Synergies Casting Ltd, Hyderabad v. DCIT, Hyderabad

ITA 864/HYD/2010 | 2006-2007
Pronouncement Date: 18-03-2011 | Result: Dismissed

Appeal Details

RSA Number 86422514 RSA 2010
Assessee PAN AAICS7410H
Bench Hyderabad
Appeal Number ITA 864/HYD/2010
Duration Of Justice 9 month(s) 7 day(s)
Appellant Synergies Casting Ltd, Hyderabad
Respondent DCIT, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 18-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 18-03-2011
Date Of Final Hearing 29-11-2010
Next Hearing Date 29-11-2010
Assessment Year 2006-2007
Appeal Filed On 10-06-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B HYDERABAD BEFORE SHRI G.C. GUPTA VICE- PRESIDENT AND SHRI AKBER BASHA A.M. ITA NO. 864/HYD/2010 ASSESSMENT YEAR: 2006-07 & ITA NO. 1364/HYD/10 ASSESSMENT YEAR 2007-08 M/S SYNERGIES CASTING LTD. AMEERPET HYDERABAD. .. APPELLANT (PAN AAICS 7410 H) VS. DY. COMMISSIONER OF INCOME TAX RESPONDENTS CIRCLE 3(2) IT TOWERS AC GUARDS HYDERABAD & ACIT CIR-3(3) HYD. APPELLANT BY : SRI PRASAD RESPONDENT BY : SRI GNANA PRAKASH ORDER PER AKBER BASHA ACCOUNTANT MEMBER: THESE APPEALS FILED BY THE ASSESSEE ARE DIRECTED A GAINST THE SEPARATE ORDERS OF CIT (A)-IV HYDERABAD PASSE D ON 31/03/2010 AND 3-8-2010 FOR THE ASSESSMENT YEARS 20 06-07 AND 2007-08 RESPECTIVELY. SINCE COMMON ISSUES ARE I NVOLVED IN THESE TWO APPEALS THESE ARE CLUBBED TOGETHER AND D ISPOSED OFF BY THIS COMBINED ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THESE TWO APPEALS COMMON GROUNDS ARE RAISED BY THE ASSESSEE AND THE SAME ARE EXTRACTED HERE-UND ER:- ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 2 1. THE LEARNED CIT (A) IS ERRONEOUS IN LAW AND ON THE FACTS OF THE CASE. 2. (A) THE LEARNED CIT (A) IS NOT JUSTIFIED IN D ENYING THE DEDUCTION OF RS.1 00 06 615/- UNDER SECT5ION 10B OF THE IT ACT WHEN THE ELIGIBLE UNDERTAKING CLAIMING THE DEDUCTION REMAINED THE SAME. (B) THE LEARNED CIT (A) ERRED IN IGNORING THE FACT THAT THE APPELLANT IS SUCCESSOR OF THE UNDERTAKING AS CONFIRMED BY DEVELOPMENT COMMISSIONER VSEZ MINISTRY OF COMMERCE AND INDUSTRY THROUGH TRANSFER ON LEASE BASIS FOR CLAIMING SECTION 10B DEDUCTION. THE LEARNED CIT (A) ERRED IN LAW IN NOT GRANTING THE TAX HOLIDAY IN THE HANDS OF THE APPELLANT THOUGH IT WAS ADMITTED BY LEARNED CIT (A) THAT THE UNIT WAS TRANSFERRED TO THE APPELLANT. (D) THE LEARNED CIT (A) HAVING COME TO A CONCLUSION THAT THE UNDERTAKING WAS TRANSFERRED TO THE APPELLANT IS NOT JUSTIFIED IN LAW IN IGNORING THE BOARD CIRCULAR NO.F.NO.15/5/63-IT(A-1) TO GRANT TAX HOLIDAY IN THE HANDS OF THE SUCCESSOR I.E. APPELLANT COMPANY. ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 3 (E) THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE RESTRUCTURING PACKAGE APPROVED BY THE LENDERS WHICH RESULTED IN TRANSFER OF UNDERTAKING ON LEASE BASIS TO THE APPELLANT COMPANY. 3. THE LEARNED CIT (A) OUGHT TO HAVE ALLOWED DEDUCT ION UNDER SECTION 10B AS CLAIMED BY THE APPELLANT 4. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING WITH THE PREVIOUS APPROVAL OF THE HONBLE ITAT. 3. SINCE THE FACTS ARE IDENTICAL FOR THE SAKE O F BREVITY WE DEAL WITH FACTS AS MENTIONED IN ASSESSM ENT YEAR 2006-07. