2014 (1) TMI 952 - AT - Income Tax

Deduction u/s 80IC of the Act allowed Job work receipts Held that - After hearing the parties before the Bench and the material available on record that the impugned order deserves to be set aside - whereas their Lordships have discussed at length, the process of manufacturing to hold that it is a separate identifiable product in the manufacturing process the order has only discussed case law and there is no discussion on the relevant aspect, the finding on record is necessary in order to consider the applicability of the judgement of the Jurisdictional Court to the facts of the case - The record shows that before the AO assertions are made that it is a separate identifiable product which the AO has not agreed with, however in the order no such discussion let alone finding has been arrived at by the CIT(A) - the order set aside and the matter remitted back to the CIT(A) Decided in favour of Revenue.

Summary

Issues:
- Whether the deduction claimed under section 80IC in respect of job work receipts is allowable?
- Whether the income derived from job work receipts qualifies for deduction under section 80IC of the Income Tax Act, 1961?

Analysis:

Issue 1:
The primary issue in this case was whether the deduction claimed under section 80IC in respect of job work receipts was allowable. The Assessing Officer (AO) disallowed the deduction claimed by the assessee, considering the job work done as a mere service provided to another party. The AO concluded that the income derived from job work was ancillary income and not eligible for deduction under section 80IC. The AO made an addition of the job work income to the total income of the assessee.

Issue 1 Analysis:
The AO's decision was based on the belief that the job work done by the assessee was not directly related to the eligible business under section 80IC. The AO considered the nature of the job work and the relationship between the assessee and the party for whom the work was done. The AO's conclusion was that the income from job work did not qualify for the deduction under section 80IC.

Issue 2:
The second issue revolved around whether the income derived from job work receipts qualifies for deduction under section 80IC of the Income Tax Act, 1961. The assessee contended that the job work charges were eligible for deduction under section 80IC, citing various judgments in support of their claim. The CIT(A) allowed the appeal and held that the job work receipts were part of the manufacturing process of the industrial undertaking and thus eligible for deduction under section 80IC.

Issue 2 Analysis:
The CIT(A) considered the judgments cited by the assessee and concluded that the job work receipts were integral to the manufacturing process of the industrial undertaking. The CIT(A) distinguished the job work receipts from export incentives, stating that job work receipts were derived from the eligible business and qualified for deduction under section 80IC. The CIT(A) relied on the jurisprudence surrounding the issue and held in favor of the assessee.

Conclusion:
The Tribunal set aside the CIT(A)'s order and directed a reevaluation of the facts and applicability of judgments by the CIT(A). The Tribunal emphasized the need for a detailed discussion on the manufacturing process and the nature of job work to determine the eligibility for deduction under section 80IC. The appeal of the Revenue was allowed for statistical purposes, indicating a need for further examination and clarification on the issues raised in the case.