Eisha Concord Realtors, Pune V. Income-tax Officer,

ITA 1888/PUN/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2005 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 12-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HEMANTKUMAR C LEUVA
• Assessee Lawyers: KRISHNA V GUJARATHI
• Keywords: Business income
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1888/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2010-11 EISHA CONCORD REALTORS, 603, SAN MAHU COMPLEX, 5, BUND GARDEN ROAD, OPP. : POONA CLUB, PUNE - 411001 PAN : AACFE2433M ....... / APPELLANT ' / V/S. THE INCOME TAX OFFICER, WARD 2(2), PUNE / RESPONDENT ASSESSEE BY : SHRI KRISHNA V. GUJARATHI REVENUE BY : SHRI HEMANT KUMAR C. LEUVA / DATE OF HEARING : 12-04-2016 / DATE OF PRONOUNCEMENT : 22-04-2016 * / ORDER PER VIKAS AWASTHY, JM : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDE R OF COMMISSIONER OF INCOME TAX (APPEALS)-II, PUNE DATED 28-05 -2014 FOR THE ASSESSMENT YEAR 2010-11. THE IMPUGNED ORDER HAS BEEN CHALLENGED BY THE ASSESSEE ON THE FOLLOWING TWO GROUNDS: 2 ITA NO. 1888/PN/2014, A.Y. 2010-11 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONOURABLE CIT (APPEALS)-II, PUNE ERRED IN CONFIRMI NG THE ADDITION OF GROSS INTEREST RECEIVED RS.23,24,436/- UNDER THE HE AD 'INCOME FROM OTHER SOURCES' WITHOUT APPRECIATING THE FACTS OF TH E CASE THAT THE INTEREST RECEIVED RS. 23,24,436/- ON LOANS AND ADVANCES IS T O BE NET OFF AGAINST INTEREST PAID ON BORROWED FUNDS FROM BANKS AS THE A SSESSEE HAS UTILIZED BORROWED FUNDS FOR ADVANCING SUCH LOANS ON INTEREST . THE APPELLANT HEREBY PRAYS THAT THE ADDITION MAY PLEASE BE DELETE D. 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONOURABLE CIT (APPEALS)-II, PUNE ERRED IN CONFIRMI NG THE DISALLOWING OF THE CLAIM OF DEDUCTION U/S. 80IB(10) OF THE I.T. AC T OF OTHER BUSINESS INCOME RS.1,17,295/- (SCRAP SALES OF RS.1,17,070/- AND INTEREST RECEIVED ON FIXED DEPOSIT RS. 225/-) WITHOUT APPREC IATING THE FACT THAT THE SAID OTHER INCOME IS DIRECTLY RELATABLE TO THE ELIGIBLE HOUSING PROJECT CONSTRUCTED BY THE APPELLANT. THE APPELLANT HEREBY PRAYS THAT THE DEDUCTION U/S. 80IB(10) MAY PLEASE BE GRANTED ON SU CH OTHER BUSINESS INCOME. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM RECORD S ARE: THE ASSESSEE IS A PARTNERSHIP FIRM AND IS ENGAGED IN THE BUSIN ESS OF CONSTRUCTION OF BUILDING AND DEVELOPMENT OF REAL ESTATE. T HE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 14-10-2010 DECLARING TOTAL INCOME OF ` 31,520/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY NOTIC E U/S. 143(2) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) WAS ISSUED TO THE ASSESSEE ON 30-08-2011. DURING THE COUR SE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSERVED T HAT THE ASSESSEE HAS PAID INTEREST ON THE BORROWINGS AND HAD A LSO RECEIVED INTEREST FROM LOANS ADVANCED TO CERTAIN PARTIES. THE AS