The Income Tax Appellate Tribunal (ITAT), Pune Bench allowed the claim of deduction under section 80IC of the Income Tax Act in respect of sale of scrap.
The Assessee, M/s. Finolex Cables Limited is a company which is engaged in the manufacture and sale of insulated wires, cables, etc. The return of income for the year under consideration was filed by the assessee declaring a total income after claiming a deduction under section 80IC of the Act for the entire profit of its LDC Division at Roorkee.
During the course of assessment proceedings, the claim of the assessee for deduction under section 80IC of the Act was examined by the Assessing Officer. On such examination, he found that deduction under section 80IC of the Act was claimed by the assessee even in respect of sale of scrap amounting to Rs.2,97,84,396.
In this regard, it was submitted on behalf of the assessee company that the sale of scrap was eligible for deduction under section 80IC of the Act as the same was derived from the eligible undertaking which was engaged in the business of manufacturing and sale of various types of cables, etc., from which the scrap was generated.
However, according to AO, scrap generated during the course of the manufacturing process was not the by-product of the assessee company, and the sale of scrap so generated therefore did not constitute the income derived by the industrial undertaking of the assessee company, which was eligible for deduction under section 80IC of the Act.
The AO therefore, disallowed the claim of assessee for deduction under section 80IC of the Act to the extent of Rs.2,97,84,396 being the sale of scrap.
The CIT(A) directed the Assessing Officer to allow the claim of the assessee for deduction under section 80IC of the Act in respect of sale of scrap for Assessment Year 2012-13.
The coram headed by the Vice President, P.M. Jagtap held that the income earned from the sale of scrap is an eligible business and the assessee is entitled to claim the said income as a deduction under section 80IC.
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