Karnataka H.C : Reconstruction of business of the assessee from Gujarat to Bangalore having been allowed by the Deptt. of Telecommunications, Govt. of India the assessee would be entitled to claim exemption under Section 10B of the Act in view of the mandatory restriction imposed under clause (ii) of Section 10B(2) of the Act applicable for the assessment year 1992-93

High Court Of Karnataka

CIT vs. Sasken Communications Tech Ltd.

Assessment Year : 1992-93

Section : 10B

N. Kumar And Ravi Malimath, JJ.

IT Appeal No. 912 Of 2006

August 2, 2011

JUDGMENT

N. Kumar, J. – This is a Revenue’s appeal challenging the order passed by the Appellate Tribunal holding that the assessee is eligible for exemption under Section 10(B) of the Income-tax Act and accordingly upholding the order passed by the Appellate Commissioner, by setting aside the order of the Assessing Authority, which had denied the said exemption.

2. The assessee is a company carrying on the business in software development. The assessee commenced his business in the year 1989 and its unit was located in the State of Gujarat. During the year 1992-93, the assessee shifted its unit from State of Gujarat to the present location at Bangalore and claimed deduction under Section 10(B) of the I.T. Act. However, the Assessing Officer proceeded to hold that this would amount to reconstruction of business. The Officer further held that the business is already in existence in accordance with Section 10(B)(d)(ii) of the Income-tax Act, 1961, therefore the assessee was not entitled to claim exemption under Section 10(B) of the IT. Act, and consequently the income was brought to tax under an order of assessment dated 08.03.2002.

3. The Appellate Commissioner was of the view that as the unit at Gujarat had been relocated at Bangalore by obtaining permission of the Department of Electronics, Government of India, therefore, by a considered order, he proceeded to hold that exemption under Section 10(B) of the Act has to be allowed to the assessee and accordingly, he set aside the order dated 08.03.2002 passed by the Assessing Officer. The Income-tax Appellate Tribunal up held the order passed by the Appellate Commissioner. Aggrieved by the said order, the appellant has filed this appeal.

4. By the order dated 16.7.2007 the appeal was admitted to consider the following question of law:

“Whether the Appellate Tribunal is right in holding that reconstruction of business of the assessee from Gujarat to Bangalore having been allowed by the Deptt. of Telecommunications, Govt. of India the assessee would be entitled to claim exemption under Section 10B of the Act in view of the mandatory restriction imposed under clause (ii) of Section 10B(2) of the Act applicable for the assessment year 1992-93”.

5. The tax effect involved in this appeal is Rs. 3,68,408/-. However, as the Department has accepted the audit objections on the premise that the circular issued by the Department is not attracted, the present appeal was filed. The material on record discloses that initially the unit was established at Gujarat. The assessee was entitled to be benefit under Section 10(B) for a period of 10 years. However, within two years from setting up the unit at Gujarat, it was shifted to the present location at Bangalore. The shifting has been done with the permission of the Government of India. In view of shifting, there is only one undertaking, whose identity, integrity and continuity is maintained. The assessee is not claiming any benefit under Section 10(B) in respect of any unit at Gujarat. The only benefit claimed is in respect of the unit at Bangalore as there is no unit at Gujarat and the only unit is at Bangalore, the assessee is entitled to the benefit under Section 10(B) of the I.T. Act. That is what precisely the Tribunal has held. The finding is strictly in accordance with law and it does not call for interference. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue.

6. Accordingly, the appeal is dismissed.

[Citation : 347 ITR 362]

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