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2015 (9) TMI 1404 - AT - Income TaxIncome from scrap sales - eligibility for section 80IB deduction - Held that - Income arising from sale of scrap is eligible for section 80IB deduction as derived from the manufacturing activity in question. The hon ble jurisdictional high court in Harjivandas Zaveri case (1999 (12) TMI 5 - GUJARAT High Court ) has adjudicated this very substantial question in asssesee s favour - Decided against revenue Sec. 80IB disallowance qua income from exchange rate difference - Held that - We find that the hon ble jurisdictional high court in CIT vs. Deversons Industries Ltd. 2015 (1) TMI 394 - GUJARAT HIGH COURT has considered hon ble apex court decision in Liberty India vs. CIT (2009 (8) TMI 63 - SUPREME COURT) and holds that such an exchange rate gain is derived from industrial undertaking in question. The Revenue does not quote any case law to the contrary.- Decided against revenue
Issues involved:
1. Eligibility of income from scrap sales for section 80IB deduction. 2. Eligibility of income from exchange rate difference for section 80IB deduction. Detailed Analysis: Issue 1: The first issue in this case pertains to the eligibility of income from scrap sales for section 80IB deduction. The Revenue challenged the CIT(A)'s order, arguing that the income of Rs. 1,98,072 from scrap sales did not have a direct nexus with the manufacturing activity. The Assessing Officer contended that the scrap sales were not derived from manufacturing but were incidental to it. The CIT(A) relied on the case law DCIT vs. Harjivandas Juthabai Zaveri (2002) 258 ITR 785 (Guj) to support the assessee's claim that scrap sales have a direct nexus with the manufacturing activity. The tribunal, in a previous assessment year's order, had ruled against the assessee on a similar issue. However, the Hon'ble jurisdictional high court's decisions favored the assessee's position, stating that income from scrap sales is eligible for section 80IB deduction as it is derived from the manufacturing activity. In light of these precedents, the tribunal rejected the Revenue's argument and upheld the eligibility of income from scrap sales for section 80IB deduction. Issue 2: The second issue concerns the eligibility of income from exchange rate difference for section 80IB deduction. The Revenue sought to disallow Rs. 66,05,498 as an exchange rate difference, claiming it lacked a direct nexus with the manufacturing activity. The CIT(A) argued that this gain was directly related to the sale/export of goods from the assessee's industrial undertaking. Citing the Hon'ble jurisdictional high court's decision in CIT vs. Deversons Industries Ltd., which considered the apex court's ruling in Liberty India vs. CIT (2009) 317 ITR 218 (SC), it was established that such exchange rate gains are derived from the industrial undertaking in question. The Revenue failed to provide any contrary case law to support its argument. Consequently, the tribunal dismissed the Revenue's appeal, affirming the eligibility of income from the exchange rate difference for section 80IB deduction. In conclusion, the tribunal upheld the CIT(A)'s decision, ruling in favor of the assessee on both issues and dismissing the Revenue's appeal.
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