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY CARRYING ON BUSINESS OF MANUFACTURERS OF ALUMINUM ALLOY WHEELS. FOR THE ASSESSMENT YEAR 200 6-07 THE ASSESSEE FILED ITS RETURN OF INCOME ON 29-11-2006 D ISCLOSING LOSS OF RS. (-) 32 77 967/- UNDER NORMAL PROVISIONS AND AN AMOUNT OF RS.1 24 23 782/- UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 29-11-2007. THEREAFTER THE C ASE HAS BEEN SELECTED FOR SCRUTINY AND A NOTICE UNDER SECTI ON 143(2) WAS ISSUED ON 5-10-2007 AND SERVED. IN RESPONSE TO THE NOTICES ISSUED UNDER SECTION 143(2) OF THE ACT AND THE QUESTIONNAIRE ISSUED ASSESSEES AUTHORIZED REPRESE NTATIVE APPEARED BEFORE THE ASSESSING OFFICER AND FILED THE INFORMATION CALLED FOR AND THE BOOKS OF ACCOUNTS PRODUCED WERE EXAMINED. THE ASSESSING OFFICER COMPLETED THE SAID ASSESSMENT ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 4 DETERMINING THE ASSESSEES TOTAL INCOME AT A LOSS OF RS.31 24 467/- UNDER THE NORMAL PROVISIONS OF THE A CT WHEREAS THE BOOK PROFITS WERE ASSESSED AT RS.2 24 3 0 397/- AS AGAINST THAT SHOWN AT RS.1 24 23 780/- BY DISALLOWI NG THE CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT OF RS.1 00 06 615/-. AGGRIEVED AGAINST THE ORDER OF TH E ASSESSING OFFICER PASSED UNDER SECTION 143(3) OF THE ACT THE ASSESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL THE CIT (A) AFTER ELABORATE DISCUSSION IN HIS ORDER HELD THAT T HE ASSESSING OFFICER IS RIGHT IN DENYING THE CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT AND BY UPHOLDING THE DECISION OF THE ASSESSING OFFICER ALL OTHER GROUNDS RAISED ARE DECIDED AGAIN ST THE ASSESSEE. FURTHER AGGRIEVED THE ASSESSEE IS IN AP PEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN TERMS OF CLAUSE (III) OF SUB-SECTION (2) OF SECT ION 10B AND EXPLANATION (2) OF SUB-SECTION (2) OF SECTION 80I F OR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 10B OF THE ACT THE UNDERTAKING IS NOT TO BE FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY AND PLANT PREVIOUSLY USED FOR ANY OTHER PURPOSE. FURTHER AS PER EXPLANATION (2) OF SUB-SE CTION (2) OF SECTION 80I OF THE ACT IF THERE IS ANY TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED THE TOTAL VA LUE SHOULD NOT EXCEED 20% OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN THE BUSINESS BY THE ASSESSEE. IT IS SUBMIT TED THAT THE ASSESSEE HAD TAKEN THE UNIT ON LICENCE ONLY FOR OPE RATING AND MAINTAINING THE UNIT WITH FACILITIES OF MANUFACTURI NG. THEREFORE IT COULD NOT BE SAID THAT THE UNIT WAS F ORMED BY THE ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 5 TRANSFER TO A NEW BUSINESS OF MACHINERY AND PLANT P REVIOUSLY USED AND IT IS ONLY THE SAME UNDERTAKING THAT CONTI NUED MANUFACTURING ACTIVITY AND THERE IS NO NEW UNIT. IN THIS CONNECTION THE ASSESSEE INVITES THE ATTENTION OF T HE BENCH TO THE PROVISIONS OF CLAUSE(III) OF SUB-SECTION (2) O F SECTION B AND THE EXPLANATION -2 OF SUB-SECTION (2) OF SECTION 80 I OF THE ACT WHICH READS AS UNDER:- !0(B)(2) THIS SECTION APPLIES TO ANY UNDERTAKING WHICH FULFILLS ALL THE FOLLOWING CONDITIONS NAMELY :- (I). (II). (III) IT IS NOT FORMED BY THE TRANSFER TO A NEW BUS INESS OF MACHINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. EXPLANATION- THE PROVISIONS OF EXPLANATION 1 AND EXPLANATION 2 TO SUB-SECTION (2) OF SECTION 80I SHA LL APPLY FOR THE PURPOSES OF CLAUSE (III) OF THIS SUB- SECTION AS THEY APPLY FOR THE PURPOSES OF CLAUSE (II) OF TH AT SUB- SECTION. 