Section 80 IB
Karan Gaur
(Querist) 29 December 2009
This query is : Resolved
Whether sales tax remmission amount forms part of "Profit Derived from Industrial Activity" u/s 80 IB
Where tax remmission is=
Output Vat + CST payable - Input Tax
(only one percent of the amount derived from above formula is to paid to the department and rest is retained by the concern) that mean 99% of VAT liability is absolved.
Raj Kumar Makkad
(Expert) 29 December 2009
Even if 99% of VAT liability is absolved in the given matter even then sales tax remission amount shall form part of "Profit derived from Industrial Activities" as per provisions of section 80IB of IT Act.
soumitra basu
(Expert) 30 December 2009
I do agree with raj kumar makkad. In this connection I may refer the judgment of the Apex Court in the case of Chowranghee Sales Corporation.
Karan Gaur
(Querist) 31 December 2009
Respected Sir,
What is the impact of S.C. judgement on Liberty India V/s CIT in this regard. Whether such remission would be treated on the same footing as Duty Draw Back is treated in the said judgement. In the said case Duty Draw Back is not treated as profit derived from industrial undertaking as per the requirement of Section 80IB and same doesnt qualify for deduction under section 80IB
Vineet
(Expert) 04 January 2010
Dear Mr Gaur
Yours is a thin line case where fine distinction between Duty Drawback and Sales TAx remission is to be judicially contested. In light of Supreme Court decision in Liberty India and earlier Sterling Foods case, certainly any income from govt promotional schemes can not be treated as profit derived from industrial undertaking. However, there is a silver line which comes from Apex Zcourt decicion in Chowrangee sales bureaue case wherein it was held that sales tax is part of sales turnover. Hence if this is the case the sales tax collected is part of revenues of industrial undertaking and any saving out of the same (remission amount) is profit of the undertaking. Here is the fine distinction as duty drawback is allowed to the business in form of cash back/ incentive whereas the sales tax remission is retention out of receipts.
You may claim the same as profit eligible for deduction u/s 80IB. Let this may be a test case for judicial scrutiny in this matter.
