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2018 (9) TMI 1791 - ITAT DELHIBenefit of deduction u/s 80IC as allowable on profits enhanced by the disallowance made u/s 32 - enhancement of the profits of the eligible business - Held that:- Bare perusal of the operative part of the Circular No.37/2016 dated 02.11.2016 issued by the CBDT goes to prove that disallowance made by the assessee u/s 32 relating to business activity against which deductions have been claimed under Chapter VI-A, as in the instant case, results in enhancement of the profits of the eligible business and that deduction under Chapter VI-A is admissible on profits so enhanced by the disallowance. The claim of depreciation made by the assessee company is allowable deduction and as such, the benefit of deduction u/s 80IC is allowable on profits enhanced by the disallowance made u/s 32 and in these circumstances, the claim of depreciation is revenue neutral. So far as question of treating the refund of excise duty as part of the cost is concerned, it is the case of the assessee that the entire cost has been paid by the assessee for plant & machinery and as such, it cannot be reduced from the cost of asset. Assessee relied upon order passed by CIT (A) dated 15.07.2016 in assessee’s own case for AYs 2012-13 & 2013-14 wherein excise duty refund has not been treated in the form of capital subsidy or grant which can be reduced from the cost of assets. Since findings returned by the CIT (A) are based upon the decision rendered in CIT vs. Meghalaya Steels Ltd. (2016 (3) TMI 375 - SUPREME COURT) we are of the considered view that the excise refund is in the nature of revenue receipt forming part of profits and gains arising from the business and as such cannot be reduced from the cost of plant & machinery. So, the findings returned by CIT (A) on this issue are confirmed. AO as well as CIT (A) have erred in making addition by disallowing the claim of depreciation of the asset made u/s 32 which would further entitle to the assessee the benefit of deduction u/s 80IC on profits enhanced by such disallowances made u/s 32 of the Act. Consequently, appeal filed by the assessee is partly allowed.
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