Commissionerof Income Tax-V v. Quadrant Infotechindia (P) Ltd

$~1 to 5. *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITANos. 315/2013, 316/2013, 317/2013, 318/2013 & 319/2013 COMMISSIONEROF INCOME TAX-V Appellant ThroughMr. Kamal Sawhney, Sr. StandingCounsel. versus QUADRANT INFOTECHINDIA (P) LTD. Respondent ThroughCounsel(presencenot given). CORAM:HON'BLE MR. JUSTICE SANJIV KHANNAHON'BLE MR. JUSTICE SANJEEV SACHDEVA % ORDER26.07.2013 Having heard learned counsel for the parties,we do not thinkany substantialquestionof law arises for considerationin view of thefactual findings recordedby the tribunal,which are not disputedand/are accepted. The factualfindingsrecordedbythetribunalare: (i)The respondenthad set up a new unit at Gurgaon in atechnology park after making investment of Rs.1.19—)technology park after making investment of Rs.1.19—)crores towards electric installationwhich was also a part r- of plant and machinery. (ii)The unit at Gurgaonwas separatelyregisteredunder theEmployees'StateInsuranceActandProvidentFundAct.Employees'StateInsuranceActandProvidentFundAct. (iii)It was allotteda separateTAN numberby the IncomeTaxDepartment.Department. (iv)Separate Form D was obtained under Shop andEstablishment Act, 1958 and a licence was obtained forEstablishment Act, 1958 and a licence was obtained for providingboundedwarehouseundertheCustomsAct. Am.' (v)The said unit was set up pursuantto Agreementwith thesoftware technology park and was registered as 100%export oriented unit.software technology park and was registered as 100%export oriented unit. (vi)The new unit had 182 employeeswhereas,the unit oftherespondent-assesseeinDelhihad 8 employees.respondent-assesseeinDelhihad 8 employees. 2.The tribunalhas rejectedthe contentionof the Revenuethat thenew unit was formed by using or utilising assets from the oldundertakingto the extentof51.78%. The tribunalhas recordedthattheAssessingOfficerwhile computingthe said percentagehad only takenwrittendown valueofthe computersas on 31^'March,2000 inthe oldunit and not the total value of the entire plant of the new unit. Thetribunalhas recordedthat the AssessingOfficershouldhavetaken intoconsiderationthe value of the entire plant and machineryinstalledinthe Gurgaon unit. The entire value of the new plant and machinery installedin the new unit when computedand calculated,showed thecorrectofoldandused inthe new unitwaspercentage plant machinerymerely 9.87%. 3.Further,the AssessingOfficer did not contestor deal with thecontentionof the respondent-assessee,which has been accepted thatthe computerspurchasedearlierwere for and installedat the Gurgaonunit. TheAssessingOfficerignoredthesaid contentionofthe assesseeby observingthatthe bills for the computers,whichhad been installedin the Gurgaonunit, were issued in the name of the assessee'sDelhiunit. This cannot be a justificationto ignore the factual positionasinstallationreports produced,stated and recordedthat the computerswere installedin Gurgaon and were not installedin Delhi. Purchasebills have been issued in the name ofthe Delhi unit for several mayreasons, but this does not mean that the computerswere installedinDelhi. The size and man power deployed at the Delhi unit was 8 It is obvious that installationof number ofpersons. large computerwas not required at Delhi. 4.The aforesaidfindings are findings of fact and in view of thefactualfindings,the tribunal,we feel has reachedthe right conclusionthat the unit establishedat Gurgaon-was a new unit and not a merereconstructionor of the business in existence.The splitting upaforesaidfinding is in accordwith the decisionof the SupremeCourt in TextileMachinery CorporationLimited versus CommissionerofIncome Tax, WestBengal, (1977) 107 ITR 195 whereinthe SupremeCourt upheld the contention of the assessee therein that a newindustrial undertakinghad been established as it was housed in aseparate building, industriallicence had been obtained and new andindependentplant and machineryhad been installed. It was observedas under 4.The aforesaidfindings are findings of fact and in view of thefactualfindings,the tribunal,we feel has reachedthe right conclusionthat the unit establishedat Gurgaon-was a new unit and not a merereconstructionor of the business in existence.The splitting upaforesaidfinding is in accordwith the decisionof the SupremeCourt in TextileMachinery CorporationLimited versus CommissionerofIncome Tax, WestBengal, (1977) 107 ITR 195 