80((2) EXPLANATION 2- WHERE IN THE CASE OF AN IND USTRIAL UNDERTAKING ANY MACHINERY OR PLANT OR ANY PART THE REOF PREVIOUSLY USED FOR ANY PURPOSE IS TRANSFERRED TO A NEW BUSINESS AND THE TOTAL VALUE OF THE MACHINERY OR PL ANT OR PART SO TRANSFERRED DOES NOT EXCEED TWENTY PER CENT OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED IN T HE BUSINESS. THEN FOR THE PURPOSE OF CLAUSE (II) OF T HIS SUB- SECTION. THE CONDITION SPECIFIED THEREIN SHALL BE DEEMED TO HAVE COMPLIED WITH. ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 6 IT IS SUBMITTED THAT FOR THE PURPOSE OF CLAIMING DE DUCTION UNDER SECTION 10B OF THE ACT THE UNDERTAKING IS NO T FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINERY OR PLAN T PREVIOUSLY USED FOR ANY PURPOSE. FURTHER AS PER EXPLANATION- 2 OF SUB- SECTION (2) OF SECTION 80I IF THERE IS ANY TRANSFE R TO A NEW BUSINESS OF MACHINERY OR PLANT PREVIOUSLY USED THE TOTAL VALUE OF SUCH PLANT OR MACHINERY TRANSFERRED SHOULD NOT E XCEED 20% OF THE TOTAL VALUE OF THE MACHINERY OR PLANT USED I N THE BUSINESS BY THE ASSESSEE. IT MAY BE APPRECIATED TH AT THE ASSESSEE COMPANY HAS TAKEN THE UNIT ON LICENCE FOR OPERATING AND MAINTAINING THE UNIT WITH FACILITIES OF MANUFAC TURING OF ALUMINUM ALLOY WHEELS. SINCE THE SAME OLD UNIT WAS TAKEN ON LICENCE FOR MANUFACTURE IT CANNOT BE SAID THAT THE UNIT IS FORMED BY THE TRANSFER TO A NEW BUSINESS OF MACHINE RY OR PLANT PREVIOUSLY USED. IN SUPPORT OF HIS CONTENTION TH E ASSESSEE PLACED RELIANCE ON THE BOARD CIRCULAR NO.F NO.15/5/ 63-IT(A1) TO GRANT TAX HOLIDAY IN THE HANDS OF THE SUCCESSOR COMPANY. THE CIRCULAR STATES THAT THE BOARD AGREE THAT THE B ENEFIT OF SECTION 84(80J) ATTACHES TO THE UNDERTAKING AND NOT TO THE OWNER THEREOF. THE SUCCESSOR WILL BE ENTITLED TO T HE BENEFIT FOR THE EXPIRED PERIOD OF FIVE YEARS PROVIDED THE UNDER TAKING IS TAKEN OVER AS A RUNNING CONCERN. IT IS SUBMITTED TH AT THE ASSESSEE COMPANY IS A SUCCESSOR UNDERTAKING WHICH F ACT HAS BEEN CONFIRMED BY THE MINISTRY OF COMMERCE & INDUST RY GOVT. OF INDIA VIDE ITS LETTER DATED 30-6-2005 WHICH IS P LACED AT PAGES 9 AND 10 OF THE ASSESSEES PAPER BOOK. THE LE TTER STATES VERY CLEARLY THAT ALL CONCESSIONS/BENEFITS ENTITLE D/ACCRUED TO M/S SYNERGIES DOORAY AUTOMOTIVE LIMITED UNDER EOU S CHEME WILL BE CONTINUED AND EXTENDED TO M/S SYNERGIES CAS TINGS ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 7 LIMITED BEING THE SAME EOU. FROM THE SAID LETTER IT IS EVIDENT THAT THE ASSESSEE COMPANY IS ENTITLED TO ALL THE BE NEFITS WHICH M/S. SYNERGY DOORAY AUTOMOTIVES LIMITED WAS ENTITLE D TO. IT IS CONTENDED THAT THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THE RESTRUCTURING PACKAGE APPROVED BY T HE LENDERS WHICH RESULTED IN TRANSFER OF