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2010 (10) TMI 772 - AT - Income TaxDepreciation - AO found that assessee has claimed depreciation of Rs. 12,79,784/- while computing profits for deduction under section 80IB whereas according to the AO such amount works out to Rs. 9,34,071 - Section 80IA contains both substantive and procedural provisions for computing such special deduction and any device adopted to reduce or inflate the profits of eligible business has to be rejected - The claim of higher depreciation or lower depreciation may not ultimately affect the tax liability of the assessee as whatever profit is derived after deducting depreciation would be eligible for 100% deduction under section 80IB - Therefore, such finally assessed income could not be disturbed by considering notionally allowable depreciation and then work out WDV for the current year - Decided against the assessee Deduction u/s 80IA - According to the AO, majority of the expenditure written off are of capital in nature - In other words any tax under section 41(1) will not be eligible for deduction under section 80IA - If such deduction was claimed and allowed in any earlier year then clearly there was reduction of profit in those earlier years and once the creditors remit the liability or liability ceased to exist and assessee declared it as part of the profit then nexus of such profit written back with the industrial undertaking is not severed - The deduction under section 80IA or 80IB is available on profits and gains computed in accordance with section 20A- 43D which includes section 41(1) also - Accordingly this ground of assessee is allowed for statistical purposes The ld. AO disallowed the claim of sum of Rs. 3,10,000/- by holding that it is not derived from business or industrial undertaking - Thus like interest receipt of FDR insurance claims also cannot be said to be derived from business of industrial undertaking and thus they are not eligible for deduction under section 80IA - In the result, appeal filed by the assessee is partly allowed but for statistical purposes
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