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2012 (6) TMI 61 - AT - Income TaxCascading effect of dis-allowance u/s 43B and 40(a)(ia) on deduction u/s 10B - Held that :- It is the well established fact recomputed profits shall be considered for the purpose of computation of deduction u/s 10B. If the assessing Officer recomputes the profit from eligible business by disallowing certain expenditure and liability u/s 40(a) (ia) and 43B, such recomputed profit shall be considered for the purpose of deduction u/s 10B - Decided in favor of assessee. Dis-allowance u/s 40(a)(ia) - Held that:- It is the well established position of law that section 40(a)(ia) has no application where the amount incurred and paid without deduction of TDS. It is applicable only when provision is made in the books of accounts and shown as payable without being deducting TDS. In present case, all the payments are being paid and none of the payments are shown as payable and hence dis-allowances made u/s 40(a)(ia) is deleted - Decided in favor of assessee. Dis-allowance of expenditure towards export business - rejection of books of account, ignoring report of special auditor reporting that there was no discrepancies in the books of accounts maintained - Held that:- When Assessing officer himself got the accounts audited from special auditors u/s 142(2A) then he cannot ignore the audit report submitted by the special auditors. If the special auditor points out any discrepancies with regard to allocation of expenditure and correctness of books of accounts, then it is open to the assessing officer to reject the books of accounts and resort to estimation. Therefore the AO is not correct in re-allocating the common expenditure on the basis of ratio of export turnover to total turnover by rejecting the books of accounts. Dis-allowance of unpaid liability u/s 43B - assessee contended that service tax, and provision for leave encashment which is future liability are not covered within the meaning of any tax or duty u/s 43B - Held that:- Section 43B covers any sum payable by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force. Therefore service tax liability is covered u/s 43B and non -payment of same within the stipulated time attracts dis-allowances. Similarly, Leave encashment is allowed as deduction on payment basis. Therefore, dis-allowance of provision for leave encashment is upheld - Decided against the assessee. Expenditure incurred for increase in authorized capital - capital or revenue expenditure - Held that:- Amount incurred for increase in authorized capital is in the nature of capital expenditure - Decided against the assessee.
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