Case Law Details
Punjab & Haryana High Court held In the case of The CIT vs. M/s H. M. Steels Ltd that on an analysis of section 80IC, it must be held that any industrial undertaking or enterprise would be entitled to deduction under sub-section (1) only to the extent of profits derived from such an industrial undertaking and not on account of any rebate or incentive made available to it by the Government. The sales tax rebate is an incentive which flows from the scheme framed by the Himachal Pradesh Government and is therefore; not a profit derived from the business but is an ancillary profit of the business. The assessee is not entitled to the benefit of section 80 IC in respect of the sales tax rebate obtained by it.
Facts of the Case
In this case assessee under a scheme/policy formulated by the Himachal Pradesh State Government, the industrial undertakings fulfilling certain conditions and situated in the notified areas were entitled for the Sales Tax/VAT Deferment Scheme. The eligible units were given an option either to avail deferment of payment of tax or to opt, by making an application in the prescribed form, to pay 65% of the tax liability for any tax period of the financial year and upon making such payment the unit would be deemed to have paid the full tax due from it accordingly. The assessee opted to pay 65% of the VAT liability and the remaining 35% i.e. a sum of Rs.24,98,964/- had been credited in the profit and loss account derived by the industrial undertaking. The assessee contended that the retention of 35% VAT has a direct nexus with the sales and is an integral part of the industrial unit and is, therefore, eligible to be deducted under section 80-IC.
Contention of the Assessee
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