2012 (11) TMI 933 - AT - Income Tax

Deduction u/s 80IB on disallowances made u/s 40(a)(ia) due to default in TDS Held that - AO has treated the disallowance u/s 40(a)(ia) as income from business and it is not the case of the Revenue that the income derived by the assessee is other than the business income from developing and building housing project - assessee is entitled to deduction u/s 80IB(10) in respect of total profits including the profits computed as business profits of the housing project for the year under appeal - Revenue s appeal stands dismissed.

Summary

Issues:
1. Allowance of deduction under section 80IB of the IT Act on disallowances made under section 40(a)(ia).
2. Applicability of the decision in the case of Liberty India v/s CIT.
3. Interpretation of the Bombay High Court decision in Plastiblends India Ltd. v/s CIT regarding eligibility for deduction under section 80IB.

Analysis:
1. The appeal was filed by the Revenue against the order passed by the ld. CIT(A) for the assessment year 2007-08. The AO disallowed a certain amount under section 40(a)(ia) of the Act, which the assessee had claimed as deduction under section 80IB(10). The AO held that the deduction under section 80IB(10) on the disallowed amount was not permissible. However, the ld. CIT(A) allowed the deduction, citing the decision in Plastiblends India Limited v/s ACIT. The Tribunal found that the disallowed amount was part of the business income, making the assessee eligible for deduction under section 80IB(10) on the total profits, including the disallowed amount.

2. The Revenue raised grounds of appeal questioning the ld. CIT(A)'s decision to allow the deduction under section 80IB of the IT Act based on the disallowed amounts. They argued that the decision in Liberty India v/s CIT was applicable to the case. However, the Tribunal found that the assessee's income was from developing and building housing projects, and the disallowed amounts were part of the business income. Therefore, the Tribunal upheld the ld. CIT(A)'s decision to allow the deduction under section 80IB(10) on the total profits, including the disallowed amounts.

3. The ld. CIT(A) relied on the Bombay High Court decision in Plastiblends India Ltd. v/s CIT to support the assessee's eligibility for deduction under section 80IB(10) despite the disallowed amounts under section 40(a)(ia). The Tribunal analyzed similar cases such as S.B. Builders & Developers and M/s Shri Ganesh Developers and Builders, where deductions under section 80IB were allowed on disallowed amounts. The Tribunal concluded that since the disallowed amounts were part of the business income, the assessee was entitled to deduction under section 80IB(10) on the total profits, including the disallowed amounts.

In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the ld. CIT(A)'s decision to allow the deduction under section 80IB(10) on the disallowed amounts, considering them as part of the business profits from developing and building housing projects.