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TMI Blog2018 (11) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... sum up, these additions made by the Assessing Officer relate to the business activity of the eligible unit for which the assessee is entitled to deduction u/s 80IC of the Act. The Assessing Officer has also not disputed the otherwise availability of deduction to the assessee. CBDT Circular No.37/2016 dated 02.11.2016 issued in the context of deductions under Chapter VI-A on enhanced profits says that f there is an enhancement of income because of such disallowances, the deductions under Chapter VIA should be granted on the enhanced income. It has been clearly spelt out in para 4 of the Circular that not only the fresh appeals be not filed on such issue, but the appeals already filed in Courts/Tribunals should be withdrawn or not pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer computed total income by making disallowance of ₹ 29,11,964/- u/s 40(a)(ia) of the Act on account of non-deduction of tax at source from the payments made by the assessee u/s 194J of the Act; and ₹ 20,97,044/- on account of 20% of purchase of paddy husk at ₹ 1.04 crore for want of full supporting evidence. The assessee itself offered voluntary disallowance of ₹ 3,93,236/- towards section 43B and ₹ 2,10,395/- on account VAT payable. The Assessing Officer, while finalizing the assessment made the above additions, but, allowed deduction u/s 80IC of the Act for a sum of ₹ 57,83,701/-. The ld. CIT(A) upheld the assessment order on this issue. The assessee is aggrieved by the reductio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 higher profit-linked deduction under Chapter VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by assessee for the purpose of developing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness activity against which the Chapter VI-A deduction has been claimed, result in enhancement of the profits of the eligible business, and that deduction under Chapter VI-A is admissible on the profits so enhanced by the disallowance. 4. Accordingly, henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/ Tribunals may be withdrawn/ not pressed upon. The above may be brought to the notice of all concerned. 6. It is apparent from a bare perusal of the Circular that the disallowances made under sections 32, 40(a)(ia), 43B and others related to business activity should be considered while computing deduction under Chapter VIA of the Act. In other words, if there is an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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