COMMISSIONER OF INCOME TAX Vs. BICYCLE WHEELS (INDIA)

JUDGEMENT

(1.) THIS order shall dispose of I. T. A. Nos. 31, 28, 32, 90, 114 of 2002, 42 of 2003, 5 of 2004 and 92 of 2005 as common questions of law are involved therein. However, the facts are being extracted from I. T. A. No. 31 of 2002. The Revenue has preferred this appeal under section 260A of the Income -tax Act, 1961 (in short "the Act"), against the order dated July 19, 2001, passed by the Income -tax Appellate Tribunal, Chandigarh Bench, Chandigarh (in short "the Tribunal"), in I. T. A. Nos. 1244/Chd/93, I. T. A. Nos. 623 and 624/Chandi/94 for the assessment years 1991 -92, 1989 -90 and 1990 -91 respectively. The Revenue has claimed the following substantial questions of law for consideration in this appeal:

(2.) THE aforesaid questions of law being inter -related are taken up together for decision. The solitary issue that would require determination is whether the scrap which had been generated during the manufacturing process and was sold in the domestic market would form part of the total turnover.

(3.) THE assessee is a registered firm. The return of income for the assessment year 1989 -90 was filed on October 30, 1989, declaring "nil" income. The Assessing Officer during the course of assessment proceedings noticed that the assessee which was a 100 per cent. export oriented unit had claimed deduction under section 80HHC of the Act on the total profit which was derived by it. The assessee had not included the sale of scrap amounting to Rs. 25,30,378 which was generated in the manufacturing process in India in the total turnover for the purposes of arriving at the profit from exports. The assessee had sold the scrap in India which, according to the Assessing Officer, constituted a local sale, therefore, the assessee was not entitled to deduction of the entire net profit and the deduction was to be calculated by adopting the formula: Business profits x