2021 (9) TMI 591 - AT - Income Tax

Deduction u/s 80IC - Income from scrap sales - AO was of the opinion that the sale of scrap generated during the manufacturing cannot be said to have been derived from industrial activities - HELD THAT - CIT(A) was convinced that the assessee has successfully demonstrated that all the items of scrap are generated out of its manufacturing activities. CIT(A) further found that the cost of all these items have been charged to profit and loss account and eligible profit u/s 80IC - CIT(A) considered the following judgment of the Hon'ble jurisdictional High Court of Delhi in the case of Sadhu Forging Ltd. 2011 (6) TMI 9 - DELHI HIGH COURT . We could not point out any error or omission in the findings of the ld. CIT(A) which is supported by the decision of the Hon'ble Jurisdictional High Court of Delhi supra . We, therefore, do not find any reason to interfere with the findings of the ld. CIT(A). - Decided against revenue.

Summary

Issues:
1. Allocation of sub-licensing fee and corporate income
2. Deduction u/s 80IC for scrap sales

Allocation of Sub-Licensing Fee and Corporate Income:
The Revenue appealed against the order of the Commissioner of Income Tax [Appeals] regarding the allocation of ?10 lakhs against sub-licensing fee and other corporate income for Assessment Year 2013-14. The Revenue contended that the basis for arriving at this amount was not provided, and the estimated expenditure figure was deemed excessive and unjustified. However, the Revenue's appeal on this ground was dismissed by the Tribunal as the grievance was not present in the first appellate authority's order.

Deduction u/s 80IC for Scrap Sales:
The main issue revolved around the allowance of deduction under section 80IC of the Income Tax Act for scrap sales amounting to ?5.98 crores by the assessee company engaged in manufacturing activities. The Assessing Officer initially disallowed the deduction, stating that the sale of scrap generated during manufacturing was not derived from industrial activities. However, the Commissioner of Income Tax [Appeals] found in favor of the assessee, noting that all scrap items were indeed generated from manufacturing activities and were charged to the profit and loss account, making them eligible for deduction under section 80IC. The Commissioner relied on a judgment from the jurisdictional High Court to support this decision. The Tribunal upheld the Commissioner's decision, emphasizing that the findings were supported by the High Court's judgment, and there was no error or omission in the Commissioner's decision. Therefore, the appeal by the Revenue was dismissed, affirming the allowance of deduction under section 80IC for the scrap sales.

In conclusion, the Tribunal upheld the Commissioner's decision to allow the deduction under section 80IC for the scrap sales, emphasizing that the scrap items were indeed generated from the assessee's manufacturing activities. The judgment highlighted the importance of demonstrating that the income was derived from industrial activities to claim such deductions successfully.