This Tax Alert summarizes a recent ruling of the Delhi High Court (HC) in the case of HCL Technologies (Taxpayer) where, having regard to the factual findings of lower authorities that the units in question were only an extension of the existing unit, the HC declined to examine the Taxpayer’s claim for grant of tax holiday benefit on the basis of the Taxpayer’s contention that units approved under a single regulatory license were separate and independent.
Based on concurrent findings of lower authorities that 31 units of the Taxpayer were not separate and distinct units, the HC declined to interfere with the conclusion of lower authorities.
There has been a controversy as to whether tax holiday benefit is attached to “license” issued by the Authority (regardless of number of units as may be approved within one license) or it is available for each unit comprised in the license so long as such unit represents a separate and distinct unit. In a case where formation of a separate unit can be established, the tax holiday period will be reckoned with reference to the year of set-up of each such unit and not with respect to the year of issuance of license for the first unit comprised in the license.
As it appears, in the present case, the HC refused to intervene in the issue of whether separate and distinct undertakings had emerged under the same license, as claimed by the Taxpayer. The HC based its decision in this regard on the finding recorded by the Tribunal that there was inadequate evidence to support the claim of the Taxpayer. In delivering its ruling, the HC does not appear to have answered the legal proposition of whether addition of a location to an existing license would always constitute expansion of an existing undertaking and, consequently, cannot be treated as a separate and distinct undertaking.
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