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2016 (10) TMI 1282 - AT - Income TaxClaim of deduction u/s 80IB - assessee has not filed the return within the due date specified u/s 139(1) - HELD THAT - In the present case the assessee had filed the return after the due date on 21-02-2008. The small distinction referred by the assessee that the audit reports were filed within time on 31-10-2007 cannot lead to in-application of Hon ble Calcutta High Court decision M/S SHELCON PROPERTIES (P) LTD 2015 (3) TMI 579 - CALCUTTA HIGH COURT in this case. Hence the undisputed fact remains that the assessee has not filed the return within the due date specified u/s 139(1) and hence the provisions of section 80AC comes into play and the assessee shall not be allowed deduction u/s 80IB. Disallowance of interest - Non deduction of TDS - Deduction u/s 40(a)(ia) - CIT(Appeals) in this case has upheld the AO s action only on the ground that since TDS has not been deducted u/s 40(a)(ia) the amount of expenditure cannot be allowed - HELD THAT - It is settled law from Hon ble Apex Court in the case of Vegetable Products 1973 (1) TMI 1 - SUPREME COURT that when two constructions are possible, the one in favour of the assessee should be applied. Accordingly in view of the above precedent, it is of the considered opinion that the assessee deserves benefit if the payees of the interest have filed their returns and paid taxes thereon. Since this aspect need factual verification, remit this issue to the file of the AO to consider the issue afresh in accordance with the Hon ble Delhi High Court decision ANSAL LAND MARK TOWNSHIP (P) LTD. 2015 (9) TMI 79 - DELHI HIGH COURT - Appeal filed by the assessee stands partly allowed for statistical purposes.
Issues Involved:
1. Disallowance of deduction under Section 80IB(3)(ii) of the Income Tax Act. 2. Disallowance of interest amounting to ?3,86,368/-. 3. Consideration of appellant’s submissions and cited decisions. Issue-wise Detailed Analysis: 1. Disallowance of Deduction under Section 80IB(3)(ii): The assessee, engaged in the business of manufacturing and trading of cotton seed oil and C.S. Cake, filed the return of income for the assessment year 2007-08 on 21-02-2008, claiming a 100% deduction under Section 80IB(3) amounting to ?2,55,690/-. The Assessing Officer (AO) disallowed this deduction on the grounds that the return was not filed within the due date specified under Section 139(1), which was 31-10-2007, as per Section 80AC. The CIT(Appeals) affirmed this disallowance. The assessee argued that the delay in filing the return was due to the finalization of individual income books and that the audit report was filed on time. The assessee cited two Tribunal decisions supporting the allowance of deduction despite late filing. However, the Department Representative (D.R.) referred to the Calcutta High Court decision in CIT vs. Shelcon Properties P. Ltd., which held that the deduction under Section 80IB cannot be allowed if the return is filed after the due date specified under Section 139(1). The Tribunal noted that Section 80AC mandates the filing of the return by the due date to claim deductions under Sections 80IA, 80IB, etc. The Tribunal, following the Calcutta High Court's decision, concluded that the assessee was not entitled to the deduction under Section 80IB due to the late filing of the return, despite the timely submission of the audit report. Therefore, the Tribunal affirmed the lower authorities' orders. 2. Disallowance of Interest Amounting to ?3,86,368/-: The AO disallowed the interest claimed by the assessee, amounting to ?3,79,983/-, on the grounds that the nexus with the business income was not proven and TDS was not deducted on the interest paid to various parties. The CIT(Appeals) upheld this disallowance, stating that the provisions of Section 40(a)(ia) apply when TDS is not deducted. The assessee argued that the interest paid was included in the recipients' returns and taxes were paid. The assessee also contended that an additional disallowance of ?6,385/- was erroneous as it was already covered in the ?3,79,983/-. The Tribunal referred to the Delhi High Court decision in CIT vs. Ansal Land Mark Township P. Ltd., which held that disallowance under Section 40(a)(ia) does not apply if the payees have filed their returns and paid taxes. The Tribunal noted that there was no jurisdictional High Court decision contrary to this and remitted the issue back to the AO for verification of the payees' tax compliance. The Tribunal directed the AO to reconsider the issue in light of the Delhi High Court decision. 3. Consideration of Appellant’s Submissions and Cited Decisions: The Tribunal acknowledged the assessee's submissions and cited decisions but emphasized that judicial precedence requires following High Court decisions over Tribunal decisions. The Tribunal found that the Calcutta High Court decision took precedence over the Tribunal decisions cited by the assessee concerning the deduction under Section 80IB. Conclusion: The appeal was partly allowed for statistical purposes. The disallowance of the deduction under Section 80IB was upheld, while the issue of disallowance of interest was remitted back to the AO for reconsideration based on the Delhi High Court decision. The Tribunal's order was pronounced on 7th October 2016.
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