New industrial undertaking in free trade zone – Export-oriented undertaking – Exemption under sections 10A and 10B – Shifting of undertaking to another place with approval of authorities – Not a case of splitting up or reconstruction of business – Assessee entitled to exemption

New industrial undertaking in free trade zone – Export-oriented undertaking – Exemption under sections 10A and 10B – Shifting of undertaking to another place with approval of authorities – Not a case of splitting up or reconstruction of business – Assessee entitled to exemption

While completing the assessment u/s 143(3) read with section 147 for the A.Ys. 2000-01 and 2001-02, the A.O. disallowed the claim of deduction made by the assessee under sections 10A and 10B on the ground that an undertaking was formed by splitting up / reconstruction of the business already in existence. While completing the assessment u/s 143(3) read with section 263(3) for the A.Y. 2002-03, the A.O. disallowed the claim u/s 10A on the ground that an undertaking was formed by splitting up / reconstruction of the business already in existence among others.

The Commissioner of Income-tax (Appeals) allowed the appeals for the A.Ys. 2000-01 and 2001-02 by following the order of the Tribunal. The Department filed appeals before the Income-tax Appellate Tribunal and the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals). The Tribunal held that this was not a case of setting up of a new business but only of transfer of existing business to a new place located in a software technology park area and, thereafter, getting the approval from the authorities.

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

‘On the facts and in the circumstances of the case, the assessee was entitled to deduction u/s 10A/10B.’