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TMI Blog2012 (7) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... 40a(ia) is not related to the business of the industrial undertaking - upholding the findings of the CIT(A) that the assessee is entitled to deduct ion u/s 80IB(10) on the amount disallowed u/s 40a(ia) - in favour of assessee. - ITA No.3763/Del/2011 - - - Dated:- 28-6-2012 - SHRI RAJPAL YADAV, SHRI A.N. PAHUJA, JJ. Assessee by Shri K. Sampath, AR Revenue by Shri Satpal Singh,DR O R D E R A.N.Pahuja:- This appeal filed on 05.08.2011 by the Revenue against an order dated 10.05.2011 of the ld. CIT(A)-I, Dehradun, raises the following grounds:- 1. The Ld. CIT(A) has erred in law and on facts in allowing the appeal of the assessee by holding that disallowance of Rs. 74,57,575/- made u/s 40(a)(ia) by the AO as tax deductible at source u/s 194C was not deducted while making payment of the aforesaid sum of Rs. 74,57,575/- against which deduction u/s 80IB(10) was not allowed by the Assessing Officer would also quality for deduction u/s 80 IB. 2. That the ld. CIT(A) has erred in law and on facts by allowing the appeal of the assessee by holding that payment to the contractors which was subject matter of addition u/s 40(a)(ia) was directly related to the cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA. 6. The order of the learned CIT(A) be set aside and that of the AO be restored. 2. Facts, in brief, as per relevant orders are that e-return declaring income of Rs. 4,96,68,230/- filed on 31.10.2007 by the assessee, engaged in the business of developing and building of a housing project, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act), issued on 24.09.2008. During the course of assessment proceedings, the Assessing Officer (A.O. in short) noticed that the assessee made labour contract payments of Rs. 74,57,575/- without deducting tax at source in terms of provisions of section 194C of the Act. To a query by the AO, seeking to disallow the amount in terms of provisions of sec. 40a(ia) of the Act and consequent deduction u/s 80IB(10) of the Act on such disallowance, the assessee while relying upon the decision in Swastik Textiles Vs. Income-tax Officer in ITA no.1018(Jp) of 1994 contended that deduction u/s 80 IB(10) may be allowed on the amount proposed to be disallowed u/s 40(a)(ia) of the Act also. However, the AO did not accept the submissions of the assessee and while disallowing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act in respect of the deduction in question. The assessee s eligibility for deduction in respect of the said condition is not disputed. In view of this it is held, the Assessing Officer s action denying the benefit of the addition made u/s 40(1)(ia) of the I.T. Act was wrong. The addition is deleted. 4. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).At the outset, both the parties agreed that the issue is squarely covered by the decision dated 11th March, 2011 of the ITAT in the assessee s own case for assessment year 2006-07 in I.T.A. no.4328/D/2009. 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of the ITAT. In the preceding year while adjudicating a similar issue, the ITAT upheld the findings of the ld. CIT(A) in the following terms:- 4. On perusal of paragraph 7 of the CIT(A) s order, we find that the CIT(A) has observed that there was a liability upon the assessee to deduct tax at source on the payment of Rs. 7,23,081/- and the assessee was obliged to deduct tax at source and pay the same to the government account. The CIT(A) further observed that since this has not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that allowance of deduction under section 80IB in the year will tantamount to double deduction to the assessee. We find that the undisputed facts of the case are that business expenditure of eligible unit stands disallowed in the year under consideration due to application of provisions of section 40(a)(ia). Thus, in other words, the said amount is deemed as expenditure not incurred by the assessee for computing its business income. Thus, as the expenditure of eligible unit stands disallowed consequently the same results in increase of the profit of the eligible unit. The deduction under section 80IB is allowable in respect of profits and gains derived from the industrial undertaking. Such profits and gains are to be computed in accordance with the provisions of section 28 to 44AC which includes section 40(a)(ia) also. Therefore, any disallowance of business expenditure of the eligible unit will logically result in enhancement of deduction allowable under section 80IB of the Act. The fear expressed by the Learned Commissioner of Income Tax(Appeals) in our considered opinion is unfounded and baseless. During the year as the expenditure of the eligible business is disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew was taken by the ITAT, Mumbai Bench in the case of M/s. Zenith Rubber Plastic Work, 35 TTJ 259. 5.4 On a similar issue in the context of claim for deduction u/s 80HHC of the Act on the additions to the income made by the AO, Hon ble Punjab and Haryana High Court in the case of CIT Vs. Bawa Skin Company, 294 ITR 537(Punjab Haryana) held that if the profits so arrived at by the Assessing Officer are related to the business of the assessee which is engaged in the business of export out of India of any goods or merchandise to which section 80HHC is applicable, then the appellant is completely justified to make the claim of deduction of such profits as determined by the Assessing Officer. 5.5 In the instant case also, the assessee did not dispute the disallowance made by the AO in terms of provisions of sec. 40a(ia) of the Act ,as was also the case in the preceding assessment year. Only dispute is with regard to deduction u/s 80IB(10) on the amount disallowed u/s 40a(ia) of the Act. Indisputably, the assessee is deriving its income only from the eligible business of construction of flats in respect of which the assessee is entitled to deduction u/s 80 IB(10) of the Act. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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