HC : Denies Sec. 80IB deduction to industrial undertaking formed by take-over of existing business

Allahabad HC upholds ITAT order for AY 2001-02, denies Sec. 80-IB deduction to assessee-company’s (running a flour mill) on profits of industrial unit formed by takeover of entire business from another entity; Holds that the industrial unit was set up by purchase of used plant and machinery thus, resulting in violation of condition u/s 80IB(2)(ii), observes that the purpose of Sec. 80-IB is to promote setting up of a new industrial undertaking by purchasing new plant and machinery which stands defeated in assessee's case; Relies on Madras HC ruling in Heartland KG Information Limited rendered in context of Sec. 10A(2), observes that Sec. 80IB(2)(ii) is pari materia with Sec. 10A(2)(iii); Clarifies that transfer of used plant and machinery to a new undertaking and the formation of an industrial undertaking by splitting up/ reconstruction of existing business are two separate conditions u/s 80IB(2), distinguishes assessee's reliance on Bombay HC ruling in Sonata Software Limited in the context of splitting up/reconstruction; Remarks that “The transfer of the used plant and machinery may not result in splitting and reconstruction of the existing industrial undertaking but nevertheless when an unit as a whole is transferred, it includes the transfer of plant and machinery which was in use by the existing unit of a separate legal entity for the formation of a separate industrial undertaking. This kind of transfer is clearly hit by clause (iii) of Sec. 10A(2)..”:HC