2013 (8) TMI 141

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....essee deduction u/s 80-IB of the IT Act in respect of disallowance of labour expenses of Rs. 14,05,701/- u/s 40(a)(ia) ?      (ii) Whether, in the facts and circumstances of the case, the learned ITAT has erred in rejecting the Revenue's appeal against the decision of the CIT(A) allowing the assessee deduction u/s 80-IB of the IT Act in respect of business profit of Rs. 41,63,672/-? 2. Briefly stated the facts are as follows: 2.1 The respondent - assessee is engaged in the business of developing housing projects. For the Assessment Year 2005-06, the assessee filed its return of income on 31.10.2005 declaring 'nil' income. During the course of assessment proceedings, the Assessing Officer disallowed the labour ex....

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....ting to Rs. 41,63,672/- is disallowed and added to the total income of the assessee. Penalty proceedings u/s 27(1)(c) of the I.T. Act are also initiated for filing inaccurate particular of income in this regard." 2.3 The assessee carried the matter before the Commissioner (Appeals), who vide order dated 23-6-2008, allowed the assessee's appeal in part. With respect to disallowance of labour expenditure of Rs. 14,05,701/- under Section 40(a)(ia) of the Income Tax Act is concerned, the Commissioner upheld the decision of the Assessing Officer. While doing so, he held that such addition in the income of the assessee would also qualify for deduction under Section 80-IB(10) of the Income Tax Act. With respect to the Assessing Officer's decisi....

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....2012) 341 ITR 403 (Guj.). In this respect, no interference is called for. 4. With respect to the Tribunal's view that if there is disallowance of expenses under Section 40(a)(ia) of the Income Tax Act, then such additional income would also qualify for deduction under Section 80-IB(10) of the Income Tax Act, we do not fully concur. It may be that certain expenditure may be disallowed on the ground that tax deductible at source at the time of making such payment was done by the assessee. Nevertheless, no effect of such disallowance would be there on the assessee's profit from its construction activity since it would be increased to that extent. Nevertheless, such increased income would also qualify for deduction, even otherwise, available....