whereinthe SupremeCourt upheld the contention of the assessee therein that a newindustrial undertakinghad been established as it was housed in aseparate building, industriallicence had been obtained and new andindependentplant and machineryhad been installed. It was observedas under "No hard and fast rule can be laid down.Trade and industry do not run in earmarkedchannels and particularly so in view ofmanifoldscientificandtechnologicaldevelopments.There is great scope forexpansionof trade and industry. The fact thatanassesseebyestablishmentofa new industrialundertaking expands his existing business,which he certainly does, would not, on thatscore, deprivehim of the benefitunder section15C. Every new creation in business is somekind of expansionand advancement. The truetestisnotwhetherthenewindustrialundertaking connotes expansion of the existingbusiness of the assessee but whether it is all thesameanewandidentifiableundertakingseparateand distinctfi-om the existingbusiness.No particulardecisioninone case can lay downan inexorable test to determine whether a givencase comes under section 15C or not. In orderthat the new undertaking can be said to be notformedout of the alreadyexistingbusiness,there must be a new emergence of a phvsically• separateindustrialunit which may exist on itsown as a viable unit. An undertakingis formedout of the existingbusinessif the physicalidentity with the old unit is preserved.This hasnothappenedherein thecase of the twoundertakingswhich are separate and distinct. i VK-l f It is clear that the principal business ofthe assessee is heavy engineering in the courseof which it manufacturesboilers,wagons,etc.If an industrialundertakingproducescertainmachinesor parts whichare, by themselves,identifiableunitsbeingmarketablecommoditiesand the undertakingcan exist evenafter the cessation of the principal business ofthe assessee.it cannot be anythingbut a newand separate industrial undertaking to qualifyfor appropriateexemptionunder section 15C.The principalbusiness of the assessee can becarriedon even if thesaid twoadditionalundertakingscease to function.Again,theconverse is also true.The fact that the articlesproducedby the two undertakingsare used bythe boilerdivisionof the assesseewillnotweigh against holding that these are new andseparateundertakings. On the other hand, thefact that a portion of the articles produced inthese two new industrial undertakings had beensold in the open market to others is acircumstance in favour of the assessee that thenew industrial units can function on their own.Use of the articles by the assessee is notdecisiveto denythe benefitof section15C." (emphasissupplied) 5.The SupremeCourtopinedthatwe haveto considerwhetherthetwo units can be identifiedby themselvesas separateand independentunits or not. This is the true test and this is satisfied in the presentcase. 6.On the questionofreconstruction,the SupremeCourtin TextileMachinery Corporation Limited (supra) hasobserved thatreconstructionof business involves an idea of substantiallythe same .-J V (emphasissupplied) 5.The SupremeCourtopinedthatwe haveto considerwhetherthetwo units can be identifiedby themselvesas separateand independentunits or not. This is the true test and this is satisfied in the presentcase. 6.On the questionofreconstruction,the SupremeCourtin TextileMachinery Corporation Limited (supra) hasobserved thatreconstructionof business involves an idea of substantiallythe same .-J V onthe same business. ofpersons carrying substantiallyConceptreconstructionof businesswould not be attracted,when a companywhich is already running one industrialunit, set up a differentandseparate industrial unit.The fact that an assessee is carrying onbusiness of the same type does not prevent the said assessee from a new industrialunit. When a distinctindustrialunit is setsettingup it is not reconstructionorof thebusinessof theup, splitting existingassessee. There is no finding or facts which show and establishthatthe said criteria is not satisfied or is violated in the present case. Thefacts recorded by the tribunal and noted above, do not require anyexamination. The ratio expoundedin TextileMachinery CorporationLimited(supra^asbeen followedin Bajaj TempoLimited,Bombayversus Commissionerof Lncome Tax, Bombay, City-LII, (1992) 3see 78.7.No substantialquestion of law arises for considerationin thepresentappealandthe same is dismissed. f SANJIVKHANNA,J. SANJEEV SACHDEVA, J. JULY 26, 2013VKR