23 January 2013
I think, the Remission has been resulted due to more tax payments by the undertaking. . Earlier, the higher tax liability was claimed as expense and there by the same resulted into lesser claims of deductions U/s 80IC. . Now, the manufacturer undertaking is being compensated by the State Govt. through such a scheme and the unit is being compensated for the same. . The profits so arising are nothing but business income and as such deductible within the ambit of Section 80IC, as deduction in respect to such amount was not claimed earlier.
My query was regarding the Sales Tax Remission granted under Assam Industries Tax Remission Scheme Scheme, 2005. Under this scheme, The assessee charges 100 % sales tax from the customers but pays only 1 % to the Sales Tax Department and the balance 99 % is kept with the assessee. Now my point is whrther the 99% Sales Tax Remission as granted by the Sales Tax Department is no doubt profit but whether such profit is eligible for deduction U/s 80 IC and if eligible whether there are any supporting case law on it.
23 January 2013
1. Please go through the case law :
Income - Capital or revenue - Subsidy for industrial development - 90% of sales tax paid: Subsidy received by assessee from the State Government under a scheme of industrial promotion, which was meant to provide financial assistance to specified industries for expansion of capacities, modernization and improving their marketing capabilities, is capital receipt, though the amount of subsidy is equivalent to 90 percent of the sales-tax paid by the beneficiary. (A. Y. 1995-96). CIT v. Rasoli Ltd. (2011) 245 CTR 667 (Cal.)(High Court)
2. Please also refer the following link. Refer Para 7 of the Article submitted by Manish Agarwal-
In the instant case, the matter is of remission and not subsidy. The assessee collects 100 % sales tax from the customers and pays only 1 % to the State Govt,. and 99% of such sales tax is retained by the assessee which is his profit(Revenue receipt) but whether such profit is eligible for deduction u/s 80 IC ?
23 January 2013
It is a revenue receipt and generated from the taxable goods sold by the unit. Other Similar units located in Surat or Patna are not eligible to get the similar kind of profit. . The profit has arisen due to the geographical advantage to the unit which is in adherence to Section 80IC. So, in my view, the profits belongs to the undertaking and are eligible for deduction. .
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