Armstrong Knitting Mills (P.) Ltd. v. Dy. CIT

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The Tax Publishers2013 TaxPub(DT) 0999 (Chen-Trib) : (2013) 051 (II) ITCL 0019 : (2013) 056 SOT 0334 INCOME TAX ACT, 1961 --Deduction under section 80-IA--Profit and gains derived from industrial undertaking Assessee earlier purchased windmill, generated energy, sold it to its sister concern and got the same leased back whether, the said course of action adopted by assessee hit by section 80-IA(3) or not--Assessee-company engaged in the business of power generation from windmills. Assessing officer noticed that the assessee had earlier purchased the windmills in question and the same were put to use by the assessee for producing wind power and thereafter it had sold the same to its sister concern who executed a lease agreement with the assessee for leasing out the windmills in lieu of lease rent, therefore, assessee was not eligible for claiming deduction under section 80-IA. Assessee however, contended that it was entitled for deduction as the relevant provisions of the section 80-IA(3)(i) and (ii) did not apply to its case. *Held:* Not rightly so as in sub-section (3) of section 80-IA the legislature has stipulated some conditions which are to be satisfied, i.e., the undertaking in question should not be formed by splitting or reconstruction of a business already in existence and it should not be formed by the transfer to a new business of machinery or plant previously used 'for any purpose'. In this case, the assessee's business stood split up since the assessee's status as proprietor of the plant changed to that of a lease holder, therefore, the same amounted to splitting up and section 80-IA(3)(i) was applicable. Similarly, the assessee's case was also hit by section 80-IA(3)(ii) as the plant previously used for generating power stood transferred to a new business of its sister concern and more so, the legislature in is wisdom had deliberately laid emphasis in using the word 'any purpose' which was of widest possible amplitude being inclusive in nature covering the facts of the present case. A perusal of the above said provision makes it clear that while enacting section 80-IA of the 'Act' for providing deduction to the undertakings engaged in infrastructure development, the legislature has incorporated the above deduction provision. At the same time, in sub-section (3), the legislature has also stipulated some conditions which are to be satisfied i.e., the undertaking in question should not be formed by splitting or reconstruction of a business already in existence and it should not be formed by the transfer to a new business of machinery or plant previously used 'for any purpose'. The assessee, in this case, had earlier purchased the windmill, sold it and later on got it leased back. Meaning thereby that its business stood split up since the assessee's status as proprietor of the plant changed to that of a lease holder. The same amounts to splitting up for the purpose of the above said legislative provision. Hence, section 80IA(3)(i) is applicable in the instant case. Similarly, assessee's case is also hit by section 80IA(3)(ii) as the assessee had earlier sold the business the windmill plant stood transferred to its sister concern. The sister concern leased back the windmill to the assessee. It has come on record that the assessee had also produced wind power in the year 2003 (supra). Therefore, as per sub-clause (ii) of section 80IA(3), once the machinery or plant previously used for 'any purpose' is transferred to a new business, the concerned undertaking is not entitled for deduction. In the instant case and in view of the circumstances involved herein, Tribunal held that since the plant previously used for generating power stood transferred to a new business of its sister concern, the condition above said would come to play in these circumstances. The legislature in its wisdom has deliberately laid emphasis in using the word 'any purpose', which is of widest possible amplitude being inclusive in nature covering the facts of the instant case. [Para 8] SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 0999 (Chen-Trib) : (2013) 051 (II) ITCL 0019 : (2013) 056 SOT 0334

INCOME TAX ACT, 1961

--Deduction under section 80-IA--Profit and gains derived from industrial undertaking Assessee earlier purchased windmill, generated energy, sold it to its sister concern and got the same leased back whether, the said course of action adopted by assessee hit by section 80-IA(3) or not--Assessee-company engaged in the business of power generation from windmills. Assessing officer noticed that the assessee had earlier purchased the windmills in question and the same were put to use by the assessee for producing wind power and thereafter it had sold the same to its sister concern who executed a lease agreement with the assessee for leasing out the windmills in lieu of lease rent, therefore, assessee was not eligible for claiming deduction under section 80-IA. Assessee however, contended that it was entitled for deduction as the relevant provisions of the section 80-IA(3)(i) and (ii) did not apply to its case. Held: Not rightly so as in sub-section (3) of section 80-IA the legislature has stipulated some conditions which are to be satisfied, i.e., the undertaking in question should not be formed by splitting or reconstruction of a business already in existence and it should not be formed by the transfer to a new business of machinery or plant previously used 'for any purpose'. In this case, the assessee's business stood split up since the assessee's status as proprietor of the plant changed to that of a lease holder, therefore, the same amounted to splitting up and section 80-IA(3)(i) was applicable. Similarly, the assessee's case was also hit by section 80-IA(3)(ii) as the plant previously used for generating power stood transferred to a new business of its sister concern and more so, the legislature in is wisdom had deliberately laid emphasis in using the word 'any purpose' which was of widest possible amplitude being inclusive in nature covering the facts of the present case.

A perusal of the above said provision makes it clear that while enacting section 80-IA of the 'Act' for providing deduction to the undertakings engaged in infrastructure development, the legislature has incorporated the above deduction provision. At the same time, in sub-section (3), the legislature has also stipulated some conditions which are to be satisfied i.e., the undertaking in question should not be formed by splitting or reconstruction of a business already in existence and it should not be formed by the transfer to a new business of machinery or plant previously used 'for any purpose'. The assessee, in this case, had earlier purchased the windmill, sold it and later on got it leased back. Meaning thereby that its business stood split up since the assessee's status as proprietor of the plant changed to that of a lease holder. The same amounts to splitting up for the purpose of the above said legislative provision. Hence, section 80IA(3)(i) is applicable in the instant case. Similarly, assessee's case is also hit by section 80IA(3)(ii) as the assessee had earlier sold the business the windmill plant stood transferred to its sister concern. The sister concern leased back the windmill to the assessee. It has come on record that the assessee had also produced wind power in the year 2003 (supra). Therefore, as per sub-clause (ii) of section 80IA(3), once the machinery or plant previously used for 'any purpose' is transferred to a new business, the concerned undertaking is not entitled for deduction. In the instant case and in view of the circumstances involved herein, Tribunal held that since the plant previously used for generating power stood transferred to a new business of its sister concern, the condition above said would come to play in these circumstances. The legislature in its wisdom has deliberately laid emphasis in using the word 'any purpose', which is of widest possible amplitude being inclusive in nature covering the facts of the instant case. [Para 8]