SESSEE HAS NETTED THE INTEREST RECEIVED AND THE INTEREST PAID AMOU NTING TO ` 60,95,369/-. THE ASSESSING OFFICER REJECTED THE NETTING OF F OF INTEREST RECEIVED AGAINST INTEREST PAID ON BORROWED FUNDS AND MAD E ADDITION OF ` 60,95,369/- IN RESPECT OF INTEREST RECEIVED. FURTHER, THE ASSESSING 3 ITA NO. 1888/PN/2014, A.Y. 2010-11 OFFICER REJECTED THE CLAIM OF DEDUCTION U/S. 80IB(10) IN RESP ECT OF INCOME FROM SALE OF SCRAP ` 1,17,295/-. AGGRIEVED BY THE ASSESSMENT ORDER DATED 25-03-2013, T HE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF I NCOME TAX (APPEALS). THE COMMISSIONER OF INCOME TAX (APPEALS) PARTLY ACCEPTED THE CLAIM OF ASSESSEE IN RESPECT OF NETTING OFF OF INTEREST RECEIVED AND INTEREST PAID AND RESTRICTED THE ADDITION TO ` 23,24,436/-. HOWEVER, THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED THE CONTENT IONS OF THE ASSESSEE WITH RESPECT TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 80IB(10) AMOUNTING TO ` 1,17,295/- ON SALE OF SCRAP. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS). 3. SHRI KRISHNA V. GUJARATHI APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAD TAKEN TERM LOAN OF ` 10,00,00,000/- FROM PNB HOUSING FINANCE. THE LOAN AMOUNT WAS NOT FULLY U TILIZED FOR THE PROJECT AND WAS LYING IDLE WITH THE ASSESSEE. THE A SSESSEE ADVANCED THE SAME TO THE OTHER CONCERNS. THE ASSESS EE IS NOT HAVING ANY OTHER SOURCE OF INCOME FROM WHERE ADVANCES CAN B E GIVEN. A CLOSE PERUSAL OF THE TRANSACTIONS WOULD SHOW THAT THEY ARE BA CK TO BACK TRANSACTIONS. TO SUBSTANTIATE ITS CLAIM, THE ASSESSEE FILED A SUMMARY OF THE LOAN DISBURSED AND THE LOANS ADVANCED BY THE ASS ESSEE. THE LD. AR SUBMITTED THAT THE LOANS ADVANCED ON VARIOUS DATES ARE EITHER ON THE SAME DATE OR JUST AFTER THE DATE OF LOAN DISBURSED BY THE PNB HOUSING FINANCE TO THE ASSESSEE. THE LD. AR FURTHER SUBMITTED THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISIO N OF CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO VS. M/S. BRAHMA ASSOCI ATES IN ITA NO. 133/PN/2014 FOR THE ASSESSMENT YEAR 2003-04 DECIDE D ON 30-11- 2015. 4 ITA NO. 1888/PN/2014, A.Y. 2010-11 4. IN RESPECT OF SECOND GROUND RAISED IN THE APPEAL, THE LD. AR SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S. 8 0IB(10) IN RESPECT OF BUSINESS INCOME FROM SALE OF SCRAP. THE AUTHOR ITIES BELOW HAVE FAILED TO APPRECIATE THE FACT THAT THE SAID INCOME IS DIRECTLY RELATABLE TO THE HOUSING PROJECT CONSTRUCTED BY THE AS SESSEE AND THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IB(10) ON THE SAID PROJECT. THE LD. AR IN SUPPORT OF HIS SUBMISSIONS PLACED RE LIANCE ON THE DECISION OF PUNE BENCH OF THE TRIBUNAL IN THE CASE OF P REETAM ENTERPRISES VS. JT. COMMISSIONER OF INCOME TAX IN ITA NOS. 544, 545 AND 613/PN/2009 FOR THE ASSESSMENT YEARS 2004-05, 200 5-06 AND 2006-07 DECIDED ON 29-04-2011. 