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2015 (9) TMI 806 - HC - Income TaxEligibility for deduction under section 80IB - additions were made u/s 40(a)(ia) for TDS default - whether ITAT was justified in holding that the disallowance made under section 40(a)(ia) separately is not permissible under the scheme of the Income Tax Act? - Held that:- The fact that TDS was not effected by the respondent assessee, is not in dispute. In view of the scheme of Section 40 of the Act, as TDS is not effected, payment to contractors cannot be deducted, as those expenditure become inadmissible. The expenditures therefore are added back to the income, which is nothing but, eligible income. This income which is eligible for deduction in terms of Section 80IB(10) of the Act, therefore, only increases by said figure of disallowed expenditure. CIT (Appeals) has in this background referred to judgment in case of Shirke Constructions and Equipments Ltd (2000 (7) TMI 40 - BOMBAY High Court), wherein distinction between certain Sections of Chapter VIA, which refer to deduction out of gross total income and other sections of Chapter VIA, which do not make such reference to gross total income, has been explained. CIT (appeals) has correctly pointed out that the deduction allowable under Section 80IB(10) of the Act is with reference to the respondents gross total income. Hence, disallowance under Section 40[a] [ia] cannot be treated separately and it gets added back to the gross total income of the assessee. Section 40 itself points out that due to error of assessee, such expenditure cannot be deducted while computing income chargeable under the head “profit and gains of business or profession”. That is the only limited effect of the lapse on the part of the respondent assessee in the present matter.ITAT has considered these facts and upheld the same. - Decided in favour of assessee.
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