Claim of Deduction on Sale of Scrap and Stores in Respect of Export Turnover u/s 80HHC: ITAT Allows Appeal [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad Bench, allowed the claim for deduction under Section 80HHC of the Income Tax Act, 1961 on the sale of scrap and parts.

The assessee in this case is Madhusudhan Industries. The issue involved in this is regarding deduction under section 80HHC of the Income Tax Act is to be allowed on the net profits remaining after the claim of deduction under Section 80IA of the Income Tax Act.

The Assessing Officer had treated the income from scrap sale to be included for the purpose of computing deduction under section 80HHC of the Income Tax Act.

This is a cross-appeal by the Revenue and the assessee against common order of the CIT(A), Ahmedabad under section 250(6) the Income Tax Act.

The Commissioner of Income Tax (Appeals) CIT(A) allowed the claim of deduction under Section 80HHC of the Income Tax Act after finding that both related to income arising from business activity of the appellant company ,which even the AO has treated as business income and not income from other sources.

The Departmental Representative (DR) filed an application seeking adjournment on the ground that he would be unable to attend the hearing since he had been called for a briefing meeting by Election Commission of India.

The Authorised Representative (AR) of the assessee pointed out that the issue arising in the assessee’s appeal related to simultaneous claim of deduction of profits of business of the assessee under section 80IA and 80HHC of the Income Tax Act, whether the deduction under section 80HHC of the Income Tax Act is to be allowed on the net profits remaining after the claim of deduction under section 80IA of the Income Tax Act.

The bench observed that the Revenue's appeal relates to minor issues of claim of deduction under Section 80HHC of the Income Tax Act on Miscellaneous incomes, whereas assesses’s appeal relates to the major issue in the appeals, in the interest of all concerned thus it was decided not to adjourn the matter any further and thus the adjournment application of the DR was accordingly rejected and the appeals were proceeded to be heard.

The only issue in this case is relateed to allowance of claim of deduction under section 80HHC of the Income Tax Act on the following incomes:

i) Misc. income such as sale of scrap, stores etc;

ii) Income in the nature of contract compensation

The Tribunal stated that it has gone through order of the CIT(A) and see no reason to interfere in the matter, the CIT (A) has recorded a finding of the fact that scrap and stores sold, arose from the business activity of the assessee-company.

Considering the uncontroverted facts, the Bench held that the assessee is entitled to claim deduction under section 80HHC of the Income Tax Act and thus he grounds raised by the Revenue are accordingly dismissed.

To Read the full text of the Order CLICK HERE

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