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TMI Blog2022 (4) TMI 1262X X X X Extracts X X X X X X X X Extracts X X X X ..... . In such circumstances we are inclined to hold that the Ld. CIT(A) has rightly allowed the deduction u/s 80-IA(4)(iii), as claimed by the assessee. - Decided in favour of assessee. Whether the other income earned by the assessee was eligible for deduction u/s 80-IA(4)(iii)? - After due consideration we find sufficient force in the submission of the Ld. AR, without repeating the same, that the Kasar Vatav and Dividend income earned by the assessee, are derived from the business of industrial park and therefore eligible for deduction u/s 80-IA(4)(iii). Accordingly, we allow deduction. Whether the bogus purchases and bogus expenditure are eligible for deduction u/s 80-IA(4)(iii)? - We have considered the submissions of both sides as also the aforesaid CBDT Circular No. 37 / 2016 dated 02.11.2016. We observe that the CBDT has clearly accepted that if the profit of business is enhanced by disallowances of expenses, such enhanced profit is eligible for deduction. Needless to mention that the Circulars issued by the CBDT are binding upon the lower authorities and so is the Circular No. 37 / 2016. Section 80AB is directly applicable, which mandates that the income computed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. 4. The assessee is a company engaged in the business of development of industrial parks. The assessee developed one such industrial park named Devraj Industrial Park at Village - Piplaj, district - Ahmedabad. In order to avail the benefit of deduction u/s 80-IA(4)(iii) and as required by that section, the assessee applied to the Secretary, ITA-1, Department of Revenue, CBDT vide application No. F.No.178/07/2009-ITA-1 dated 27.01.2009 for notification of Devraj Industrial Park under Industrial Park Scheme, 2008. Vide letter dated 09.02.2009, the CBDT called for a report from Ld. AO on Devraj Industrial Park , which the Ld. AO submitted. Much later thereafter on 14.02.2013, the CBDT issued a notice to the assessee raising certain issues for clarifications, which is reproduced by Ld. AO in Para No. 5.5 of the assessment-order. The assessee submitted replies on those issues vide letter dated 25.02.2013 and also filed a copy of the letter to the Ld. AO during the course of assessment-proceedings, which is also reproduced by Ld. AO in Para No. 5.6 of the assessment-order. Thereafter the matter remained pending with the CBDT. The assessee filed return for A.Y. 2010-11 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for availing tax deduction under section 80-IA(4)(iii) from the financial year 2009-10, Assessment Year 2010-11, the order rejecting the Rectification Application dated 17.03.2017 deserves to be set aside. The condition in the Notification extending the benefit of availing of deductions under section 80-IA(4)(iii) from the date of commencement of 05.09.2010 is a condition not found in any of the other notifications vis- -vis other such projects, produced in other such cases. Accordingly, the respondents are directed to delete the condition No. 7 in the Notification of 26.12.2016. The petitioner s claim for deduction at whichever stage pending before the assessing or appellate authority shall be governed by this declaration. Petition stands disposed of accordingly. Rule is made absolute accordingly. [Underlined emphasis supplied] Taking into account above facts, the Ld. CIT(A) allowed deduction, as claimed by the assessee in the return, by observing as under on Page No. 25 of the appeal-order: In view of above facts as narrated above and the ruling of the Hon ble Gujrat High Court, setting aside the order of the CBDT rejecting the rectification application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore rightly allowed the deduction and his action must be upheld. 9. We have considered the rival submissions and contentions of both side and also perused the material held on record. We firstly observe that the Ld. AO has disallowed deduction for the sole reason that the notification required u/s 80-IA(4)(iii) was not issued by the CBDT till finalization of the assessment and there was no other reason. As discussed in the foregoing paragraphs, we also observe from the submissions made by the Ld. AR that the assessee has submitted full details of the park to the CBDT, Ld. AO and Ld. CIT(A). We also observe that the assessee has submitted audited P L A/c, audited Balance-Sheet and Form 3CD alongwith the return. We also observe that the Hon ble Gujrat High Court in its order dated 03.11.2017, para No. 31, reproduced above has mandated The petitioner s claim for deduction at whichever stage pending before the assessing or appellate authority shall be governed by this declaration . In such circumstances we are inclined to hold that the Ld. CIT(A) has rightly allowed the deduction u/s 80-IA(4)(iii), as claimed by the assessee. Accordingly, we dismiss revenue s Ground No. 