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2015 (5) TMI 827 - HC - Income TaxEntitlement to deduction under section 80HHBA - sale of scrap - Held that - As relying on Fenner (India) Ltd. Versus CIT (No. 2) 1998 (4) TMI 67 - MADRAS High Court the scrap materials come within the manufacturing process of the industrial undertaking in the manufacture of certain products such as V-belts oil seals. O-rings and certain rubber moulded products etc. In this view of the matter we are of the view that profits and gains from the sale of scrap materials are eligible to deduction in an amount equal to twenty per cent under section 80HH inasmuch as such gains or profits are derived from the industrial undertaking and includible in the gross total income of the assessee and the question relatable to the profit on the sale of scrap is thus answered in favour of the assesse. Accrual of interest - ITAT deleted the addition - Held that - there is no dispute to the fact that the assessee-company had passed requisite Board Resolutions not to charge interest from aforesaid 3 parties on the advances given by it to them. Therefore we hold that the Assessing Officer was not justified to consider that the interest income has accrued to the assessee on the outstanding advances as the assessee has agreed not to charge interest on the outstanding advances before the interest income had accrued to it. - Decided in favour of assesse. Disallowance of registration charges - ITAT deleted disallowance - Held that - It was essentially a question of fact whether apportionment of the registration charges and the stamp duty had been made by the assessee and the question of fact was answered concurrently in favour of the assessee both by the CIT(A) and the learned Tribunal. The amount allowed to be treated as revenue expenditure pertained to that part of the expenditure which related to the construction raised by the assessee for the purpose of real estate business.Therefore the investments made were all in the nature of revenue expenditure - Decided in favour of assesse.
Issues:
1. Deduction under section 80HHBA for sale of scrap 2. Deletion of accrued interest income 3. Treatment of registration and stamp duty expenses Analysis: Issue 1: Deduction under section 80HHBA for sale of scrap The appeal questioned the allowance of deduction under section 80HHBA for the sale of scrap unrelated to a housing project. The CIT(A) directed the Assessing Officer to consider income from the sale of scrap for the deduction, which was upheld by the Tribunal. The Tribunal relied on a judgment stating that profits from the sale of scrap materials are eligible for deduction under section 80HH. The judgment emphasized that such profits are derived from the industrial undertaking and included in the gross total income. The Tribunal's decision was in favor of the appellant, confirming the allowance of the deduction for income from the sale of scrap. Issue 2: Deletion of accrued interest income The dispute involved the deletion of interest accrued on advances to three companies due to the waiver of interest by the assessee company. The Tribunal held that since the assessee had passed resolutions not to charge interest before it accrued, the Assessing Officer was unjustified in adding the interest income. The Tribunal referred to a Supreme Court judgment emphasizing that if the waiver of interest occurs before accrual, the liability to pay tax on that amount cannot be imposed. The Tribunal upheld the deletion of the accrued interest income, rejecting the Department's appeal. Issue 3: Treatment of registration and stamp duty expenses The issue revolved around disallowance of registration charges related to a real estate project. The Assessing Officer disallowed the expenses, but the CIT(A) directed verification of charges attributable to rented shops for proportionate disallowance. The Tribunal upheld the CIT(A)'s decision, considering the apportionment of expenses by the assessee. The Tribunal found no reason to interfere with the CIT(A)'s order, as the expenses related to the construction for the real estate business were treated as revenue expenditure. The Tribunal rejected the Department's appeal, affirming the treatment of registration charges as revenue expenditure. In conclusion, the High Court dismissed the appeal, upholding the decisions of the Tribunal regarding all three issues in favor of the assessee.
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