M/S. SHUBHAM FEED MILLS,UTTRAKHAND vs. ITO- I, UTTRAKHAND

The present appeal has been filed by assessee against order dated 09.10.2012 passed by Ld.CIT(A)-2, Dehradun for assessment year 2009-10, on following grounds of appeal:

Brief facts of the case are as under: Assessee filed its return of income on 29.09.2010 declaring total income of rupees nil. Notice under section 142(1) and 143(2) was issued and served upon assessee. Representatives of assessee appeared and discussed case during assessment proceedings.

It was observed by assessing officer that, Rs.3,09,149/- as qualifying for deduction under section 80IC. On further verification assessing officer observed that this income has been declared on sale of Bardana. Assessing officer was of the opinion that since income was not derived from business of manufacturing of cattle food this amount do not qualify to be includable for the purposes of deduction under section 80IC. He accordingly disallowed deduction under 80IC on Rs.3,09,149/-. Aggrieved by addition made assessee preferred an appeal before Ld. CIT(A), who upheld addition by relying upon decision of Hon’ble Supreme Court in the case of Sterling Foods reported in 237 ITR 53 and Pandian Chemicals Ltd., reported in 262 ITR 278. Aggrieved by order of Ld. CIT(A) assessee is in appeal before us now. Ground No. 1 and 2 4. Ld. AR submitted that assessee is engaged in the manufacturing activity of cattle foods. He submitted that raw materials for manufacture of cattle food comes in packed condition, which is unpacked and bags/bardana is separated from raw materials. The raw material is then processed and final product is repacked in printed bardana/packets carrying assessee’s name which is sold in market. Ld. AR submitted that some accumulated bardana’s were sold in market, which was shown as “other income”. He submitted that since these bandannas are used for activity carried on by assessee, income on sale of such baradana’s is to be considered for deduction under section 80IC, as the same is “derived from” and “attributed to” the main business activity. 5. We have perused submissions advanced by both sides in the light of records placed before us and decisions relied upon by both sides. 6. In our considered view claim of deduction under section 80IC is on income generated through products manufactured and sold by assessee, in which assessee deals. On the face of facts on record the submissions by assessee before authorities below it is observed that unused packets/bardanas sold by assessee in market. These are unused bardana’s received from packets in which raw materials reached assessee. This per se does not have any connection with the sale of manufactured product by assessee. Ld. CIT(A) was therefore, right in not allowing claim of inclusion of Rs. 3,09,149/-, being sales of unused packets/bardana’s as eligible for deduction under section 80IC. Accordingly, this ground raised