Section 80IC deduction applies to enhanced profits from disallowances linked to eligible business activity.

Deduction under section 80IC is admissible on enhanced profits where additions in the assessment increase the eligible business income. Disallowances made in computing business income, including items under sections 40(a)(ia), 43B and unsupported purchase claims, were treated as arising from the business activity of the eligible unit. Relying on CBDT Circular No. 37/2016, the Tribunal noted that such disallowances enhance profits of the eligible business and the Chapter VI-A deduction must be allowed on the revised figure, resulting in relief to the assessee.

---

---

Issues: Whether deduction under section 80IC of the Income-tax Act, 1961, is admissible on enhanced profits arising from disallowances made in computing business income.

Analysis: The additions made in the assessment, including disallowance under section 40(a)(ia), disallowance relating to purchases for want of supporting evidence, and disallowances under section 43B, were held to arise from the business activity of the eligible unit. The Tribunal relied on CBDT Circular No. 37/2016 dated 02.11.2016, which ed that disallowances such as those under sections 32, 40(a)(ia), 40A(3), and 43B, when related to the business activity against which a Chapter VI-A deduction is claimed, enhance the profits of the eligible business and the deduction must be allowed on such enhanced profits.

Conclusion: Deduction under section 80IC was held admissible on the enhanced income resulting from the disallowances, in favour of the assessee.

---