The Commissioner Of Income Tax-Iii v. M/S Bicycles Wheels (India

ITA No. 431 of 2007 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH The Commissioner of Income Tax-III Versus M/s Bicycles Wheels (India) ITA No. 431 of 2007 Date of Decision: 9.12.2010 ....Appellant. ...Respondent. CORAM:-HON'BLE MR. JUSTICE ADARSH KUMAR GOEL.HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. Denesh Goyal, Advocate for the appellant. AJAY KUMAR MITTAL, J. 1.This Court while admitting the appeal vide order datedFebruary 29, 2008 had framed the following substantial questions of lawfor determination by this Court:- “1.Whether on the facts and in the circumstances of thecase, the ITAT was right in law in holding that sale ofscrap in India is not a part of total turnover of therespondent firm for the purposes of calculation ofdeduction under Section 80HHC?case, the ITAT was right in law in holding that sale ofscrap in India is not a part of total turnover of therespondent firm for the purposes of calculation ofdeduction under Section 80HHC? 2. Whether on the facts and circumstances of the case,the ITAT was justified in ignoring sales of scrap incomputing total turnover, when such generation wasa bye-product of manufacturing process?the ITAT was justified in ignoring sales of scrap incomputing total turnover, when such generation wasa bye-product of manufacturing process? 3.Whether on the facts and in the circumstances of the case, a bye-product in a manufacturing process isnot eligible for being considered in computation oftotal turnover for computing deduction under Section80HHC?” 2.The relevant facts as narrated in the instant appeal are thatthe assessee filed its return on 29.10.2001 for the assessment year2001-02 declaring an income of Rs.11,29,036/-. The assessee derivedincome from manufacturing and export of bicycle parts. For the saidpurpose, the assessee exported goods to the tune of Rs.2,77,72,931/-and sold scrap in India to the tune of Rs.42,59,111/-. The AssessingOfficer treated the sale of scrap as domestic sale in India and restrictedthe claim of deduction under Section 80HHC of the Income Tax Act,1961 (in short “the Act”) from Rs.45,16,150/- to Rs.39,85,026/-.Feeling aggrieved, the assessee filed an appeal before theCommissioner of Income Tax (Appeals) [for brevity “the CIT(A)”], whovide order dated 2.6.2004 allowed the appeal holding that the sale ofscrap did not form part of the total turnover. Against the order of theCIT(A), the revenue filed an appeal before the Tribunal who vide orderdated 10.8.2005 upheld the order of the CIT (A). Hence, the presentappeal by the revenue. 3.Learned counsel for the appellant-revenue states that thisissue has already been concluded in favour of the revenue by this Courtin ITA No. 31 of 2002 [Commissioner of Income-tax-III, Ludhiana v.Bicycle Wheels (India)] decided on 11.10.2010, wherein this Court hadheld that the sale of scrap in the domestic market shall form part of total ITA No. 431 of 2007 turnover for calculating the deduction under Section 80HHC of the Act. 4.In view of the above, the substantial questions of law areanswered in favour of the revenue and against the assessee. Theappeal stands allowed. (AJAY KUMAR MITTAL) JUDGE December 9, 2010gbs (ADARSH KUMAR GOEL)JUDGE