THE UNDERTAKING ON A LEASE BASIS TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESS EE INVITED OUR ATTENTION TO THE DECISION OF TRIBUNAL (PARAS 19 AND 20 OF THE SAID ORDER) IN THE CASE OF ITO VS. TECHDRIVE IN DIA PVT. LIMITED (25 SOT 152) FOR THE PROPOSITION THAT IN O RDER TO CLAIM DEDUCTION UNDER SECTION 10B OF THE ACT THE ASSESSE E NEED NOT OWN ANY PLANT AND MACHINERY. IT IS FURTHER HELD TH AT WHEN THE ACTIVITY IS NOT CARRIED OUT IN THE UNDERTAKING OF T HE ASSESSEE OR WHERE THE ASSESSEE DOES NOT HAVE ITS OWN PLANT AND MACHINERY IN THE ABSENCE OF ANY PROVISION IN THE SECTION CONT AINING A POSITIVE REQUIREMENT THAT THE ASSESSEE SHALL OWN PL ANT AND MACHINERY THE REQUIREMENTS OF SUB-SECTION (2) ARE NOT APPLICABLE. IT IS SUBMITTED THAT THE LEARNED CIT(A) HAS OBSERVED IN PARA 6.5 OF HIS ORDER THAT THE DECISION GIVEN IN ITO VS. TECH DRIVE INDIA P LTD. PERTAINS TO A CASE OF MANUFACTURING OF COMPUTER SOFTWARE WHEREIN HUMAN SK ILL AND EXPERTISE IS REQUIRED. WHAT WAS HELD BY THE TRIBUNA L WAS THAT THE ASSESSEE NEED NOT OWN PLANT AND MACHINERY TO CL AIM DEDUCTION UNDER SECTION 10B OF THE ACT TO CARRY ON THE MANUFACTURING ACTIVITY AND THEREFORE THE FACTS OF T HE CASE GIVEN IN ITO VS. TECH DRIVE ARE SIMILAR TO THE FACT S OF THE INSTANT CASE. IT IS CONTENDED THAT THE THREE CONDI TIONS LAID DOWN IN CLAUSES (I) (II) AND (III) OF SUB-SECTION (2) OF SECTION 10B ARE CUMULATIVE CONDITIONS AS THE WORD USED IS ALL THE ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 8 FOLLOWING CONDITIONS. IN A NUMBER OF DECISIONS THE HONBLE SUPREME COURT AND THE HIGH COURT HAVE HELD THAT EVE N IF THE ASSESSEE GETS THE ARTICLES MANUFACTURED BY ANOTHER PERSON USING PLANT AND MACHINERY OWNED BY THAT PERSON AND BY PAYING HIM SOME CHARGES FOR THE HIRE OR THE USE OF THE MAC HINERY BUT UNDER THE CONTROL AND SUPERVISION OF THE ASSESSEE W HO SUPPLIES THE RAW MATERIALS ETC. IT MUST BE TAKEN AS IF IT I S THE ASSESSEE WHO IS THE MANUFACTURER. THE LEGISLATURE WAS AWARE OF SUCH INTERPRETATION PLACED BY THE COURTS AND EVEN THEN I N SECTION 10B AND OTHER SECTIONS SUCH AS 80IA 80IB 80HH ETC . NO EXPRESS PROVISION TO THE EFFECT THAT THE ASSESSEE C LAIMING DEDUCTION SHOULD ITSELF OWN THE PLANT AND MACHINERY AND SHOULD ITSELF MANUFACTURE OR PRODUCE THE ARTICLES O R THINGS OR THE COMPUTER SOFTWARE WITH THE HELP OF THE SAID PLA NT AND MACHINERY WAS INCORPORATED. THUS THE LEGAL POSIT ION LAID DOWN BY THE COURTS BASED ON THE MAXIM QUIFACIT PER ALIUM FACIT PER SE (ONE WHO DOES SOMETHING TO OTHERS DO I T HIMSELF) WAS NOT SOUGHT TO BE ALTERED. IT IS WELL SETTLED P RINCIPLE THAT WHERE A WORD OF DOUBTFUL MEANING HAS RECEIVED CLEAR JUDICIAL INTERPRETATION THE SUBSEQUENT STATUTE WHICH INCORPO RATES THE SAME WORD OR PHRASE IN A SIMILAR CONTEXT MUST BE CO NSTRUED SO THAT THE WORD OR PHRASE IS INTERPRETED ACCORDING TO THE MEANING THAT HAS BEEN PREVIOUSLY ASSIGNED TO IT. T HEREFORE UNDER SECTION 10B OF THE ACT IT IS NOT NECESSARY T HAT THE MANUFACTURING ACTIVITY HAS TO BE CARRIED ON BY THE ASSESSEE HIMSELF BY USING HIS OWN PLANT AND MACHINERY. THE ASSESSEE IS NOT FORMED BY THE TRANSFER TO A NEW