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Section 80IB of Income Tax Act, 1961


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Chapter VIA of the Income Tax Act, 1961 (herein after referred as the Act) covers only deductions available to assessee under Section 80A of the Income Tax Act, 1961. The assessee by some act as mentioned can reduce its taxable under this provision. Amongst number of sub-sections of chapter VIA, the most important is Section 80IA and 80IB as this relates to the deductions on the profit made on infrastructures projects and also the most litigated sections. In case you claim deductions under this section, 90% chances are that Assessing Officer will dispute your claim and then the process of litigation begins.

In the case of Aqua Plumbing (P) Ltd. v. Asst. CIT[1]  conditions as laid down for claiming deduction under section 80IA /80IB are to be complied within the initial year and not in all the assessment years in which the assessee is eligible for deduction. Once the assessee has complied with the conditions as laid down in sections 80IA / 80IB in the initial year, expansion or extension of the existing unit by acquiring assets of another units in a subsequent year does not disentitle the assessee to claim deduction under sections 80IA/80IB in respect of increased profit due to such expansion or extension of industrial undertaking. For claiming deduction under section 80IB, it is not necessary for assessee to compute entire project and even on partial completion of project, assessee would be eligible for deduction under section 80IB. Held in the case of  Nagarjuna Homes v. ITO[2]. Even in CIT v. Metalman Auto P. Ltd.[3] it was held that deduction u/s. 80IB is allowable on profits of job work and also on miscellaneous receipts, rebate/discounts and balances written off.

The Hon’ble High Court of Delhi stated in CIT v. Sadhu Forgings Ltd.[4] that activity of forging which involves heat treatment of material to produce automobile parts is “manufacture “ and therefore, labour charges and job work charges earned by the assessee for doing the job of forging for customers are gains derived from industrial undertakings and the same are entitled for deduction under section 80IB. Sale of scrap which generated in the process of manufacturing activity and proximate there to constitute gains derived from Industrial undertaking for the purpose of computing deduction under section 80IB.



[1] 46 SOT 366( Agra) (Trib)

[2] 46 SOT 287 (Hyd) (Trib)

[3] 199 Taxman 149 (P & H.) (Mag.)( High Court)

[4] 57 DTR 194/242 CTR 158 ( Delhi) (High Court)

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