The Delhi High Court recently observed that the eligible industrial undertakings carrying out manufacturing activity essential requisite to claim benefit under Section 80IC of the Income Tax Act, 1961.
The Commissioner impugned the order passed by the Income Tax Appellate Tribunal [“ITAT”] and has proposed the following questions of law: “Whether on the facts and in the circumstances of the case, the ITAT was legally justified in adjudicating that no royalty was payable by Dabur Nepal Pvt. Ltd. to the respondent as against the royalty chargeable at the rate of 7.5 percent on FOB sale value as worked out by the TPO/AO?
Another question of law in issue was whether the ITAT’s was justified in allowing deduction under Section 80-IB and 80-IC in respect of additions on account of Sale of Scrap, Rental income, Miscellaneous Incomes besides statutory disallowances under Section 40(a)(ia) etc. of the Income Tax Act, more so when income from these activities have no direct nexus with the eligible activities of the industrial undertakings.
The Court relied on the judgment in CIT v. Sadhu Forging Ltd, wherein it was held that “we have no hesitation in arriving at the conclusion that the activity of forging was “manufacturing” within the ambit of section 80-IB. It was immaterial that the assessee was doing the job of forging also for customers and was charging them on job work basis or on the basis of labour charges. It will still be qualified as carrying eligible business under section 80-IB.”
A Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that “In view of the aforesaid, there is no infirmity in the order of the ITAT. No substantial question of law arises.”
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