Ita/483/2007 Of The Commissioner Of Income Tax v. Industrial Hydraulics Pvt Ltd

IN THE HIGH COURT OF KARNATAKADHARWAD BENCH DATED THIS THE 3 DAY OF MARCH, 2015 PRESENTTHE HON’BLE MR.JUSTICE B.S.PATIL THE HON’BLE MR.JUSTICE P.S.DINESH KUMAR ITA No.483 /200 BETWEEN: 1.The Commissioner of Income Tax,Khimjibhoi Commercial Complex,Opp. Civil Hospital,Belgaum — 590 OO1.Khimjibhoi Commercial Complex,Opp. Civil Hospital,Belgaum — 590 OO1. 2.The Deputy Commissioner ofIncome Tax, Circle-1,Income Tax, Circle-1, Belgaum. |... APPELLANTS (By Sri Y.V.Raviraj, Adv.) AND Industrial Hydraulics Pvt. Ltd.,C-27, Angol Industrial Area,Udyambagh,Belgaum — 590 O08. |.. RESPONDENT (Respondent served, but unrepresented) This ITA is filed under Section 260-A of I.T.Act, 1961arising out of Order dated 17.01.2007 passed in ITANo.184/PANJ/2005 for the Assessment Year 1997-98, praying to formulate the substantial questions of law stated thereinand allow the appeal and set aside the order passed by theITAT,Panaj1Bench.1n ITA|No.184/PANJ/2005dated17.01.2007 and confirm the order passed by the AssessingAuthority, vide Annexure-A. This appeal coming on for Final Hearing this day,P.S.DINESH KUMAR, J.,delivered the following; JUDGMENT 1.The revenue is in appeal challenging the order dated17.01.2007 passed by the Income Tax Appellate Tribunal,Panaji Bench, Panaji, (for short, hereinafter referred to as‘theTribunal’) 1NITANo.184/PANJ/2005{Ortheassessment year 1997-98, wherein the Tribunal has heldthat Section SOB of the Income Tax Act, 1961 (for short,hereinafter referred to as ‘the Act’? is not applicable withretrospective effect from O1.04.2000 and therefore, theprovisions of Section S8Q0-IA of the Act are also napplicable to the facts of the case, inasmuch as the entirebusiness undertaking was transferred as an ongoingconcern with the whole assets and liabilities comprisingtherein to the respondent herein with effect from 01.01.1996; it was a slump sale as per the agreement andtherefore, it was not chargeable for the capital gain tax. a2The assessee — M/s.B.P.C.Desai was a proprietaryconcern and later on, it was converted into a PrivateLimitedCompanyunder|the|Tianhandstyle“M/s.Industrial Hydraulics Pvt. Ltd.” For the assessmentyear 1995-1996, return was filed under Section 143(1)(a)of the Act by the assessee claiming deduction undersection 80-IA. The Assessing Officer passed an orderunder Section 104 of the Act on 12.08.1996 rejecting therelief under Section 80-IA. The said order was challengedbefore the appellate authority and the appellate authority,by order dated 19.03.1997, set aside the order of theAssessing Officer. Thereafter, the Assessing Officer has|issued notice under Section 148 of the Act and reopenedthe assessment. The contention of the assessee that theAssessing Officer was not justified in re-opening theassessment and in invoking the provisions of Section 147 of the Act was negatived and for the assessment year1996-97, the Assessing Officer held that since there wassale of going concern and formation of Private LimitedCompany, there was capital gain, for which tax was liableto be paid by the assessee under Section 5O-B of the Actand disallowed the deduction claimed by the assesseeunder Section 80O-IA of the Act and accordingly, passed thorder of assessment on 30.03.2000. Being aggrieved bythe said order, appeals were filed by the assessee beforethe Commissioner of Income Tax (Appeals), Belgaum. 3.The appellate authority confirmed the order passedby the Assessing Officer. Being aggrieved by the same,appeals were preferred before the Tribunal in ITA Nos.97and 98/PANJ/2001 for the assessment years 1995-1996and1996-1997..TheTribunal,by orderdated16.10.1992, remitted the matter to the appellate authorityfor fresh disposal. Thereafter, the appellate authority, byorder dated 04.07.2005, dismissed appeals — ITA Nos.390 3.The appellate authority confirmed the order passedby the Assessing Officer. Being aggrieved by the same,appeals were preferred before the Tribunal in ITA Nos.97and 98/PANJ/2001 for the assessment years 1995-1996and1996-1997..TheTribunal,by orderdated16.10.1992, remitted the matter to the appellate authorityfor fresh disposal. Thereafter, the appellate authority, byorder dated 04.07.2005, dismissed appeals — ITA Nos.390 and 391/BGM of 2003-2004 filed by the assessee andbeing aggrieved by the order of the first appellate authoritydated 04.07.2005, the assessee preferred ITA Nos.179 and181/PANJ/2005 in respect of the Assessment years 1995-1996and1996-1997andITANos.180_and184/PANJ/2005 in respect of the assessment year 1996-1997 and 1997-1998 before the Tribunal. 