Delhi bench of Income Tax Appellate Tribunal in DCIT versus M/S Dynamic Transmission Limited while dismissing the appeal of Revenue held that job work charges received from the assessee’s eligible unit can be deducted under section 80IC of the Income Tax Act.
In instant case Assessee engaged in the business of manufacturing of Precision turned parts and gears from bright bars and forging etc. filed its e-return declaring income to the tune of 1 crore and claimed deduction to the tune of 74 lakh under 80IC of the Act. In reply to the notice proceedings counsel for Assessee appeared and complied with the procedures.
However, the Assessing officer made addition of 68 lakhs to the income of assessee by disallowing the deduction under 80 IC of the Act and completed the assessment to the tune of 2 crore.
Aggrieved with the aforementioned Assessment, Assessee filed an appeal before CIT (A) who has allowed the appeal of Assessee by deleting the additions in dispute. Aggrieved with the order of CIT (A) Revenue filed this appeal and challenged the same.
The counsel for Revenue reiterated the contentions and relied on the decision of Assessing Officer and stated that job work income credited in the P&L account of Assessee’s eligible unit can be considered as income from the industrial activities of him yet the same cannot considered as income received for articles or things manufactured or produced in its eligible unit.
The bench heard both the parties and perused case record cited by them, Tribunal observed the fact that the AO laid a preposition that aforementioned deduction is available only on articles or things manufactured by itself in its specified industrial unit. However AO not disputed that job work charges were received from articles or things manufactured or produced in its eligible unit.
The tribunal bench impressed with the contention raised by Assessee that the nature of job work done and also process done for completing such job work.
Finally bench noted that “it cannot be denied that the assessee received job work charges from the manufacturing process through which a new product has emerged from the raw material supplied by its customers”
In the light of decision in assessee’s own case has allowed the deduction under Chapter VIA u/s. 80-IC and also the ITAT New Delhi bench in ITO vs. Zeon Lifessciences Ltd. wherein held that assessee job work charges have to be treated as manufacturing activity, and it is not envisaged u/s. 80-IC to maintain separate books of account for manufacturing on his own account and for job work.
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