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TMI Blog2017 (1) TMI 257X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance made by the Revenue. We find that the Revenue’s appeal and the assessee’s cross objection are duly covered by the CBDT circular although Section 10B of the Act is not placed under Chapter VI-A of the Act rather the same is placed under Chapter-III of the Act but the deductions u/s 10B of the Act are profit linked deductions and hence there is no reason why the same should not be allowed keeping in view the spirit of afore-stated CBDT circular as the deduction u/s 10 B of the Act is also profit linked deduction The use of the word ‘etc.’ clearly denotes that it will apply to similarly placed disallowances and disallowance u/s 40(a)(i) of the Act is also disallowance due to non-deduction of withholding tax as is contemplated by Section 40(a)(ia) of the Act. Hence the CBDT circular will be applicable to deductions u/s 10B of the Act as well to disallowance u/s 40(a)(ia) of the Act as well. Hence the appeal of the Revenue is not sustainable/maintainable in view of afore-stated CBDT circular dated 02-11-2016 and we dismiss the appeal filed by the Revenue , while the C.O. filed by the assessee is allowed as the additions of ₹ 1,35,556/- made by the AO are w.r.t. dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales marketing expenses payable to agents abroad is deemed to accrue and arise in India and therefore liable for deduction of tax at source u/s 195 of the Income Tax Act. 3. For these and other grounds that may be urged at the time of hearing, the decision of the DRP may be set aside and that of A.O. restored. 3. In the C.O. filed by the assessee, the assessee has raised the following objections in the CO filed with the tribunal :- I. On the facts and in the circumstances of the case, the Learned Income Tax Officer, Ward 2(1 )(4), Mumbai (Ld AO')/The Learned Dispute Resolution Panel - IV, Mumbai (Ld DRP') has:- 1. erred in confirming disallowance under section 40(a)(i) of the Act of ₹ 1,35,556/- on payment made to John blyzinskyi; 2. erred in disregarding the notarised confirmation provided from then existing Chairman and CEO of the Company on the period of stay of John Blyzinskyi and holding that the Company has not substantiated the period of stay of the individual in India whereby the disallowance of ₹ 135,556 u/s 40(a)(i) of the Act has been upheld; 3. Without prejudice to Ground 1 above, erred in not granting deduction und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100% of the profits of the undertaking. The A.O. has proposed in the draft assessment order passed u/s 143(3) r.w.s. 144C of the Act dated 25th February, 2014 to disallow an amount of ₹ 1,49,73,455/- on the ground that the assessee has not deducted tax at source under the provisions of section 195 of the Act. The details of which are as under:- Sl No. Name of the party Amount (Rs) 1 Mark R Luciw 22,10,258/- 2 Garry O Neil 1,04,57,012/- 3 Bruce Sugaarman 21,70,629/- 4 John Blyzinkyl 1,35,556/- TOTAL 1,49,73,455/- The DRP vide its directions dated 29-11-2014 has accepted that the assessee is able to substantiate the payments to the tune of ₹ 1,48,37,899/- as the assessee submitted notorized copies of the passports , which proved that three individuals at s.no 1 to 3 in above chart did not visit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee will be entitled for deduction u/s 10B of the Act on the enhanced profit. It was submitted that in any case this issue is also covered by decision of Hon ble jurisdictional Bombay High Court in favour of the assessee in CIT v. Gem Plus Jewellary India Limited in (2010) 194 taxman 192(Bombay) as disallowance u/s 40(a)(i) of the Act is a statutory disallowance and the hence enhanced profits after statutory disallowance shall be considered for deduction u/s 10B of the Act which deduction is profit linked deduction. 6. The ld. D.R. fairly conceded that it has been decided by the Revenue that such payments are covered by the afore-stated circular and such appeals should not be pressed/withdrawn before the tribunal. It is submitted that the CBDT has directed that appeals may not be filed on this ground by the department , and also that issue is covered in favour of the assesee in 194 taxman 192. 7. We have heard the rival contentions and also perused the material available on record including the afore-stated CBDT circular. We have observed that the assessee is registered as a 100% export oriented unit under the Software Technology Park of India Scheme and the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions u/s 144C(5) of the Act, which additions were confirmed by the AO in his assessment order dated 17.12.2014 passed u/s 143(3) of the Act r.w.s. 144C(13) of the Act in pursuance of directions of DRP. . We have observed that the CBDT has issued Circular No. No. 37/2016 dated 2nd November, 2016, which is reproduced below:- SECTION 80-IB, READ WITH SECTIONS 32, 40(a)(ia), 40A(3) 43B, OF THE INCOME-TAX ACT, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS - CHAPTER VIA DEDUCTIONS ON ENHANCED PROFITS CIRCULAR NO.37/2016 [F.NO.279/MISC./140/2015/ITJ], DATED 2-11-2016 Chapter VI-A of the Income-tax Act, 1961 ( the Act ), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circular is that the Revenue does not want to continue the litigation with respect to disallowance made by the Revenue u/s 32,40(a)(ia), 40A(3), 43B etc. of the Act , which ultimately led to increase in profits which are otherwise eligible for profit linked deduction under Chapter VI-A of the Act. The Board has accepted that the disallowance made u/s 32, 40(a)(ia), 40A(3), 43B etc. of the Act and other disallowance out of specific expenditure related to the business activity may be made by Revenue which led to enhancement of profits against which Chapter VIA profit linked deductions has been claimed and it is accepted that enhanced profit linked deduction under Chapter VI-A is admissible on the profits so enhanced by the said disallowance made by the Revenue. We find that the Revenue s appeal and the assessee s cross objection are duly covered by the CBDT circular although Section 10B of the Act is not placed under Chapter VI-A of the Act rather the same is placed under Chapter-III of the Act but the deductions u/s 10B of the Act are profit linked deductions and hence there is no reason why the same should not be allowed keeping in view the spirit of afore-stated CBDT circular as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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