Law:

Section:

Section 80-I of the Income-tax Act, 1961 - Deductions - Profits and gains from industrial undertakings after certain dates - Assessment years 1968-69 and 1969-70 - Assessee company was carrying on business of manufacture and sale of air compressor equipments for automobile vehicles - It took sub-contracts from other companies manufacturing automobile spare parts, and sold scrap being by-product of its manufacturing activities - Whether since scrap arising out of manufactured items came within scope of priority industry, income arising from sale thereof would be attributable to priority industry and hence, entitled to relief under section 80-I - Held, yes - Whether since sub-contracts in question were only with reference to items that came within scope of priority industry, link between priority industry and income from sub-contracts was established thereby entitling such income to relief under section 80-I - Held, yes FACTS The assessee was a company carrying on the business in the manufacture and sale of air-compressor equipments for automobile vehicles. It had taken sub-contracts from various other companies connected with the manufacture of automobile spare parts, and sold scraps, being the by-product of its manufacturing activities. In the original assessment, the assessee was granted relief under section 80-I in respect of incomes from sale of scrap as also from said sub contracts. Subsequently, the ITO withdrew said relief on both the items on ground that such income was relatable to non-priority industry. On appeal, the AAC held that the amounts in question were relatable to a priority industry which view was affirmed by the Tribunal. On reference : HELD As far as the sale of scrap was concerned, there could be no dispute that it was one attributable to a priority industry as it was a by-product out of the manufactured items coming within the scope of a priority industry. Therefore, the Tribunal acted properly in allowing the relief to the extent of the sale of scraps. With regard to the question insofar as it related to the income arising from the sub-contracts. From the narration of facts, it would be clear that the sub-contracts were only with…

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