5. ON THE OTHER HAND SHRI HEMANT KUMAR C. LEUVA REPRESENTING T HE DEPARTMENT VEHEMENTLY DEFENDED THE FINDINGS OF COMMISSIONE R OF INCOME TAX (APPEALS) IN CONFIRMING THE DISALLOWANCE AND REJ ECTING THE NETTING OFF OF INTEREST CLAIMED BY THE ASSESSEE. THE LD. DR SUBMITTED THAT THE DETAILS FURNISHED BY THE ASSESSEE BEFORE THE TR IBUNAL SHOWING DISBURSAL OF LOAN AND ADVANCING OF SAME TO OTHER CONCERNS WERE AVAILABLE WITH THE ASSESSEE RIGHT FROM THE BEGINNING. NO RE ASON WHATSOEVER HAS BEEN GIVEN FOR NOT FURNISHING SUCH DETAILS IN THE FIRST INSTANCE BEFORE THE ASSESSING OFFICER AND THEREAFTER DURIN G THE FIRST APPELLATE PROCEEDINGS. THE LD. DR PRAYED FOR DISMISSING THE APPEAL OF THE ASSESSEE. 6. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE EXAMINED THE ORDERS OF THE AUTHORITIE S BELOW. WE HAVE ALSO CONSIDERED THE DECISION ON WHICH THE LD. AR OF TH E ASSESSEE HAS PLACED RELIANCE. THE FIRST GROUND RAISED IN THE APPEA L RELATES TO THE 5 ITA NO. 1888/PN/2014, A.Y. 2010-11 ADDITION OF INTEREST RECEIVED ` 23,24,436/- BY THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. THE CONTENTION OF TH E ASSESSEE IS THAT THE INTEREST RECEIVED BY THE ASSESSEE IS ON THE LO AN ADVANCED TO OTHER CONCERNS. THE ASSESSEE HAS ADVANCED LOANS TO O THER CONCERNS FROM TERM LOAN AMOUNT DISBURSED BY THE PNB HOUSING FINAN CE. THE ASSESSEE HAS PAID INTEREST OF ` 60,95,369/- ON THE SAID LOANS AND HAS RECEIVED INTEREST OF ` 60,95,369/- ON THE AMOUNT ADVANCED. THEREFORE, THE INTEREST RECEIVED BY THE ASSESSEE IS NOT THE INCOME OF THE ASSESSEE TAXABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. T HE ASSESSEE IS ENTITLED TO CLAIM BENEFIT OF NETTING OFF OF INTEREST. IN SUPPOR T OF HIS SUBMISSIONS, THE LD. AR OF THE ASSESSEE HAS PLACED ON RECO RD THE DETAILS OF TERM LOAN DISBURSED TO THE ASSESSEE AND THE AMOUNT S ADVANCED TO OTHER CONCERNS TO SHOW THAT THE LOAN AMOUNTS RECEIVED AND ADVANCED ARE BACK TO BACK TRANSACTIONS AND HAVE DIRECT NEXUS. 7. THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ITO V S. M/S. BRAHMA ASSOCIATES (SUPRA) HAS DEALT WITH THE ISSUE WHEREIN UNDER SIMILAR CIRCUMSTANCES THE ASSESSEE HAD GIVEN ADVANCES TO ASSOCIATE CONCERNS FROM THE LOAN AVAILED FROM RUPEE CO-OPERATIVE BA NK LTD. THE RELEVANT EXTRACT OF THE ORDER OF TRIBUNAL IS REPRODUCED HERE-IN-B ELOW: 11. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND CIT(A) AND THE PAP ER BOOK FILED ON BEHALF OF THE ASSESSEE. THE ONLY DISPUTE THAT HAS T O BE DECIDED IN THE IMPUGNED APPEAL IS REGARDING ALLOWABILITY OF THE IN TEREST INCOME OF RS.71,75,503/- FROM THE INTEREST EXPENDITURE ON THE BASIS OF NEXUS BETWEEN THE INTEREST EXPENDITURE AND THE INTEREST I NCOME. FROM THE DETAILS FURNISHED BY THE ASSESSEE WE FIND THE ASSES SEE HAD SHOWN INTEREST INCOME OF RS.1,09,94,741/- AND INTEREST EX PENDITURE OF RS.1,10,01,275/- FOR THE FINANCIAL YEAR ENDING ON 3 1- 03-2003. THE AO IN THE ASSESSMENT ORDER HELD THAT THE ASSESSEE COULD E STABLISH SUCH