Section 80IB
surendra gandhi
(Querist) 12 September 2009
This query is : Resolved
The assessee is eligible for deduction u/s 80 IB of the Incometax Act 1961. Along with manufacturing activivties, the assessee undertaking has started job work for outsiders and receives labour charges from the parties. Whether the amount of labour charges received form part of the eligible profit of the concern? Can the assessee claim deductionu/s 80IB on such labour charges received or the same is to be excluded for the purpose of determining eligible business for claiming deduction u/s. 80IBriven
Vineet
(Expert) 02 November 2009
The deduction allowed u/s 80IB is in respect of profits and gains derived from eligible Industrial Undertaking. This implies that the Undertaking should be the direct source of profits. The Hon'ble Supreme Court in the case of Sterling Food ( 237 ITR 570) held that for the application of these words, a direct nexus between the profits and gains and the industrial undertaking is necessary and the deduction is not allowable if the particular income is merely attributable or relatable to such undertaking.
However, if a particular income has been earned from an activity which has a nexus with the business of Industrial Undertaking or utilises the process of such unit is eligible for deduction. Hence if the job work/ labour charges have been earned utilising the manufacturing/ processing machinery and process and the same is in course of business, the same is eligible for deduction u/s 80IB. CIT vs Rane 238 ITR 377 (Mad)
