1999 (12) TMI 5 - HC - Income Tax

Sale receipts of empty barrels and jute bags treated as industrial income under section 80-I; raw-material deduction irrelevant

The HC affirmed the lower authorities, holding that receipts from sale of empty barrels and jute bags arise from activities of an industrial undertaking ... Deduction under section 80-I - income of industrial undertakings - New Industrial Undertaking - Special Deduction - Trust - HELD THAT:- Learned counsel, drew our attention to section 80-I of the Act and submitted that this section is meant for deduction in respect of profits and gains from industrial undertakings. With regard to the question raised by the Revenue that the amount received on sale of jute bags, barrels, etc., ought to have been deducted from the cost of the material, the learned advocate for the assessee, submitted that it would not make any difference if the amount received by the sale of empty barrel or 'bardan' (jute bags) is deducted from the cost of the raw material. He submitted that if the cost is reduced by deducting the sum so received, the profit will increase and, ultimately, the total would be the same. He submitted that the Commissioner of Income-tax (Appeals) and the Tribunal have rightly come to the conclusion that the items covered by question No. 5 are covered by section 80-I of the Act inasmuch as the amount received can be said to have been received from the activities undertaken by the assessee. It is required to be noted that if the assessee was not engaged in industrial activities, there was no question of empty barrels or bardans. Instead of manufacturing if the assessee was doing trading activities, i.e., dealing in raw material, and if the assessee had sold the material on retail basis and earned amount by sale of bardans, then obviously this section will not apply. Appeal stands dismissed. Issues:1. Deduction under section 80L for the assessee-trust2. Deletion of interest paid by the assessee-trust to its beneficiaries3. Deletion of addition on account of estimate of earned interest on bank fixed deposits4. Deletion of interest on deposits made by the assessee-trust with a company5. Allowance of deduction under section 80-I for specific income itemsAnalysis:1. The court found that the issue of allowing deduction under section 80L to the assessee-trust treating the status as an individual was already settled in a previous case. Referring to the decision in CIT v. Deepak Family Trust, it was concluded that no substantial question of law arose, and thus, this issue did not need to be referred.2. Regarding the deletion of the addition of interest paid by the assessee-trust to its beneficiaries, the court relied on the decision in CIT v. Tanvi Sajni Family Trust and found that no substantial question of law arose in this matter as well, hence not requiring a reference.3. The Tribunal had deleted the addition made on account of an estimate of earned interest on bank fixed deposits after considering the material presented. The court noted that the Tribunal's decision was in favor of the assessee based on previous accepted decisions by the Revenue. Consequently, it was determined that no substantial question of law arose, and therefore, questions 3 and 4 were not referred.4. The Tribunal had also deleted the addition made on account of interest on deposits with a company. The court upheld the Tribunal's decision, stating that no substantial question of law arose based on the material considered and the previous decisions accepted by the Revenue. Thus, this issue was not referred for further consideration.5. The court addressed the issue of allowing a deduction under section 80-I for specific income items related to industrial undertakings. The court examined the relevant provisions and submissions made by the counsel for the assessee. It was concluded that the items in question were covered by section 80-I, as the income could be attributed to the activities undertaken by the assessee. The court referenced a previous decision related to similar activities and held that the appeal lacked merit. Consequently, the appeal was dismissed, and no costs were awarded.