The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) granted deductions for notice pay, scrap sales and miscellaneous income under Section 80 IC of the Income Tax Act, 1961
The assessee has claimed deduction under section 80-IC of the Act by treating them as profit derived from the business of eligible undertaking. However, the AO disputed the deduction with respect to such items of income by holding that such incomes are not derived from business of manufacturing of article or things. In other words, the above incomes did not have direct nexus with the manufacturing activity of the eligible undertaking
Thus, the AO denied the deduction claimed by the assessee. On appeal by the assessee, the learned CIT (A) allowed deduction on certain items as income eligible for deduction under section 80-IC of the Act and simultaneously, confirmed the disallowance of certain items by holding them non-eligible for deduction under section 80-IC of the Act.
The bench found support and guidance from the judgment of High Court in the case of Metrochem Industries Ltd (supra) Section 80-I of the Income-tax Act, 1961 – Deductions – Profits and gains from industrial undertakings, etc., after a certain date (Computation of deduction) – Assessment years 1994-95, 1996-97 and 1997-98 – Deduction under section 80-I was allowable in respect of Kasar, discount and sales-tax set off In favour of assessee
No material was placed on record pointing out any distinguishing feature in the facts of the case of earlier AY and the year under consideration, Therefore, The two member bench of the hold that the Madhumitha Roy (Judicial member) and Waseem Ahemed (Accountant member) concluded that assessee was eligible for deduction in respect of the income as discussed above under section 80 IC of the Act. Accordingly, ITAT held that the assessee was eligible for deduction under section 80-IC of the Income Tax Act with respect to the income being miscellaneous Income, notice pay, and scrap sales, Accordingly, appeal of the revenue was dismissed
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