NEXUS ONLY TO THE EXTENT OF R.38,19,238/-. HE, THEREFORE, TREATED THE BALANCE INTEREST INCOME OF RS.71,75,503/-, [I.E. RS.1,09,94 ,741/- (-) RS.38,19,238/-] AS INCOME FROM OTHER SOURCES AND DI D NOT ALLOW SET OFF 6 ITA NO. 1888/PN/2014, A.Y. 2010-11 FROM THE INTEREST EXPENDITURE SINCE ACCORDING TO TH E AO THE ASSESSEE COULD NOT ESTABLISH ANY DIRECT NEXUS BETWEEN THE BO RROWED FUNDS, LOANS GIVEN, INTEREST EXPENDITURE INCURRED AND INTEREST E ARNED. WE FIND THE LD.CIT(A) ON THE BASIS OF THE VARIOUS DETAILS FILED BY THE ASSESSEE ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THA T THE AO HAS NOT EXAMINED THE ENTIRE DETAILS FURNISHED BY THE ASSESS EE AND HAS BEEN GUIDED BY THE HEADING OF THE EXPENSES SUCH AS ADVERTISEMENT/MISCELLANEOUS EXPENSES AND CONCLUDED THAT INTEREST EXPENDITURE INCLUDES NUMBER OF OTHER EXPENSES WHERE AS INTEREST RECEIVED INCLUDES CERTAIN MISCELLANEOUS EXPENSES WR ITTEN OFF AS NOLONGER PAYABLE. WE FIND THE LD.CIT(A) HAS GIVEN A FINDING ON THE BASIS OF THE DETAILS FILED BY THE ASSESSEE THAT THE ASSESSEE HAS RECEIVED INTEREST AMOUNTING TO RS.59,20,843/- FROM BRAHMA FINANCE COR PORATION UPTO F.Y. 31-03-2002 AND FROM BRAHMA BUILDERS AMOUNTING TO RS .12,54,660/- FOR THE F.Y. 2002-03. HE HAS GIVEN A FINDING THAT THERE IS A DIRECT NEXUS BETWEEN THE LOAN TAKEN FROM RUPEE COOPERATIVE BANK LTD AND THE AMOUNT OF ADVANCE TO BRAHMA FINANCE CORPORATION AND BRAHMA ASSOCIATES. THE LD. DEPARTMENTAL REPRESENTATIVE COU LD NOT CONTROVERT THE ABOVE FACTUAL FINDING GIVEN BY THE CIT(A). FURTHER, THE FINDING OF THE LD.CIT(A) THAT THE MISCELLANEOUS EXPENDITURE IN THE LEDGER ACCOUNT CONTAINS THE ENTIRE DETAILS OF EXPENDITURE WHICH IN CLUDES THE INTEREST EXPENDITURE AND ALSO THE RECEIPT OF INTEREST AND DI VIDEND FOR F.Y. 2001- 02 WHEREIN THE JOURNAL ENTRIES 447 AND 448 ARE ALSO MENTIONED COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL REPRESENTAT IVE. THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE BEFORE US THAT THE LOAN OBTAINED FROM THE BANK AND GIVEN TO THE VARIOUS CONCERNS ARE BACK TO BACK TRANSACTIONS COULD NOT BE CONTROVERTED BY THE LD. DEPARTMENTAL R EPRESENTATIVE . IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASO NING GIVEN BY THE LD.CIT(A) WE FIND NO INFIRMITY IN HIS ORDER. ACCORD INGLY, THE SAME IS UPHELD AND THE GROUNDS RAISED BY THE REVENUE ARE DI SMISSED. 8. THE ASSESSEE IN THE PRESENT CASE HAS FURNISHED THE DETAILS OF TERM LOAN DISBURSED TO THE ASSESSEE BY PNB HOUSING FIN ANCE AND ADVANCED BY THE ASSESSEE TO SHOW THE NEXUS BETWEEN TWO. THESE DETAILS WERE NOT FURNISHED BY THE ASSESSEE BEFORE THE AU THORITIES BELOW. IN OUR CONSIDERED OPINION THIS ISSUE NEEDS A REVISIT TO TH E FILE OF ASSESSING OFFICER FOR VERIFICATION OF THE LOANS RECEIVED AND SA ME AMOUNT BEING ADVANCED TO OTHER CONCERNS. IF THE ASSESSEE IS SUCCESSFUL IN ESTABLISHING THE LINK BETWEEN THE LOAN AMOUNT RECEIVED BY THE ASSESSEE 7 ITA NO. 1888/PN/2014, A.Y. 2010-11 AND THE LOAN ADVANCED, THE ASSESSEE SHALL BE ENTITLED TO THE BENEFIT OF NETTING OFF OF INTEREST AMOUNT. ACCORDINGLY, THE FIRST GROUND OF APPEAL O F THE ASSESSEE IS ALLOWED FOR THE STATISTICAL PURPOSE. 