2010 (9) TMI 1207 - AT - Income Tax

Summary

Issues Involved:
1. Exclusion of certain receipts from profits for deduction u/s 80IB.
2. Eligibility of plating and service charges for deduction u/s 80IB.
3. Eligibility of scrap sales for deduction u/s 80IB.
4. Eligibility of insurance claim for deduction u/s 80IB.
5. Eligibility of interest from customers for delayed payments for deduction u/s 80IB.

Summary:

1. Exclusion of Certain Receipts from Profits for Deduction u/s 80IB:
The assessee contested the CIT(A)'s decision to uphold the AO's recomputation of deduction u/s 80IB by excluding receipts such as plating and service charges, scrap sales, insurance claims, and interest from customers for delayed payments. The AO, referencing Supreme Court decisions, excluded these receipts, arguing they did not have a direct nexus with the profits derived from the industrial undertaking.

2. Eligibility of Plating and Service Charges for Deduction u/s 80IB:
The Tribunal noted that plating and service charges were earned by utilizing the plant and machinery of the undertaking, thus forming part of the profit derived from the business. The Tribunal referenced its own previous decision and the Delhi High Court's ruling in Eltek SGS P Ltd, concluding that such income is eligible for deduction u/s 80IB.

3. Eligibility of Scrap Sales for Deduction u/s 80IB:
The Tribunal held that income from scrap sales, generated during the manufacturing process, has a direct nexus to the business of the undertaking. This issue was also covered in the Tribunal's previous orders, affirming that such income is eligible for deduction u/s 80IB.

4. Eligibility of Insurance Claim for Deduction u/s 80IB:
The Tribunal acknowledged the jurisdictional High Court's decision in CIT V/s M/s Pfizer Ltd, which held that insurance claims related to stock-in-trade are eligible for deduction u/s 80IB. However, since the nature of the insurance claim was not verified, the Tribunal remitted the issue back to the AO to ascertain whether the claim was for stock-in-trade damage.

5. Eligibility of Interest from Customers for Delayed Payments for Deduction u/s 80IB:
The Tribunal, referencing the Delhi High Court's decision in CIT V/s Advance Detergents Ltd and the Gujarat High Court's ruling in Nirma Industries Ltd, concluded that interest received due to delayed payments by customers has a direct nexus with the sale proceeds. Thus, it is part and parcel of the profit derived from the business of the industrial undertaking and eligible for deduction u/s 80IB.

Conclusion:
The appeal by the assessee was partly allowed for statistical purposes, with specific issues remitted back to the AO for further verification. The Tribunal's decision was pronounced in the Open Court on 30.09.2010.