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TMI Blog2015 (8) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... up factory a small amount of plant and machinery was transferred from previous business cannot be basis to come conclusion that it is a reconstruction. Moreover, there is no commonality in the business of undertaking of the M/s. Metal Recycling Industry and the undertaking of assessee except that three partners were also the partners of assessee’s undertaking. This cannot be basis to hold that undertaking setup by assessee has arisen because of splitting up or reconstruction of existing business of assessee. Thus CIT(A) justified in holding that new unit set up by assessee is not formed by splitting up or reconstruction of existing business and therefore deduction u/s. 10B cannot be denied to assessee especially when in the last year, same was allowed after examining the facts in detail and there was no change in the facts during the year. - Decided in favor of assessee. - ITA. No. 1367/RJT/2010 - - - Dated:- 24-6-2015 - SHRI SHAILENDRA KUMAR YADAV AND SHRI N. S. SAINI, JJ. For The Appellant : Shri Avinash Kumar, D.R. For The Respondent : Shri M. J. Ranpura ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant. h) Appellant has purchased some of the assets of the erstwhile firm of ₹ 7,96,915/-. iii. Further the AO relied on the decision of CIT V Hindustan General industries Limited 137 ITR 851, T. Satish U Pai V CIT 11 CTR 79, CIT V Orient papers Mills Limited 94 ITR 73 CIT V Ganga Sugar Corporation Limited 92 ITR 173. 2.1 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee as detailed in para 5 of the order of CIT(A) and having considered the same CIT(A) has allowed the appeal of assessee. Same has been opposed on behalf of Revenue before us inter alia submitting that CIT(A) erred in law and on facts in deleting addition of ₹ 1,01,07,319/- on account of disallowance of deduction u/s.10B of the Act. According to learned Departmental Representative order of CIT(A) on the issue be set aside and that of Assessing Officer be upheld. On other hand, learned Authorized Representative supported the order of CIT(A) and submitted that similar claim has been allowed to assessee in A.Y. 2007-08. 2.2 After going through rival submissions and material on record, we find that one of the reasons given by A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit. In this regard, it was found that though some portion of assessee is lease hold land which was also given on lease to M/s Metal Recycling Industries. However, Assessing Officer has lost sight that assesseet has purchased new land at the cost of ₹ 23,26,653/- and on which construction for the new factory has been made of ₹ 47,70,850/-. In this construction, new machineries and plant were installed of ₹ 5,20,22,975/-. The manufacturing of a new product with a new technology at an existing place after taking fresh approvals from SEZ authorities does not amount to splitting up or reconstruction of an existing business for the purpose of section l0A of the Income Tax Act. 2.5 Assessing Officer held that there were six staff members of assessee, who were also the staff members of Metal Recycling Industries and therefore, it is splitting up or reconstruction of metal recycling Industry. In assessment order, Assessing Officer has mentioned that new firm had 29 staff members whereas, in case of Metal Recycling Industries out of its staff six members were employed by the new firm. Even if some members of the staff were common to the old and new unit, it would not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in the Act but has received judicial interpretation. In In re South African Supply Cold Storage Co. (1904) 2 Ch 268 (Ch D) Buckley, I, dealing with the meaning of the word reconstruction in a company matter, observed as follows: What does 'reconstruction' mean? To my mind it means this. An undertaking of some definite kind is being carried on, and the conclusion is arrived at that it is not desirable to kill that undertaking, but that it is desirable to preserve it in some form, and to do so, not by selling it to an outsider who shall carry it on- that would be a mere sale--but in some altered form to continue the undertaking in such a manner as that the persons now carrying it on will substantially continue to carry it on. It involves, I think that substantially the same business shall be carried on and substantially the same persons shall carry it on. But it does not involve that all the assets shall pass to the new company or resuscitated company, or that all the shareholders of the old company shall be shareholders in the new company or resuscitated company. Substantially the business and the persons interested must be the same. This concept of recons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he benefit under s.15C, the following facts have to be established by the assessee, subject always to time-schedule in the section. (1) investment of substantial fresh capital in the industrial undertaking set up, (2) employment of requisite labour therein, (3) manufacture or production of articles in the said undertaking, (4) earning of profits clearly attributable to the said new undertaking, and (5) above all, a separate and distinct identity of the industrial unit set up. We may add that there is no bar to an assessee carrying on a particular business to set up a new industrial undertaking on account of which exemption of tax under s. 15C may be claimed. The legislature has advisedly refrained from inserting a definition of the word reconstruction in the Act. Indeed, in the infinite variety of instances of restructuring of industry in the course of strides in technology and of other developments, the question has to be left for decision on the peculiar facts of each case. If any undertaking is not formed by reconstruction of the old business that undertaking will not be denied the benefit of s. 15C simply because it goes to expand the general business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m where as the new unit has production capacity of 10000 MT. This proves that what is manufactured by the undertaking of assessee was not manufactured by Metal Recycling Industries. Assessee has also detailed the production process of both units. There is difference in the production process of these units. The list of customers of Metal Recycling industries and assessee has also been submitted and it was found that there is not a single customer of assessee who was purchasing material from M/s metal Recycling Industries. There are separate licenses/registration and permissions governed both the units under various statutory laws. This establishes that assessee s undertaking is separate; Investments of the funds, separate production facilities, separate goods produced with different installed capacities and separate customers of the unit. Therefore under the facts and circumstances of the case, CIT(A) was justified in holding that unit is not setup by splitting up or reconstruction of the existing business. Mere fact that while setting up factory a small amount of plant and machinery was transferred from previous business cannot be basis to come conclusion that it is a reconstructi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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