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Issues: (i) Whether deduction under section 80IB was allowable despite the dispute regarding commencement of manufacturing activity and the date of grant of factory licence; (ii) Whether scrap sale income formed part of eligible profits for deduction under section 80IB.
Issue (i): Whether deduction under section 80IB was allowable despite the dispute regarding commencement of manufacturing activity and the date of grant of factory licence.
Analysis: The deduction under section 80IB(4) depends on the industrial undertaking having begun to manufacture or produce articles on or before the stipulated date. The record did not establish when the application for factory licence was made or when it was granted. The date of issue of the licence by itself was not treated as conclusive, and the matter required verification in light of the principle that a short delay in obtaining the licence may be only a technical lapse if the application was made in time.
Conclusion: The issue was remitted to the Assessing Officer for verification, and the Revenue succeeded only for statistical purposes.
Issue (ii): Whether scrap sale income formed part of eligible profits for deduction under section 80IB.
Analysis: The claim depended on whether the scrap was generated in the course of manufacturing activity. As the details and nature of the scrap were not established on the record before the appellate authorities or the Tribunal, the matter required factual verification before deciding whether the income was derived from the industrial undertaking.
Conclusion: The issue was remitted to the Assessing Officer for verification, and the Revenue succeeded only for statistical purposes.
Final Conclusion: The appeal did not result in a substantive reversal on merits and was sent back for fresh examination of the factual issues relating to eligibility under section 80IB.
Ratio Decidendi: For deduction under section 80IB, entitlement turns on factual verification of timely commencement of manufacture and of whether the disputed income is derived from the industrial undertaking; where these facts are not established, remand for examination is appropriate.
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