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Facts
The assessee, a manufacturer of automobile parts, claimed a deduction under Section 80-IC on scrap sales. The Assessing Officer disallowed this deduction, treating the scrap sale as not eligible for the deduction, leading to an addition. The CIT(A) confirmed the Assessing Officer's action.
Held
The Tribunal held that the issue of allowing deduction under Section 80-IC needs to be decided based on the profit element embedded in scrap sales. Since this was not decided by the lower authorities, the matter was remanded to the CIT(A) for further examination.
Key Issues
Whether the deduction under Section 80-IC is admissible on income from scrap sales, and if so, the profit element needs to be examined. Whether the assessee was denied a reasonable opportunity of being heard.
Sections Cited
80-IC, 250, 115JD, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
BEFORE SHRI LALIET KUMAR, JUDICIAL MEMBER & SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ �नधा�रण वष� / Assessment Year : 2018-19 Aspee Sons, The ITO, बनाम Village Kuranwala, Parwanoo Barotiwala, Vs. S.O.Barotiwala (196), Solan 174103 �थायी लेखा सं./ PAN NO: AAQFA1827R अपीलाथ�/Appellant ��यथ�/Respondent ( PHYSICAL HEARING ) �नधा�रती क� ओर से/Assessee by : Sh. Parikshit Aggarwal, C.A. राज�व क� ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई क� तार�ख/Date of Hearing : 16.07.2025 उदघोषणा क� तार�ख/Date of Pronouncement : 21.07.2025 आदेश/Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the assessee against the order dated 19.09.2024 passed by the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2018-19.
Grounds of appeal are as u
1. That on the facts, circumstances and legal position of the case, Worthy CIT(A). NFAC in 1168-Chd-2024 Aspee Sons, Solan 2 Appeal No. CIT (A). NFAC/2017-18/10033046 has erred in passing order dtd. 19.09.2024 in contravention of provisions of S. 250 of the Income Tax Act, 1961 (hereinafter referred to as "Act").
2. That on law, facts and circumstances of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of disallowance of deduction claimed by the assessee u/s 80-IC of Rs.11,53,338/-even when the appellant was eligible for the same.
3. That on law, facts and circumstances of the case, Worthy CIT(A) has erred in confirming the action of Ld. AO of computing the tax liability on assessed income in the tax computation sheet, has erred in not granting the benefit of MAT Credit of Rs. 4,60,316/- u/s 115JD and that too when nothing adverse or contrary in this regard has been recorded in the assessment order and order passed u/s 250by Worthy CIT(A), even when the said AMT credit had been brought forward from immediately preceding year & the appellant was eligible for the said set-off/credit.
4. That on facts, circumstances and legal position of the case, the order passed by Ld. AO and then by Worthy CIT(A) deserves to be quashed since the same have been passed without affording reasonable opportunity of being heard to the appellant.
5. That the appellant craves leave for any addition, deletion or amendment in the 1168-Chd-2024 Aspee Sons, Solan 3 grounds of appeal on or before the disposal of the same.
Brief facts of the case, as per the order of the CIT(A), are as under:
The appellant is a firm and is into manufacturing of automobile parts and allied services.
2. The return for the year under reference was filed on 09.10.2018 by the appellant declaring income for the year at Rs. 5,20,03,070/- 3. The appellant is an eligible unit claiming deduction u/s 80IC. For the year in question, appellant claimed deduction u/s 80IC @ 25% as it was the seventh assessment year for claim of this deduction. The deduction u/s 80IC has always been allowed to the appellant in the past and most of previous assessments were framed u/s 143(3). 4. During assessment proceedings, AO called for various details which were duly placed on record. No query was raised during
1168-Chd-2024 Aspee Sons, Solan 4 assessment proceedings on the issue of allowability of deduction u/s 80IC on scrap sales. Further, even before making the addition in the impugned assessment order, no show cause notice in this regard was issued. Finally, in the impugned assessment order, Ld. AO held that the scrap sale of Rs. 51,25,947/- is not income eligible for deduction uls 80IC and thereby he disallowed deduction 25% on such scrap sales resulting into impugned addition of Rs. 12,81,487/-
During the proceedings before us, ld. Counsel for the Assessee argued that, in fact, the only issue involved in this case is to decide whether deduction u/s 80IC of the Income Tax Act, 1961 (in short 'the Act') could be available on scrap sales or not. It is related to the profit element embedded in the sale of scrap as well as unfinished product. The ld. Counsel for the Assessee argued that deduction u/s 80IC of the Act should be given to the Assessee on the sale of profit of scrap also.
1168-Chd-2024 Aspee Sons, Solan 5
5. Per Contra, the ld. DR relied on the order of the Ld. CIT(A).
6. We have considered the findings given by the Assessing Officer in the assessment order and CIT(A) in the appellate order. We have also considered the arguments put forward by the Counsel of the Assessee and the ld. DR. We find that allowance of 80IC is to be decided on the amount of profit earned from the sale of scrap. Since it is not been decided by the authorities below, therefore, we are of this opinion that the matter should be remanded back to the CIT(A) for limited purpose of examining the profit element embedded in the sale of scrap as well as that of the finished product.
Accordingly, the case is remanded back to the file of the ld. CIT(A) for adjudication to the limited extent of examining the profit element embedded in the sale of scrap, in accordance with law, on affording due and adequate opportunity of hearing to the Assessee. The Assessee, no doubt, shall cooperate in the proceedings
1168-Chd-2024 Aspee Sons, Solan 6 before the CIT(A). All pleas available under the law shall remain so available to the assessee. Ordered accordingly.
In the result, Assessee’s appeal is allowed for Statistical Purposes.