M/S. VIJAY INDUSTRIES vs COMMISSIONER OF INCOME TAX

The Supreme Court interpreted Section 80HH of the Income Tax Act, 1961, determining that the deduction of 20% is to be calculated on 'profits and gains' rather than 'income' as defined under the Act. The Court held that the Income Tax Department's stance of computing deductions after accounting for depreciation and investment allowances was incorrect. The judgment reaffirmed the need for clarity in distinguishing between 'profits and gains' and 'income', thereby allowing the assessees to claim deductions based on gross profits.