Case Law Details
Sundaram Non-Conventional Energy Systems Limited Vs ACIT (Madras High Court)
On a plain reading of Section 80-IA(3) would clearly show that the words “previously used” would mean actual physical use of the asset and not deemed to have been previously used. The benefit claimed by the assessee in the case on hand is a deduction under Section 80-IA, which is a deduction, which was brought to encourage industrial growth. Therefore, the correct way to interpret the words “previously used” would mean actual physical use of the asset. There was nothing brought on record by the Assessing Officer that the asset was put to actual physical use for any purpose before the lease transaction and the inference drawn by the Assessing Officer is solely based upon the claim for depreciation made by the lessor. This, in our considered view, cannot be the correct way of interpretation of a beneficial provision, which provides for deduction in certain cases, where conditions are fulfilled and the object of granting such deduction was to promote industrial growth. Therefore, the CIT(A) is right in its observation that a lease transaction would not amount to a transfer and merely because the lessor had claimed 100% depreciation on the said asset cannot make the asset as ‘previously used’ to disqualify the asset from claiming deduction. In fact, in the decision in Bajaj Tempo Ltd., (supra), the Hon’ble Supreme Court did not approve the decision of the Bombay High Court, which was referred to by the Assessing Officer in the case of Capsulation Services Pvt. Ltd. vs. CIT reported in (1973) 91 ITR 566 (Bom.) and it was observed that “previously used in any other business” cannot be construed so narrowly as to confine it to building of the assessee (therein) only.
Further, the Hon’ble Supreme Court did not approve the view of the Bombay High Court that if a new undertaking is established in a premises taken on lease then it, always, amounts to formation of the undertaking by transfer of the building previously used. The Hon’ble Supreme Court came to such conclusion by observing that the said decision was given without examining the scope of the word “formed”, which was construed by the Hon’ble Supreme Court in Textile Machinery Corporation Ltd. vs. CIT reported in (1997) 186 ITR 195, which approved the decision of the High Court of Delhi in CIT vs. Ganga Sugar Corporation Ltd. reported in (1973) 92 ITR 173 (Del). Further, it was held that building, machinery or plant used previously in other business should not result in the undertaking being formed by it. The transfer to take out the new undertaking out of the purview of sub-section (1) must be such that but for transfer the new undertaking could not have come into being.
The decision of the Hon’ble Supreme Court in Bajaj Tempo Ltd. (supra), was followed in CIT vs.Nayyars Minerals Export (P.) Ltd. reported in (1998) 231 ITR 864 (HP), wherein it was held that hiring of certain machineries from sister concern would not amount to transfer as provided under Section 80J(4)(ii) of the Act.
FULL TEXT OF THE MADRAS HIGH COURT ORDER /JUDGEMENT
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