COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, C.R. BUILDING, QUEENS ROAD BANGALORE, THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12(3), C.R. BUILDING, QUEENS ROAD, BANGALORE Vs. M/S SAHNEY COMMUTATORS (P) LTD. NO. 78, VICTORIA ROAD, BANGALORE-56

JUDGEMENT

(1.) These two appeals are preferred by the revenue challenging the order passed by the tribunal which has held the receipts from sub contract services and sale of scrap material do not fall within the definition of explanation baa to Section 80HHC(I) of the Income Tax Act, 1961.

(2.) The assessee is a manufacturer of commutators. It also manufactures certain goods on sub contract basis for others and received services/job charges to the tune of Rs. 71,44,752/- (ITA 1141/06) and Rs. 386675/- (ITA 22/08) besides receipts from safe of copper scrap. They claimed deduction under Section 80HHC including the said receipts, The assessing authority held that the receipts from the sub contract receipts and scrap fall within the explanation baa to Section 80HHC and therefore, the same could not be included. Aggrieved by the said order, the assessee preferred an appeal. The appellate authority held as there is a direct nexus between the receipts from special contract as well as sale of scrap material, it does not fall within the explanation (baa) and the assesses is entitled to include the said receipts in the income from and business and profits. The revenue's appeals to the tribunal came to be dismissed. It is thereafter, they have preferred this appeal.

(3.) The appeal was admitted to consider the following substantial questions of law in ITA 22/ 08 and respectively: