JUDGMENT N. Kumar , J.—The revenue has preferred these appeals challenging the orders passed by the Tribunal dismissing the appeals filed by the revenue and affirming the orders passed by the Appellate Commissioner who held that the assessee is entitled to the benefit of section 10A of the Income-tax Act, 1961. The assessee is engaged in development and export of software/hardware. The assessee has plant and machinery of Rs. 13,15,083/- as on 31.03.1993 and the same is Rs. 16,65,116/- as on 31.03.1994 as could be seen from fixed asset schedule. The written down value as on 01.04.1993 in respect of machinery was Rs. 35,63,498/- and additions made during the year was Rs. 9,30,298/- bringing the gross block to Rs. 44,93,797/-. The value of the machinery used in the new business, according to the Assessing Authority, exceeded 20% of the value of the machinery transferred into the business. The assessee pointed cut that an addition of Rs. 1,38,59,994/- was made to plant and machinery, which was received from the foreign customers. This represents certain plant and machinery received on returnable basis from foreign customers and on no cost basis. Therefore, it was contended that if that machinery is taken into consideration, the value of the machinery used in the new business would not exceed 20% of the value of the machinery transferred and therefore, the assessee is entitled to the benefit under section 10A(2) of the Act. The Assessing Officer rejected the said contention on the ground that as could be seen from the schedule of fixed assets as on 31.03.1994, no such machinery is shown by the assessee. Further, he held that assuming that plant and machinery was brought into India on no cost/returnable basis, the conditions specified under section 10A(2) are not satisfied. Therefore, the benefit of section 10A was denied. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals). The Appellate Commissioner held that the assessee has deployed the new plant and machinery of more than 80% of the total plant and machinery deployed during the year. In view of the provision of section 10A(2) read with section 80-I, the ownership of new plant and machinery deployed is not a condition or requirement for claiming exemption under section 10A of the Act. Therefore, he held that the assessee is entitled to exemption under section 10A of the Act. In view of the provision of section 10A(2) read with section 80-I, the ownership of new plant and machinery deployed is not a condition or requirement for claiming exemption under section 10A of the Act. Therefore, he held that the assessee is entitled to exemption under section 10A of the Act. Aggrieved by the said order, the revenue preferred an appeal to the Tribunal. The Tribunal held that the Assessing Officer denied the claim of the assessee on the assumption that the new machinery has been supplied by the parties on returnable basis are not owned by the assessee company. It was of the view that the ownership of the machinery is not relevant for the purpose of granting exemption under section 10A(2) of the Act. What is to be seen is whether the machinery transferred to the undertaking should be less than 20% of the total value of the machinery used by the undertaking. There is no dispute in this regard. The remand report supports the said facts. Therefore, the Tribunal did not find any infirmity in the order passed by the Commissioner of Income-tax (Appeals). Accordingly, the appeal came to be dismissed. Aggrieved by the said order, the revenue is in appeal. 2. These appeals came to be admitted on 22.6.2009 to consider the following substantial questions of law: 1. Whether the Appellate Authorities were correct in holding that ownership of the machinery is not relevant for the purpose of granting deduction u/s. 10A of the Act without taking into account the conditions stipulated u/s. 10A(2) of the Act r.w.s. 80-I of the Act that the total value of the machinery or plant so transferred does not exceed 20% of the total value of the machinery or plant already used in the business of the assessee? 2. Whether the Appellate Authorities were correct in holding that the value of plant and machinery of Rs. 1,38,59,994/- claimed to have brought in by the assessee on lease basis should be treated as an asset exceeding 80% of the existing asset when computing deduction u/s. 10A of the Act despite this machinery not being owned by the assessee nor reflected in the fixed asset schedule? 3. The learned Counsel for the revenue assailing the impugned order contends that the machinery received from the foreign customer is not reflected either in the books of the assessee or in the balance sheet. 3. The learned Counsel for the revenue assailing the impugned order contends that the machinery received from the foreign customer is not reflected either in the books of the assessee or in the balance sheet. Therefore, that cannot be taken into consideration. In order to assess 20% as stipulated under section 10A(2), the total value of the machinery owned by the assessee should be reflected in their accounts. Admittedly in the instant case, if the accounts are looked into, the value of the machinery transferred to the new undertaking would be more than 20% and thus, the assessee is not entitled for the benefit of exemption under section 10A(2). The Tribunal committed an error in taking into consideration the machinery, which the foreign customer has supplied, to the assessee. Therefore, he submits that the impugned order requires interference. 