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M/s Bora Agro Foods Versus Addl. Commissioner of Income Tax

Disallowance u/s 40(a)(ia) - since no additional taxes on the disallowance in question were paid by the assessee in the preceding assessment year, the assessee cannot be allowed to reduce its tax burden by claiming deduction of the said amount against taxable income of the current year by utilizing the proviso to section 40(a)(ia) as per revenue - Held that:- Ostensibly, the present claim of the assessee in the current assessment year is for deduction of ₹ 70,35,997/- in terms of the provi .....

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ion because there is no multiple deductions claimed by the assessee qua the impugned amount in the assessment year under consideration i.e. 2010-11. Therefore, we find that there is no relevance of section 80A(4) of the Act in order to test the efficacy of the claim for deduction of ₹ 70,35,997/- made by the assessee on the strength of the proviso to section 40(a)(ia) of the Act. Thus, this stand of the Revenue is liable to be rejected. - Decided in favour of assessee. - ITA No.1882/PN/201 .....

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this appeal, the only grievance of the assessee is against the action of the income-tax authorities in denying deduction for a sum of ₹ 70,35,997/-. 3. In brief, the relevant facts are as follows. The appellant is a company incorporated under the provisions of the Companies Act, 1956 and is, interalia, engaged in the business of manufacture and export of Hulled sesame seeds and dealing in spices. The Assessing Officer noticed that in the return of income, assessee had claimed deduction of .....

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h expenditure was not allowable while computing income chargeable under the profits and gains of business for assessment year 2009-10. However, in terms of the proviso to section 40(a)(ia) of the Act which prescribed that where such tax has been deposited to the credit of the Central Government in the subsequent year, such sum shall be allowed as a deduction in computing the income of the subsequent year in which such tax has been paid; assessee contended that in the previous year relevant to th .....

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matrix but he has denied assessee s claim for deduction of ₹ 70,35,997/- in the year under consideration. The reasons advanced by the Assessing Officer was that though the assessee added back ₹ 70,35,997/- to its income in the preceding assessment year 2009-10 but the entire income of the assessee (inclusive of such add back) was allowed a deduction in terms of section 10B of the Act. In so far as the current assessment year is concerned, there is no claim for deduction u/s 10B of th .....

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see is that having regard to the provisions of section 40(a)(ia) of the Act, if the assessee does not pay the TDS deducted on an expenditure, then such expenditure is not allowable as a deduction while computing the income. Following the aforesaid, the disallowance of impugned expenditure was made in assessment year 2009-10. Furthermore, in the current assessment year following the provisions of section 40(a)(ia) of the Act, such expenditure was liable to be allowed since the requisite TDS has b .....

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it is contended that the said claim of the assessee be allowed. 5. On the other hand, the Ld. Departmental Representative appearing for the Revenue has contended that since no additional taxes on the disallowance in question were paid by the assessee in the preceding assessment year, the assessee cannot be allowed to reduce its tax burden by claiming deduction of the said amount against taxable income of the current year by utilizing the proviso to section 40(a)(ia) of the Act. The Ld. Departme .....

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Finance (No.2) Act, 2009, The newly inserted sub-section (4) in section 80A provides that notwithstanding anything to the contrary contained in Sec 10A or sec 10AA or sec 10B or Sec 10BA or in any provisions of Chapter VI-A under the heading. "C-Deductions in respect of certain incomes", where, In the case of an assessee, any amount of profits and gains of an undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction under any of those provisions for a .....

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ss. 2. Such deduction is allowed under any of the specified section including sec 10B for any of the assessment year then the following consequences will follow that deduction in respect of and to the extent of such profits and gains shall not be allowed under any other provisions of the Act for such assessment year. The above amendment has been brought about to curb the claim of multiple deduction by the assessee, though sec 80IA(a) also controls double deduction. These sections are overlapping .....

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claim made by the appellant is liable to be rejected. 6. We have carefully considered the rival submissions. Section 40(a)(ia) of the Act prescribes that in respect of certain expenditure specified therein on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or, after deduction, has not been paid within the period prescribed therein then such expenditure shall not be allowed as a deduction while computing the income chargeable under the head profits and g .....

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s concerned, assessee had defaulted in terms of section 40(a)(ia) of the Act and in computing the income chargeable under the profits and gains of business it added back the sum of ₹ 70,35,997/- which represented freight charges. On the strength of the proviso to section 40(a)(ia) of the Act in the current assessment year i.e. assessment year 2010-11, the case setup by the assessee is that such sum be allowed as a deduction in computing the income because the same has been paid during the .....

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it was allowed deduction u/s 10B of the Act. Because of the allowance of deduction u/s 10B of the Act in assessment year 2009-10, the case of the Revenue is that the impugned sum cannot be allowed as a deduction in the current assessment year on an application of the proviso to section 40(a)(ia) of the Act. According to the Revenue, it would result in a double benefit to the assessee. Apart therefrom, reliance has been placed on section 80A(4) to support the denial of assessee s claim. The prov .....

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spect of, and to the extent of, such profits and gains shall not be allowed under any other provisions of this Act for such assessment year and shall in no case exceed the profits and gains of such undertaking or unit or enterprise or eligible business, as the case may be. 7. Section 80A(4) of the Act prescribes that where in the case of an assessee any amount of profits and gains of undertaking or unit or enterprise or eligible business is claimed and allowed as a deduction u/s 10A or section 1 .....

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inance (No.2) Act, 2009 w.r.e.f. 01.04.2003. A perusal of the aforesaid provision would reveal that the purpose of its introduction is to prevent an assessee from claiming multiple deductions for the same profits. Notably, the deductions referred to therein are those contained in section 10A or section 10AA or section 10B or section 10BA or under any provisions of Chapter VI-A under the heading CDeductions in respect of certain incomes . It is also pertinent to note that the said section seeks t .....

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levant, which is reported at 314 ITR 57 (statutes) especially at page 199, and reads as under :- Amendment in Chapter VIA to prevent abuse of tax incentives The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the taxpayers, at times, claim multiple deductions for the same profits. With a view to preventing such misuse, it is proposed to amend the provisions of section 80A of the .....

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various provisions referred to in (i) above, shall not exceed the profits and gains of the undertaking or unit or enterprise or eligible business, as the case may be; [underlined for emphasis by us] 8. Ostensibly, the present claim of the assessee in the current assessment year is for deduction of ₹ 70,35,997/- in terms of the proviso to section 40(a)(ia) of the Act. There is no claim under any of the provisions covered in section 80A(4) of the Act. Therefore, invoking section 80A(4) of th .....

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we find that there is no relevance of section 80A(4) of the Act in order to test the efficacy of the claim for deduction of ₹ 70,35,997/- made by the assessee on the strength of the proviso to section 40(a)(ia) of the Act. Thus, this stand of the Revenue is liable to be rejected. 9. Now, we may take-up the other plea of the Revenue to the effect that the assessee would derive double benefit if the claim was allowed because in the earlier year such income has not suffered tax on account of .....

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High Court was relating to the liability for additional income tax on payment of excess dividends . Actually, assessee was found to have paid excess dividend, so however, it resisted the liability to additional income tax on the ground that it had no taxable income otherwise. The Hon ble High Court held that the claim of the Revenue was unsustainable, and in coming to such conclusion, the Hon ble High Court made the following observations, as appearing in the Head notes :- It is a condition prec .....

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