C I T vs. M/S BICYCLE WHEELS

ITA No. 431 of 2007 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 431 of 2007 Date of Decision: 9.12.2010 The Commissioner of Income Tax-III ....Appellant. Versus M/s Bicycles Wheels (India) ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1. This Court while admitting the appeal vide order dated February 29, 2008 had framed the following substantial questions of law for determination by this Court:- “1. Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that sale of scrap in India is not a part of total turnover of the respondent firm for the purposes of calculation of deduction under Section 80HHC? 2. Whether on the facts and circumstances of the case, the ITAT was justified in ignoring sales of scrap in computing total turnover, when such generation was a bye-product of manufacturing process?

ITA No. 431 of 2007 -2- 3. Whether on the facts and in the circumstances of the case, a bye-product in a manufacturing process is not eligible for being considered in computation of total turnover for computing deduction under Section 80HHC?” 2. The relevant facts as narrated in the instant appeal are that the assessee filed its return on 29.10.2001 for the assessment year 2001-02 declaring an income of Rs.11,29,036/-. The assessee derived income from manufacturing and export of bicycle parts. For the said purpose, the assessee exported goods to the tune of Rs.2,77,72,931/- and sold scrap in India to the tune of Rs.42,59,111/-. The Assessing Officer treated the sale of scrap as domestic sale in India and restricted the claim of deduction under Section 80HHC of the Income Tax Act, 1961 (in short “the Act”) from Rs.45,16,150/- to Rs.39,85,026/-. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity “the CIT(A)”], who vide order dated 2.6.2004 allowed the appeal holding that the sale of scrap did not form part of the total turnover. Against the order of the CIT(A), the revenue filed an appeal before the Tribunal who vide order dated 10.8.2005 upheld the order of the CIT (A). Hence, the present appeal by the revenue. 3. Learned counsel for the appellant-revenue states that this issue has already been concluded in favour of the revenue by this Court in ITA No. 31 of 2002 [Commissioner of Income-tax-III, Ludhiana v. Bicycle Wheels (India)] decided on 11.10.2010, wherein this Court had held that the sale of scrap in the domestic market shall form part of total

ITA No. 431 of 2007 -3- turnover for calculating the deduction under Section 80HHC of the Act. 4. In view of the above, the substantial questions of law are answered in favour of the revenue and against the assessee. The appeal stands allowed. (AJAY KUMAR MITTAL) JUDGE December 9, 2010 (ADARSH KUMAR GOEL) gbs JUDGE