2017 (2) TMI 1430 - AT - Income Tax

Entitled to claim deduction u/s 10A on the additions/disallowances made u/s 40(a) (ia) - HELD THAT - Appellant is entitled to claim of deduction u/s 10A on an enhanced income. The appellant had relied on various other decisions and contended that deduction u/s 10A should be allowed on the income which was assessed to tax by the A.O after considering the allowance/disallowance made during the course of assessment proceedings as per the provisions of the I.T.Act. Therefore, the action of A.O in not considering the disallowance made u/s 40 a (ia) while computing the deduction u/s 10A is not correct and hence, the addition made is deleted. In CIT vs. Gem Plus Jewellery India Ltd. 2010 (6) TMI 65 - BOMBAY HIGH COURT one of the issues before the Hon ble High Court was whether on the facts and in the circumstances of the case the Tribunal was justified in directing the A.O to exempt u/s 10A of the Act, on the assessed income which was enhanced due to disallowance of the employers as well as the employees contribution towards Provident Fund/ESIC. - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to claim deduction u/s 10A on additions/disallowances made u/s 40(a)(ia) of the Income Tax Act.

Analysis:
The appeal was filed by the revenue against the order passed by the Ld. CIT (Appeals)-24, Mumbai, for the assessment year 2011-2012. The assessee, engaged in providing business support and IT services, declared total income under normal provisions and book profit under section 115JB of the Act. The assessment order u/s 143(3) of the Act was passed, making additions including disallowance of deduction u/s 10A. The Ld. CIT(A) partly allowed the appeal filed by the assessee, leading to the revenue's appeal before the Tribunal on the issue of deduction u/s 10A on additions/disallowances made u/s 40(a)(ia) of the Act.

The Ld. DR argued that the deduction claimed by the assessee was wrongly allowed by the Ld. CIT(A). On the contrary, the Ld. Counsel for the assessee relied on precedents like CIT vs. Gem Plus Jewellery India Ltd. and decisions of the ITAT Hyderabad Bench to support the deduction claimed u/s 10A. The Ld. CIT(A) allowed the deduction on enhanced income, considering various decisions and contending that the deduction should be allowed on the income assessed after considering allowances/disallowances made during assessment proceedings.

The Tribunal examined the submissions and decisions relied upon by the parties. It noted the decision in CIT vs. Gem Plus Jewellery India Ltd., where the High Court held that the assessed income enhanced due to disallowances should be considered for deduction u/s 10A. Similarly, the ITAT Hyderabad Bench ruled in favor of the assessee in a related case. The Tribunal found no infirmity in the Ld. CIT(A)'s order, passed in line with the legal principles established by the High Court, and upheld the order, dismissing the revenue's appeal for the assessment year 2011-2012.

In conclusion, the Tribunal upheld the Ld. CIT(A)'s decision to allow the deduction u/s 10A on the enhanced income, based on legal precedents and relevant provisions of the Income Tax Act. The appeal filed by the revenue was dismissed, affirming the order passed by the Ld. CIT(A) for the assessment year 2011-2012.