9. THE SECOND GROUND RAISED IN THE APPEAL IS WITH RESPEC T TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S. 80IB(10) ON INCOME ARISIN G FROM SALE OF SCRAP. THE CONTENTION OF THE ASSESSEE IS TH AT THE SAID INCOME IS DIRECTLY RELATABLE TO THE INCOME FROM HOUSING PRO JECT ON WHICH THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION U/S. 80IB (10). IN THE CASE OF PREETAM ENTERPRISES VS. JT. COMMISSIONER OF INCOME TAX (SUPRA) SIMILAR ISSUE HAD COME UP FOR ADJUDICATION BEFORE THE TRIBUNAL. THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE B Y HOLDING AS UNDER: 6.1 THE ISSUE INVOLVED IN THIS APPEAL IS IN RESPEC T OF CLAIM OF SEC. 80-IB IN RESPECT OF INCOME FROM MACHINING CHARGES (JOB WO RK) AND SCRAP SALE. THE ISSUE OF CLAIM OF DEDUCTION U/S 80- IA ON INCOM E FROM MACHINING AND SCRAP SALE IS COVERED BY THE DECISION OF B BENCH OF THE TRIBUNAL IN THE CASE OF RAMCHANDRA ENTERPRISES IN ITA NO. 1066, 106 7/PN/2008 AND 353/PN/2009 WHEREIN THE ISSUE HAS BEEN DECIDED AS U NDER: 5. THE LD. CIT(A) HAS APPRECIATED THIS SUBMISSIONS THEREFORE HE HAS HELD THAT THE MACHINING CHARGES RECEIVED BY THE ASSESSEE DID QUALIFY THE DEDUCTION U/S 80IB AFTER CONSIDERING THE PRECEDENTS NAMELY RANE (MADRAS) LTD., 238 ITR 377, TAJ FIRE WORKS INDUSTRI ES 288 ITR 92 (MAD.) AND NORTHERN AROMATICS LTD., 196 CTR 479 (DEL.) .WE FIND NO FALLACY IN THE DECISION OF LD. CIT(A) FOR ALLOWING THE CLAIM I N RESPECT OF MACHINING CHARGES RECEIVED BY THE ASSESSEE. HOWEVER, THE QUES TION BEFORE US AS RAISED FROM THE SIDE OF THE ASSESSEE IS IN RESPECT OF SCRAP SALES. IN THIS REGARD THE SUBMISSION OF THE ASSESSEE WAS THAT THE SCRAP IS GENERATED DURING MANUFACTURING ACTIVITY HENCE, THE VEHEMENT S UBMISSION WAS THAT THE GENERATION OF SCRAP WAS INCIDENTAL TO THE MANUF ACTURING ACTIVITY. HENCE THE ARGUMENT WAS THAT THE INCOME EARNED ON SA LE OF SCRAP WAS INCOME FROM BUSINESS OF AN ELIGIBLE INDUSTRIAL UNDE RTAKING HENCE ENTITLED FOR 80IB DEDUCTION. A RELEVANT PORTION OF THE SUBMI SSION PERTAINING TO SALE OF SCRAP IS REPRODUCED BELOW:- 3.1 INCOME FROM SALE OF SCRAP. THE SCRAP IS GENERATED DURING VARIOUS MACHINING ACT IVITIES CARRIED OUT BY THE APPELLANT DURING THE COURSE OF M ANUFACTURING 8 ITA NO. 1888/PN/2014, A.Y. 2010-11 ACTIVITY. THE GENERATION OF SCRAP IT-SELF IS DUE TO BUSINESS ACTIVITY OF THE APPELLANT. THUS INCOME EARNED ON ACCOUNT OF SALE OF SCRAP HAS DIRECT LINK / NEXUS WITH THE INDUSTRIAL UNDERTA KING AND THEREFORE, ENTITLED FOR DEDUCTION U/S 80IB. 3.2 IN THIS CONNECTION THE RELIANCE IS PLACED ON H ON. ITAT MUMBAI G BENCHS DECISION IN THE CASE OF ASIA INVESTMENTS LT D., VS. D.C.I.T (90 TTJ 65). IN THIS CASE ISSUE