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2019 (2) TMI 790 - AT - Income TaxExclusion of Other Income for deduction u/s 80IC - income from sale of scrap - Held that:- Assessee has filed certain details of sale of scrap, discount from suppliers, excess provision written back, credit balance written back and miscellaneous income before us which required verification by the authorities below as to its direct nexus of being derived from undertaking on which deduction u/s 80IC was claimed is required to be proved. There is no quarrel with this proposition of the assessee that sale of scrap is to be considered for deduction u/s 80IC but however we are of the view that the assessee has to show that this income from sale of scrap has direct nexus and was derived from the industrial undertaking on which deduction u/s. 80IC was claimed to get benefit of deduction u/s 80IC. This is a factual matter and requires verification of fact and the facts may differ from year to year. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from sale of scrap was derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under Section 80IC. Similar is for the other incomes viz. discount from supplies, excess provision written back, credit balances written back and miscellaneous income, we are of the view that the assessee has to show that these incomes from discount from supplies , excess provision written back, credit balances written back and miscellaneous income have direct nexus and were derived from the industrial undertaking on which deduction u/s. 80IC was claimed by the assessee to get benefit of deduction u/s 80IC. Hence for verification purposes, we are restoring the matter back to the file of the AO wherein the assessee will be required to prove through cogent evidences that these incomes from discount from supplies, excess provision written back, credit balances written back and miscellaneous income were derived from the industrial undertaking on which deduction u/s. 80IC was claimed, as is contemplated and required under the provisions of Section 80IC of the Act. Ad-hoc disallowance of 2% of total Miscellaneous Expenditure booked by the assessee under the head ‘Miscellaneous Expenses’ in its books of accounts - Held that:- No incriminating material has been brought on record by the AO and by the CIT(A) to prove that these are not business expenses and these were not incurred wholly and exclusively for the purposes of business of the assessee. The authorities below have merely disallowed 2% of these miscellaneous expenses on ad-hoc basis without brining any incriminating material on record merely on the presumption that these expenses may not be verifiable. The contention of the authorities below that TDS might not have been deducted on some of these expenses also lacks merit as the assessee has brought on record tax audit report to prove that there was no default in compliance of TDS. The complete details of these expenses were furnished by the assessee before the authorities below. Disallowance of these miscellaneous expenses on adhoc basis @ 2% of miscellaneous expenses was made by authorities below merely on conjectures and surmises without bring any incriminating material on record and such disallowances on adhoc basis in the manner done by the authorities below keeping in view facts and material on record before the authorities below is not permissible. Thus, the assessee succeeds on this issue and the entire disallowance of miscellaneous expenses as was made by the AO and as confirmed by learned CIT(A) stood deleted.
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