IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 3 RD DAY OF MARCH, 2015 PRESENT THE HON BLE MR.JUSTICE B.S.PATIL AND THE HON BLE MR.JUSTICE P.S.DINESH KUMAR ITA No.483/2007 BETWEEN: 1. The Commissioner of Income Tax, Khimjibhoi Commercial Complex, Opp. Civil Hospital, Belgaum 590 001. 2. The Deputy Commissioner of Income Tax, Circle-1, Belgaum.... APPELLANTS (By Sri Y.V.Raviraj, Adv.) AND Industrial Hydraulics Pvt. Ltd., C-27, Angol Industrial Area, Udyambagh, Belgaum 590 008.... RESPONDENT (Respondent served, but unrepresented) This ITA is filed under Section 260-A of I.T.Act, 1961 arising out of Order dated 17.01.2007 passed in ITA No.184/PANJ/2005 for the Assessment Year 1997-98, praying
2 to formulate the substantial questions of law stated therein and allow the appeal and set aside the order passed by the ITAT, Panaji Bench in ITA No.184/PANJ/2005 dated 17.01.2007 and confirm the order passed by the Assessing Authority, 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 dated 17.01.2007 passed by the Income Tax Appellate Tribunal, Panaji Bench, Panaji, (for short, hereinafter referred to as the Tribunal ) in ITA No.184/PANJ/2005 for the assessment year 1997-98, wherein the Tribunal has held that Section 50B of the Income Tax Act, 1961 (for short, hereinafter referred to as the Act ) is not applicable with retrospective effect from 01.04.2000 and therefore, the provisions of Section 80-IA of the Act are also not applicable to the facts of the case, inasmuch as the entire business undertaking was transferred as an ongoing concern with the whole assets and liabilities comprising therein to the respondent herein with effect from
3 01.01.1996; it was a slump sale as per the agreement and therefore, it was not chargeable for the capital gain tax. 2. The assessee M/s.B.P.C.Desai was a proprietary concern and later on, it was converted into a Private Limited Company under the name and style M/s.Industrial Hydraulics Pvt. Ltd. For the assessment year 1995-1996, return was filed under Section 143(1)(a) of the Act by the assessee claiming deduction under Section 80-IA. The Assessing Officer passed an order under Section 154 of the Act on 12.08.1996 rejecting the relief under Section 80-IA. The said order was challenged before the appellate authority and the appellate authority, by order dated 19.03.1997, set aside the order of the Assessing Officer. Thereafter, the Assessing Officer has issued notice under Section 148 of the Act and reopened the assessment. The contention of the assessee that the Assessing Officer was not justified in re-opening the assessment and in invoking the provisions of Section 147
4 of the Act was negatived and for the assessment year 1996-97, the Assessing Officer held that since there was sale of going concern and formation of Private Limited Company, there was capital gain, for which tax was liable to be paid by the assessee under Section 50-B of the Act and disallowed the deduction claimed by the assessee under Section 80-IA of the Act and accordingly, passed the order of assessment on 30.03.2000. Being aggrieved by the said order, appeals were filed by the assessee before the Commissioner of Income Tax (Appeals), Belgaum. 3. The appellate authority confirmed the order passed by the Assessing Officer. Being aggrieved by the same, appeals were preferred before the Tribunal in ITA Nos.97 and 98/PANJ/2001 for the assessment years 1995-1996 and 1996-1997. The Tribunal, by order dated 16.10.1992, remitted the matter to the appellate authority for fresh disposal. Thereafter, the appellate authority, by order dated 04.07.2005, dismissed appeals ITA Nos.390
5 and 391/BGM of 2003-2004 filed by the assessee and being aggrieved by the order of the first appellate authority dated 04.07.2005, the assessee preferred ITA Nos.179 and 181/PANJ/2005 in respect of the Assessment years 1995-1996 and 1996-1997 and ITA Nos.180 and 184/PANJ/2005 in respect of the assessment year 1996-1997 and 1997-1998 before the Tribunal. 4. The Tribunal after considering the material on record came to the conclusion that the unit established in Shed No.C-54 was a new unit and the assessee was manufacturing hydraulic products of higher capacity and different sizes from the assessment year 1995-96 and therefore, the assessee was entitled for deduction under Section 80-IA of the Act pertaining to this manufacturing unit during the relevant assessment year. 5. The revenue being aggrieved by the order passed by the Tribunal has filed this appeal by framing substantial questions of law.
6 6. Learned counsel for the revenue submits that this Court while dealing with similar orders has framed the following substantial question of law and allowed the appeals of the revenue: i) Whether the assessee is entitled for claiming deduction under Section 80-IA when more than 20% of old plant and machinery were used in the reconstructed unit as contemplated under Sub-section (3) of Section 80-IA? ii) Whether Section 15 C of Income Tax Act, 1922 would be applicable to the facts of the case and would it be in paramateria with Section 80-IA of Income Tax Act, 1961? iii) Whether deduction under Section 80-IA would be available to the assessee when the two units are common and the machinery/vehicles would be complementary-supplementary for use of each other? 7. Learned counsel for the revenue submits that the unit not being an independent unit and it was an
7 expansion of the old unit and more than 20% of the old plant being used in reconstructed unit, the assessee was not entitled for claiming deduction under Section 80-IA of the Act. He further submits that there is concurrent finding by the Assessing Officer as well as the Appellate Authority that the assessee is not entitled to claim deduction under Section 80-IA of the Act which has been set aside by the Tribunal by the impugned order. Thus, among other grounds, learned counsel prays for allowing the appeal. 8. Respondent though served has remained unrepresented. We have perused the order dated 12.08.2011 passed by this Court in ITA No.480/2007 and connected appeals and respectfully agree with the view taken by the Bench. 9. In order to claim deduction under Section 80-IA of the Act, assessee has to satisfy the following requirements:
8 i) Industrial undertaking must be set up on or after 01.04.1991 and before 31.03.1995. ii) Industrial undertaking is not formed by splitting up or reconstruction of a business already in existence (subjected to certain other conditions as specified in Section 80-IA.) iii) The transferred assets of old business should not exceed 20% of the total value of the machinery or plant used in the new business. iv) It should not manufacture or produce articles specified in the Eleventh Schedule. 10. The records placed for perusal show that the assessee has not fulfilled the above conditions and therefore, the Assessing Officer and the Appellate Authority had rightly disallowed the benefit. The Tribunal without any just and cogent reasons has reversed the orders passed by the Assessing Officer as confirmed by the Appellate Authority. The Tribunal while setting aside the order of the Appellate Authority has erroneously held that
9 the unit established in Shed No.C-54 is a new unit and the products manufactured in both the units are identical. Thus, the findings of the Tribunal in setting aside the concurrent orders of the Assessing Officer as well as the Appellate Authority are unsustainable in law. Hence, we answer the questions framed for consideration of this Court by the revenue in its favour. 11. In the result, this appeal is allowed. Order passed by the Tribunal in ITA.184/PANJ/2005 holding that the assessee is entitled for deduction under Section 80-IA of the Act is set aside restoring the order passed by the Assessing Officer as affirmed by the Appellate Authority. In the circumstances of the case, there shall be no order as to costs. Sd/- JUDGE PKS Sd/- JUDGE