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TMI Blog2015 (8) TMI 548X X X X Extracts X X X X X X X X Extracts X X X X ..... e, assessee had filed appeals before the Commissioner of Income Tax (Appeals) ("CIT)(A)" for short). The learned CIT(A) deleted the additions made for both the assessment years by order dated 22.02.2001 and 30.04.2001. In the meantime, learned CIT, Central, Bangalore issued a notice under Section 263 of the Act for the assessment year 1997 - 98 dated 11.03.2002. This was suitably replied by the assessee on 26.03.2002. On the basis of the reply filed, the CIT-Central, dropped proceedings, but no orders were passed and the same was informed to the assessee by letter dated 31.05.2005. In the meantime, a notice under Section 148 of the Act was issued for both the assessment years under consideration. The reasons for such reopening are, in fact, the same reasons for which the learned CIT (A) initiated revision proceedings under Section 263 of the Act for the assessment year 1997-98 dated 11.03.2002. Therefore., it was contended before the assessing authority that the proceedings initiated under Section 147 of the Act is not maintainable. There was no new material which justifies the initiation of the proceedings. At the most it may amount to change of opinion which has no justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use the proceedings initiated under Section 263 of the Act are dropped, even if on the same grounds the proceedings are initiated under Section 147 of the Act, which is permissible in law, the appellate authority was not justified in holding that the proceedings are not maintainable. Secondly, he contended that admittedly, the assessee is having a undertaking in the third floor of the technology park -Golden Enclave. The said undertaking was commenced prior to 1993 and therefore, the assessee is not entitled to the benefit of Section 10A of the Act. The assessee sought for expansion of its units in third floor undertaking to construct second and sixth floors which was granted. They are not new undertakings. It is not in dispute that the account maintained by the assessee is only one account in respect of all the three undertakings and no separate accounts are maintained. Therefore, ignoring these above facts benefit had been granted under Section 10A of the Act. After noticing its mistake, rightly the assessing authority initiated the proceedings for reassessment under Section 147 of the Act and rightly, it disallowed the said benefit which was wrongly restored by the appellate aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing afresh assessment." Therefore, the Commissioner can exercise the revisional powers if on the order passed by the assessing officer is erroneous insofar as it is prejudicial to the interest of the revenue. Once the said condition is satisfied, the Commissioner is vested with the power to revise the orders passed by the assessing officer. Section 147 of the Act deals with the income escaping assessment, which reads as under: "147. Income escaping assessment - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned." Therefore the grounds on which the Commissioner could initiate proceedings in revising the orders pass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be formed, by splitting up or reconstruction of a business already in existence. In other words, it should be a new undertaking. Third condition to be satisfied is that it should not have been formed by a transfer to a new business of any machinery or plant previously used for any purpose. In other words, that new undertaking should use new machinery or plant. Once all the conditions are fulfilled, the assessee is entitled to the benefit of tax exemption in respect of the income accrued from such undertaking. 8. The arguments of the revenue is that if the assessee has to avail the said benefit, he should set up a new independent undertaking after obtaining requisite permission for each of the floors and then only such benefit is granted. In the instant case, it is not disputed that the assessee is having manufacturing unit in the third floor of the Golden Enclave which was commenced prior to 1993 for which the assessee is not entitled to claim the benefit under Section 10A of the Act. The assessee sought permission to expand its business. After getting such permission it has set up a undertaking in the second floor on 16.11.1995 and in sixth floor on 30.07.1996. No separate bank a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee claims exemption under section 15C. No hard and fast rule can be laid down. Trade and industry do not run in earmarked channels and particularly so in view of manifold scientific and technological developments. There is great scope for expansion of trade and industry. The fact that an assessee by establishment of a new industrial undertaking expands his existing business, which he certainly does, would not, on that score, deprive him of the benefit under section 15C. Every new creation in business is some kind of expansion and advancement. The true test is not whether the new industrial undertaking connotes expansion of the existing business of the assessee but whether it is all the same a new and identifiable undertaking separate and distinct from the existing business. No particular decision in one case can lay down an inexorable test to determine whether a given case comes under section 15C or not. In order that the new undertaking can be said to be not formed out of the already existing business, there must be a new emergence of a physically separate industrial unit which may exist on its own as a viable unit. An undertaking is formed out of the existing business if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely because pursuant to a single collaboration agreement the units in question came into existence it cannot be said that they are not new industrial undertakings or separate units. The fact that the assessee was getting articles produced from the new undertakings from abroad for manufacturing dashboard instruments earlier, shows that they were marketable commodities and they answered one of the tests adopted by the Supreme Court in determining whether an undertaking is a new industrial undertaking or not. The fact that there was common management or the fact that separate accounts had not been maintained, would not also lead to the conclusion that they were not separate undertakings. Even if separate account is not maintained the investment on each of the units can be reasonably determined with the material which the assessee may make available to the Department. We are, therefore, of the view that the finding of the Tribunal that the assessee was not entitled to relief under s. 84 and deduction under s. 80J of the Act during the assessment years in question, is erroneous.' 10. From the aforesaid judgments, it is clear that trade and industry do not run in ear-marked channels ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment on each of the units can be reasonably determined with the material which the assessee may make available to the Department. It has to be understood that by establishing of a new industrial undertaking the assessee expands its existing business. The assessee should not be deprived of the benefit under Section 10A. In order that the new undertaking is said to be not form part of the already existing business there must be a new emergence of a physically and separate industrial unit which may exist on its own as a viable unit. An undertaking newly formed should be in physical identity and the old unit be preserved. The fact that if there was common management or separate accounts had not been maintained would not lead to the conclusion that there were not separate undertakings. Even if separate accounts are not maintained, the investment on each of the units can be reasonably determined with the material, which the assessee may make available with the department. 11. In the background of the law, if we look at the facts of the case, the assessee set up an undertaking in the third floor of the Golden Enclave which is a software technology park. It was commenced prior to 1993. It ..... X X X X Extracts X X X X X X X X Extracts X X X X
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