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TMI Blog2012 (7) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 10B(2) is concerned, the criteria for grant of the relief is that the undertaking is not formed by transfer to a new business of machinery or plant previously used for any purpose - Extending the said decision to sub clause (iii) of Section 10B(2) it is clear that as a result of the merger of the subsidiary company with the holding company, there is no new business formed by transfer of machinery or plant previously used for any business - the assessee's status as 100% EOU and after the deletion of Section 84 and insertion of 80J and thereafter benefit under Section 10B being attached to the undertaking no point of not extending the claim of exemption u/s 10B Development of software - a revenue expenditure or capital exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Apex Court reported in 177 ITR 377 ALEMBIC CHEMICAL WORKS CO., LTD, this Court held that upgradation of computers by changing certain parts, thereby enhancing the configuration of the computers for improving their efficiency, was only a revenue expenditure. The said view was again followed by this Court in 288 ITR 15 CIT v. SOUTHERN ROADWAYS LIMITED. Following the above decisions, we confirm the order of the Tribunal in respect of second question of law. 3. As far as the first question of law on the claim on Section 10B of the Income Tax Act, is concerned, following details need to be seen. The assessment year under consideration is 1994-95. The assessee herein was the holding company and Renuga Soft-X Towels Private Limited was a 100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. This arrangement was approved by the Government by its order dated 8.4.94. Referring to Section 10B (2)(iii) of the Act, the Commissioner of Income Tax (Appeals) held that there was no violation of the said provision. Hence, the only question was as to whether the assessee was granted deduction under Section 80-I of the Act. The Commissioner of Income Tax (Appeals) directed the Assessing Officer to verify the same. Otherwise it agreed with the assessee's contention that it was entitled to claim under Section 10B of the Act. Aggrieved by this, the Revenue went on appeal before the Income Tax Appellate Tribunal, which upheld the order of the Commissioner of Income Tax (Appeals). The Tribunal pointed out that Renuga Soft X Towels Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the transfer to a new business of machinery or plant previously used for any purpose." 5. As far as the present case is concerned, there is no denial of the fact that the assessee is engaged in the manufacture of cotton yarn which is not formed by splitting up or reconstruction of business already in existence. The second requirement which is emphasised by the Revenue is that the assessee must show that it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. 6. The Revenue contends that as far as this aspect is concerned, on the amalgamation, the amalgamating company is wound up and the entire business is transferred to the assessee's company. The machinery and plant previously us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the relief is rightly granted to the assessee. Quite apart from that, the assessee is recognised as 100% EOU by the Central Government and after such recognition, it is not open to the Revenue to dispute the claim of the assessee. 9. Heard learned Standing Counsel for the Revenue as well as learned counsel for the assessee. 10. We agree with the contention of the assessee herein that it is entitled to get the benefit under Section 10B of the Act. As already seen in the preceding paragraph, the subsidiary company amalgamated with the holding company with effect from 1.1.93 and as a result of the merger, the business of the amalgamating company became the business of the assessee company. Given the fact that the assessee is a holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Apex Court pointed out that upon amalgamation, the amalgamating company ceased to exist and the assessee company was a separate entity. Hence, the amalgamating company would not liable to pay tax under Section 41(1) on the benefit derived by it in relation to the deduction allowed to the amalgamated company. The Apex Court pointed out that when two companies are merged or so joined as to form a third company or one is absorbed into the other or blended with another, the amalgamating company loses its identity. 12. Extending the said decision to sub clause (iii) of Section 10B(2) of the Act, it is clear that as a result of the merger of the subsidiary company with the holding company, there is no new business formed by transfer of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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