|The Tax Publishers2020 TaxPub(DT) 5589 (Karn-HC) : (2021) 279 TAXMAN 0364
INCOME TAX ACT, 1961
Assessee was entitled to the benefit of deduction under section 10B as there was no transfer of old plant and machinery to Unit-II so as to form a belief that Unit-II was formed by splitting up of Unit-I, which was already in existence and after referring to various decisions it was found that the activity of assessee amounted to manufacture / production of articles or things.
Deduction under section 10B - Allowability - Assessee not engaged in manufacture of articles -
During the course of assessment proceedings, it was noted by AO that tax audit report filed by assessee mentioned it to be engaged in the business of providing contract research services in the field of molecular biology and synthetic chemistry. Assessee had categorized its receipts under two heads viz., contract research fees and sale of compounds. Assessee had two separate and distinct units. It was claiming deduction in respect of Unit-I since, 1999-00 and the same was allowed to the assessee till the year 2002-03. It started claiming deduction under section 10B in respect of Unit-II for assessment year 2003-04. AO held that assessee was not engaged in the business of manufacture or production of articles or things as it was exporting the result of research which was intangible. He further held that Unit-II was formed by splitting up of Unit-I, which was already in existence. AO, therefore, disallowed the deduction claimed by assessee under section 10B to the tune of Rs. 21,31,59,892 and added it to the income of assessee. Held: CIT (Appeals) held that there was no transfer of old plant and machinery to Unit-II and there was no formation of unit as transfer of old plant and machinery. It had examined the issue of manufacture/production of any article or thing and after referring to various decisions had recorded a finding that the activity of assessee amounted to manufacture / production of articles or things. CIT (Appeals) had recorded following reasons for arriving at the conclusion that assessee was entitled to benefit of section 10B. Tribunal after analysing the contingencies held that assessee was engaged in the activity of production. Thus, the order passed by CIT had been upheld. It was pertinent to mention that in the memo of appeal filed before Tribunal, Revenue had not assailed the finding recorded in favour of the assessee that there had been no splitting up of the business.
REFERRED : Commissioner of Customs (Import) v. Dilip Kumar & Company &Ors. (2018) 68 GST 239 : 2018 TaxPub(EX) 737 (SC); Mangalore Ganesh Beedi Works v. CIT &Anr. (2016) 2 SCC 556 : 2015 TaxPub(DT) 4100 (SC); Union of India v. Ibrahim Uddin &Anr. (2012) 8 SCC 148; Vijay Kumar Talwar v. CIT (2011) 1 SCC 673 : 2011 TaxPub(DT) 0693 (SC); CIT v. Oracle Software India Ltd. (2010) 187 Taxman 275 (SC) : 2010 TaxPub(DT) 1317 (SC); CIT v. B. Suresh (2009) 178 Taxman 457 (SC) : 2009 TaxPub(DT) 1519 (SC); Hero Vinoth (Minor) v. Seshammal (2006) 5 SCC 545; CIT v. NC Budharaja& Co. &Anr. (1993) 204 ITR 412 (SC) : 1993 TaxPub(DT) 1502 (SC); CIT v. Indian Aluminium Company Ltd. (1977) 108 ITR 367 (SC) : 1977 TaxPub(DT) 0803 (SC); T. Satish U. Pai v. CIT (1979) 1 Taxman 123 (Kar.) : 1979 TaxPub(DT) 0701 (Karn-HC); Dy. CIT v. Syngene International Ltd. 2016 TaxPub(DT) 3223 (Bang-Trib); CIT v. Peerless Consultancy & Services (P) Ltd. (2001) 116 Taxman 13 (SC) : 2001 TaxPub(DT) 0725 (SC).
FAVOUR : In assessee's favour
A.Y. : 2005-06
IN THE KARNATAKA HIGH COURT
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