4. Per contra, the learned Counsel appearing for the assessee submitted that, it is not the requirement of law that the assessee should own the entire machinery used in the manufacturing process to be eligible for exemption under section 10A(2) of the Act. 20% is to be calculated with regard to the machinery used in the manufactured process. In the instant case, admittedly,, if the value of the machinery used in the manufacturing process is taken into consideration, it is certainly less than 20% of the used machinery transferred to the new undertaking. On a perusal of the records, the Appellate Commissioner as well as the Tribunal has extended the benefit to the assessee, which is strictly in accordance with law. Therefore, he submits that no case for interference is made out. 5. Section 10A is a special provision in respect of newly established undertaking in free trade zone, granting a deduction of such profits and gains as derived by an undertaking from the export of articles or things or computer software for a period of 10 consecutive assessment years from the total income of the assessee. Sub-section (2) of section 10A sets out the conditions to be fulfilled by an undertaking to be eligible for the said exemption. Sub-clause (1), (2) and (3) of section 10A reads as under:- 10A. Sub-section (2) of section 10A sets out the conditions to be fulfilled by an undertaking to be eligible for the said exemption. Sub-clause (1), (2) and (3) of section 10A reads as under:- 10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, shall be allowed from the total income of the assessee: Provided that where in computing the total income of the undertaking for any assessment year, its profits and gains had not been included by application of the provisions of this section as it stood immediately before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years: Provided further that where an undertaking initially located in any free trade zone or export processing zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or export processing zone into a special economic zone, the period of ten consecutive assessment years referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in which the [undertaking began to manufacture or produce such articles or things or computer software] in such free trade zone or export processing zone: [Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this sub-section shall be ninety percent of the profits and gains derived by an undertaking from the export of such articles or things or computer software :] Provided also that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, [2012], and subsequent years. (1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of an undertaking, which begins to manufacture or produce articles or things or computer software during the previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any special economic zone, shall be, - (i) hundred percent of profits and gains derived from the export of such articles or things or computer software for a period of five consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or things or computer software, as the case may be, and thereafter, fifty percent of such profits and gains for further two consecutive assessment years, and thereafter; (ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty percent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the "Special Economic Zone Re-investment Allowance Reserve Account") to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B): [Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.] (1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are fulfilled, namely: - (a) the amount credited to the Special Economic Zone Re-investment Allowance Reserve Account is to be utilized- (i) for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next following the previous year in which the reserve was created; and (ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the business of the undertaking other than for distribution by way of dividends or profits or for remittance outside India as profits or for the creation of any asset outside India; (b) the particulars, as may be prescribed in this behalf, have been furnished by the assessee in respect of new machinery or plant along with the return of income for the assessment year relevant to the previous year in which such plant or machinery was first put to use. (1C) Where any amount credited to the Special Economic Zone Re-investment Allowance Reserve Account under clause (ii) of sub-section (1A),- (a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount so utilised; or (b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of sub-section (1B), the amount not so utilised, shall be deemed to be the profits,- (i) in a case referred to in clause (a), in the year in which the amount was so utilised; or (ii) in a case referred to in clause (b), in the year immediately following the period of three years specified in sub-clause (i) of clause (a) of sub-section (1B), and shall be charged to tax accordingly.] (2) This section applies to any undertaking which fulfils all the following conditions, namely:- (i) it has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year- (a) commencing on or after the 1st day of April, 1981, in any free trade zone; or (b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology park; (c) commencing on or after the 1st day of April, 2001 in any special economic zone; (ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence: Provided that this condition shall not apply in respect of any undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation. - The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. Explanation. - The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. "(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. Explanation 1. - For the purposes of this sub-section, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange. Explanation 2. - The sale proceeds referred to in this sub-section shall be deemed to have been received in India where such sale proceeds are credited to a separate account maintained for the purpose by the assessee with any bank outside India with the approval of the Reserve Bank of India. 