TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 232
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....has erred on facts and in law in confirming the addition of Rs. 15,092/-, being 2% of Rs. 7,54,587/- on account of alleged commission paid for obtaining the accommodation entry. 5. The Ld. CIT(A) has erred on facts and in law in not accepting the contention of assessee to recomputed the deduction u/s 10AA after considering the trading addition of Rs. 2,03,739/- ignoring the CBDT Circular No. 37/2016 dt. 02/11/2016." 2. Briefly stated, the facts of the case are that the assessee firm is engaged in the business of manufacturing and export of gold, silver and base material jewellery plain & studded with precious & semi precious stones. It has set up its manufacturing and export unit/factory in Special Economic Zone at Sitapura Industrial Area, Jaipur and has started commercial production from 21.04.2008 and has claimed deduction u/s 10AA of the Act. The assessee originally filed its return of income on 20.09.2013 at 90,220/- after claiming deduction u/s 10AA at Rs. 7,21,35,825/-. The assessment was completed u/s 143(3) on 27.01.2016 wherein the returned income was accepted by the Assessing Officer. Subsequently, basis the information obtained from Investigation wing, Mumbai that th....
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....a disallowances pertaining to Sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter- VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non deduction of TDS under law, such disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction under section 80- IB of the Act. This view was tak....
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....er section 10B relying on the aforesaid CBDT Circular has taken a similar view and it would be relevant to refer to the findings of the Co-ordinate Bench which read as under:- "7. We have heard the rival contentions and also perused the material available on record including the afore-stated CBDT circular. We have observed that the assessee is registered as a 100% export oriented unit under the Software Technology Park of India Scheme and the assessee is engaged in the business of provision of information technology enabled services and other back office support services. It is also an undisputed and admitted position between both the parties that the assessee is entitled for deduction u/s. 10B of the Act and the profits of the assessee are exempt from payment of taxes u/s. 10B of the Act. We have observed that the assessee has undertaken total turnover of Rs. 32,76,00,596/- which is also export turnover of the assessee and the assessee has claimed deduction u/s. 10B of the Act of Rs. 7,60,34,821/-. Additions have been proposed u/s. 40(a)(i) of the Act at Rs. 1,49,73,455/- by the AO vide draft assessment order, the details of which are as under:- Sl. No. Name of the party Am....
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.... have been raised as to whether such higher profits would also result in claim for a higher profit-linked deduction under Chapter VI-A. 2. The issue of the claim of higher deduction on the enhanced profits has been a contentious one. However, the courts have generally held that if the expenditure disallowed is related to the business activity against which the Chapter VI-A deduction has been claimed, the deduction needs to be allowed on the enhanced profits. Some illustrative cases upholding this view are as follows: (i) If an expenditure incurred by assessee for the purpose of developing a housing project was not allowable on account of non-deduction of TDS under law, such (ii) If deduction under section 40A(3) of the Act is not allowed, the same would have to be added to the profits of the undertaking on which the assessee would be entitled for deduction under section 80-IB of the Act. This view was taken by the court in the following case: disallowance would ultimately increase assessee's profits from business of developing housing project. The ultimate profits of assessee after adjusting disallowance under section 40(a)(ia) of the Act would qualify for deduction und....
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....owed keeping in view the spirit of afore-stated CBDT circular as the deduction u/s. 10 B of the Act is also profit linked deduction. Similarly, it is stated in the circular about disallowance u/s. 40(a)(i) of the Act which is succeeded by the word 'etc' wherein the circular has stated as under: "In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act." The use of the word 'etc.' clearly denotes that it will apply to similarly placed disallowances and disallowance u/s. 40(a)(i) of the Act is also disallowance due to non-deduction of withholding tax as is contemplated by Section 40(a)(ia) of the Act. Hence the CBDT circular will be applicable to deductions u/s. 10B of the Act as well to disallowance u/s. 40(a)(ia) of the Act as well. Hence the appeal of the Revenue is not sustainable/maintainable in view of afore-stated CBDT circular dated 02-11-2016 and we dismiss the appeal filed by the Revenue, while the C.O. filed by the assessee is allowed as the additions of Rs. 1,35,556/- made by the AO are w.r.t. disallowance u/s....