1986 (3) TMI 46 - HC - Income Tax

High Court allows deductions under section 80-I for internal consumption of PVC resin, aligning with commercial principles.

The High Court of Gujarat ruled in favor of a public limited company, allowing deductions under section 80-I of the Income-tax Act for profits from a ... Priority Industry, Special Deduction Issues involved: Interpretation of deduction under section 80-I of the Income-tax Act for profits and gains from priority industries, specifically related to the supply or use of products between different units of a company.Summary:The High Court of Gujarat considered the case of a public limited company with units manufacturing various products, including polyvinyl chloride resin, polyvinyl acetate, and calcium carbide. The company claimed a deduction under section 80-I of the Income-tax Act for profits from the plant producing polyvinyl chloride resin. The Income-tax Officer allowed deductions only for products sold in the market, not for internal consumption by other units. The Tribunal ruled in favor of the company, stating deductions should apply regardless of product usage. The Court referred to a previous case involving industrial starch to determine that the market price of products used internally should be considered for profit calculations. Consequently, the Court held that the company was entitled to the deduction under section 80-I for the polyvinyl chloride resin used in other units, irrespective of market sale or internal consumption.In conclusion, the Court answered the question in the affirmative, allowing the deduction for the profits of the polyvinyl chloride plant used by other units for the respective assessment years. The decision was made in line with commercial principles and previous legal interpretations.