2016 (4) TMI 858 - AT - Income Tax

Disallowance of deduction u/s.80IB(10) - Held that - From the details on record it is not disputed that the assessee is entitled to be allowed deduction under section 80 IB(10) in respect of its business income derived from its building, construction and development activities from the earlier assessment year 2006-07 itself. We find from a perusal of the decision of the Co-ordinate Bench in the case of M/s. Meha Medicure 2012 (3) TMI 517 - ITAT MUMBAI that the assessee would be entitled to enhanced deduction under section 80 IB(10) of the Act to the extent the assessed business income of the assessee is enhanced by virtue of disallowances that go to enhance its profits and would be eligible for full deduction under section 80 IB(10) of the Act, which provides for deduction from the profits and gains from the eligible business. Thus we hold and direct that the assessee would be entitled to deduction under section 80 IB(10) of the Act to the extent of the assessee s assessed business income of ₹ 2,64,65,160/-, determined in the order of assessment dated 14/12/2009 for assessment year 2007-08 and which has been enhanced thereto by virtue of the disallowance of compensation of ₹ 8,85,750/-, which would go to enhance the profits of the assessee s eligible business. - Decided in favour of assessee

Summary

Issues:
- Disallowance of deduction under section 80IB(10)
- Disallowance of compensation
- Restriction of deduction under section 80IB(10)

Analysis:
- The appeal was against the order of the CIT(Appeals) for assessment year 2007-08, where the assessee, a builder and developer, had claimed deduction under section 80IB(10) of the Income Tax Act, 1961. The assessment resulted in disallowances and additions, including disallowance of deduction u/s. 80IB(10) and disallowance of compensation.
- The CIT(Appeals) partially allowed the assessee's claim for deduction under section 80IB(10) to the extent of &8377; 2,55,90,033. The Assessing Officer, in a subsequent order, restricted the deduction to &8377; 2,52,97,456. The assessee appealed this decision, seeking the deduction to be based on the enhanced business income of &8377; 2,64,65,160.
- The Tribunal considered the assessee's submissions and relevant case laws, including Meha Medicure and S.B. Builders & Developers, which supported the assessee's claim for enhanced deduction based on the assessed business income. The Tribunal held that disallowances enhancing profits are eligible for full deduction under section 80IB(10).
- Relying on the precedent set in Meha Medicure, the Tribunal allowed the assessee's appeal, directing the deduction under section 80IB(10) to be based on the assessed business income of &8377; 2,64,65,160, including the disallowance of compensation. Consequently, the assessee's grounds were allowed, and the appeal for assessment year 2007-08 was allowed.

This detailed analysis of the judgment highlights the issues involved, the arguments presented by the parties, the relevant legal provisions, and the final decision rendered by the Tribunal, providing a comprehensive understanding of the case.