2018 (6) TMI 1567 - AT - Income Tax

Deduction u/s. 80IB(11A) on the portion of the eligible business profit enhanced on account of disallowances under s. 40A(3) - Held that - Enhanced deduction under s.80IB(11A) owing to increase in eligible profits in view of the disallowances made u/s 43B amounting to ₹ 42,07,953/-. It is the case on behalf of the assessee that the assessee is eligible for corresponding deduction under s.80IB(11A) on account of disallowances made in the assessment 40A(3) and 43B of the Act since the eligible profit stood enhanced due to such disallowance. As submitted on behalf of the assessee, we find that CBDT has addressed the aforesaid issue in favour of the assessee as per its Circular no.37/2016 dated 2nd November, 2016. As per the aforesaid circular, the Board has accepted the proposition that disallowances so made under s.40A(3), 43B etc. of the Act related to business activity would be eligible for chapter VI-A deduction in view of the enhancement of the profits of the eligible business. In view of the CBDT Circular, the controversy stands settled in view of the assessee. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of loan received under section 68 of the Income Tax Act.
2. Denial of deduction under section 80IB(11A) due to disallowances under sections 40A(3) and 43B.

Analysis:

Issue 1: Addition of Loan Received under Section 68:
The appellant contested the addition of a loan amount under section 68 of the Income Tax Act. The appellant argued that the Assessing Officer (AO) had invoked powers under section 133(6) to seek confirmation, shifting the onus to him. Additionally, the appellant cited a High Court ruling where it was held that section 68 addition is unwarranted if the amount is repaid and accepted by the AO. However, during the hearing, the appellant waived the right to press this issue, leading to its dismissal.

Issue 2: Denial of Deduction under Section 80IB(11A) due to Disallowances:
Grounds 4 and 5 of the appeal related to denial of deduction under section 80IB(11A) due to disallowances under sections 40A(3) and 43B. The appellant argued that the enhanced eligible business profit resulting from these disallowances should qualify for the deduction. The appellant relied on a Circular issued by the Central Board of Direct Taxes (CBDT) which supported the eligibility of such disallowances for the deduction under chapter VI-A. The Tribunal found merit in the appellant's argument, citing the CBDT Circular, and allowed grounds 4 and 5 of the appeal, partially in favor of the assessee.

In conclusion, the Tribunal partially allowed the appeal of the assessee, dismissing some grounds while granting relief on the issue of deduction under section 80IB(11A) concerning disallowances under sections 40A(3) and 43B. The judgment highlighted the significance of relevant legal provisions and precedents in determining the tax implications for the appellant.