22 U/s. 10A – Exemption – A.Y. 2005-06 – Newly established undertaking in free trade zone – Units set up with fresh investments – Units not formed by reconstruction or expansion of earlier business – Business of each unit independent, distinct, separate and not related with other – Assessee entitled to deduction u/s. 10A

22. Exemption
u/s. 10A – A.Y. 2005-06 – Newly established undertaking in free trade zone –
Units set up with fresh investments – Units not formed by reconstruction or
expansion of earlier business – Business of each unit independent, distinct,
separate and not related with other – Assessee entitled to deduction u/s. 10A

 CIT vs.
Hinduja Ventures Ltd.; 397 ITR 139; (Bom):

The assessee had four units
engaged in the business of information technology and information technology
enabled services. For the A.Y. 2005-06, the assesee claimed deduction u/s. 10A
of the Act, in respect of unit II and unit III. The Assessing Officer did not
allow deduction u/s. 10A. Even though the remand report was in favour of the
assessee, the Commissioner (Appeals) confirmed the order of the Assessing
Officer. The Tribunal agreed with the remand report of the Assessing Officer
and held that unit II and unit III were entitled to the benefit u/s. 10A of the
Act.

On appeal by the Revenue,
the Bombay High Court upheld the decision of the Tribunal and held as under:

“i)   The
Assessing Officer in his remand report had specifically observed that both
units were set up with fresh investment. The assessee purchased plant and
machinery for these units and it was not the case that these units were formed
by splitting or reconstructing existing business.

ii)   Separate
books of account were maintained. The employees of each of the units were fresh
set of employees and were not transferred from the existing business. The
nature of activity of both units was totally different. The customers of each
unit were completely different and unrelated and both the units had new and
independent sources of income.

iii)   Thus,
unit II and unit III were not formed by reconstruction of earlier business nor
were they expansions thereof. Though permission was sought by way of an
expansion, the facts on record categorically and succinctly establish that the
business of unit II and unit II was independent distinct and separate and they
were not related with each other or even with unit I. Therefore, the assessee
was entitled to benefit u/s. 10A of the Act.”