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2016 (2) TMI 492 - ITAT AHMEDABAD

2016 (2) TMI 492 - ITAT AHMEDABAD - TMI - Eligibility for deduction u/s 80IB - income from scrap sales - assessee is mainly involved in manufacturing activities - Held that:- If the main manufacturing activity is eligible for deduction u/s 80IB of the Act then receipt from sale of scrap generated in the process of manufacturing as well as the scrap from other items available in the manufacturing unit, then such receipts from sale of scrap shall come within the ambit of gains eligible for deducti .....

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. 1078/Ahd/2012 - Dated:- 13-1-2016 - Shri Rajpal Yadav, JM, & Manish Borad, AM. For The Appellant : Shri Sanjay Agrawal, CIT, DR For The Respondent : Smt. Urvashi Sodhan, AR ORDER PER Manish Borad, Accountant Member. This is an appeal filed by the Revenue against the order of CIT(A), Valsad dated 21.02.2012 in appeal No.CIT(A)/VLS/130/11-12 for Asst. Year 2009-10. Assessment was framed u/s 143(3) of the Income-tax Act, 1961 (in short the Act) on 19.08.2011 by Addl. CIT, Vapi Range, Vapi. Th .....

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nion Territory of Daman which is a backward area as specified in the VIII schedule to the I.T. Act. The assessee filed its return of income on 29.09.2009 declaring total income of ₹ 22,68,68,410/-. The case was selected for scrutiny assessment u/s CASS in view of clause of the Action Plan Target for Asst. Year 2010-11. Notice was issued on 20.08.2010 u/s 143(2) of the Act and duly served on 7.9.2010. In response to the notice assessee filed various details. The Assessing Officer observed i .....

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, rather it has been earned from sale of old unusable products/material. Income of the assessee was assessed at ₹ 24,39,96,780/-. 3. The assessee being aggrieved, carried the matter in appeal before CIT(A). The CIT(A) after considering the contentions of Assessing Officer in the assessment order and the submissions of assessee accepted the claim of assessee and allowed the same by observing as under :- 5.3 Decision : I have carefully considered the observation of the A.O. in the assessment .....

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t u/s 80IB of the Act. Thus, this ground is allowed. 3. Aggrieved, the Revenue is now in appeal before us. 4. The ld. DR supported the order of Assessing Officer. On the other hand the ld. AR supported the order of ld. CIT(A) and submitted that the issue is covered in favour of assessee by the several decisions of the Tribunal (copies of orders placed on record) and even by the decision of Hon ble Gujarat High Court in the case of CIT vs. Jikar A. Saiyed in Tax Appeal No.368 of 2008 dated 21/12/ .....

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sue has been dealt by the Tribunal in the case of ACIT vs. Standard Oil & Greases in ITA No.1584/Ahd/2011 for Asst. Year 2008-09 and the issue has been decided in favour of assessee vide its order dated 04/09/2015 by observing as under :- 5. Heard both sides. Records perused. The Revenue s only argument is in tune with the Assessing Officer s findings narrated hereinabove that the impugned scrap sales cannot be held to have been derived from asssessee s manufacturing activity as per the trib .....

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favour. The same view is reiterated in a recent decision (2014) 42 taxmann. 403 (Guj) CIT vs. Jikar A Saiyed. Both views hold that income arising from sale of scrap is eligible for section 80IB deduction as derived from the manufacturing activity in question. We follow the hon ble jurisdictional high court against that of the learned co-ordinate bench and reject the Revenue s first substantive ground. 6. Further we find that the issue in appeal has also been dealt by Hon ble Gujarat High Court i .....

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the jurisdictional High Court in the case of Harjivandas Juthabhai Zaveri and Anr (supra). In the case of Harjivandas Juthabhai Zaveri and Anr (supra) while answering the question whether the Appellate Tribunal is right in law and on facts in allowing deduction under Section 80IB of the Act on the items (i) Job work receipt, (ii) sale of empty soda ash bardana, (iii) sale of empty barrels and (iv) sale of plastic waste. The Division Bench has observed and held as under: So far as question No. 5 .....

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sale of empty barrel or bardan (jute bags) is deducted from the cost of the raw material. He submitted that if the cost is reduced by deducting the sum so received, the profit will increase and ultimately, the total would be the same. He submitted that the Commissioner of Income Tax (Appeals) and the Tribunal has rightly come to the conclusion that the items covered by question No. 5 are covered by section 80.I of the Act inasmuch the amount received can be said to have been received from the ac .....

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ere was no question of empty barrels or bardans. Instead of manufacturing if the assessee was doing trading activities I.e. dealing in raw material and if the assessee had sold the material on retail basis and earned amount by sale of bardans, then obviously this section will not apply. 5.0. The decision of this Court in the case of Harjivandas Juthabhai Zaveri and Anr (supra) has been subsequently considered by the Delhi High Court in the case of Commissioner of Income Tax vs. Sadhu Forging Lim .....

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ivity of forging was manufacturing within the ambit of section 80IB. It was immaterial that the assessee was doing the job of forging also for customers and was charging them on job work basis or on the basis of labour charges. It would still be qualified as carrying on eligible business under Section 80IB. The activities of the assessee were in giving heat treatment for which it had earned labour charges and job work charges. It could thus be said that the assessee had done a process on the raw .....

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on under Section 80IB. There could not be any two opinions that manufacturing activity of the type of material being undertaken by the assessee would also generate scrap in the process of manufacturing. The 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 80IB. 6.0. Applying the ratio / law laid down by this Court in the .....

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