Tribunal affirms deduction under section 80IB for scrap income, excludes surplus from taxable income

The Tribunal upheld the CIT(A)'s decision allowing the deduction u/s. 80IB for income from sale of scrap, emphasizing the direct nexus with the industrial undertaking. Additionally, the Tribunal affirmed the exclusion of a surplus from taxable income arising from pre-payment of deferred sales tax loan liability, following a Tribunal decision. The Revenue's appeal was dismissed, and the Tribunal's order was pronounced on 29th September 2014.

---

---

Issues:
1. Eligibility of income from sale of scrap for deduction u/s. 80IB of the Income-tax Act.
2. Exclusion of surplus credited by the assessee in its income on account of pre-payment of deferred sales tax loan liability.

Eligibility of income from sale of scrap for deduction u/s. 80IB:
The Revenue appealed against the CIT(A)'s decision allowing the deduction u/s. 80IB for income from sale of scrap for the Pimpri Unit-II and Goa unit of the assessee company. The Assessing Officer initially disallowed the deduction, stating that the income from the sale of scrap was not derived from the industrial undertaking. However, the CIT(A) referred to past judgments and allowed the deduction, emphasizing the direct nexus of scrap generation with the industrial undertaking. The Tribunal upheld the CIT(A)'s decision based on past precedent, dismissing the Revenue's appeal.

Exclusion of surplus from taxable income:
The Revenue challenged the CIT(A)'s decision to exclude a surplus of Rs. 12,73,99,650 from the taxable income, which arose from the pre-payment of deferred sales tax loan liability. The assessee initially treated this surplus as income but later contended it was a capital receipt not chargeable to tax, citing a Tribunal decision. The CIT(A) admitted this additional ground and directed the exclusion of the surplus from income, relying on the Tribunal's decision. The Revenue argued against this, stating that the surplus was already credited as income by the assessee. However, the Tribunal upheld the CIT(A)'s decision, citing the competence of the CIT(A) to admit the additional ground and the applicability of the Tribunal's decision in the case. Consequently, the Revenue's appeal was dismissed.

In conclusion, the Tribunal affirmed the CIT(A)'s decisions regarding both issues, upholding the eligibility of income from sale of scrap for deduction u/s. 80IB and the exclusion of the surplus from taxable income. The appeal of the Revenue was dismissed, and the Tribunal pronounced the order on 29th September 2014.

---