- (1.) The revenue is in appeal under Section 260-A of the Income Tax Act, 1961 aggrieved against the order passed by the Income Tax Appellate Tribunal on 18.10.2010 in ITA No. 553/Chandi/2010 for the assessment year 2006-07 raising following substantial questions of law:- 1. Whether the learned ITAT was right in law in allowing deduction under Section 80IC of the Income Tax Act on stock transfer to sister unit at Gurgaon ignoring the fact that stock had either been moved in raw or in semi-finished form and this does not constitute manufacturing activity? 2. Whether the learned ITAT was right in law in holding that the income from sale of scrap was eligible for deduction under section 80IC of the Income Tax Act? The assessee is a manufacturing unit at Parwanoo. The assessee claimed deduction under Section 80-IC of the Act to the tune of transfer sales of Rs. 2,48,87,941 and scrap sales to the tune of Rs. 12,49,436/-. The Assessing Officer found that the scrap sales and stock transfer to sister concern at Gurgaon is not an income derived from manufacturing process and, therefore, not liable to deduction as contemplated under Section 80-IC of the Act.
(2.) In respect of the first substantial question of law, it was found by the Tribunal that the Gurgaon unit of the assessee has no manufacturing activity as such unit does not have any plant and machinery but only facility is of packaging and then transfer of the shaft assembly to Maruti Udyog Limited. It is, thus, concluded that the entire manufacturing process takes place at Parwanoo unit, therefore, deduction claimed is in respect of income derived from manufacturing process. We do not find such finding is in any way erroneous which may give rise to said substantial question of law.
(3.) In respect of second question of law, the Tribunal has relied upon judgment of the Madras High Court in Fenner (India) Ltd. v. CIT, 2000 241 ITR 803, wherein industrial undertaking was engaged in the manufacturing of V-belts, oil seals, O-rings, rubber moulded products, etc. Certain scrap material resulted from process which has a saleable value. The Hon'ble Madras High Court has held that to say that the scrap material has no direct link or nexus with the industrial undertaking, cannot at all be accepted to commend acceptability on the facts and in the circumstances of the case.;