BUSINESS OF MAC HINERY OR PLANT PREVIOUSLY USED FOR ANY PURPOSE. IT IS FURTH ER SUBMITTED THAT EVEN THE MINISTRY OF COMMERCE VIDE ITS LETTER DATED 30 TH ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 9 JUNE 2005 HAS GIVEN THE SAME BENEFITS TO THE ASSES SEE COMPANY WHICH WERE EARLIER ENJOYED BY M/S SYNERGIES DOORAY AUTOMOTIVE LIMITED. THIS ENDORSES THE FACT THAT SU CCESSION HAPPENED FROM 1-5-2005 AND NOT IN FEBRUARY 2005 WH EN THE ASSESSEE COMPANY WAS INCORPORATED AND IT ALSO CONFI RMS THE FACT THAT THE RESTRICTIVE CONDITION RELATING TO FO RMATION IS NOT TRIGGERED ON THE INSTANT CASE AS THERE IS NO NEW UN DERTAKING THAT HAS COME INTO EXISTENCE AND THE WORD FORMED IS RELEVANT ONLY IN THE CONTEXT WHEN A NEW UNDERTAKING COMES IN TO EXISTENCE. IN SUPPORT OF THIS PROPOSITION HE RELIE D ON THE DECISION OF APEX COURT IN THE CASE OF BAJAJ TEMPO LTD. VS. CIT (196 ITR 188). IT IS APPARENT FROM THE FACT THA T THE SAME OLD UNDERTAKING CONTINUED WITHOUT ANY CHANGE IN ITS SHAPE AND CAPACITIES. IT IS SUBMITTED THAT THE RESTRICTIVE CO NDITIONS OF SECTION 10B(2) IN TERMS SPLIT UP AND RECONSTRUCTIO N WOULD APPLY ONLY IN A CASE WHERE THERE EXISTS ONE UNIT WH ICH IS OLD AND ANOTHER UNIT WHICH IS NEW AND IN THE SAME MANNE R NO NEW UNIT IS FORMED BY TRANSFER OF ANY OLD MACHINERY AND THEREBY THE RESTRICTIVE CONDITION INS SECTION 10B(2) (II) A ND (III) HAVE NO APPLICATION IN THE INSTANT CASE. THE INTENTION OF LEGISLATION IS TO DENY BENEFIT ONLY TO A NEW UNDERTAKING WHICH IS SPLIT UP OR RE-CONSTRUCTED FROM AN OLD UNDERTAKING. IN THE PRESENT CASE THERE IS NEITHER SPLIT UP NOR RECONSTRUCTION AS THE SAME OLD UNDERTAKING CONTINUED MANUFACTURING ACTIVITY WI THOUT ANY CHANGE. THE ONLY CHANGE IS THE ASSESSEE WHO IS CAR RYING OUT THE MANUFACTURING ACTIVITY. IN OTHER WORDS THERE IS SUCCESSION IN CONTROLLING THE UNDERTAKING FROM SDAL TO SCL AND THEREFORE THE SUCCESSION OF UNDERTAKING FROM SDAL TO SCL IS S QUARELY COVERED BY THE BOARD CIRCULAR WHICH ENTITLES SCL FO R CLAIM OF ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 10 TAX HOLIDAY UNDER SECTION 10B OF THE ACT. IT IS SUB MITTED THAT SUCCESSION CAN BE IN MANY FORMS INCLUDING A FULL-FL EDGED LICENSING/LEASING OF THE UNDERTAKING. IN THIS CONT EXT IT IS RELEVANT TO RELY ON THE RATIO OF THE DECISION IN TH E CASE OF CIT VS. NARANG DAIRY PRODUCTS (1996) 85 TAXMAN 375 (SC) WHEREIN IT WAS HELD THAT TRANSFER INCLUDES EXCLUSIV E POSSESSION AND ENJOYMENT OF MANUFACTURING FACILITY THROUGH LEA SE. THEREFORE IN THE PRESENT CASE THERE IS SUCCESSION OF UNDERTAKING FROM SDAL TO SCL THROUGH A FULL-FLEDGED LEASE OF UNDERTAKING AND THE BENEVOLENT CLARIFICATION OF THE BOARD CIRCULAR IS AVAILABLE TO SCL FOR CLAIM OF TAX HOLID AY UNDER SECTION 10B OF THE ACT FOR THE YEAR UNDER CONSIDERA TION. THE CASE OF THE ASSESSEE COMPANY IS FURTHER FORTIFIED B Y REPEAL OF SUB-SECTION (9A) TO SECTION 10B OF THE ACT WHICH C LEARLY PROVIDES THAT THE UNDERTAKING NEED NOT BE OWNED/MAN AGED OR CONTROLLED BY THE SAME ASSESSEE THROUGH OUT THE TAX HOLIDAY PERIOD AND IN OTHER WORDS THERE CAN BE SUCCESSION OF THE UNDERTAKING FROM ONE ASSESSEE TO ANOTHER AND