Commissioner of Income Tax vs Sagun Gems (P) Ltd.

Narendra Kumar Jain, J.—Heard learned counsel for the appellant. This income tax appeal is directed against order dt. 20th Jan., 2012 passed by Tribunal, Jaipur Bench ''A'', Jaipur, whereby, appeal preferred by Revenue/appellant, against order of CIT(A), has been dismissed.

Brief facts of the case are that respondent/assessee was engaged in the business of manufacturing and export of gems and silver jewelries .The assessee claimed deduction under s. 10A of the IT Act, which was disallowed by AO, CIT(A), on an appeal preferred on behalf of assessee, allowed the exemption, claimed by the assessee and set aside the order of AO. Thereafter, Department preferred an appeal before the Tribunal, which has been dismissed. Thereafter, Department has preferred this appeal.

Submission of learned counsel for the appellant is that AO rightly disallowed the claim of exemption made by assessee. The CIT(A) as well as Tribunal both committed an illegality in setting (aside) the order of AO.

We have considered submissions of learned counsel for the appellant and examined the impugned order of Tribunal as well as orders passed by CIT(A) and also the AO.

The CIT(A) has considered all the factual aspects of the matter and recorded a finding that it has been brought on record that Shri Pitambar Sharma did not divert the funds from his existing concern to the new company but invested in share capital of M/s Shagun Gems (P) Ltd. from realization of his assets other than the capital employed in the firm. CIT(A) also came to a conclusion that from the bills it is clear that the new plant and machinery was purchased by the concern and further that out of 70 employees in the new concern, only 8 were from the earlier concern. The finding of the CIT(A) was quoted in para 5 of the impugned order by the Tribunal, which is again reproduced here for ready reference :

I have carefully perused the order of the AO and the submissions of the Authorised Representative. On verification of the facts as submitted by the Authorised Representative and law as per the judicial pronouncements relied on by him I concur with the submissions of the Authorised Representative that the claim of exemption under s. 10A was correctly made by the assessee. First of all, it has been brought on record that Shri Pitambar Sharma did not divert the funds from his existing concern to the new company but invested share capital of M/s Shagun Gems (P) Ltd. from realization of his assets other than the capital employed in the firm. Secondly, it is clear from the bills submitted that the new plant and machinery was purchased by the concern. Thirdly, out of 70 employees in the new concern, only 8 were from the earlier concern. In view of the above facts, it cannot be concluded that the new company i.e. M/s Shagun Gems (P) Ltd. is nothing but reconstruction of old business within the meaning of provisions of s. 10A(2)(ii). On the basis of these facts and judicial pronouncements relevant to these facts, the exemption claimed by the assessee under s. 10A of Rs. 94,84,191 is directed to be allowed.

The above factual aspects and submissions of both the parties were considered by Tribunal in detail and Tribunal also recorded a finding that there is no reason to hold that assessee company is nothing but restructured company of earlier company and is not entitled for exemption. Para 9 of the order of the Tribunal is also reproduced as under :

After considering the orders of the AO, learned CIT(A) and submissions of both the parties, we find no infirmity in the finding of learned CIT(A) who has examined the issue and then found that the assessee''s case does not bit by provisions of s. 10A(2)(ii) of the Act and, therefore, assessee is entitled for deduction under s. 10A. Various objections raised by AO as mentioned above have been verified by learned CIT(A) and found that land and building and machineries are new. Capitals introduced by the directors are from teir own sources and not by transferring from M/s Shagun. Out of 70 employees employed by assessee company, only 8 employees were related to M/s Shagun and this is not a reason that for employing the ex-employees of any other company curtails the benefit allowable to the assessee. If by any reason any employee has left the services of any company and joins a new company it does not hold that a new company is a restructured company of the earlier company from where the employee has left the services. There is no bar to sale the goods to the customers which were purchasing the goods from other entity i.e. M/s Shagun. The assessee company is an independent unit doing its own activity of manufacturing and thereafter the material has been sold on the basis of market price. Therefore, there is no reason to hold that assessee company is a restructured company of earlier and hit by provisions of s. 10A(2)(ii) of the Act. In view of these facts and circumstances, we hold that learned CIT(A) was justified in allowing the issue in favour of the assessee. Accordingly, we confirm his order.

The finding of CIT(A) as well as Tribunal and other facts and circumstances of the present case, narrated and discussed above, make it clear that all these questions are relating to questions of facts and there is a concurrent finding of facts recorded by CIT(A) as well as Tribunal.

It is a settled law that income tax appeal can be admitted by this Court only on substantial question of law. This Court cannot interfere in the finding of fact recorded by Courts below. Since no substantial questions of law are involved in this appeal, therefore, we are not inclined to admit it and the same is, accordingly, dismissed in limine.