The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) comprising Shri Prashant Maharishi, AM and Shri Pavan Kumar Gadale, JM has held that deduction u/s 80IB can be disallowed for the sale of scrap generated during manufacturing process.
The revenue appealed against the order of Commissioner of income-tax (Appeal)-22, Mumbai wherein disallowance under section 37 of the Act, of ₹2,79,20,249/- was deleted. Further argued against the depreciation and computation of eligible income for deduction under section 80IB of the Income Tax Act, 196 concerning the scrap sold.
The assessee company filed a return of income at ₹164,34,74,429/- as regular income and book profit under section 115JB of the Act of ₹185,42,11,000/-. The total income of the assessee was assessed at ₹167,27,56,936/- by the order passed under section 143(3) read with Section 144C(3) of the Act. CIT(A) partly allowed the appeal of the assessee.
The appellant revenue stated that the expenses have been incurred on various promotional Articles and noted that Indian Medical Council Regulations with effect from 14th December 2009 prohibits expenditure towards gifts, etc. to the doctors. Such expenditures are not allowable as per the Central Board of Direct Taxes by circular dated 1st August 2012.
The assessee submitted that the items do not have any significant value for the doctors and the value of each gift is restricted to ₹1,000/- per item and the circular applies to only doctors and not to the company.
It was contended that the Assessing Officer noted that ₹8,075/- as the sale of scrap included in the deduction claimed by the assessee u/s 80IB on the profit of Goa Plant amounting to ₹27,16,35,136/-CIT(A), allowed the claim of the assessee as the scrap was generated during the manufacturing process. The appellant failed to prove that the scrap was not generated during the manufacturing process.
The Tribunal directed the assessee to submit the details of expenses within 60 days and the Assessing Officer to decide the issue of disallowance after considering the details. Further, the tribunal didn’t find any infirmity in the order of CIT(A) on the disallowance of deduction u/s 80IB of the Income Tax Act,1961. Shri Jeet Kamdar appeared on behalf of the assessee and Shri Hioshang appeared on behalf of the revenue.
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