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5. That the Ld. CIT(A) has erred in law & facts in directing the A. O. to reduce 90% instead of 100% of interest received from suppliers and customers for the purpose of deduction u/s 80HHC.

6. That the CIT(A) has erred in law & facts in directing the A.O. not to reduce scrap sales from total turnover and profit of the asessee company.

7. That the CIT(A) has erred in law & facts in directing the A.O. not to exclude 90% of rental income received from employees of the company, Misc. receipts and foreign exchange fluctuation for calculating deduction u/s 80HHC.

15. Issue No. 10: Reduction of scrap sales from total turnover for 80HHC:

A.Y. 2004-05 Ground No. 6 of the Revenue's Appeal 15.1 The assessee included sale of scrap in total turnover while computing deduction under section 80HHC. The Assessing Officer has excluded entire scrap sale from total turnover and profits of the business for calculating that deduction under section 80HHC. The Assessing Officer relied on the judgment in the case of Mahavir Cycles Industries to exclude the profits of scrap.
15.2 Ld. CIT(A) relied on the decision of ITAT Chandigarh in the case of Kangaro Industries in ITA 23/CHD/2007 for the A.Y. 2004-05 wherein it was held that the case of manufacturing, sale of scrap is not to be reduced from the total turnover and profits of the business.
15.3 Before us, Ld. AR relied on the case of R.N. Gupta 351 ITR 369 wherein it was held as under:
"(i) Whether in facts and circumstances of the case, the action of the ld.

authorities below in ignoring the fact that scrap is incidental to manufacturing of finished good and no expense is incurred for the same and therefore the entire scrap sale forms part of business profit and thus includible for the computation purposes u/s 80 HHC is legally unsustainable in the eyes of law?

"9. As regards the inclusion of value of scrap sale in the profits of the business for computing the relief u/s 80HHC, the entire value of scrap sales cannot be included in the profits of the business. What can be included in the profits of the business for working out the relief u/s 80HHC is the profit element in respect of sales of scrap and not the total sales of scrap. On the facts of the case, the profit element on sale of scrap is estimated at 7.5 percent. The AO is directed to include 7.5 percent of sales of scrap in the profits of the business for working out the relief u/s 80HHC. In this view of the matter, the order of the ld. CIT(A) directing the AO to include the total sales of scrap in the profits of business is vacated. The AO is directed to include only 7.5 percent being estimated element of profit in the sale of scrap in the profits of the business for working out the relief u/s 80HHC.