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of industrial park, but it is certainly not derived from the said business and therefore not eligible for deduction. Hence the Ld. AO disallowed the deduction in respect of other income. 16. During appellate proceeding, the Ld. CIT(A) found that the Ld. AO had taken wrong impression that the other income is from interest. In fact, the other income consists of Kasar Vatav of ₹ 1,10,567/- plus dividend of ₹ 3,60,000/- from shares of the Kalupur Commercial Co-operative Bank acquired for availing secured loan for business purpose. The Ld. CIT(A) found that both of these incomes are derived from the business of industrial park and eligible for deduction. Therefore, the Ld. CIT(A) allowed deduction. 17. Before us, the Ld. DR submitted emphasized the decisions of Hon ble Supreme Court in the case of Pandian Chemicals Ltd. 262 ITR 278 (SC) and Sterling Foods 237 ITR 53 (SC) and strongly claimed that the Kasar Vatav as well as Dividend are the income which are attributable to the business of industrial park but still they are not derived from that business. Hence the Ld. DR submitted that the Ld. CIT(A) has wrongly allowed deduction in respect of these incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. In this Appeal, the revenue has raised following Grounds: 1. That the ld. CIT(A) erred in law and on facts in deleting the disallowance of deduction u/s 80-IA(4)(iii) amounting to ₹ 1,69,73,423/-. 2. That the ld. CIT(A) erred in law and on facts by allowing the deduction u/s 80IA(4)(iii) in as much as the CBDT notification was issued after the completion of assessment and that the same was contingent upon fulfillment of conditions which remain to be verified. 3. That the ld. CIT(A) has erred in law and on facts in holding that the assessee is entitled to deduction u/s 80-IA of the Act in respect of other income of ₹ 4,00,637/-. 4. That the ld. CIT((A) has erred in law and on facts in holding that bogus purchase of ₹ 91,18,800/- and bogus expenditure of ₹ 26,67,267/- are entitled for deduction u/s 80-IA of the Act. 5. That the ld. CIT(A) has erred in law and on facts in interpreting the CBDT Circular and the Act in as much as bogus purchases and expenditure are not related to business activity against which Chapter VI-A has been claimed and that deduction u/s 80-IA is not allowable for such bogus items. 6. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of non-deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80-IB of the Act. This view was taken by the courts in the following cases: Income-tax Officer-Ward 5(1) v. Keval Construction [2013] 33 taxmann.com 277 (Guj.) Commissioner of Income-tax-IV, Nagpur v. Sunil Vishwambharnath Tiwari [2016] 63 taxmann.com 241 (Bom.) (ii) If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. This view was taken by the court in the following case: Principal CIT, Kanpur v. Surya Merchants Ltd. [2016] 72 taxmann.com 16 (All.). The above views have attained finality as these judgments of the High Courts of Bombay, Gujarat and Allahabad have been accepted by the Department. 3. In view of the above, the Board has accepted the settled position that the disallowances made un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iii) which is a part of section 80-IA allows deduction in respect of income derived from the business of industrial park which is included in the Gross Total Income of assessee. Hence section 80AB is directly applicable, which mandates that the income computed in accordance with the provisions of this Act shall be deemed to be the income derived from the business of industrial park. In the present case, the Ld. AO has computed the income of the business of industrial park after making the disallowances of bogus purchases of ₹ 91,18,800/- and bogus expenditure of ₹ 26,67,267/- and therefore the amount arrived at after making these disallowance i.e. the enhanced profit of the industrial park, is the income computed in accordance with the provisions of this Act. Hence such enhanced profit is deemed to be the income derived from the business of industrial park and eligible for deduction. In view of this, we find no infirmity in the action of Ld. CIT(A). Hence we hold that the profit of business enhanced by the disallowance of bogus purchases of ₹ 91,18,800/- and bogus expenses of ₹ 26,67,267/- is eligible for deduction u/s 80-IA(4)(iii). Accordingly, we dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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