Tribunal upholds deductions under Section 80-IA(4)(iii) for assessee, citing High Court directives.

The Tribunal dismissed all three appeals of the revenue, upholding the CIT(A)'s decisions to allow the deductions claimed by the assessee under Section 80-IA(4)(iii) for the respective assessment years. The judgments emphasized the binding nature of High Court directives and CBDT circulars, as well as the correct interpretation of the Income Tax Act's provisions.

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Issues Involved:
1. Allowability of deduction under Section 80-IA(4)(iii) of the Income Tax Act.
2. Eligibility of other income for deduction under Section 80-IA(4)(iii).
3. Eligibility of bogus purchases and expenditures for deduction under Section 80-IA(4)(iii).

Detailed Analysis:

1. Allowability of Deduction under Section 80-IA(4)(iii):
The assessee, engaged in the development of industrial parks, claimed deductions under Section 80-IA(4)(iii) for the assessment years 2010-11, 2011-12, and 2012-13. The primary issue was the absence of a CBDT notification at the time of assessment. The Gujarat High Court directed the CBDT to issue the notification, which was eventually issued with a condition that allowed deductions from the assessment year 2011-12 onwards. The High Court later deemed the assessee eligible for deductions from the assessment year 2010-11. The CIT(A) allowed the deduction based on the High Court's ruling, which the Tribunal upheld, noting that the AO disallowed the deduction solely due to the absence of the notification at the time of assessment.

2. Eligibility of Other Income for Deduction under Section 80-IA(4)(iii):
For the assessment year 2011-12, the AO disallowed the deduction for other income (Rs. 4,70,567/-), considering it not derived from the business of the industrial park. The CIT(A) found that this income consisted of Kasar Vatav and dividends from shares acquired for securing a business loan, deeming them derived from the business. The Tribunal agreed, noting that Kasar Vatav is essentially a reduction in purchase expenditure and the dividends were a result of a business requirement, thus eligible for deduction.

3. Eligibility of Bogus Purchases and Expenditures for Deduction under Section 80-IA(4)(iii):
For the assessment year 2012-13, the AO disallowed deductions on enhanced profits resulting from disallowed bogus purchases (Rs. 91,18,800/-) and expenditures (Rs. 26,67,267/-). The CIT(A) allowed the deduction based on CBDT Circular No. 37/2016, which states that disallowances related to business activities against which Chapter VI-A deductions are claimed result in enhanced profits eligible for deduction. The Tribunal upheld this view, emphasizing the binding nature of the CBDT circular and the applicability of Section 80AB, which mandates that income computed in accordance with the Act's provisions is deemed derived from the business.

Conclusion:
The Tribunal dismissed all three appeals of the revenue, upholding the CIT(A)'s decisions to allow the deductions claimed by the assessee under Section 80-IA(4)(iii) for the respective assessment years. The judgments emphasized the binding nature of High Court directives and CBDT circulars, as well as the correct interpretation of the Income Tax Act's provisions.

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