K.S.JHAVERI,J. - (1.) By way of all these appeals, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the department and confirmed the order of the CIT(A) modifying the order of the Assessing Officer.
(2.) This Court while admitting the appeal No. 285/2011 on 31.03.2014 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 7,38,85,415/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.1. This Court while admitting the appeal No.382/2011 on 31.03.2014 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 2,32,67,650/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.2. This Court while admitting the appeal No.224/2012 on 31.03.2014 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 12,15,247/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.3. This Court while admitting the appeal No.95/2014 on 23.04.2016 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 2,21,13,167/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.4. This Court while admitting the appeal No.96/2014 on 23.04.2016 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 3,30,87,091/- despite violation of mandatory conditions prescribed in section 10AA(4)(ii) of the Act." 2.5. This Court while admitting the appeal No.10/2016 on 03.01.2017 has framed the following substantial question of law: "Whether on the facts and circumstances of the case and in law the Hon'ble ITAT is justified in deleting the disallowance of Rs. 20,82,95,557/- made by the Assessing Officer under Section 10-AA even though the assessee does fulfill the conditions of Section 10AA(4)(ii) of the Income Tax Act, 1961 namely that the undertaking should be formed by the reconstruction of business already in existence." 2.6. This Court while admitting the appeal No.132/2016 on 14.9.2016 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 2,95,41,452/- despite violation of mandatory conditions prescribed under section 10AA(4)(ii) of the Act , which provides that the assessee should be formed by construction of a business already in existence and the assessee was formed by reconstruction of another unit which was his proprietary concerned in the same trade of business?" 2.7. This Court while admitting the appeal No.257/2016 on 23.01.2017 has framed the following substantial question of law: "Whether the Tribunal as well as CIT(A) were justified in holding the assessee entitled for benefit under section 10AA of the Act and thereby granting deduction of Rs. 2,17,55,743/- despite violation of mandatory conditions prescribed under section 10AA(4)(ii) of the Act , which provides that the assessee should be formed by construction of a business already in existence and the assessee was formed by reconstruction of another unit which was his proprietary concerned in the same trade of business?"
(3.) Counsel for the appellant has taken us to the order of the Assessing Officer and contended that the Assessing Officer while concluding the issue has observed as under: "The Assessee had contended that just because the proprietor of M/s Green Fire is one of the partner should be taken as 'reconstruction of old business' as the assessee firm is a separate entity formed and carrying on business much before the AY 2007-08. The repeated concern of the assessee with respect to the assessee coming into existence is irrelevant and has already been addressed in above paragraphs. As discussed in detail in the show caused dated 16.12.2009, and at the cost of repetition, the main points are summarized once again as under:- i. The unit set up in SEZ is actually an all the same a new and identifiable unit. A business activity normally comprises assets, employees and contracts. When any one or more of these move, from one location to another, the issue for consideration is whether such shifting tantamount to reconstruction. In the case of the assessee, it is clear form perusal of details placed on file that there has been a transfer of assets i.e. in terms of capital induction, human resources, transacting parties-purchase as well as sales, inventories, customer base, nature of business itself, trademark and even the Brandname of both the concerns. There cannot be reconstruction without transfer of assets. A new industrially recognizable unit of the assessee can be said to be reconstruction of his old business if there is no transfer of assets of the old business to the new undertaking. But in the given case, the assets have been substantially transferred out of the existing business on to the new unit. ii. The major sales party of M/s Green Fire (Proprietorship concern, AY 2006-07) was M/s Emsaru USA Corporation to which sales of Rs. 9,24,54,775/- out of total sales of Rs. 10,24,87,665/- was made. And out of the total sales of Rs. 20,79,56,985/-, sales of Rs. 193636330/- was made to the same concern by the assessee. Therefore, it is obvious that there has been a near total shift of customer's base from the old business to the new one. iii. Reconstruction of business involves the idea of substantially the same persons carrying on substantially the same business. In order to be entitled to the benefit, the new unit has to be former by substantially new investment, which unfortunately was the case here. Even if a new business is carried on but by piercing the veil of the new business it is found that there is employment of the assets of the old business, the benefit will be be available. From this it is clear that substantial investment of new capital is imperative and this substantial investment of fresh capital must be made in order to enable earning of profits attributable to that new capital. As mentioned in the show cause also, in the AY2007-08, capital of Rs. 27 lacs out of total receipt of Rs. 38 lacs in the year was received from M/s Green Fire. Even in the earlier year also, there has been a direct intake of capital from it by M/s Green Fire Exports. Thus, it is clear that the new unit in the name of M/s Green Fire Exports has been formed out of new funds, but it merely reflects shift of money from the original business i.e. M/s Green Fire to the new one. The new undertaking must be substantially the same old existing business. Even if a new business is carried on but by piercing the veil of the new business it is found that there is employment of the assets of the old business, the benefit will be available. Same is the case as far as funds from unsecured loans is concerned, i.e. source of funds remains the same. iv. Further, the concept of 'reconstruction of business already in existence' essentially rests on changes but the changes must be constructive and destructive. There must be something positive about the whole matter as opposed to negative. The brought out by the section itself - of a business already in existence'. The changes that have taken place in non-SEZ unit has been anything but positive. Continuity and preservation of old unit has been completely lost. There couldn't be a clearer case of destruction of the old unit. v. Transfer of assets and the consequent reconstruction of existing business also finds reflection in the fact that most of the purchase parties of both unit are same. This fact also strengthens the stand of deconstruction of old unit and reconstruction of the same in the form of the assessee firm. All these points tell only one thing i.e. only represents shifting of contracts from M/s Green Fire to M/s Green Fire Exports. Same reasoning hold true with respect to shifting of employees en masse.";