Case Law Details
It is undisputed fact that the appellant is an undertaking and is engaged in the manufacturing of article specified in Fourteenth schedule and in a specified category of states for which it is eligible for deduction u/s.80IC. Such an exemption has been allowed in the earlier years by the Assessing 0fficer himself i.e. for the Assessment Year 2005-06 and 2006-07. Sub-section 3 of section 80IC categorically provides that the deduction would be available for 100% of such profits and gains for 10 assessment years if the profits and gains have been derived from such business activities.
In this case, the disallowance have been made on account of non deduction of TDS on the items which are directly attributable/related to the business of the appellant, which is apparent from the heads of expenses under which these disallowances have been made. Income derived from such eligible business must be computed in accordance with the provisions of section 30 to 43D as has been provided under section 29. Section 40 is a non-obstante clause which places embargo on the allowability of expenses / expenditure from section 30 to 38. Therefore, any disallowance u/s.40(a)(ia) will go to enhance the profit of 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).
Similarly in the case of M/s. Jitsan Enterprises v. ITO (supra), the ITAT after relying on various judgments has held that the assessee would be entitled to deduction u/s.801B on the amount disallowed u/s.40(a)(ia) while working out the eligible profits of the industrial undertaking.
In view of the aforesaid preposition of law and ratio laid down by the various courts, we hold that disallowance of Rs. 7,38,038/- made u/s.40(a)(ia) by the Assessing Officer will go to enhance the profit which would again be eligible for full deduction u/s.801C as it provides for 100% deduction from the profits and gains from the eligible business.
INCOME TAX APPELLATE TRIBUNAL, MUMBAI
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I have been assessed. I have availed benefit u/s 80IC in AY 2007-08. The assessing officer has disallowed the deduction u/s 80c, 80D and 80G , and this has been upheld by the CIT appeal.
I donot find any such provisions in the aact.
Kindly advise.
Thanking You
V.K.Dadoo