ITO 20(1)(2), MUMBAI V. CREAM JEWELLERY, MUMBAI

ITA 1585/MUM/2014

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 2408 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ALOK SAXENA
• Section: 143(3); 10

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI , . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.1585/MUM/2014 ASSESSMENT YEAR 2009-10 INCOME TAX OFFICER-20(1)(2), ROOM NO.606, 6 TH FLOOR, PIRAMAL CHAMBERS, LALBAUG, PAREL, MUMBAI-400012 / VS. M/S CREAM JEWELLERY, 404, BLOCK-I, SEEPZ, ANDHERI EAST, MUMBAI-400096 ( ! / REVENUE) ( '#$ % /ASSESSEE) PAN. NO. AAHPS2361R ! / REVENUE BY SHRI O. P. MEENA-DR '#$ % / ASSESSEE BY SHRI ALOK SAXENA & !' ( % ) / DATE OF HEARING : 24/11/2015 ( % ) / DATE OF ORDER: 24/11/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 10/12/2012 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO A LLOWABILITY OF EXEMPTIONS U/S 10A2(III) OF THE INCOME TAX ACT, 1961. M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 2 2. DURING HEARING OF THIS APPEAL, AT THE OUTSET, S HRI ALOK SAXENA, LD. COUNSEL FOR THE ASSESSEE, CLAIMED THAT THE IMPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL FOR A.Y. 2008-09 (ITA NO.833/MUM/2012) ORDER DATED 15/10/2015. THE LD. COUNSEL FURNISHED THE COPY OF THE AFORESAID ORDER. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LD. DR, SHRI O.P. MEENA AND HE MERELY RELIED UPON THE ASSESSMENT ORDE R. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER DATED 15/10/2015 FOR READY REFERENCE AND ANALYSIS:- THE AFORESAID APPEAL HAS BEEN FILED BY THE REVENUE AGAINST IMPUGNED ORDER DATED 26.11.2011 PASSED BY CIT(A)-31 , MUMBAI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE ASSESSMENT YEAR 2008-09 ON THE FOLLOWING GROUNDS :- 1. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN L AW AND IN THE CIRCUMSTANCES OF THE CASE IN IGNORING THE SPECI FIC PROVISIONS OF SECTION 10A2(III) WHEREBY EXEMPTION I S NOT ALLOWABLE IN CASE OF TRANSFER AND MACHINERY PREVIOU SLY USED FOR ANY PURPOSE. 2. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LA W AND IN THE CIRCUMSTANCES OF THE CASE IN IGNORING THAT IN THE P RESENT CASE IT IS NOT UNDER DISPUTE THAT THERE IS A TRANSFER FROM A COMPANY TO A FIRM AND MACHINERY WAS USED FOR ANY PURPOSE EARLI ER. M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 3 3. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LA W AND IN THE CIRCUMSTANCES OF THE CASE BY RELYING ON THE CIRCULA R AND JUDICIAL DECISIONS WHICH RELATES TO OTHER PROVISION S OF THE ACT, WHEN CLEAR INTERPRETATION OF SECTION 10A2(III) WAS POSSIBLE AND AVAILABLE. 4. THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LA W AND IN THE CIRCUMSTANCES OF THE CASE IN CONSIDERING THE ASSESS EES PLEA THAT THE SHAREHOLDERS OF THE TRANSFER COMPANY AND P ARTNERS OF THE TRANSFEREE FIRM ARE SAME IGNORING THE FACT THAT BOTH ARE SEPARATE LEGAL ENTITIES AND THE IDENTITY OF SHARE HOLDERS/PARTNERS IS NO WAY MATERIAL TO THE ISSUE UN DER CONSIDERATION. 2. BRIEF FACTS ARE THAT, THE ASSESSEE IS A PARTNERS HIP FIRM ENGAGED IN THE BUSINESS OF EXPORT OF GOLD AND DIAMO ND STUDDED JEWELLERY. THE ASSESSEE HAD CLAIMED RELIEF OF RS.3, 39,85,870/-, U/S 10A WHICH WAS DULY SUPPORTED BY AUDIT REPORT IN FORM 56F. FROM THE AUDIT REPORT THE LD. ASSESSING OFFICE R NOTED THAT THE DATE OF INITIAL REGISTRATION IN FTZ/EPZ/SE Z WAS 25TH SEPTEMBER, 2004 AND DATE OF COMMENCEMENT OF MANUFAC TURING OF PRODUCTION WAS 4TH SEPTEMBER 2004, WHEREAS PARTN ERSHIP DEED OF THE ASSESSEE FIRM WAS DATED 3RD AUGUST, 200 6. SINCE THE ASSESSEE FIRM WAS FORMED ON 3RD AUGUST, 