Pr. Commissioner Of Income Tax - 24 v. M/S. Cream Jewellery

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J.INCOME TAX APPEAL NO. 307 OF 2017 Pr. Commissioner of Income Tax - 24 ..Appellant Versus M/s. Cream Jewellery ..Respondent ................... •Mr. Sham Walve for the Appellant ................... CORAM : AKIL KURESHI & SARANG V. KOTWAL, JJ. DATE : APRIL 16, 2019. P.C.: 1.This appeal is filed by the Revenue to challenge thejudgment of the Income Tax Appellate Tribunal, Mumbai (“theTribunal” for short). 2.Following question is presented for our consideration:- "Whether on the facts and circumstances of the case and in law, theTribunal was right in allowing deduction u/S. 10A of the I.T. Act, 1961ignoring the fact that Section 10A(2)(iii) clearly states that theundertaking should not be formed by the transfer to a new businessof machinery and plant previously used for any purpose?"Tribunal was right in allowing deduction u/S. 10A of the I.T. Act, 1961ignoring the fact that Section 10A(2)(iii) clearly states that theundertaking should not be formed by the transfer to a new businessof machinery and plant previously used for any purpose?" 3.Respondent – assessee in the return of income filed for the assessment year 2008-09 had claimed deduction under Section 10A of the Income Tax Act ("the Act" for short) whichthe Assessing OfÏcer denied on the ground that theundertaking was formed by the transfer to a new business ofmachinery and plant previously used for any purpose. CIT(A)allowed the appeal of the assessee upon which the issuereached the Tribunal. The Tribunal by the impugnedjudgment, while dismissing the Revenue’s appeal held andobserved as under:- "7.After considering the relevant finding given in theimpugned orders and also the decisions relied upon by the Ld.Counsel, we find that the AO has denied the exemption on theground that undertaking has been formed by transfer of‘undertaking’ from M/s Cream Jewellery Pvt Ltd to theassessee firm, vide, ‘Deed of Transfer’ dated 26.11.2006,therefore, a new undertaking with new business has come intoexistence and therefore, assessee was not eligible for claim ofdeduction u/s 10A. As culled out from the records Ld. CIT(A)has given a finding of fact that the transfer of the undertakingwas as a going concern at its book value and same businesswhich was already in existence continued even after change ofownership from Private Limited Company to Partnership Firm.There was continuation of some business activities with someundertaking. The Hon’ble jurisdictional High Court on similarissue and circumstanced has held that where a runningbusiness is transferred lock, stock and barrel by one assesseeto another assessee, the principle of reconstruction, splittingup and transfer of plant machinery cannot be applied. Thebenefit of section10A is attached to an undertaking and not tothe assessee who owns the undertaking, therefore, assessee is entitled for exemption u/s 10A. Similar view was taken bythe Madras High Court in the case of CIT vs Heartland KGInformation Ltd (supra). Thus, in view of the legal propositionas upheld by the jurisdictional High Court, the observation andfinding of the CIT(A) is hereby affirmed and grounds raised bythe revenue are dismissed." 4.From the record, it can be said that the Revenue’sobjection emerges from the fact that the unit in question wastransferred as going concern, entire business was transferredto the new owner who claimed continued benefit underSection 10A of the Act. This issue is squarely covered by thedecision of Division Bench of this Court in the case of CIT Vs.Sonata Software Ltd[1]. It was held that sale of business wasnot a reconstruction within the meaning of Section 10A of theAct. 5.No question of law, therefore, arises. Income TaxAppeal is dismissed. [ SARANG V. KOTWAL, J. ] [ AKIL KURESHI, J ] 1[2012] 343 ITR 397 (Bom)