2016 (1) TMI 1468 - AT - Income Tax

Deduction u/s 80IB in respect of scrap sales - determination of gains derived from the industrial undertaking for the purpose of computing deduction - HELD THAT - The issue is covered in favour of the assessee by the decision of Hon ble Jurisdictional High Court in the case of Sadhu Forging Ltd. 2011 (6) TMI 9 - DELHI HIGH COURT wherein held receipts from sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from the industrial undertaking for the purpose of computing deduction under section 80- IB - Thus we direct the Assessing Officer to compute the deduction under Section 80IB after taking into account the scrap sales.

Summary

Issues: Validity of proceedings under Section 153A and claim of deduction under Section 80IB for scrap sales.

Validity of proceedings under Section 153A:
The appeal raised concerns about the initiation of proceedings under Section 153A of the Income-tax Act, 1961. However, during the hearing, no specific arguments were presented challenging the validity of the notice issued under Section 153A. Consequently, the ground related to this issue was considered as not pressed and subsequently rejected.

Claim of deduction under Section 80IB for scrap sales:
The second ground of appeal focused on claiming a deduction under Section 80IB concerning scrap sales. The Assessing Officer had initially allowed the deduction under Section 80IB but excluded the scrap sales while computing the profit of the industrial undertaking. The appellant argued that the issue was favorably settled by a decision of the Hon'ble Jurisdictional High Court in a specific case. The appellant also referenced previous Tribunal decisions in their favor for similar assessment years. The Departmental Representative, however, contended that the facts of the current case differed from those in the aforementioned High Court case.

Upon reviewing the arguments and evidence, the Tribunal concurred with the appellant's position. Citing the decision of the Hon'ble Jurisdictional High Court, the Tribunal acknowledged that receipts from scrap sales, being integral to the industrial activity, should be considered as part of the gains derived from the industrial undertaking for the purpose of calculating deductions under Section 80IB. Consequently, the Tribunal directed the Assessing Officer to compute the deduction under Section 80IB while including the scrap sales. As a result, the appeal of the assessee was partially allowed, with the order pronounced in open court on 06.01.2016.