2006 AN D REGISTRATION WAS GRANTED MUCH EARLIER IN SEPTEMBER, 2004, THEREFORE, SUCH AN EXEMPTION / DEDUCTION U/S 10A CL AIMED BY THE ASSESSEE CANNOT BE ALLOWED. IN RESPONSE, TO THE SHOW CAUSE, THE ASSESSEE SUBMITTED THAT DEDUCTION U/S 10 A IS ATTACHED TO AN UNDERTAKING AND NOT TO THE ASSESSEE AND IN M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 4 SUPPORT, CERTAIN DECISIONS WERE ALSO FILED. HOWEVER , THE LD. AO REJECTED THE ASSESSEES CONTENTION ON THE FOLLOW ING REASONS :- I) THE ASSESSEE FIRM HAS ENTERED IN TO DEED OF TRAN SFER AGREEMENT WITH CREAM JEWELLARY PVT LTD FOR PURCHASI NG THE UNIT WITH ALL ITS ASSETS AND LIABILITIES INCLUDING PLANT AND MACHINERIES. THE ASSESSEE FIRM HAS ALSO PURCHASED A LL THE PLANT AND MACHINERIES WHICH WAS PREVIOUSLY USED BY THE CREAM JEWELLARY PVT LTD. SECTION 10A(2)(III) CLEARL Y STATES THAT THE UNDERTAKING SHOULD NOT BE FORMED BY THE TR ANSFER TO A NEW BUSINESS OF MACHINERIES AND PLANT PREVIOUSLY US ED FOR ANY PURPOSE. IF THE TOTAL VALUE OF PLANT AND MACHINERIE S PREVIOUSLY USED FOR ANY PURPOSE IS TRANSFERRED DOES NOT EXCEED 20% OF THE TOTAL VALUE OF PLANT AND MACHINERIES THAN THE CONDI TION IS DEEMED TO BE SATISFIED. IN THIS CASE ONE UNDERTAKIN G TRANSFERRED ASSETS USED PREVIOUSLY TO THE UNDERTAKI NG & IT EXCEEDS THE LIMIT OF 20% GIVEN IN 10A(2)(III). HENC E THE ASSESSEE DOES NOT SATISFY THE CONDITION IN SECTION 10A, SO NATURALLY ASSESSEE FIRM WILL NOT BE ELIGIBLE FOR TH E EXEMPTION U/S 10A. II) THE OWNERSHIP AND BENEFICIAL INTEREST IN THE UN DERTAKING IS TRANSFERRED FROM CREAM JEWELLARY PVT LTD TO ASSESSE E FIRM AND DEDUCTION SHALL NOT BE ALLOWED. AND ACCORDINGLY, DENIED THE CLAIM OF DEDUCTION U/S 10A. 3. BEFORE THE CIT(A), ASSESSEE MADE VERY EXHAUSTIVE SUBMISSIONS AFTER REFERRING TO RELEVANT PROVISION O F SECTION M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 5 10A, PARTICULARLY CBDT CIRCULAR AND VARIOUS JUDICIA L DECISIONS, WHICH HAS BEEN DISCUSSED BY CIT(A) FROM PAGES 3 TO 8 OF THE APPELLATE ORDER. 4. AFTER CONSIDERING ASSESSEES SUBMISSIONS AND REL EVANT LEGAL PROPOSITION, LD. CIT(A) WE DECIDED THE ISSUE IN FAV OUR OF THE ASSESSEE AFTER CONCLUDING AS UNDER :- THEREFORE, IN VIEW OF THE AFORESAID DISCUSSION, TO MY CONSIDERED OPINION THE AO IS NOT JUSTIFIED IN REJEC TING THE VALID CLAIM OF THE APPELLANT MADE U/S 10A OF THE ACT BY H OLDING THAT THE EXEMPTION CLAIMED IS IN RESPECT OF A NEW UNDERT AKING FORMED BY SPLITTING-UP OR RECONSTRUCTION OF A BUSIN ESS ALREADY IN EXISTENCE AS PROVIDED UNDER CLAUSES (I) & (II) O F SUBSECTION (2) OF SECTION 10A OF THE ACT. THE AO IS ALSO NOT J USTIFIED IN HOLDING THAT BY TRANSFER OF UNDERTAKING FROM THE M/ S CREAM JEWELLERY PVT LTD TO THE APPELLANT FIRM VIDE DEED O F TRANSFER DATED 24.11.2006, A NEW UNDERTAKING WITH A NEW BUSI NESS HE HAS COME INTO EXISTENCE AND ACCORDINGLY, THE APPELL ANT IS NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 10A OF THE ACT. IN FACT, FROM THE FACTS OF THE CASE AND THE POSITION OF LAW AS DI SCUSSED ABOVE, IT IS CLEAR THAT BY TRANSFER OF THE UNDERTAK ING AS A GOING OR RUNNING CONCERN AT ITS BOOK VALUE AND THE SAME B USINESS ALREADY IN EXISTENCE, IS CONTINUED BY AN UNDERTAKIN G EVEN AFTER THE CHANGE OF OWNERSHIP; WOULD NOT MAKE THE APPELLA NT NOT ELIGIBLE FOR DEDUCTION/EXEMPTION AS PROVIDED U/S 10 A OF THE ACT. THEREFORE, ON ACCOUNT OF THE SAME, THE AO IS D IRECTED TO ALLOW THE DEDUCTION CLAIMED BY THE APPELLANT U/S 10 A OF THE ACT. THIS GROUND RAISED BY THE APPELLANT IS THEREFO RE ALLOWED. M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 6 5. BEFORE US, THE LD. COUNSEL SUBMITTED THAT, THIS VIEW/PROPOSITION NOW STANDS COVERED IN FAVOUR OF TH E ASSESSEE BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS SONATA SOFTWARE LTD, REPORTED IN [20 12] 343 ITR 397 AND MADRAS HIGH COURT IN THE CASE OF CIT VS HEARTLAND KG INFORMATION LTD, REPORTED IN [2013] 35 9 ITR 1. 