TaxTMI 
TaxTMI 
2011 (1) TMI 127
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....54,399/- whereas in the order under section 143(3) dated 29.12.2008 provisions of section 44BB were invoked and profit at 10% of the aggregate amount received from the contract work were assessed and the total income was determined at Rs. 30,86,12,920/-. Subsequently the A.O. noticed that disallowance under sections 40(a) and 43B were not made and issued notice under section 154 and passed order disallowing the amount under section 43B. He also levied interest under sections 234B, 234C and 234D. The CIT(A), vide his order, considered assessee's submissions addition confirmed the disallowance under section 43B while deleting the interest levied. Assessee is aggrieved on the addition so made under section 43B and the Revenue is aggrieved on the interest disallowed. 4. We have heard the learned counsel and the learned D.R. 5. Ground No. 1 in assessee's appeal is with reference to the disallowance under section 43B. The learned counsel submitted that the incomes are determined under the provisions of section 44BB and accordingly there is no need for disallowing any amount under section 43B. It was his contention that under the provision of section 44BB what is assessed is deemed prof....
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....n. 7. We have considered the issue. The provisions of section 44BB are as under: - 44BB. (1) Notwithstanding anything to the contrary contained in sections 28 to 41 and sections 43 and 43A, in the case of an assessee [, being a non-resident,] engaged in the business of providing services or facilities in connection with, or supplying plant and machinery on hire used, or to be used, in the prospecting for, or extraction or production of, mineral oils, a sum equal to ten per cent of the aggregate of the amounts specified in sub-section (2) shall be deemed to be the profits and gains of such business chargeable to tax under the head "Profits and gains of business or profession" : Provided that this sub-section shall not apply in a case where the provisions of section 42 or section 44D or section 115A or section 293A apply for the purposes of computing profits or gains or any other income referred to in those sections. (2) The amounts referred to in sub-section (1) shall be the following, namely :- (a) the amount paid or payable (whether in or out of India) to the assessee or to any person on his behalf on account of the provision of services and facilities in connect....
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....that provisions of section 43B are not applicable as the assessee has not claimed any deduction has to be considered favourably. Provisions of section 43B are as under: - " 43B. Notwithstanding anything contained in any other provision of this Act, a deduction otherwise allowable under this Act in respect of- (a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or (b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or (c) any sum referred to in clause (ii) of sub-section (1) of section 36, or (d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution [or a State financial corporation or a State industrial investment corporation], in accordance with the terms and conditions of the agreement governing such loan or borrowing [, or] (e) any sum payable by the assessee as interest on any [loan or advances from a scheduled bank in accordance with the ter....
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....r in which the sum is actually paid by him. Explanation 3A -For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (e) of this section is allowed in computing the income referred to in section 28 of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 1996, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing the income of the previous year in which the sum is actually paid by him. Explanation 3B -For the removal of doubts, it is hereby declared that where a deduction in respect of any sum referred to in clause (f) of this section is allowed in computing the income, referred to in section 28, of the previous year (being a previous year relevant to the assessment year commencing on the 1st day of April, 2001, or any earlier assessment year) in which the liability to pay such sum was incurred by the assessee, the assessee shall not be entitled to any deduction under this section in respect of such sum in computing ....
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....essment proceedings invoking provisions of section 44BB has determined the profit or gains of such business chargeable to tax under the head 'Profits and gains of Business or Profession'. Since the amount deemed to be profit and gains of such business chargeable to tax include the deemed allowances/ disallowances. The provisions of Sec. 44BB estimate the income at 10% if gross receipts and no separate claim for expenditure is allowable. In view of this we are of the opinion that the disallowance under section 43B of Rs. 5,86,624/- is not warranted. The CIT(A) analysed the provisions of section 44BB and distinguished the judgement of Hon'ble Madras High Court stating that the exclusion of the provisions are applicable upto sections 43A and not to 43B. However, application of section 43B can only arise only when there is an amount claimed as deduction otherwise allowable under the Act. Since assessee's books of account are rejected, the claim of deduction was made in the P & L Account are deemed to have been rejected and as a result, incomes are determined on presumption basis under section 43BB. That may be the reason why the disallowance under section 40A (which the A.O. has accept....