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2018 (11) TMI 1240 - AT - Income TaxNon-granting of deduction u/s 80IC - enhancement of income due to certain additions/disallowances made in the assessment order - Held that:- It is evident from the nature of additions made by the AO, which led to the reduction in the amount of deduction u/s 80IC, that the same are on account of business transactions. First disallowance is u/s 40(a)(ia) on account of the failure of the assessee to deduct tax at source on business expenses incurred. Second disallowance is at 20% of the purchases made by the assessee for want of availability of complete vouchers and there are other two disallowances u/s 43B of the Act. To sum up, these additions made by the Assessing Officer relate to the business activity of the eligible unit for which the assessee is entitled to deduction u/s 80IC of the Act. The Assessing Officer has also not disputed the otherwise availability of deduction to the assessee. CBDT Circular No.37/2016 dated 02.11.2016 issued in the context of deductions under Chapter VI-A on enhanced profits says that f there is an enhancement of income because of such disallowances, the deductions under Chapter VIA should be granted on the enhanced income. It has been clearly spelt out in para 4 of the Circular that not only the fresh appeals be not filed on such issue, but the appeals already filed in Courts/Tribunals should be withdrawn or not pressed. To put it simply, the Department has accepted the position that enhancement of income due to the above additions/disallowances should be coupled with the proportionately increased amount of deductions under Chapter VI-A of the Act. Since all the disallowances/additions made in the assessment order resulting in the enhancement of income fall within the nature of disallowances mentioned in the Circular, we hold that the assessee should be allowed deduction u/s 80IC at the enhanced amount of income resulting from such disallowances etc.
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