2013 (9) TMI 1146

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..... 21,15,000/- under section36(l)(iii)on the ground that the same should be considered as relatable to acquisition of capital asset. 4.The learned CIT (Appeals) erred in confirming the addition of Rs. 4,37,665/-by invoking the rule 8D under section 1 4A even though this provision was not applicable for this assessment year. 5.The assessee craves leave to alter, amend, rescind and substitute any of the above-mentioned grounds and add any further ground before or at the time of hearing of the appeal." 2. Assessee-company,engaged in the business of manufacturing textiles,filed its return of income on 16.11.2006 declaring total income of Rs. 5.15 Crores.Assessing officer (AO) finalised the assessment order u/s.143(3) of the Act,on 12.12.2008,determining the total income at Rs. 11.58 Crores. 2.1. First Ground of appeal pertains to exclusion of Rs. 7,36,938/-being the income earned from the sale of a scrap for the purposes of computing the eligible income for allowance of deduction under section 80-IB of the Act.During the assessment proceedings AO found that the assessee has claimed deduction u/s.80IB in respect of 3 units i.e. Balaji Industries @30%, Balaji Texti....

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....ted out of the sale of Scrap,in our opinion,forms part of the amount that can be claimed exempt u/s.80IB of the Act.We find that dealing with the issue of sale of Scrap with regard to deduction u/s. 80IB of the Act Hon'ble Delhi High Court has in the case of Sadhu Forging Ltd. has held as under: "With the consent of the counsel for the parties, we have heard the matter finally. To answer the questions in both the appeals, we need to consider, firstly, as to whether the scrap, generated at various stages of manufacturing process, was part of manufacturing activity of the industrial unit and thus represented profits and gains derived from the industrial undertaking on this account were entitled to deduction under section 80-IB. .....There cannot be any two opinions that manufacturing activity of the type of material being undertaken by the assessee would also generate scrap in the process of manufacturing. The receipts of sale of scrap being part and parcel of the activity and being proximate thereto would also be within the ambit of gains derived from the industrial undertaking for the purpose of computing deduction under section 80-IB." Respectfully following t....

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....um/2011 dated 03.04.2013.) 3.3.We have heard the rival submissions and perused the material before us. assessee in the AYs.1999-2000 to2004-05 and AY.2007-08.We further find that while deciding the appeal no. 6748/Mum/2011 for the AY 2007-08 'D' bench of the Tribunal had relied upon the earlier orders passed by the Tribunal in assessee's own case.Here,we would like to reproduce the operative portion of the order of the Tribunal for the AY 2001-02 and for the AY 2002-03 : "7"Regarding the second issue, the CIT(A) had allowed u/s. 80IB on profits attributable to manufa -cturing activities carried out by the assessee On job work basis from outside parties....... 8."We heard both the parties. The. issue is covered by the. decision of ITAT Mumbai Bench 'E' in the case of Shah Originals Vs ACIT/DCIT 19 SOT 568 (Mum) wherein it has been held as fol1ows:, "In view of the above; we are of the considered opinion that job-work got done under own, supervision of the assessee can be considered to,be a part of the manufacturing process of the assessee and in this vies of matte, dyeing and printing although got done as job-work can 'qualify as manufacturing process. ....

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....capital assets,that no details were submitted before the AO or before him to substantiate its claim,it was a well established law that the assessee had to submit the details before the AO to his satisfaction for claiming any deduction,that it did not file any details to prove the nexus between borrowed funds and utilisation for acquiring the capital assets,that it had failed to discharge its onus.He relied upon the cases of Hon'ble Madras High Court and the Hon'ble Supreme Court delivered in the cases of Mir Mohamad (38 ITR 413 and 52 ITR 165). He finally held that when interest bearing borrowed funds were diverted for any purpose other than business,interest paid on borrowed funds could not be allowed u/s.36(l)(iii) of the Act.He confirmed the order of the AO. 4.2.Before us,AR submitted that assessee had filed necessary details before the AO,that profits and reserves had gone up substantially whereas the interest payment on loan had gone down during the year under consideration,that no loan was raised during the year,that work-in-progress had also increased,that notional interest could not be taxed.He referred to the balance sheet and the working of interest paid and received b....