SUBMIT TED THAT THE CLAIM OF TAX HOLIDAY IS AVAILABLE TO THE SUCCES SOR OF THE UNDERTAKING FOR THE UNEXPIRED PERIOD. IT IS FURTH ER SUBMITTED THAT THERE IS NO ABUSE OF TAX HOLIDAY PROVISIONS AS THE CLAIM IS MADE ONLY BY SUCH ASSESSEE WHO IS CARRYING OUT MANU FACTURING ACTIVITY. IN OTHER WORDS THE PREDECESSOR AND SUCC ESSOR HAVE CLAIMED TAX HOLIDAY BENEFIT IN LEGALLY ACCEPTABLE M ANNER FOR THE PERIOD BEFORE SUCCESSION BY THE PREDECESSOR AND POST SUCCESSION BY THE SUCCESSOR THE CLAIM BEING RESTRI CTED TO THE OVERALL PERIOD OF 10 YEARS AND THEREFORE THERE IS NEITHER DOUBLE CLAIM NOR CLAIM FOR AN EXCESSIVE PERIOD OTHE R THAN WHAT IS PRESCRIBED BY THE LAW. IT IS SUBMITTED THAT TH E IMPORT OF ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 11 TEXTILE MACHINERY CASE RULED OUT BY THE APEX COURT HAS NO RELEVANCE TO THE FACTS OF THE CASE AS NO NEW UNDERT AKING HAS COME INTO EXISTENCE. IN VIEW OF THE ABOVE SUBMISS IONS THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE COMPANY IS LEGALLY ENTITLED TO CLAIM TAX HOLIDAY UN DER SECTION 10B OF THE ACT FOR THE UNEXPIRED PERIOD AS A SUCCES SOR OF THE UNDERTAKING. THE LEANRED COUNSEL FOR THE ASSESSEE FILED ALSO THE PAPER BOOK WHICH CONTAINS COPIES OF THE LETTER ISSUED BY THE DEVELOPMENT COMMISSIONER VSEZ COPIES OF THE G REEN CARD ETC. IN SUPPORT OF HIS CLAIMS. 5. ON THE OTHER HAND THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE RELYING ON THE ORDERS OF THE A UTHORITIES BELOW SUBMITTED THAT SINCE THE EOU BEING OPERATED B Y THE ASSESSEE ON TRANSFER ON LEASE BASIS WAS EFFECTIVELY FORMED BY THE TRANSFER OF THE PLANT AND MACHINERY PREVIOUSLY USED BY THE SDAL AND THE ASSESSING OFFICER IS RIGHT IN DENYING THE CLAIM OF THE EXEMPTION UNDER SECTION 10B OF THE ACT. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECOR D. WE FIND FROM THE ORDER OF THE CIT [A] THAT FOR THE ASSESSM ENT YEAR 2006-07 THE ASSESSEE HAS MADE A MEAGER INVESTMENT OF RS.1 38 55 000/- IN MACHINERY WHEREAS THE SAME BUS INESS WAS BEING CARRIED OUT BY M/S SYNERGY DOORAY AUTOMAT IC LIMITED WITH THE PLANT MACHINERY VALUE OF RS.125.55 CRORES AND THEREFORE IT IS CLEAR THAT BUT FOR THIS PREMEDITAT ED ARRANGEMENT IT WOULD NOT HAVE BEEN POSSIBLE FOR TH E ASSESSEE COMPANY TO MANUFACTURE THE COMMODITY OF THIS KIND A ND ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 12 THEREFORE IT IS ONLY WHEN SUCH AN INTEGRATED UNIT I S LAUNCHED THAT IT CAN BE SAID THAT THERE WAS NO SPITTING UP O F BUSINESS OR THERE WAS NO RE-CONSTRUCTION. IT IS HELD BY THE CI T (A) THAT ACCORDING TO HONBLE APEX COURT THE INDUSTRIAL UNIT SET UP MUST BE NEW IN THE SENSE THAT NEW PLANTS AND MACHINERY A RE ERECTED FOR PRODUCING EITHER THE SAME COMMODITIES OR SOME D ISTINCT COMMODITIES. IN THE CASE OF THE ASSESSEE HOWEVER THERE IS NO NEW INTEGRATED UNIT WHICH IS CAPABLE ENOUGH TO CARR Y OUT THE PRODUCTION OF THE GOODS AS HAVE BEEN CLAIMED AS MAN UFACTURED AND EXPORTED BY IT. IT IS FURTHER HELD BY THE CIT ( A) THAT THE DEVELOPMENT OR PRODUCTION OF COMPUTER SOFTWARE REQU IRES APPLICATION OF MIND AND CREATION OF ALGORITHMS WH ICH CAN BE DONE BY OUTSIDE AGENCIES ALSO AT THE INSTRUCTIONS O F THE ORIGINAL MANUFACTURER. IN THE CASE OF MANUFACTURI NG OF ALUMINIUM ALLOY WHEELS IT IS OF PLANT AND MACHINER Y WHICH IS OF UTMOST IMPORTANCE FOR CARRYING OUT THE MANUFACTURE. BESIDES IT IS NOT THE CASE THAT IN ADDITION TO THE PRODUCTI ON CARRIED OUT ON ITS OWN THE ASSESSEE HAD TAKEN THE ASSISTANCE O F PLANT AND MACHINERY BELONGING TO OTHERS FOR THE SAKE OF SOME ADDITIONAL PRODUCTIONS. 