2013 (1) TMI 208 - AT - Income Tax

Deduction u/s 80IB (10) - CIT(A) allowed the deduction - Held that - CIT(A) has examined the matter giving detailed finding that all the four shops located on the ground floor has area of (i) 6.50 3.085 sq. meters, (ii) 6.50 2.915 sq. meters, (iii) 6.50 2.915 sq. meters and (iv) 6.50 3.085 sq. meters aggregating to 78 sq. meters which is approximately 2% of the built-up area. Thus as the Revenue has not produced any materials to substantiate its claim no interfere with the order of the CIT(A) is required. Deduction u/s 80IB (10) on the addition made u/s 40 (a)(ia) - revenue contested as the addition was not on account of disallowance of any expenditure but on account of infringement of law - Held that - It is settled principle that the deeming fiction created under any provisions of the Act cannot be imported into a beneficial provisions of the Act. In this case, the addition made on account of disallowance of expenditure is due to the deeming fiction created by the penal section 40(a)(ia) thus, the effect of the same cannot be imported into a beneficial provision of section 80-IB(10) As decided in Executors & Trustees of Sir Cawasji Jehangir v. CIT 1958 (9) TMI 58 - BOMBAY HIGH COURT unless it is clearly and expressly provided, it is not permissible to impose a supposition on a supposition of law. It is not permissible to sub-join or track a fiction upon fiction - in favour of the revenue As from the facts of the case, it is not clear whether the assessee has deposited the tax deducted at source to the government treasury within the due date of filing of the return remit this issue back to the file of AO for such verification and to pass appropriate order as per law and merits. Accordingly, this issue is allowed for statistical purpose.

Summary

Issues:
1. Allowance of deduction u/s 80-IB (10) of the Act.
2. Allowing deduction u/s 80-IB (10) of the Act on the addition made u/s 40(a)(ia) of the Act.

Issue 1: Allowance of deduction u/s 80-IB (10) of the Act:
The appeal by the revenue challenges the order of the CIT(A) regarding the allowance of deduction u/s 80-IB (10) of the Act for the assessment year 2006-07. The AO disallowed the deduction for the assessee amounting to Rs.50,86,734 due to the area of four shops exceeding the prescribed limit of 5%. However, the CIT(A) found that the area of the shops was only 2% of the built-up area and granted the deduction. The Revenue contended that the AO's decision should be upheld, but the CIT(A)'s detailed findings were supported by the AR. The ITAT, after examining the case, upheld the CIT(A)'s decision as the Revenue failed to provide any evidence to support its claim. The ITAT concluded that the CIT(A)'s order was justified, and hence dismissed the Revenue's ground of appeal.

Issue 2: Allowing deduction u/s 80-IB (10) of the Act on the addition made u/s 40(a)(ia) of the Act:
The second issue pertains to allowing deduction u/s 80-IB (10) of the Act on an addition made u/s 40(a)(ia) of the Act. The AO added Rs.1,20,895 due to the delayed deposit of TDS by the assessee, invoking section 40(a)(ia). However, the CIT(A) deleted this addition, noting that while the AO's disallowance under section 40(a)(ia) was justified, the deduction u/s 80-IB(10) on this addition was also permissible. The ITAT analyzed the legal principles involved, emphasizing that the deeming fiction under section 40(a)(ia) cannot affect the application of the beneficial provision under section 80-IB(10). The ITAT held that the deduction u/s 80-IB(10) must be computed strictly according to its provisions without incorporating other sections creating legal fictions. Consequently, the ITAT allowed this issue in favor of the revenue and remitted the matter back to the AO for verification regarding the timely deposit of TDS. The appeal of the revenue was partly allowed for statistical purposes.

In conclusion, the ITAT's judgment addressed the issues concerning the allowance of deductions u/s 80-IB (10) of the Act and the interaction between sections 40(a)(ia) and 80-IB(10) in a detailed and legally sound manner, providing clarity on the application of these provisions in the given context.