Judgment ( 1. ) APPELLANT has filed this appeal under Section 260-A of the Income Tax act, 1961 against the order dated 28-6-2001 passed by the Income Tax Appellate tribunal Bench, Indore in ITA No. 510/ind. /96. A. Y.-94-95 arising out of the order of C. I. T. (A) dated 8-2-1996 passed in appeal No. IT-443/95-96 against the assessment order dated 1-11-1995 passed by the A. C. I. T. Special Range, bhopal. ( 2. ) THIS Court has admitted the appeal on the following substantial question of law:- "whether the amount of set off received by the appellant would form part of its gross total income from a small scale industrial undertaking ?" ( 3. ) BRIEF facts of the case are that the appellant Company M/s engineers Prestressed Structures (Antri Unit) (P) Ltd. is a company incorporated under the Companies Act, 1956 and is now known as Econ Antri limited. The company was established to manufacture and supply prestressed concrete sleepers to the Railway. In the accounting year 1994-95 for the income tax company received incentive from the Sales Tax Authority for purchasing the raw material from the State to the amount of Rs. 2,65,023. 00 for the assessment year 1994-95 and Rs. 29849. 00 for the assessment year 1989-90. At the time of assessment assessee claimed deduction for both the amounts. The A. C. I. T. vide order dated 1-11-1995 disallowed the deductions under Section 80-HHA and under Section 80-I of the aforesaid amounts and has not treated the said incentive as income of the industry. In an appeal C. I. T. (Appeals) granted the relief after holding that it would be industrial income and the appellant would be entitled for deduction under Section 80-HHA and under Section 80-I of the aforesaid amounts and has treated the said incentive as income of the industry. ( 4. ) AGAINST which department Revenue preferred an appeal before the income Tax Appellate Tribunal, Indore, Bench Indore. The learned Tribunal vide order dated 28-6-2001 held that it is kind of incentive given by the State government to make purchase from within the State and set aside the order of the Commissioner (A ). ( 4. ) AGAINST which department Revenue preferred an appeal before the income Tax Appellate Tribunal, Indore, Bench Indore. The learned Tribunal vide order dated 28-6-2001 held that it is kind of incentive given by the State government to make purchase from within the State and set aside the order of the Commissioner (A ). The Tribunal was also of the view that this refund or set off can be equated with MODVAT because in case of MODVAT the application is universal and this income cannot be treated as derived from manufacturing activity and it was held that company is not entitled for deduction under Sections 80-HHA and 80-I, as the amount received from Sales Tax as set off amounting to Rs. 29,849/- for assessment year 1989-90 and Rs. 2,65,023/- for the assessment year 1993-94. Against which the appellant/assessee has filed this appeal under Section 260-A of the Income Tax Act. ( 5. ) WE have heard the learned Counsel for the parties and perused the documents and finding recorded by the authorities below. After considering the submissions we are of the view that the order passed by the CIT (Appeals) appears to be logical and justified. It is not in dispute before us that the Sales Tax authorities of M. P. granted incentive to the appellant Industry on the ground that he made some purchase of raw material from within the State. There is no dispute that the sales tax was paid by the assessee on account of the raw material purchased by company and if any amount received from the sales tax authority towards the incentive or refund the same amount would go in the accounts of the industry towards the manufacturing activities. Directly or indirectly the amount of refund relates to the raw material purchased by the assessee, therefore, any amount received by the Industry would be treated as the income of the Industry. We do not agree with the finding recorded by the Tribunal that it is a kind of incentive given by the State Government to make purchase and this will not go to the income of the assessee industry. The incentive given to the industry for purchase of raw material for the use in the manufacturing activities is the income of the industry. The incentive given to the industry for purchase of raw material for the use in the manufacturing activities is the income of the industry. Thus we can safely hold that the refund of set off received by the assessee Industry would be the income of the industry and adding the aforesaid amount the company would be entitled for deduction under Sections 80-HHA and 80-I of the Income Tax Act. ( 6. ) LEARNED Counsel for the appellant drew our attention on a decision in a case of Ch. Tika Ramji and others Vs. The State of Uttar Pradesh and others, air 1956 SC 676 , in which some other contest of the Industry the Supreme court has held that the raw materials are an integral part of the industrial process. On the contrary Department has placed reliance on a decision in the case of Commissioner of Income Tax, Karnataka Vs. Sterling Foods, Mangalore, air 1999 SC 2036 , according to which the Supreme Court has held that assessee doing business of processing and exporting sea food. Import entitlements granted to him under export promotion scheme of Govt. Income derived from sale of import entitlements had no direct nexus with business of assessee. We have perused the judgment cited by the Revenue and we do not find that the judgment is helpful in this case. ( 7. ) THUS, considering the totality of the facts and circumstances of the case we hold that any amount of incentive given by the State Government to make purchase of raw material from within the State and if on such incentive set off or special rebates on sales tax is given it would be the income of the company derived from the manufacturing activities and would form part of its gross total income for a Small Scale Industrial Undertaking. Thus we set aside the impugned order by the Income Tax Appellate Tribunal, Indore and restore the judgment of the C. I. T. (Appeals ). Accordingly this appeal is allowed and the question is answered accordingly. Misc. Appeal allowed.