7. IN THE CASE UNDER CONSIDERATION WE FIND THAT T HERE WAS AN INDUSTRIAL UNDERTAKING OWNED BY M/S SYNERGY DOORAY AUTOMATIC LIMITED [SDAL] AND THE SAID COMPANY WAS A LLOWED DEDUCTION UNDER SECTION 10B OF THE ACT IN THE PROCE EDING ASSESSMENT YEARS. THE ASSESSMENT YEAR WITH WHICH WE ARE CONCERNED IN THE CASE UNDER CONSIDERATION IS ASSESS MENT YEARS 2006-07 AND 2007-09. IN THE PREVIOUS YEARS RELEVAN T TO THE ASSESSMENT YEARS UNDER CONSIDERATION THE ASSESSEE COMPANY ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 13 TAKEN THE UNIT ON LEASE OR LICENSE FOR OPERATING AN D MAINTAINING THE UNIT WITH FACILITIES OF MANUFACTURI NG OF ALUMINUM ALLOY WHEELS FROM SDAL AND CARRIED ON MANUFACTURING. THE ASSESSEE COMPANY CLAIMED CONTI NUATION OF RELIEF UNDER SECTION 10B OF THE ACT FOR THE BALA NCE UNEXPIRED PERIOD. IN OTHER WORDS THE ASSESSEE COMPANY CLAIME D BENEFIT UNDER SECTION 10B OF THE ACT NOT ON THE BASIS OF TH E ESTABLISHMENT OF NEW INDUSTRIAL UNDERTAKING BUT ON THE BASIS OF THE LEASE ARRANGEMENT BETWEEN THE ASSESSEE COMPA NY WITH SDAL. WE AGREE THAT THE CIRCULAR ISSUED BY THE CBD T VIDE NO.F.NO.15/5/63-IT[AI] IS WITH THE VIEW THAT THE B ENEFIT UNDER SECTION 10B [IN CIRCULAR IT WAS FOR SECTION 80J OF THE ACT] OF THE ACT ATTACHES TO THE UNDERTAKING AND NOT TO THE OWNE R THEREOF AND THEREFORE A SUCCESSOR TO THE BUSINESS WOULD BE ENTITLED TO THE BENEFITS FOR THE BALANCE UNEXPIRED PERIOD. HEN CE IN ORDER TO GET THE BENEFIT OF SECTION 10B OF THE ACT FOR T HE UNEXPIRED PERIOD THE ASSESSEE COMPANY MUST PROVE THAT IT IS A SUCCESSOR TO THE PREDECESSOR WHO WAS ENJOYING THE BENEFIT OF SECTION 10B OF THE ACT. BUT ACCORDING TO THE FACTS OF INSTANT CASE THE ASSESSEE COMPANY IS ONLY A LESSEE HAVING A RIGHT T O ENJOY THE PLANT AND MACHINERY. OWNING THE PLANT AND MACHINERY AND TAKING PLANT AND MACHINERY ON LEASE ARE TWO DIFFERE NT THINGS. OWNERSHIP IS A BUNDLE OF RIGHTS. LEASE-HOLD RIGHTS ARE A PART OF BUNDLE OF RIGHTS IN THE OWNERSHIP. IN THE CASE BEFORE US THE ASSESSEE COMPANY IS NOT A SUCCESSOR TO THE LESS OR. IN ORDER TO DECIDE THE ELIGIBILITY OF THE ASSESSEE COM PANY TO CLAIM UNDER SECTION 10B OF THE ACT IT IS REQUIRED TO BE SEEN THAT WHETHER THE UNDERTAKING TRANSFERRED TO THE ASSESSEE COMPANY ON LEASE BASIS CAN BE SAID TO BE A NEW UNDERTAKING . IT IS ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 14 CLEAR THAT ON READING OF SECTION 10B OF THE ACT T HE EXEMPTION IS APPLICABLE ONLY TO AN ABSOLUTELY NEW UNDERTAKING STARTED FOR THE FIRST TIME. UNLESS THE ASSESSEE WHO CLAIMS THE BENEFIT UNDER SECTION 10B OF THE ACT FOR THE UNEXPIRED PERI OD ESTABLISHES THAT IT IS A SUCCESSOR OF A LESSOR AND IT FULFILLS ALL OTHER NECESSARY CONDITIONS IN EACH YEAR IT