2006 (11) TMI 267 - AT - Income Tax

Summary

Issues Involved:
1. Allowability of deduction u/s 80-IA/80-IB.
2. Reduction in addition made on account of obsolete stores.

Summary:

1. Allowability of Deduction u/s 80-IA/80-IB:
The Revenue's appeal contested the allowability of a deduction of Rs. 77,55,056 claimed u/s 80-IA/80-IB. The assessee derived income from mining, processing, and grinding of minerals, showing consolidated sales of Rs. 43.35 crores with a net profit of Rs. 3.41 crores. The AO denied the deduction, arguing that the activities did not result in a new or different article, referencing the Supreme Court decision in Divisional Dy. CST & Anr. vs. Bherhaghat Mineral Industries. However, the CIT(A) allowed the deduction after considering various judicial precedents. The Tribunal upheld the CIT(A)'s decision, noting that the assessee's integrated activities of mining, processing, and grinding of Wollastonite and Calcite products amounted to production, thus entitling the assessee to the deduction. The Tribunal distinguished the case from the Supreme Court decision cited by the AO and referenced the Supreme Court's judgment in Lucky Minmat (P) Ltd. vs. CIT and CIT vs. Sesa Goa Ltd., which supported the assessee's claim.

2. Reduction in Addition Made on Account of Obsolete Stores:
The assessee claimed a deduction of Rs. 68,59,108 for obsolete stores written off under 'Plant and machinery repairs'. The AO disallowed the claim, arguing that s. 145A did not permit such valuation and criticized the uniform 5% valuation of items regardless of their purchase date or condition. The CIT(A) partially upheld the AO's decision but enhanced the valuation to 10% based on the Bombay High Court's judgment in Alfa Laval India Ltd. The Tribunal upheld the CIT(A)'s decision, noting that the valuation at 5% was too low given the subsequent consumption and sale of the stores, which justified a 10% valuation.

Conclusion:
The Tribunal dismissed both the Revenue's appeal and the assessee's cross-objection, upholding the CIT(A)'s decisions on both issues. The order was pronounced in open court on 16th Nov., 2006.