The assessee being an individual and a proprietor, was engaged in the business of manufacturing of ancillary equipment catering to plastic, paper, rubber, confectionery food, and medical industries. The assessee during the year under consideration, set up a unit in Haridwar and claimed a deduction towards profit derived from undertaking situated at Haridwar under section 80IC of the Act. The AO did not allow the deduction for the same holding that the assessee had split up the business of the entity and diverted it to his proprietary concern especially to the Haridwar unit. The Ld. CIT(A) held that new unit established at Haridwar was a new undertaking, but not established by splitting or reconstructing of existing unit of the assessee. Also, the Ld. CIT(A) negated the observations made by the AO considering transfer of used plant and machinery more than prescribed limit.

On appeal, the Hon’ble Tribunal on going through the facts of the case and relying on the decision of the Hon’ble High Court of Delhi in the case of CIT v. Ganga Sugar Corporation Ltd (1973) 92 ITR 173(Delhi)(HC)  held that the concept of reconstruction of business would not be attracted when a company which is already running one industrial unit set up another industrial unit. Further, the new industrial unit would not lose its separate and independent identity even though it has been set up by a company which is already running an industrial unit before the setting up of the new unit. The Hon’ble Tribunal noted that the object of the section was to provide incentive for the setting up of new industrial unit to accelerate the process of industrialization. Therefore, the action of Ld. CIT(A) was correct in holding that the assessee was eligible for deduction under section 80IC of the Act. (AY. 2013-14)