M/s ACE Private Limited, an existing manufacturing company having two units named X and Y split up both the units into two separate companies as X Limited and Y Limited under a demerger drive. Further M/s X Limited setup

Tax Evasion: Among the essential conditions of for claiming deduction of respect of newly established units in Free Trade Zones/Special Economic Zones under section 10AA of the Income Tax, Act, 1961, one condition is that the new unit must not be constituted by the transfer of old machines previously used for any purpose whatsoever with an exception that only such old used machines are allowed as does not exceed 20 percent of the total value of the machinery or plant used in the new unit. Thus, on the basis of above provision, since M/s ACE Private Limited transferred the old machine for value exceeding the limit of 20%, it clearly refers to the case of availing the tax holiday by dishonest and unethical means having an element of deceit and thus have the possibility of penalties and prosecutions as per law.