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TMI Blog2012 (5) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Authority, exceeded 20% of the value of the machinery transferred into the business. The assessee pointed cut that an addition of Rs. 1,38,59,994/- was made to plant and machinery, which was received from the foreign customers. This represents certain plant and machinery received on returnable basis from foreign customers and on no cost basis. Therefore, it was contended that if that machinery is taken into consideration, the value of the machinery used in the new business would not exceed 20% of the value of the machinery transferred and therefore, the assessee is entitled to the benefit under section 10A(2) of the Act. The Assessing Officer rejected the said contention on the ground that as could be seen from the schedule of fixed assets as on 31.03.1994, no such machinery is shown by the assessee. Further, he held that assuming that plant and machinery was brought into India on no cost/returnable basis, the conditions specified under section 10A(2) are not satisfied. Therefore, the benefit of section 10A was denied. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The Appellate Commissioner held that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected either in the books of the assessee or in the balance sheet. Therefore, that cannot be taken into consideration. In order to assess 20% as stipulated under section 10A(2), the total value of the machinery owned by the assessee should be reflected in their accounts. Admittedly in the instant case, if the accounts are looked into, the value of the machinery transferred to the new undertaking would be more than 20% and thus, the assessee is not entitled for the benefit of exemption under section 10A(2). The Tribunal committed an error in taking into consideration the machinery, which the foreign customer has supplied, to the assessee. Therefore, he submits that the impugned order requires interference. 5. Per contra, the learned Counsel appearing for the assessee submitted that, it is not the requirement of law that the assessee should own the entire machinery used in the manufacturing process to be eligible for exemption under section 10A(2) of the Act. 20% is to be calculated with regard to the machinery used in the manufactured process. In the instant case, admittedly,, if the value of the machinery used in the manufacturing process is taken into consideration, it is certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :] Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, [2012], and subsequent years. (1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be, - (i) hundred per cent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty per cent of such profits and gains for further two consecutive assessment years, and thereafter; (ii) for the next ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (1B), and shall be charged to tax accordingly.] (2) This section applies to any undertaking which fulfils all the following conditions, namely :- (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year- (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park; (c) commencing on or after the 1st day of April, 2001 in any special economic zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2. - Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with." 10. Explanation 2 makes it clear that wherein the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty per cent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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