9911796707
TMI Blog2020 (1) TMI 1182X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. In this regard, we find that in the case of CIT v. Gem Plus Jewellery India Ltd. [ 2010 (6) TMI 65 - BOMBAY HIGH COURT] and ITO v. Kewal Construction [ 2013 (7) TMI 291 - GUJARAT HIGH COURT] have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. This position has also been now confirmed by the CBDT in its Circular No.37/2016 dated 02.11.2016 It therefore appears that there will be no tax liability on the assessee, consequent to disallowance u/s. 40(a)(i) of the Act. In suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grieved by the aforesaid addition made by the AO, the assessee preferred appeal before the CIT(Appeals) challenging the disallowance u/s.40(a)(i) of the Act and raising an alternate argument that if the disallowance/addition is sustained then the disallowance/addition will go to increase the profits of the business that is eligible for deduction u/s.10AA of the Act and the deduction should be allowed on such enhanced profits. If the alternate argument is accepted then the disallowance u/s.40(a)(i) of the Act will have no tax implications for the Assessee. The alternate ground raised by the Assessee before CIT(A) reads thus: 3 Error in computation of deduction under Section 10AA of the Act 3.1 While computing the deduction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The AO vide his remand report dated 12.04.2018 submitted that the appellant furnished invoices only on sample basis and all the invoices were not produced before him and accordingly the appellant's claim of expenses is not backed by proper documentary evidence. The appellant has not been able to establish as to how the expenses were concluded as marketing charges to refute the stand of the AO that the expenses incurred were in the nature of Technical services as defined u/s 9(1)(vii) of the Income tax Act,1961.Therefore am of the opinion that the finding given by the AO during the scrutiny proceedings after following the directions of the Hon'ble ITAT the genuineness and reasonableness of the expenditure claimed by the appellant cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ofit consequent to disallowance u/s. 40(a)(i) of the Act. In this regard, we find that two High Courts viz., Hon ble Bombay High Court in the case of CIT v. Gem Plus Jewellery India Ltd. (2010) 194 Taxman 192 (Bom) and Hon ble Gujarat High Court in the case of ITO v. Kewal Construction, 354 ITR 13 (Guj) have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. This position has also been now confirmed by the CBDT in its Circular No.37/2016 dated 02.11.2016 wherein the Board has observed as follows:- 3. In view of the above, the Board has accepted the settled posi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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