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2022 (6) TMI 1024 - AT - Income TaxDeduction u/s 80IA - whether the income earned by the assessee in the form of refund of VAT, interest income on the FDs with the bank shall qualify for deduction u/s 80IA or not? - HELD THAT - A perusal of the above provisions of the Act, it would show that the Parliament had employed the language that any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4), such business being hereinafter referred to as the eligible business . The expression derive had come for interpretation before the Hon ble Supreme Court in the case of Pandian Chemicals Ltd 2003 (4) TMI 3 - SUPREME COURT in the context of the provisions of section 80HH. Following this interpretation cited supra, it cannot be said that the income earned by the assessee in the form of all those items cannot be said to flow directly from undertaking itself. Therefore, the income so earned does not qualify for deduction u/s 80IA of the Act. Thus, we do not find any illegality in the order of the ld. CIT(A). Thus, this ground of appeal no.1 stands dismissed. Disallowance u/s 14A - HELD THAT - We find from the order of the CIT(A) that only contention raised before the ld. CIT(A) was that the provisions of section 14A have no application in the case of strategic investments. We further find from the order of the Assessing Officer, it was asserted vide para 15(c) that during the year under consideration the appellant had not received any exempt income and therefore, no disallowance can be made. AO without dealing with this contention applied the provisions of section 14A of the Act. In the circumstances, we are of the considered opinion that to meet the ends of justice matter requires remission to the AO with direction that if it is found on verification that no exempt income was earned from the investments made no resort to provisions of section 14A can be made keeping in view of the decision cited supra. Accordingly, this ground of appeal remitted to the file of AO for de novo consideration on merits in accordance with law after affording reasonable opportunity of being heard to the assessee. Thus, this ground of appeal no.2 stands partly allowed for statistical purposes. Reduction from the book profits the amount of eligible profits u/s 80IB - HELD THAT - This issue raised by way of additional ground of appeal is covered against the appellant by decision of the Coordinate Bench of the Tribunal in the case of M/s. Chheda Electricals and Electronics Pvt. Ltd. 2022 (5) TMI 510 - ITAT PUNE - additional ground raised by the assessee stands dismissed.
Issues Involved:
1. Eligibility of miscellaneous receipts for deduction under Section 80IA of the Income Tax Act. 2. Disallowance under Section 14A of the Income Tax Act. 3. Non-pressed ground of appeal. 4. Additional ground regarding reduction from book profits under Section 80IB of the Income Tax Act. Issue-wise Detailed Analysis: 1. Eligibility of Miscellaneous Receipts for Deduction under Section 80IA: The appellant, a company involved in civil, electrical, and mechanical contracts, claimed a deduction under Section 80IA of the Income Tax Act for the assessment year 2012-13. The Assessing Officer disallowed this claim, arguing that the appellant is a small works contractor and that miscellaneous receipts (VAT reimbursement, interest on bank deposits, discounts from creditors) do not qualify for the deduction. The CIT(A) partially allowed the appeal, affirming that the appellant is entitled to the deduction under Section 80IA but excluding the miscellaneous receipts from this benefit. The Tribunal upheld the CIT(A)'s decision, referencing the Supreme Court's interpretation in *Pandian Chemicals Ltd. vs. CIT* and *Liberty India vs. CIT*, which clarified that the term "derived from" implies a direct nexus with the business. Therefore, the miscellaneous receipts do not qualify for the deduction under Section 80IA. 2. Disallowance under Section 14A: The appellant contested the disallowance under Section 14A, arguing that no exempt income was earned during the relevant period. The CIT(A) upheld the disallowance, but the Tribunal found merit in the appellant's contention that if no exempt income was earned, the provisions of Section 14A should not apply. The Tribunal remitted this issue back to the Assessing Officer for verification, directing that if no exempt income was indeed earned, no disallowance under Section 14A should be made. 3. Non-pressed Ground of Appeal: Ground of appeal no.3 was dismissed as it was not pressed during the hearing before the CIT(A). 4. Additional Ground Regarding Reduction from Book Profits under Section 80IB: The appellant sought a reduction from book profits under Section 80IB, which was not initially raised. The Tribunal referred to its earlier decision in *M/s. Chheda Electricals and Electronics Pvt. Ltd. vs. DCIT*, which held that deductions under Section 80IB are not permissible in computing book profits under Section 115JB. The Tribunal dismissed this additional ground, aligning with the precedent that Section 115JB is a special provision and does not allow for such deductions. Conclusion: The appeals for both assessment years 2012-13 and 2013-14 were partly allowed for statistical purposes, with directions for the Assessing Officer to reconsider the disallowance under Section 14A based on the presence of exempt income. The Tribunal upheld the CIT(A)'s decisions on the other issues, including the ineligibility of miscellaneous receipts for deduction under Section 80IA and the non-applicability of Section 80IB deductions in computing book profits under Section 115JB.
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