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2014 (11) TMI 341 - AT - Income TaxAllowability of claim of deduction u/s 80IB Quantification of the profit of the assessee from the activity of execution of works contract - Held that - The assessee is engaged in the business of manufacture of HDPE pipes as well as execution of works contract - CIT(A) upheld the decision of the AO that the interest income received on bank deposits was not eligible for deduction u/s 80IB, and this apparently was accepted by the assessee and the decision of the CIT(A) on that aspect became final - the issue relating to the determination of the profit from the manufacturing division eligible for deduction under S.80IB was dependent on and consequential to the estimation of profit of the assessee from the activity of works contract in as much as the balancing figure, after estimating the profit of the assessee from the activity of execution of works contract, was going to be the profit of the manufacturing division which is eligible for deduction u/s 80IB. CIT(A) rightly after estimating the profit of the assessee from the activity of execution of works contract as per the directions of the Tribunal, proceeded to direct the AO to allow deduction to the assessee u/s 80IB in respect of the balancing figure, which represented the profit of the manufacturing division of the assessee - CIT(A) has not gone beyond the scope of the set aside proceedings, while directing the AO to allow the claim of the assessee for deduction u/s 80IB in respect of the profit of the manufacturing division, which is determined in consequence to the estimation of the profit of the assessee from the activity of execution of works contract Decided against revenue. Invocation of section 40(a)(ia) Held that - CIT(A) has actually deleted the entire disallowance made by the AO u/s 40(a)(ia) by following the decision in COMMISSIONER OF INCOME TAX, KOL-XI, KOL Versus VIRGIN CREATIONS 2011 (11) TMI 348 - CALCUTTA HIGH COURT - CIT(A) rightly deleted the disallowance made by the AO u/s 40(a)(ia) Decided against revenue.
Issues:
1. Disallowance of deduction under S.80IB for interest income and works contract profits. 2. Estimation of profits for deduction under S.80IB. 3. Disallowance under S.40(a)(ia) for belated TDS payment. Issue 1: Disallowance of deduction under S.80IB The Revenue appealed against the order disallowing the claim of the assessee for deduction under S.80IB for interest income and works contract profits. The Assessing Officer disallowed the claim entirely due to inclusion of interest income and lack of separate books for works contract. The CIT(A) upheld the disallowance for works contract profits but allowed a deduction for HDPE pipe manufacturing profits. The Tribunal restored the works contract profit estimation to the CIT(A) for reassessment. The Revenue contended that the CIT(A) exceeded the scope by allowing the deduction for manufacturing division profits. The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision on the deduction. Issue 2: Estimation of profits for deduction under S.80IB The CIT(A) reduced the works contract profit estimate and directed the Assessing Officer to allow deduction for HDPE pipe manufacturing profits. The Revenue challenged this decision, arguing that the CIT(A) overstepped the Tribunal's direction. The Tribunal found that the CIT(A) acted within the set-aside proceedings' scope, as the manufacturing division profit was dependent on the works contract profit estimation. Consequently, the Tribunal dismissed the Revenue's appeal regarding profit estimation for deduction under S.80IB. Issue 3: Disallowance under S.40(a)(ia) for belated TDS payment The Assessing Officer disallowed a TDS payment due to late remittance by the assessee. The CIT(A) upheld the disallowance, but the Tribunal referred the issue back to the CIT(A) for review. The CIT(A, following relevant court decisions, found the TDS payment was made before the return filing due date, deleting the disallowance. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal against the disallowance under S.40(a)(ia). In conclusion, the Tribunal upheld the CIT(A)'s decisions on the issues raised by the Revenue, dismissing the appeal and ruling in favor of the assessee.
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