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TMI Blog2016 (2) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... are that the Assessing Officer while completing the assessment and while computing the deduction u/s. 80IB of the Act excluded scrap sale holding that the same is not derived from industrial undertaking. It was the submission of the assessee that scrap sale is generated from the manufacturing activities of the industrial undertaking and it is part and parcel of a reminder portion of raw material, finished goods, rejected goods etc., and is generated out of inventory process by the industry. Therefore, the income from sale of scrap is an income from manufacturing operation, and eligible for deduction u/s. 80IB of the Act. The assessee placed reliance on the decision of the ITAT Ahmedabad Bench in the case of M/s. Arvind Fashions Ltd Vs ACIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80-IB of the Act in respect of scrap generated out of manufacturing process treating the same as business income. The A.O observed that the scrap is not a bye product of the assessee and hence the sale of the same cannot be treated as the business income of the unit and hence not eligi9ble for deduction u/s 80-IB of the Act. As regards the alternative ground of the assessee of taking net income earned out of the sale of scrap, the A.O ITA No. 100 to 104/PN/07 A.Y: 2000-01 to 2002- 03 Page 15 of 16 observed that the same is not acceptable as the cost relating to the sale of scrap was already debited to the P & L a/c of the unit. The A.O also did not grant deduction u/s 80-IB in respect of miscellaneous income amounting to Rs. 56,32,480/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 80IB after considering the precedents namely Rane (Madras) Ltd., 238 ITR 377, Taj Fire Works Industries 288 ITR 92 (Mad.) and Northern Aromatics Ltd., 196 CTR 479 (Del.) .We find no fallacy in the decision of ld. CIT(A) for allowing the claim in respect of machining charges received by the assessee. However, the question before us as raised from the side of the assessee is in respect of scrap sales. In this regard the submission of the assessee was that the scrap is generated during manufacturing activity hence, the vehement submission was that the generation of scrap was incidental to the manufacturing activity. Hence the argument was that the income earned on sale of scrap was income from business of an eligible industrial undertaking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) the court was of the view that the sale of scrap was nothing but a byproduct of the industry. The generation of scrap if happens during the manufacturing activity then eligible for deduction. An another decision of respected co ordinate bench Mumbai has also been quoted namely Asian Investments 90 TTJ 65. Thus considering the factual aspect as also the legal aspect a view can be taken in favour of the assessee especially under the circumstances when it is demonstrated before the authorities below that the generation of the scrap in this case had a direct link and close nexus with the manufacturing activity of the assessee. Once it is established that during the manufacturing activity scrap was generated as a byproduct hence, follow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on regarding origin of such goodwill was given as under: "In accordance with Scheme of Amalgamation of YSN Shares & Securities (P) Ltd with Smifs Securities Ltd (duly sanctioned by Hon'ble High Courts of Bombay and Calcutta) with retrospective effect from 1st April, 1998, assets and liabilities of YSN Shares & Securities (P) Ltd were transferred to and vest in the company. In the process goodwill has arisen in the books of the company." It was further explained that excess consideration paid by the assessee over the value of net assets acquired of YSN Shares and Securities Private Limited [Amalgamating Company] should be considered as goodwill arising on amalgamation. It was claimed that the extra consideration was paid towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer, as a matter of fact, came to the conclusion that no amount was actually paid on account of goodwill. This is a factual finding. The Commissioner of Income Tax (Appeals) ["CIT(A)', for short] has come to the conclusion that the authorised representatives had filed copies of the Orders of the High Court ordering amalgamation of the above two Companies; that the assets and liabilities of M/s. YSN Shares and Securities Private Limited were transferred to the assessee for a consideration; that the difference between the cost of an asset and the amount paid constituted goodwill and that the assessee‐Company in the process of amalgamation had acquired a capital right in the form of goodwill because of which the marke ..... X X X X Extracts X X X X X X X X Extracts X X X X
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