Commissioner Of Income Tax-I v. M/S Sagun Gems Pvt. Ltd

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHANJAIPUR BENCH, JAIPUR J U D G M E N T D.B. INCOME TAX APPEAL NO.210/2012 Commissioner of Income Tax-IVs.M/s Sagun Gems Pvt. Ltd. Date of Judgment: August 22, 2012 PRESENT HON'BLE THE CHIEF JUSTICE MR. ARUN MISHRA'-HONBLE MR. JUSTICE NARENDRA KUMAR JAINI Mr. J.K. Singhi, Sr. Counsel assisted by Mr.O.P. Pareek, for the appellantBY THE COURT(Per Jain J.) Heard learned counsel for theappellant. 2This income tax appeal is directedagainst order dated 20[th] January, 2012 passedby Income Tax Appellate Tribunal, Jaipur Bench'A', Jaipur, whereby, appeal preferred byrevenue/appellant,againstorderofCommissioner of Income Tax (Appeals), has beendismissed. 3.Brief facts of the case are thatrespondent/assessee was engaged in the businessof manufacturing and export of gems and silverjeweleries. The assessee claimed deductionunder Section 10-A of the Income Tax Act, which wasdisallowedbyAssessingOfficer.Commissioner of Income Tax (Appeals), on anappeal preferred on behalf of assessee, allowedthe exemption, claimed by the assessee and setaside the order of Assessing Officer.Thereafter, Department preferred an appealbefore the Tribunal, which has been dismissed.Thereafter, Department has preferred thisappeal. 4.Submission of learned counsel for theappellant is that Assessing Officer rightlydisallowed the claim of exemption made byassessee. The Commissioner of Income Tax(Appeals) as well as Income Tax AppellateTribunal both committed an illegality insetting the order of Assessing Officer. 5.We have considered submissions oflearned counsel for the appellant and examinedthe impugned order of Tribunal as well asorders passed by Commissioner of Income Tax(Appeals) and also the Assessing Officer. 6.The Commissioner of Income Tax(Appeals) has considered all the factualaspects of the matter and recorded a findingthat it has been brought on record that ShriPitambar Sharma did not divert the funds fromhis existing concern to the new company butinvested in share capital of M/s Shagun GemsPvt. Ltd. from realization of his assets other than the capital employed in the firm.Commissioner of Income Tax (Appeals) also cameto a conclusion that from the bills it is clearthat the new plant and machinery was purchasedby the concern and further that out of 70employees in the new concern, only 8 were fromthe earlier concern. The finding of theCommissioner of Income Tax (Appeals) was quotedin Para 5 of the impugned order by theTribunal, which is again reproduced here forready reference:- “I have carefully perused the order ofthe AO and the submissions of the AR.On verification of the facts assubmitted by the AR and law as per thejudicial pronouncements relied on byhim I concur with the submissions ofthe AR that the claim of exemption u/s10A was correctly made by theassessee. First of all, it has beenbrought on record that Shri PitambarSharma did not divert the funds fromhis existing concern to the newcompany but invested share capital ofM/s Shagun Gems Pvt. Ltd. fromrealization of his assets other thanthe capital employed in the firm.Secondly, it is clear from the billssubmitted that the new plant &machinery was purchased by theconcern. Thirdly, out of 70 employeesin the new concern, only 8 were fromthe earlier concern. In view of theabove facts, it cannot be concludedthat the new company i.e. M/s ShagunGems Pvt. Ltd. is nothing butreconstruction of old business withinthe meaning of provisions of section10A(2)(ii). On the basis of thesefacts and judicial pronouncementsrelevant to these facts, the exemptionclaimed by the assessee u/s 10A of Rs.94,84,191/- is directed to beallowed.” 7.The above factual aspects andsubmissions of both the parties were consideredby Tribunal in detail and Tribunal alsorecorded a finding that there is no reason tohold that assessee company is nothing butrestructured company of earlier company and isnot entitled for exemption. Para 9 of the orderof the Tribunal is also reproduced as under:- “9. After considering the orders ofthe AO, ld. CIT (A) and submissions ofboth the parties, we find no infirmityin the finding of ld. CIT (A) who hasexamined the issue and then found thatthe assessee's case does not bit byprovisions of section 10A(2)(ii) ofthe Act and, therefore, assessee isentitled for deduction under section10A. Various objections raised by AOas mentioned above have been verifiedby ld. CIT (A) and found that land andbuilding and machineries are new.Capitals introduced by the Directorsare from teir own sources and not bytransferring from M/s. Shagun. Out of70 employees employed by assesseecompany, only 8 employees were relatedto M/s Shagun and this is not a reasonthat for employing the ex-employees ofany other company curtails the benefitallowable to the assessee. If by anyreason any employee has left theservices of any company and joins anew company it does not hold that anew company is a restructured companyof the earlier company from where theemployee has left the services. Thereis no bar to sale the goods to thecustomers which were purchasing thegoods from other entity i.e. M/s.Shagun. The assessee company is anindependent unit doing its ownactivityofmanufacturingandthereafter the material has been soldon the basis of market price.Therefore, there is no reason to holdthatassesseecompanyisarestructured company of earlier andhit by provisions of section 10A(2)(ii) of the Act. In view of these facts and circumstances, we hold thatld. CIT (A) was justified in allowingthe issue in favour of the assessee.Accordingly, we confirm his order.” 8.The finding of Commissioner of IncomeTax (Appeals) as well as Tribunal and otherfacts and circumstances of the present case,narrated and discussed above, make it clearthat all these questions are relating toquestions of facts and there is a concurrentfinding of facts recorded by Commissioner ofIncome Tax (Appeals) as well as Income TaxAppellate Tribunal. ' 9.It is a settled law that income taxappeal can be admitted by this Court only onsubstantial question of law. This Court cannotinterfere in the finding of fact recorded bycourts below. 10.Since no substantial questions of laware involved in this appeal, therefore, we arenot inclined to admit it and the same is,accordingly dismissed in limine. (NARENDRA KUMAR JAIN-I),J. (ARUN MISHRA),CJ. BKS/- “All corrections made in the judgment/order have beenincorporated in the judgment/order being emailed.”