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TMI Blog2014 (8) TMI 209X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the proprietorship firm into a partnership firm there was no transfer of plant and machinery to the new firm - there was only transfer of the industrial undertaking as a whole along with assets and liabilities - the two conditions provided u/s 80-IB(2)(i) of the Act, which disqualifies the deduction are not present – thus, the benefit u/s 80-IB of the Act is available to the partnership firm – relying upon Commissioner of Income Tax Vs. Bullet International [2012 (5) TMI 187 - ALLAHABAD HIGH COURT] - the exemption granted to a proprietorship concern, which converted from a proprietorship into a partnership concern was still entitled for exemption u/s 10A of the Act – thus, the Tribunal was justified in holding that upon conversion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that on 1st April, 2004 a partnership firm was constituted in which two other persons were inducted as partners. According to the Assessing Officer, a new legal entity was formed on 1st April, 2004. The Assessing Officer accordingly held that the industrial undertaking under proprietorship was converted into a partnership firm on 1st April, 2004 and that the transfer of machinery or plant previously used by the proprietorship concern was being used by the partnership firm and, accordingly, the assessee was not entitled for exemption under Section 80-IB of the Act. The Assessing Officer, accordingly, disallowed the deduction claimed by the assessee. The assessee, being aggrieved, filed an appeal before the Commissioner of Income Tax, who al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is entailed to deduction u/s 80 IB of I.T. Act, 1961, when the industrial undertaking has been formed by transfer of already existing proprietorship business and assets to the partnership firm? 2. Whether the facts and circumstances of the case the Hon'ble ITAT is correct in holding that on the conversion of proprietorship firm into partnership firm there was no transfer of Plant & Machinery to the next firm? 3. Whether the facts and circumstances of the case the Hon'ble ITAT is correct in holding that the new Industrial Undertaking is not formed by transfer to a new business of Machinery & Plant, previously used for any purpose?" We have heard Sri Dhananjay Awasthi, the learned counsel for the department and Sri Rohit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified in this section. (2) This section applies to any industrial undertaking which fulfills all the following conditions, namely:- (I) it is not formed by splitting up, or the reconstruction, of a business already in existence." From a perusal of the aforesaid provision, the emphasis is on the formation of the undertaking, which is not formed by splitting up or reconstruction of an existing business. The formation of the undertaking should not be confused with the ownership of the business. If the undertaking is formed by splitting up or by reconstruction, in that case, the undertaking will not be qualified for claiming exemption. In the instant case, the undertaking was already in existence and was not formed by splitting up or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) it is not formed by the splitting up, or the reconstruction of a business already in existence; (ii) it is not formed by the transfer to a new business of a building machinery or plant previously used for any purpose; (iii) it manufactures or produces articles or operates one or more cold storage plants, in any part of India, and has begun or begins to manufacture or produce articles or to operate such plant or plants, at any time within the period of twenty-three years next following the 1st day of April, 1948, or such further period as the Central Government may, by notification in the Official Gazette, specify with reference to any particular industrial undertaking." From a perusal of the aforesaid provision, it is clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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