INVOLVED WAS DEDUCT ION U/S 80HH IN RESPECT OF RECEIPTS FROM SALE OF SCRAP. FOLLOWIN G THE DECISION OF HON. MADRAS HIGH COURT IN THE CASE OF FENNER (INDIA ) LTD. VS. CIT (241 ITR 803) THE HON. ITAT HELD THAT PROFIT FROM S ALE OF THE SCRAP MATERIAL WAS ELIGIBLE FOR DEDUCTION U/S. 80HH. 6. ON THE BASIS OF THE ABOVE FACTS WE HAVE EXAMINED FEW PRECEDENTS NAMELY FENNER (INDIA) LTD., 241 ITR 803, WHEELS (I) LTD. 141 ITR 745. THE OBSERVATION OF THE COURTS WERE THAT A DEDUCTION CAN BE CLAIMED ONLY IN RESPECT OF PROFITS DERIVED FROM AN INDUSTRIAL UN DERTAKING. AN INDUSTRIAL UNDERTAKING ITSELF MUST BE THE SOURCE OF THAT PROFI T. OBSERVATION HAS ALSO BEEN MADE THAT IT IS WRONG TO SAY THAT THE SCRAP HA S NO DIRECT NEXUS WITH INDUSTRIAL UNDERTAKING MANUFACTURING SUCH PROD UCTS. IN THE OTHER CASE, WHEELS (I) LTD. (SUPRA) THE COURT WAS OF THE VIEW THAT THE SALE OF SCRAP WAS NOTHING BUT A BYPRODUCT OF THE INDUSTRY. THE GENERATION OF SCRAP IF HAPPENS DURING THE MANUFACTURING ACTIVITY THEN ELIGIBLE FOR DEDUCTION. AN ANOTHER DECISION OF RESPECTED CO ORDI NATE BENCH MUMBAI HAS ALSO BEEN QUOTED NAMELY ASIAN INVESTMENTS 90 TT J 65. THUS CONSIDERING THE FACTUAL ASPECT AS ALSO THE LEGAL AS PECT A VIEW CAN BE TAKEN IN FAVOUR OF THE ASSESSEE ESPECIALLY UNDER TH E CIRCUMSTANCES WHEN IT IS DEMONSTRATED BEFORE THE AUTHORITIES BELOW THA T THE GENERATION OF THE SCRAP IN THIS CASE HAD A DIRECT LINK AND CLOSE NEXU S WITH THE MANUFACTURING ACTIVITY OF THE ASSESSEE. ONCE IT IS ESTABLISHED THAT DURING THE MANUFACTURING ACTIVITY SCRAP WAS GENERATED AS A BYPRODUCT HENCE, FOLLOWING THE VIEW PRONOUNCED BY THE HONBLE COURTS WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE IS ELIGIBLE FO R THE CLAIM OF DEDUCTION U/S 80IB IN RESPECT OF SALE OF SCRAP. SIMILAR VIEW HAS BEEN TAKEN IN ASSESSEES OWN CASE I N ITA NO. 1237 AND 1238/PN/2008 FOR A.Y. 2004-05 AND 2005-06. 6.2 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR NOTICE BY THE LEARNED DR. SO FOLLOWING THE AFORESAID ORDER OF THE TRIBUNAL IN THE CASE OF RAMCHANDRA ENTERPRISES (SUPRA), THE ISSUE WITH REGA RDS TO ALLOWABILITY OF DEDUCTION U/S 80-IB IN RESPECT OF INCOME FROM MA CHINING CHARGES AND SALE OF SCRAP IS DECIDED IN FAVOUR OF THE ASSESSEE. 9 ITA NO. 1888/PN/2014, A.Y. 2010-11 10. THE LD. DR HAS NOT BEEN ABLE TO DISTINGUISH THE FINDINGS OF THE TRIBUNAL IN THE AFOREMENTIONED CASE. RESPECTFULLY FOLLOWING TH E SAME WE HOLD THAT THE ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION U/ S. 80IB(10) IN RESPECT OF INCOME FROM SALE OF SCRAP. THUS, THE SECOND GR OUND RAISED IN THE APPEAL IS ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE AFORESAID TERMS. ORDER PRONOUNCED ON FRIDAY, THE 22 ND DAY OF APRIL, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 22 ND APRIL, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-II, PUNE 4. ' / THE CIT-II, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE