2018 (4) TMI 1615 - AT - Income Tax

Tribunal grants deduction for enhanced profits under section 80IC based on CBDT circular

Sukam Power Systems Ltd. Versus ACIT Range-9, New Delhi.

The Tribunal allowed the appeal, permitting the appellant to claim a deduction under section 80IC on the enhanced profit determined by the assessing ... Claim of deduction u/s 80IC - disallowance made by the assessing officer under the profit and gains of business or profession - disallowance has been made by assessing officer as per section 43B which is a disallowance under the head profit and gains of business or profession - Held that:- CBDT has issued a circular no. 37/2016 dated 2nd November, 2016 regarding deduction under Chapter VI A on the additions made by the authorities below under the head profit and gains of a business activity which clears that the assessee is eligible for deduction under chapter VI -A on enhanced profit made by the assessing officer u/s 43B as claimed by the assessee u/s 80IC of the IT Act, 1961. The above circular explains the situation well. In our considered opinion the case of the assessee is squarely covered by the above noted circular. In view of the above the assessee is entitled to claim deduction U/s 80IC on the enhanced profit under the head business income for the eligible unit - Decided in favour of assessee. Issues:1. Disallowance under section 43B for non-payment of statutory dues.2. Claim of deduction under section 80IC on disallowance made by assessing officer.Issue 1: Disallowance under section 43B for non-payment of statutory dues:The assessing officer observed that the assessee had not discharged certain statutory dues within the due date as prescribed under section 43B. The disallowance was made on the grounds that the expenditures were in the nature of statutory liabilities, and the assessee should not benefit from defaults in payment of such dues. The assessing officer also disallowed the claim under section 40A, which was actually a deduction disallowed under section 43B. The CIT(A) partly allowed the appeal but sustained the addition made by the assessing officer on the deduction claimed under section 80IC.Issue 2: Claim of deduction under section 80IC on disallowance made by assessing officer:The appellant contended that they were entitled to claim deduction under section 80IC on the disallowance made by the assessing officer under section 43B. The appellant argued that the disallowance under section 43B falls under the head of profit and gains of business or profession, making it eligible for deduction under section 80IC. The appellant cited various case laws to support their argument. The Departmental Representative, on the other hand, supported the lower authorities' decision to disallow the claim, stating that allowing such deductions would benefit the assessee for defaulting in payments of statutory dues.The Tribunal analyzed the circular issued by the CBDT, which clarified that disallowances made under various sections, including section 43B, related to the business activity against which the Chapter VI-A deduction was claimed, would result in an enhancement of profits eligible for deduction under Chapter VI-A. The Tribunal held that the appellant was entitled to claim deduction under section 80IC on the enhanced profit made by the assessing officer under section 43B. The Tribunal found that the appellant's case was covered by the circular, and therefore allowed the appeal, stating that the appellant could claim deduction under section 80IC on the enhanced profit under the head of business income for the eligible unit.In conclusion, the Tribunal allowed the appeal of the assessee based on the eligibility to claim deduction under section 80IC on the enhanced profit made by the assessing officer under section 43B.