An assessee which had existing units in an SEZ and was claiming benefits under section 10AA, set up a new unit in the SEZ, with new plant and machinery and sought exemption under section 10AA on the profits earned from the said new units. The AO denied such exemption in the third year of claim on the ground that the new unit was formed by splitting or reconstruction of the existing business. Held that the conditions stipulated under section 10AA have to be satisfied on a unit wise basis and not on an entity basis. Simply because the assessee was carrying on the same business through existing units does not mean that the new unit, setup with new plant and machinery, will said to have been formed by splitting or reconstruction of business. Further, once the claim was allowed in the first year, it could not be denied in the third year. Accordingly, the issue was to be decided in assessee’s favour. (AY. 2013-14)