4The Tribunal after considering the material onrecord came to the conclusion that the unit established inShed No.C-54 was a ‘new unit’ and the assessee wasmanutacturing hydraulic products of higher capacity anddifferent sizes from the assessment year 1995-96 andtherefore, the assessee was entitled for deduction undersection 80O-IA of the Act pertaining to this manufacturinunit during the relevant assessment year. 5.The revenue being aggrieved by the order passed bythe Tribunal has filed this appeal by framing substantialquestions of law, 6.Learned counsel for the revenue submits that thisCourt while dealing with similar orders has framed theCourt while dealing with similar orders has framed the following substantial question of law and allowed theappeals of the revenue:appeals of the revenue: 1)Whether the assessee is entitled for claimingdeduction under Section SO-IA when morethan 20% of old plant and machinery wereused in the reconstructed unit as contemplatedunder Sub-section (3) of Section 80-IA?deduction under Section SO-IA when morethan 20% of old plant and machinery wereused in the reconstructed unit as contemplatedunder Sub-section (3) of Section 80-IA? 11)Whether Section 15 C of Income Tax Act, 1922would be applicable to the facts of the case andwould it be in paramateria with Section 80-IAof Income Tax Act, 1961?would be applicable to the facts of the case andwould it be in paramateria with Section 80-IAof Income Tax Act, 1961? 111)Whether deduction under Section 80-IA wouldbe available to the assessee when the two unitsaTe€COTMMNIandthemachinery/vehicleswould be complementary-supplementary foruse oft each otherbe available to the assessee when the two unitsaTe€COTMMNIandthemachinery/vehicleswould be complementary-supplementary foruse oft each other T.Learned counsel for the revenue submits that theunit not being an independent unit and it was an expansion of the old unit and more than 20% of the oldplant being used in reconstructed unit, the assessee wasnot entitled for claiming deduction under Section 80-IA ofthe Act. He further submits that there is concurrentfinding by the Assessing Officer as well as the AppellateAuthority that the assessee is not entitled to claimdeduction under Section 80O-IA of the Act which has beeset aside by the Tribunal by the impugned order. Thus,among other grounds, learned counsel prays for allowingthe appeal. 8.Respondentthoughservedhasremainedunrepresented. We have perused the order dated12.08.2011 passed by this Court in ITA No.480/2007 andconnected appeals and respectfully agree with the viewtaken by the Bench. QOIn order to claim deduction under Section SO-IA ofthe Act, assessee has to satisfy the following requirements; 1)Industrial undertaking must be set up on orafter 01.04.1991 and before 31.03.1995,after 01.04.1991 and before 31.03.1995, 11)Industrial undertaking is not formed bysplitting up or reconstruction of a businessalready in existence (Subjected to certain otherconditions as specified in Section 8O0-IA.splitting up or reconstruction of a businessalready in existence (Subjected to certain otherconditions as specified in Section 8O0-IA. 8.Respondentthoughservedhasremainedunrepresented. We have perused the order dated12.08.2011 passed by this Court in ITA No.480/2007 andconnected appeals and respectfully agree with the viewtaken by the Bench. QOIn order to claim deduction under Section SO-IA ofthe Act, assessee has to satisfy the following requirements; 1)Industrial undertaking must be set up on orafter 01.04.1991 and before 31.03.1995,after 01.04.1991 and before 31.03.1995, 11)Industrial undertaking is not formed bysplitting up or reconstruction of a businessalready in existence (Subjected to certain otherconditions as specified in Section 8O0-IA.splitting up or reconstruction of a businessalready in existence (Subjected to certain otherconditions as specified in Section 8O0-IA. 111)The transferred assets of old business shouldnot exceed 2YO% of the total value of thmachinery or plant used in the new business.not exceed 2YO% of the total value of thmachinery or plant used in the new business. 1V)It should not manufacture or produce articlesspecified in the Eleventh Schedule.specified in the Eleventh Schedule. 10,The records placed for perusal show that theassessee has not fulfilled the above conditions andtherefore, the Assessing|Officer and the AppellateAuthority had rightly disallowed the benefit. The Tribunalwithout any just and cogent reasons has reversed theorders passed by the Assessing Officer as confirmed by theAppellate Authority. The Tribunal while setting aside theorder of the Appellate Authority has erroneously held that the unit established in Shed No.C-54 is a new unit andthe products manufactured in both the units are identical.Thus, the findings of the Tribunal in setting aside theconcurrent orders of the Assessing Officer as well as theAppellate Authority are unsustainable in law. Hence, weanswer the questions framed for consideration of thisCourt by the revenue in its favour. 11.In the result, this appeal is allowed. Order passedby the Tribunal in ITA.184/PANJ/20095 holding that thassessee is entitled for deduction under Section S8O-IA othe Act is set aside restoring the order passed by theAssessing Officer as affirmed by the Appellate Authority,In the circumstances of the case, there shall be no orderas To costs. Sd/- JUDGE Sd/- JUDGE PKS