CANNOT CLAIM OF BENEFIT UNDER SECTION 10B OF THE ACT FOR THE BALANC E UNEXPIRED PERIOD. APPROVALS AND PERMISSIONS GIVEN BY THE CON CERNED DEVLOPMENT COMMISSIONER ON RESTRUCTURING PACKAGE AR E ALL IN THE CONTEXT OF BONDING DE-BONDING OF THE UNIT CEN TRAL EXCISE AND CUSTOM DUTY FORMALITIES ETC AND IT IS NOTING T O DO WITH THE EXEMPTION UNDER SECTION 10B OF THE INCOME TAX ACT. WE DO NOT SEE ANY MERIT IN THE ARGUMENTS OF THE LEARNED COUNS EL FOR THE ASSESSEE THAT UNDER SECTION 10B OF THE ACT IT IS N OT NECESSARY THAT THE MANUFACTURING ACTIVITY HAS TO BE CARRIED O N BY THE ASSESSEE HIMSELF BY USING HIS OWN PLANT AND MACHINE RY. IF THE ARGUMENTS OF THE LEARNED COUNSEL FOR THE ASSESSEE A RE TO BE TAKEN AS CORRECT THEN THERE IS NO LOGIC OR PURPOSE TO HAVE SUB- SECTION 2 OF SECTION 10B OF THE ACT IN THE STATUE B OOK AND THE CONDITIONS LAID DOWN THERE UNDER. THE ARRANGEMENTS ENTERED BY THE ASSESSEE COMPANY IS TO BE HELD IN THE NATURE OF A DEVICE ADOPTED BY IT TO AVOID THE APPLICATION OF TH E PROVISIONS OF SUB-SECTION 2 TO SECTION 10B OF THE ACT AND RELE VANT APPLICABLE EXPLANATIONS. THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF ITO VS. TEC HDRIVE [SUPRA]; WE FIND THAT THE ASSESSEE WAS IN THE BUSIN ESS OF EXPORT OF SOFTWARE AND ALSO HAD ITS OWN COMPUTERS A ND LAPTOP COMPUTERS FOR DOING THE INTEGRATION OF THE COMPONE NT PROGRAMMES DEVELOPED BY THE OTHER COMPANY. IN THE C ASE OF ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 15 ITO VS. HEARTLAND K.G. [SUPRA] RELIED ON BY THE LE ARNED COUNSEL FOR THE ASSESSEE IN THAT CASE THE ASSESSE E ACQUIRED ASSETS FROM ANOTHER COMPANY AND THERE WERE NO LEASE ARRANGEMENTS. IN THE CASE OF CIT VS. NARANG DAIRY PRODUCTS [SUPRA] RELIED ON BY THE LEARNED COUNSEL FOR THE AS SESSEE IN THAT CASE THE ASSESSEE CLAIMED DEVELOPMENT REBATE AND THE APEX COURT HELD THAT WITHDRAWAL OF DEVELOPMENT REBA TE BY THE ASSESSING OFFICER RELYING ON SECTION 34(3)(B) OF TH E ACT IS JUSTIFIED BY INTERPRETING THE CRUCIAL WORDS OTHERW ISE TRANSFERRED OCCURRING IN SECTION 34(3)(B) OF THE A CT. ALL THE DECISIONS RELIED ON BY THE ASSESSEE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. AFTER CONSI DERING THE TOTALITY OF FACTS AND THE CIRCUMSTANCES OF THE CASE AND GOING THROUGH THE ORDERS OF THE AUTHORITIES BELOW WE FIN D THAT THE CIT (A) IS PERFECTLY JUSTIFIED IN UPHOLDING THE FIN DINGS OF THE ASSESSING OFFICER IN DENYING THE CLAIM OF EXEMPTION UNDER SECTION 10B OF THE ACT FOR THE ASSESSMENT YEARS UND ER CONSIDERATION. THEREFORE NO INTERFERENCE IS CALLED FOR. 8. IN THE RESULT BOTH THE APPEALS FILED BY THE AS SESSEE ARE DISMISSED. PRONOUNCED IN THE COURT ON 18-3-2011. SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEM BER DATED:18 TH MARCH 2011 FIT FOR PUBLICATION SD/- SD/- (G.C. GUPTA) (AKBER BASHA) VICE PRESIDENT ACCOUNTANT MEM BER ITA NOS.864 &1364/HYD/2010. SYNERGIES CASTINGS LTD. 16 COPY TO:- 1) PRASAD & PRASAD CHARTERED ACCOUNTANTS 30 & 31 FIRST FLOOR REDDY HOSTEL SHOPING COMPLEX TILAK ROAD ABIDS HYDERABAD. 2) DCIT CIR-3(3) HYDERABAD. 3) THE CIT (A)-IV HYDERABAD. 4) THE CIT AP HYDERABAD. 5) THE DR ITAT HYDERABAD. JMR*