Receipts from Sale of Scraps is part of Gains derived from Industrial undertaking for Computing Deduction: ITAT [Read Order]

Sale of Scraps -ITAT - IT Act - Taxscan

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has ruled that the receipts from the sale of scraps shall be treated as part of gains derived from industrial undertaking for the purposes of computing deduction under section 80IBof the Income Tax Act, 1961.

The assessee company is engaged in the business of Manufacturing & Selling of Electric Generating sets.The Assessing Officer, while completing the assessment proceedings against the assessee, made a disallowance of Rs.18,725/- by including income from sale of scrap from the profit eligible for deduction u/s 80IB of the Act.

A bench comprising comprising Judicial Member SudhansuSrivasthava and Accountant Member R K Panda held thatthe amount received by the assessee from sale of scrap pertained to scrap generated from the activities carried by the assessee which were part and parcel of the manufacturing process of the industrial undertaking.

“As far as the issue of deduction u/s 80IB on sale of scrap is concerned, although the Ld. CIT(A) has not passed a speaking order on the same and has relied on his orders for the previous assessment years while deleting the addition, we note that the issue is squarely covered in favour of the assessee by numerous judicial precedents, case in point being the judgment of the Hon’ble Delhi High Court in the case of CIT vs. Sadhu Forging Ltd. reported in 336 ITR 444 (Delhi High Court),” the bench said.

The bench, while ruling in favour of the assessee, also relied on the Delhi High Court decision in the case of CIT vs. Sadhu Forging Ltd., wherein it was held that the receipts from sale of scrap being part and parcel of the activities and being approximate thereto would also be within the ambit of gains derived from industrial undertaking for the purposes of computing deduction under section 80IB.

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