Law:

Section:

Section 80-IB of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings other than infrastructure development undertakings - Assessment year 2004-05 - Assessee's industrial undertaking was set up for purpose of manufacture of steel, forging, transmission gears and parts, and accessories of motor vehicles - It claimed deduction under section 80-IB on its gross receipts which, apart from goods sales, also included scrap sales, labour charges and job work charges - Assessing Officer held that deduction under section 80-IB could not be permitted on sale of scrap, job work and labour charges as same were not derived from assessee's industrial undertaking - Whether activity of forging undertaken by assessee was 'manufacturing' within ambit of section 80-IB and when assessee was entitled to claim exemption in respect of income derived from such processes doing for itself, there was no reason to deny deduction on job work charges and labour charges merely because raw material component was being supplied by other customers for whom assessee was doing job - Held, yes - Whether since manufacturing activity of type of material being undertaken by assessee would also generate scrap in process of manufacturing receipts of sale of scrap being part and parcel of activity and being proximate thereto would also be within ambit of gains derived from industrial undertaking for purpose of computing deduction under section 80-IB - Held, yes FACTS The assessee's industrial undertaking was set up for the purpose of manufacture of steel, forging, transmission gears and parts, and accessories of motor vehicles. During the relevant assessment year, it claimed deduction under section 80-IB on its gross receipts which, apart from goods sales, also included scrap sales, labour charges and job work charges. The Assessing Officer held that the deduction under section 80-IB could not be allowed on sale of scrap, job work and labour charges as the same were attributable to the business carried on by the assessee, but not derived from the profits of industrial undertaking. On appeal, the Commissioner (Appeals) allowed deduction under section 80-IB on the scrap…

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