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TMI Blog2017 (5) TMI 1571X X X X Extracts X X X X X X X X Extracts X X X X ..... s prescribed in section 10AA(4)(ii) of the Act." 2.1. This Court while admitting the appeal No.382/2011 on 31.03.2014 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit u/s 10AA of the Act and thereby granting deduction of Rs. 2,32,67,650/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.2. This Court while admitting the appeal No.224/2012 on 31.03.2014 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit u/s 10AA of the Act and thereby granting deduction of Rs. 12,15,247/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.3. This Court while admitting the appeal No.95/2014 on 23.04.2016 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit u/s 10AA of the Act and thereby granting deduction of Rs. 2,21,13,167/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Green Fire is one of the partner should not be taken as 'reconstruction of old business' as the assessee firm is a separate entity formed and carrying on business much before the AY 2007-08. The repeated concern of the assessee with respect to the assessee coming into existence is irrelevant and has already been addressed in above paragraphs. As discussed in detail in the show caused dated 16.12.2009, and at the cost of repetition, the main points are summarized once again as under:- i. The unit set up in SEZ is actually not an all the same a new and identifiable unit. A business activity normally comprises assets, employees and contracts. When any one or more of these move, from one location to another, the issue for consideration is whether such shifting tantamount to reconstruction. In the case of the assessee, it is clear form perusal of details placed on file that there has been a transfer of assets i.e. in terms of capital induction, human resources, transacting parties-purchase as well as sales, inventories, customer base, nature of business itself, trademark and even the Brandname of both the concerns. There cannot be reconstruction without transfer of assets. A new ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anges must be constructive and not destructive. There must be something positive about the whole matter as opposed to negative. The brought out by the section itself - of a business already in existence'. The changes that have taken place in non-SEZ unit has been anything but positive. Continuity and preservation of old unit has been completely lost. There couldn't be a clearer case of destruction of the old unit. v. Transfer of assets and the consequent reconstruction of existing business also finds reflection in the fact that most of the purchase parties of both unit are same. This fact also strengthens the stand of deconstruction of old unit and reconstruction of the same in the form of the assessee firm. All these points tell only one thing i.e. only represents shifting of contracts from M/s Green Fire to M/s Green Fire Exports. Same reasoning hold true with respect to shifting of employees en masse." 4. He has strongly relied upon the definition of Section 10AA sub clause (4) which reads as under: "4. This section applies to any undertaking, being the Unit, which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtant part of business undertakings, cannot be considered as an assets in its commercial sense. So long as the assets appearing in the balance sheet of old concern are not shofted to new unit but lying as it is, it cannot be a case of reconstruction of business. The purchasing or selling may be common but it cannot amount to reconstruction of old business. The Hon'ble S.C. in the case of Textile Machinery Corp. Ltd. vs. CIT(relied upon by the AO) has held that reconstruction of business involves substantially the same person carrying on substantially the same business but at the same time has also held that where the new industrial undertaking is separate and independent production unit and the undertakings can be carried out separately without complete absorption of identity of the old business they are not to be treated as business formed by reconstruction of the old business. The Hon'ble Court has observed that by establishing new undertakings if the assessee expands his existing business then also the assessee cannot be deprived of the benefit. That every new creation in business is some kind of expansion and advancement but as long as a new and identifiable undertaking separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has expended the business and therefore the undertaking should be considered to have been formed as the result of reconstruction. The tribunal in this case observed that the unit was bigger then the unit which the assess has already there and there were new features in the new unit. The Hon'ble Allahabad High Court observed that every new creation in business is some kind of expansion and advancement. If the undertaking is new and identitiable undertaking, separate and distinct, foom the existing business then it will not be reconstruction of business already in existence. The Hon'ble Delhi Court in the case of CIT V/s Gedore Tools India (Pvt) Ltd. 126 ITR 673 has held that the fact that the new Unit manufactured some of the items which were manufactured by the old unit will not make it an integral part of old unit, Even if new undertaking manufactures a product which is feeded to the old business even then it will not amount reconstruction of the old business. Establishment of the new unit with new separate plant and machinery by investing substantial funds is essential. If the new unit has not derived any thing foom the old unit by way of equipment or by way of factory bu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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