2012 (3) TMI 517

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....ce of deduction u/s.80IC to the extent of Rs. 7,38,038/- in pursuance of disallowance u/s.40(a)(ia). 2. Facts of the case, in brief, are that the appellant which is a partnership firm is engaged in the business of manufacturing of soaps, detergents, shampoos and lotions. For the activities carried out by it, it has been claiming deduction u/s.80IC of the Income Tax Act, which is 100% of the profits derived from eligible business in certain special category states. Such a claim has been found to be eligible and accepted by the department in the earlier years. The Assessment Year 2007-08 is a third year in which deduction u/s.80IC have been claimed in the return of income. Even in the impugned assessment year the Assessing Officer has comp....

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....0(a)(ia) will go to enhance the profits of the eligible business u/s.80IC, because such a disallowance is directly related to the manufacturing and business activity of the appellant. In support of her contention reliance was placed on following decisions :- (i) S. B. Builders & Developers v. ITO (2011) 50 DTR (Mumbai)(Tribunal) 299. (ii) M/s. Jitsan Enterprises v. ITO passed by ITA Ahmedabad Bench in ITA No.1652/Ahd/2009 vide order dated 13.04.2010 (iii) CIT vs. Allied Industries (2010) 31 (I) ITCL 222 (HP-HC) (iv) Rajkumar Exports (P) Ltd. v. Asstt. CIT (2009) 30 (II) ITCL 474 (Chen-Tribunal) 4. On the other hand, the learned DR relied upon the findings of the Assessing Officer and the learned CIT(Ap....

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....f the assessee from the eligible business. This preposition of law is now squarely covered by the decision of the ITAT, Mumbai 'E' Bench in the case of S.B. Builders & Developers v. ITO (supra) wherein it was observed and held as under : "Held : Under section 80AB the income that is derived from the eligible business must be computed in accordance with the provisions of sections 30 to 43D, as provided in section 29. Section 29 provides that the income chargeable to tax under the head "profits and gains of business" "shall be computed in accordance with the provisions contained in sections 30 to 43D". Unquestionably, section 40(a)(ia) is a section falling between sections 30 to 43D and therefore effect must be given to the same in c....

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....this Act....". The section would have been differently worded if the contention of the Revenue is to be accepted. One would be ignoring the mandate of s.80AB r/w s. 29 it one accepts the stand of the Revenue. There is no authority given by these sections to ignore the effect of s.40(a)(ia). Those sections do not say that the assessee will be allowed all the deductions from the profits, but when it comes to disallowing certain claims to expenditure somehow, those provisions will have to be ignored. While giving effect to the computation provisions contained in ss. 30 to 43D one should not be bogged down by the theory that the disallowed expenditure cannot be considered as profits "derived" from the housing project or as "operational profits"....