6. It is not in dispute that the assessee satisfies the requirement of sub-clauses (1) and (2). The dispute is regarding sub-clause 3. 7. The phrase previously used for any purpose in sub-clause (3) is to be understood in the context of Explanations 1 and 2 to sub-section (2) of Section 80-I. 8. Section 80-I(2)(ii) reads as under:- (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) **** (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) & (iv) **** Explanation 1. Section 80-I(2)(ii) reads as under:- (2) This section applies to any industrial undertaking which fulfils all the following conditions, namely:- (i) **** (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose; (iii) & (iv) **** Explanation 1. - For the purposes of clause (ii) of this sub-section, any machinery or plant which was used outside India by any person other than the assessee shall not be regarded as machinery or plant previously used for any purpose, if the following conditions are fulfilled, namely:- (a) such machinery or plant was not, at any time previous to the date of the installation by the assessee, used in India; (b) such machinery or plant is imported into India from any country outside India; and (c) no deduction on account of depreciation in respect of such machinery or plant has been allowed or is allowable under the provisions of this Act in computing the total income of any person for any period prior to the date of the installation of the machinery or plant by the assessee. Explanation 2. - Where in the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty percent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. 9. Explanation 2 makes it clear that wherein the case of an industrial undertaking, any machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred does not exceed twenty percent of the total value of the machinery or plant used in the business, then, for the purposes of clause (ii) of this sub-section, the condition specified therein shall be deemed to have been complied with. 10. 10. Clause (b) of Explanation 1, makes it clear that any machinery or plant, which was used outside India by any person other than the assessee, shall not be regarded as machinery or plant previously used for any purpose, such machinery or plant is imported into India from any country outside India. 11. Further Explanation 2 makes it clear that twenty percent of the value of the machinery or plant is to be calculated on the total value of the machinery or plant used in the business. 12. Neither in section 10A(2) nor in section 80-I, there is any requirement in law that the assessee should own the machinery before claiming the said exemption. The requirement of law is that the assessee should use the machinery or plant in the business. The machinery or plant or any part thereof previously used for any purpose is transferred to a new business and the total value of the machinery or plant or part so transferred should not exceed 20% of the total value of the machinery or plant, then the assessee is entitled to the benefit. In addition to the machinery so used, is transferred to an undertaking, the assessee uses the plant and machinery which he has received by way of import and uses it in the business. In calculating 20%, the total value of the machinery and plant used in the business is to be taken into consideration and not the total value of the plant and machinery, which he was using earlier, which he has transferred to the new undertaking. In the instant case, it is not in dispute that the total value of the plant and machinery which was owned by the assessee is Rs. 44,93,797/-. Out of that, value of the old machinery is only Rs. 13,15,083/-, which amounts to more than 20% of Rs. 44,93,797/-. But if the value of the plant and machinery which is worth Rs. 1,38,59,994/- is taken into consideration, the total value of the machinery used in the business would be Rs. 1,83,53,791/-. With reference to the same, the plant and machinery which is used and transferred to the new undertaking is only Rs. 13,15,083/-, which is less than 20% of the total value of the machinery used in the business. 1,38,59,994/- is taken into consideration, the total value of the machinery used in the business would be Rs. 1,83,53,791/-. With reference to the same, the plant and machinery which is used and transferred to the new undertaking is only Rs. 13,15,083/-, which is less than 20% of the total value of the machinery used in the business. Therefore, the assessee is entitled to the benefit of exemption under section 10A of the Act and that is what the Appellate Commissioner as well as the Tribunal has held. In that view of the matter, we do not see any merit in these appeals. Accordingly, the substantial questions of law are answered in favour of the assessee and against the revenue. The appeals are dismissed.