TMI Blog2016 (2) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... ial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression `any other business or commercial right of a similar nature' - Decided in favour of assessee. - ITA No. 5515/Mum/2013 - - - Dated:- 5-2-2016 - SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER Appellant by: Ms. Bharti M. Singh Respondent by: Shri Vijay Mehta ORDER PER C.N. PRASAD, JM: This appeal is filed by the Revenue against the order of the Ld. CIT(A)-24, Mumbai dated 31.05.2013 pertaining to assessment year 2009-10. 2. The first ground in Revenue s appeal is that the Ld. CIT(A) erred in holding that scrap scale income of ₹ 10,79,232/- of Goa unit is eligible for deduction u/s. 80IB of the Income tax Act, 1961. 3. Brief facts 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .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 ₹ 56,32,480/- relying on the judgments of Apex Court in the case of Pandian Chemicals (233 ITR 497) and Sterling Foods Ltd. (236 AITR 529). On appeal, the CIT(A) has confirmed the view taken by the A.O on this issue. At the very outset, the Learned Counsel for the assessee has mentioned that the said issue is also covered in favour of the assessee by virtue of Madras High Court judgment in the case of M/s Fenner India Ltd (241 ITR 803) for the proposition that the profit on sale of scrap material since had a direct link or nexus with the industrial undertaking and therefore, it is eligible for deduction u/s 80IB. Considering the similarity in language used in sections 80HH and 80IB of the Act, we are of the considered opinion that the assessee should succeed in this regard also. Accordingly, ground 3 of the revenue s appeal is dismissed. 7. Similarly in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. On the basis of the above facts we have examined few precedents namely Fenner (India) Ltd., 241 ITR 803, Wheels (I) Ltd. 141 ITR 745. The observation of the courts were that a deduction can be claimed only in respect of profits derived from an industrial undertaking. An industrial undertaking itself must be the source of that profit. Observation has also been made that it is wrong to say that the scrap has no direct nexus with industrial undertaking manufacturing such products. In the other case, Wheels (I) Ltd. (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 tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was paid towards the reputation which the Amalgamating Company was enjoying in order to retain its existing clientele. The Assessing Officer held that goodwill was not an asset falling under Explanation 3 to Section 32 (1) of the Income Tax Act, 1961 [ Act , for short]. We quote hereinbelow Explanation 3 to Section 32(1) of the Act: Explanation 3.‐‐ For the purposes of this sub‐section, the expressions assets' and block of assets' shall mean‐‐ [a] tangible assets, being buildings, machinery, plant or furniture; [b] intangible assets, being know‐how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. Explanation 3 states that the expression asset' shall mean an intangible asset, being know‐how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. A reading the words any other business or commercial rights of similar nature' in clause (b) of Explanation 3 indicates that goodwill would fall under the expression any other business or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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