Brief of the case:
The Hon’ble Himachal Pradesh High Court in the case of CIT vs. M/s Yash International Inc. held that the fact that the new firm has almost the same partners and some workers of existing firm shifted to new firm’s unit cannot make the new entity arising as result of splitting up of the existing one. It is because new entity has its own independent existence and its survival does not depend on the existing entity’s future business prospects.
Facts of the case:
- Assessing officer during the course of assessment proceedings disallowed the deduction claimed u/s 80IC on the ground that the new partnership firm was formed by splitting up the existing partnership firm having the same partners which utilizes the infrastructure and employees of the existing firm.
- The assessee filed an appeal before the Commissioner of Income Tax (Appeals) and the same was allowed by CIT (Appeals). ITAT also upheld the order passed by CIT (Appeals).
- Aggrieved by the same, revenue is now appeal before the Hon’ble Himachal Pradesh High Court.
Contention of the Assessee:
- The new firm although have all partners of the existing firm but also one new partner and the new firm has its existence independent of the existing firm. Further, it obtained separate registration under industrial laws and made investment which has resulted in having installed capacity more than that of the existing firm.
- Considering all these factors the new entity could not be said to be formed by splitting up the existing one.
Contention of the Revenue:
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