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TMI Blog2012 (7) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... at the disallowance made u/s 40(a) (ia) was as such never related to the eligibility business and in fact ld. CIT(A) has also not appreciated that the disallowance u/s 40(a)(ia) was made because there was violation on the part of assessee in not complying with the provisions of 194C as contained Chapter XVII-B. 3. That the ld. CIT(A) has erred in law and on facts in not appreciating the contents of section 80IB which provides that the gross total income of an assessee includes any profit and gains derived from eligible business, there shall be allowed in accordance with and subject to provision of this section, in computing the total income, a deduction from such profit and /gains of amount equal to the prescribed percentage etc. Ld. CIT(A) has thus erred in law in holding that disallowance made u/s 40(a)(ia) on account of violations of the provisions of Act was profit and gain derived from conduct of eligible business. 4. While allowing the appeal of the assessee ld. CIT(A) has not considered the definition of the expression "Gross Total Income" as contained in section 80B(5) read with section 80A(1) and has simultaneously not considered the fact that as per section 5, total inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 40(a)(ia) of the Act, did not allow deduction u/s 80 IB(10) of the Act on the enhanced income as a result of aforesaid disallowance, following his own decision for the preceding assessment year. 3. On appeal, the learned CIT(A) allowed the claim in the following terms: "1.2 The matter has been examined. According to the provision of section 80 IB of the Income-tax Act, an assessee is entitled to deduction under that section in respect of its profit from the eligible business, subject to the satisfaction of other conditions mentioned in that section. One of the eligible businesses, as per sub-section (10) of that section is developing and building housing projects approved by local authority before which accrues/arises to the assessee directly from the conduct of the eligible business; whether such profit is shown by the assessee or is discovered by the Assessing Officer in course of the assessment is immaterial. Such profit is calculated by reducing the expenditure directly related to the eligible business form the receipts directly attributable to it. Here, the nature of the receipt and expenditure is important; the quantum thereof is not. There is no disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is thus seen that the disallowance of payment of Rs. 7,23,081/- made by the Assessing Officer has been confirmed by the CIT(A). However, CIT(A) further stated that even if this disallowance made by the AO in terms of section 40(a)(ia) is taken into account, the assessed income of the assessee shall be increased by that amount which will automatically qualify for deduction u/s 80 IB(10) as the assessee has been deriving its income only from the eligible business of construction of flats in respect of which the assessee is entitled to deduction u/s 80 IB(10). In the light of this view taken by the learned CIT(A), it is clear that disallowance of Rs. 7,23,081/- u/s 40(a)(ia) has been upheld by the CIT(A) but, at the same time, he directed the AO to allow deduction u/s 80 IB(10) on this amount if the assessee is entitled to deduction u/s 80 IB(10) of the Act. We, therefore, reject this ground of appeal filed by the revenue. Before parting with this issue, it may be observed that the assessee has also not filed any appeal against CIT(A)'s order in holding that disallowance of the payment of Rs. 7,23,081/- in violation of section 40(a)(ia) was called for." 5.1 We f ind that the ITAT, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of the industrial undertaking stands at increased figure and therefore, the assessee will be eligible for deduction of enhanced amount under section 801B of the Act. However, in the subsequent year in which TDS is paid by the assessee, the expenditure will be allowed as deduction from the eligible profits of the subsequent year and thereby the eligible profit of the industrial undertaking will be reduced in the subsequent year and consequently the assessee will be eligible for deduction under section 80IB at the reduced amount only. Thus, there cannot be a double deduction to the assessee. In view of the above, we set aside the orders of the lower authorities and direct the Learned Assessing Officer to allow deduction under section 80IB in respect of entire profit derived from industrial undertaking after taking into consideration the provisions under section 40(a)(ia). Thus, the ground of appeal of the assessee is allowed." 5.2 . Hon'ble Karnataka High Court in the case of CIT Vs.HMT Ltd., 203 ITR 811(Kar) held that for the purposes of sections 80J and 80HH of the Act, profits and gains of new undertakings are not commercial profits but only such profits as are computed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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