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE ORDER OF THE AO. 7. AFTER CONSIDERING THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDERS AND ALSO THE DECISIONS RELIED UPON BY THE LD . COUNSEL, WE FIND THAT THE AO HAS DENIED THE EXEMPTION ON THE GROUND THAT UNDERTAKING HAS BEEN FORMED BY TRANSFER OF UN DERTAKING FROM M/S CREAM JEWELLERY PVT LTD TO THE ASSESSEE FI RM, VIDE, DEED OF TRANSFER DATED 26.11.2006, THEREFORE, A N EW UNDERTAKING WITH NEW BUSINESS HAS COME INTO EXISTEN CE AND THEREFORE, ASSESSEE WAS NOT ELIGIBLE FOR CLAIM OF D EDUCTION U/S 10A. AS CULLED OUT FROM THE RECORDS LD. CIT(A) HAS GIVEN A FINDING OF FACT THAT THE TRANSFER OF THE UNDERTAKIN G WAS AS A GOING CONCERN AT ITS BOOK VALUE AND SAME BUSINESS W HICH WAS ALREADY IN EXISTENCE CONTINUED EVEN AFTER CHANGE OF OWNERSHIP FROM PRIVATE LIMITED COMPANY TO PARTNERSHIP FIRM. T HERE WAS CONTINUATION OF SOME BUSINESS ACTIVITIES WITH S OME UNDERTAKING. THE HONBLE JURISDICTIONAL HIGH COURT ON SIMILAR ISSUE AND CIRCUMSTANCED HAS HELD THAT WHERE A RUNNI NG BUSINESS IS TRANSFERRED LOCK, STOCK AND BARREL BY O NE ASSESSEE TO ANOTHER ASSESSEE, THE PRINCIPLE OF RECONSTRUCTIO N, SPLITTING UP AND TRANSFER OF PLANT MACHINERY CANNOT BE APPLIE D. THE M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 7 BENEFIT OF SECTION 10A IS ATTACHED TO AN UNDERTAKIN G AND NOT TO THE ASSESSEE WHO OWNS THE UNDERTAKING, THEREFORE, A SSESSEE IS ENTITLED FOR EXEMPTION U/S 10A. SIMILAR VIEW WAS TA KEN BY THE MADRAS HIGH COURT IN THE CASE OF CIT VS HEARTLAND K G INFORMATION LTD (SUPRA). THUS, IN VIEW OF THE LEGAL PROPOSITION AS UPHELD BY THE JURISDICTIONAL HIGH COURT, THE OBS ERVATION AND FINDING OF THE CIT(A) IS HEREBY AFFIRMED AND GR OUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE STANDS DISM ISSED. 2.2. IF THE OBSERVATION MADE IN THE ASSESSMENT ORDE R, LEADING TO ADDITION MADE TO THE TOTAL INCOME, CONCLUSION DR AWN IN THE IMPUGNED ORDER, CONCLUSION DRAWN IN THE ORDER OF TH E TRIBUNAL DATED 15/10/2015, MATERIAL AVAILABLE ON RECORD, AS SERTIONS MADE BY THE LD. RESPECTIVE COUNSELS, IF KEPT IN JUX TAPOSITION AND ANALYZED, WE FIND THAT ON IDENTICAL ISSUE FOR A .Y. 2008-09 AN ELABORATE DISCUSSION ALONG WITH CBDT CIRCULAR HA S BEEN MADE BY THE TRIBUNAL. IT IS ALSO NOTED THAT THE IS SUE UNDER HAND IS ALSO COVERED BY THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT IN CIT VS SONATA SOFTWARE LTD. (2012) 343 ITR 397 AND ALSO HONBLE MADRAS HIGH COURT IN C IT VS HEART LAND KG INFORMATION LTD. (2013) 359 ITR 1, TH EREFORE, WE FIND NO INFIRMITY IN THE CONCLUSION DRAWN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE ORDER OF THE LD. FIRST APPELLATE AUTHORITY IS AFFIRMED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. M/S CREAM JEWELLERY ITA NO.1585/MUM/2014 8 THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 24/11/2015. SD/- SD/- ( JASON P. BOAZ ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; * DATED : 24/11/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. +,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 & 1% ( + ) / THE CIT, MUMBAI. 4. 0 0 & 1% / CIT(A)- , MUMBAI 5. 3!4 .%' , 0 +) +' 5 , & ' / DR, ITAT, MUMBAI 6. 6# 7' / GUARD FILE. / BY ORDER, /3% .% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & ' / ITAT, MUMBAI.