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2016 (8) TMI 278 - HC - Income TaxEligibility for the benefit of Section 10B in respect of profit from sale of scrap and spent solution - Held that - As decided in assessee s own case for AY 2000-01 scrap and spent solution have been generated directly from the manufacturing activity and hence, the Assessing Officer is not correct in excluding these items from the profits of EOU and bringing them to tax under the head other sources . From the records it is clear that the scrap and spent solution have been generated directly from the manufacturing activity and. hence profit on sale of such items is derived from the 100% EOU only. After considering the explanation given by the Assessee regarding the generation of scrap and spent solution, we are of the considered opinion that the scrap and spent solution are part of the manufacturing process and the C.I.T.(Appeals) was justified in directing the Assessing Officer to recompute the income/loss exempt under sec. 10B of the Act. - Decided in favour of the assessee. Loss incurred from the Aurangabad unit includible in the EOU - Whether loss cannot be considered as a single undertaking of the assessee along with the EOU at Alathur? - Held that - On the aspect of treating profit/loss from Aurangabad Unit, to be included in the export oriented unit at Alathur, we are not inclined to accept the contentions of the appellant that the Tribunal has committed an error, in holding that the loss incurred from Aurangabad Unit, to be included in the export oriented unit. The findings of the Tribunal that the Unit at Aurangabad was also an integral part of the export oriented unit at Chennai, cannot be interferred with, though the unit at Aurangabad, was purchased only in the year 2000, whereas, the Unit in Chennai, it was existing from 1994 onwards. - Decided in favour of the assessee.
Issues Involved:
1. Eligibility for Section 10B benefit on profit from sale of scrap and spent solution. 2. Inclusion of loss from Aurangabad unit in the Export Oriented Unit (EOU). Analysis: Issue 1: Eligibility for Section 10B Benefit The appellant, an export-oriented undertaking, challenged the assessing officer's denial of exemption under Section 10B for income from scrap and spent solution sales. The Commissioner of Income Tax (Appeals) held that these items are part of the manufacturing process and should be treated as income from 100% EOU. The Income-Tax Appellate Tribunal upheld this decision, emphasizing that the items were directly generated from manufacturing. The court noted that the Finance Act, 2000, introduced specific criteria for deductions, effective from 01.04.2001, which did not apply to the assessment year 2000-01. Consequently, the court affirmed the Tribunal's decision, rejecting the appellant's arguments against including scrap and spent solution sales under Section 10B. Issue 2: Inclusion of Aurangabad Unit's Loss in EOU The second issue revolved around whether the loss from the Aurangabad unit should be included in the EOU at Alathur. The Tribunal found that the assessing officer had not properly analyzed the facts and directed the exclusion of Aurangabad unit's loss from non-EOU activities. The Tribunal determined that the Aurangabad unit met the conditions to be considered part of the EOU operations. The court agreed with the Tribunal's decision, stating that the assessing officer had overlooked relevant facts. Despite the Aurangabad unit being acquired in 2000 and the Chennai unit existing since 1994, the court upheld the inclusion of Aurangabad unit's loss in the EOU at Alathur. Both substantial questions of law were answered against the revenue and in favor of the assessee. In conclusion, the Tax Case Appeal was dismissed, with no costs awarded, and the connected Miscellaneous Petition was closed in light of the detailed analysis and findings on the issues of Section 10B benefit eligibility and the inclusion of Aurangabad unit's loss in the EOU.
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