2016 (2) TMI 492 - AT - Income Tax

Eligibility for deduction u/s 80IB - income from scrap sales - assessee is mainly involved in manufacturing activities - Held that - If the main manufacturing activity is eligible for deduction u/s 80IB of the Act then receipt from sale of scrap generated in the process of manufacturing as well as the scrap from other items available in the manufacturing unit, then such receipts from sale of scrap shall come within the ambit of gains eligible for deduction u/s 80 IB of the Act. In the case of assessee the issue is similar as the assessee s business is eligible for deduction u/s 80IB and it has also received income from sale of scrap and, therefore, in view of our above discussion, we find that the issue of assessee is covered by the decision of Hon ble Jurisdictional High Court in the case of CIT vs. Jikar A. Saiyed (2013 (12) TMI 1562 - GUJARAT HIGH COURT). The ground raised by the Revenue is dismissed. - Decided in favour of assessee

Summary

Issues:
1. Eligibility of income from scrap sales for deduction u/s 80IB.

Analysis:
The appeal pertains to the eligibility of income from scrap sales for deduction under section 80IB of the Income-tax Act, 1961. The Revenue contested the order of the CIT(A) which allowed the deduction claimed by the assessee. The Assessing Officer had disallowed the claim on the grounds that the income from scrap sales was not generated as a by-product during the manufacturing process but from the sale of old unusable products/material. The CIT(A) upheld the claim citing a previous decision in the appellant's favor for the assessment year 2008-09. The Revenue challenged this decision before the ITAT.

Upon examination, the ITAT considered whether the income from scrap sales of a manufacturing unit eligible for deduction u/s 80IB of the Act. The ITAT referred to a previous decision in favor of the assessee by the Tribunal in a similar case. The Tribunal held that income arising from the sale of scrap is eligible for section 80IB deduction as it is derived from the manufacturing activity in question. The ITAT further noted a decision by the Hon'ble Gujarat High Court supporting this view.

Additionally, the ITAT referred to a judgment by the Hon'ble Gujarat High Court in the case of CIT vs. Jikar A. Saiyed, where it was held that income from the sale of scrap is part and parcel of industrial activity and qualifies for deduction under Section 80IB. The Court emphasized that if the main manufacturing activity is eligible for deduction under Section 80IB, the receipts from the sale of scrap generated in the manufacturing process are also eligible for the deduction. Based on these precedents, the ITAT dismissed the Revenue's appeal, upholding the eligibility of the income from scrap sales for deduction under Section 80IB.

In conclusion, the ITAT ruled in favor of the assessee, affirming the decision of the CIT(A) and allowing the deduction claimed on income from scrap sales under Section 80IB. The other ground raised by the Revenue was of a general nature and did not require adjudication. The appeal was ultimately dismissed by the ITAT, with the order pronounced on 13 January 2016.