to any undertaking which fulfils all th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide import and take within their ambit the transfer of the undertaking either by sale of individual assets or as a going concern by way of slump sale. This provision is attracted to the facts of this case for assessment years 2002-03 and 2003-04. It is provided that in a case so covered, the deduction under sub-section (1) shall not be allowed in the year of transfer and subsequent years. The case of the learned counsel is that this provision is applicable in the case of transferor and not the transferee. However, the case of the learned Departmental Representative is that this provision is applicable to both the transferor and the transferee in the year of transfer and to the latter in subsequent years. We agree with this view of the learned Departmental Representative for the reason that the words "and the subsequent years" will have no meaning if the provision is applicable only to the transferor for the simple reason that no income will accrue to the transferor in subsequent years. One of the cardinal principles of the construction of the statute is that no part thereof should be rendered otiose by interpretation. This principle supports the case of the Departmental Representat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by holding that an assessee is entitled to claim any relief admissible to it, which the Revenue authorities are bound to allow as per law. Coming to the controversy of undertaking versus the assessee, it has been held that the transferee shall be entitled to the deduction for the unexpired period. It may be mentioned that while deciding this case the provision contained in sub-section (9) of section 10A or section 10B was not brought to the notice of the Tribunal and, therefore, this provision was not considered in the order. 6.4 In the case of Bajaj Tempo Ltd. ( supra ) it has been held that the incentive provisions, intended for growth and development, should be liberally interpreted. The decision was rendered under section 15C(2)( i ) of the 1922 Act. The assessee had taken a building on lease for setting up of its new industrial undertaking and the exemption was denied on this ground. The Hon ble Court held that lease of previously used building was not the dominant factor in setting up a new industrial undertaking and thus the claim of the Revenue was negated. In the case of Haji Mohd. Ali Mohd. Ishaq ( supra ), it has been held that the benefit under section 84, later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 10B(9) is clear in terms of its language. Its content has already been explained by us. The question is whether, when a provision is clear, then, reference can be made to a circular explaining its legal importance ? It is an accepted principle of interpretation of the fisical statutes that there is no need to seek any external aid when the language is clear. Therefore, it is not really necessary for us to look into the circular to place any interpretation of section 10B(9). 7.3 There is another aspect of the issue, namely, that if this circular is construed to be a beneficial circular, then, it is binding on the lower authorities. The Assessing Officer has not followed this circular by implication as the deduction has been denied. However, neither the provision nor the circular was before him and it was brought into picture for the first time before the learned CIT(A). The circular furnishes the intendment behind the provision, which is to prevent trading in incentives by such companies formed only for such purpose. It is further stated that the provision is not intended to bring within its purview cases of genuine business reorganization while maintaining the major portio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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