Hyderabad bench of the Income-tax Appellate Tribunal (the Tribunal) in the case of Synergies Casting Ltd. Vs. DCIT (ITA No. 864 & 1364/Hyd/2010) held that exemption under Section 10B of the Income-tax Act, 1961 (the Act) is not available to an undertaking taken over on lease. Further, the Tribunal held that in order to get the benefit of Section 10B of the Act, for the unexpired period, the taxpayer must prove that it is a successor to the predecessor company. Since the taxpayer was only a lessee it was not a successor to the lessor.
Background
Sub-section 2 to section 10B states that benefits of Section 10B applies to any undertaking which manufactures or produces any articles or things or computer software, is not formed by the splitting up, or the reconstruction, of a business already in existence and is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
Facts of the case
- Synergy Dooray Automatic Limited (SDAL) owned an industrial undertaking which was allowed deduction under Section 10B of the Act.
- The taxpayer had taken the eligible unit on lease or license from SDAL for operating and maintaining with facilities of manufacturing. The taxpayer continued to claim relief under section 10Bof the Act for the balance unexpired period.
- The Assessing Officer (AO) contended that the unit was operated by the taxpayer on lease basis and therefore was effectively formed by the transfer of plant and machinery previously used by SDAL. Accordingly, the AO denied the claim of the exemption under Section 10Bof the Act.
Taxpayer’s contentions
