TMI Blog2021 (1) TMI 232X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-1, Jaipur dated 23.01.2019 wherein the assessee has taken the following grounds of appeal:- 1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of the order passed u/s 147 of IT. Act, 1961. 2. The Ld. CIT(A) has erred on facts and in law in upholding the rejection of books of accounts u/s 145(3) of IT Act, 1961. 3. The Ld. CIT(A) has erred on facts and in law in upholding the action of AO in treating the purchases of ₹ 7,54,587/- made from M/s Arihant Exports as bogus by not considering the various evidences filed by the assessee. He has further erred in confirming the addition of ₹ 1,88,647/- by disallowing 25% of alleged unverifiable purchases of ₹ 1,88,647/- u/s 69C of IT Act, 1961. 4. The Ld. CIT(A) has erred on facts and in law in confirming the addition of ₹ 15,092/-, being 2% of ₹ 7,54,587/- on account of alleged commission paid for obtaining the accommodation entry. 5. The Ld. CIT(A) has erred on facts and in law in not accepting the contention of assessee to recomputed the deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in favour of the assessee by the decision of the Tribunal in assessee s own case in ITA No. 190 191/JP/2019 for A.Ys 2009- 10 2014-15 dated 04.11.2019 and our reference was drawn to the relevant findings of the Tribunal which are contained at paras 9 to 12 of its order which read as under. 9. We have heard the rival contentions and perused the materials available on record. The limited issue under consideration is whether the Assessing Officer is required to recompute the deduction u/s 10AA after considering the addition of ₹ 2,80,500/- so made by him and in that sense, the addition so made is revenue neutral. In this regard, we refer to the CBDT No. 37/2016 dated 2.11.2016 which reads as under:- Chapter VI-A of the Income-tax Act, 1961 ( the Act ), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such a disallowances pertaining to Sections 32, 40(a)(ia), 40A(3), 43B etc., of the Act. At times disallowance out of specific expenditure claimed may also be made. The effect of such disallowances is an increase in the profits. Doubts have been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in Courts/Tribunals may be withdrawn/not pressed upon. The above may be brought to the notice of all concerned. 10. Though the aforesaid circular has been issued by the CBDT in the context of Chapter VI-A of the Act, the deduction u/s 10AA is equally profit- link deduction though the fall under Chapter III of the Act and the legal position which has been accepted by the CBDT in the aforesaid circular will equally applies to the deductions claimed section 10AA of the Act. In the said circular, the CBDT has accepted the judgment of the various High Courts wherein it has been held that if the expenditure disallowed is related to business activity against which deduction has been claimed, the deduction needs to be allowed on enhanced profit worked out taking into consideration the disallowances so made by the Assessing officer. 11. The Co-ordinate Bench in case of ITO vs. Anthelio Business Technologies Pvt. Ltd. 78 taxmann.com 203 (Mumbai) in context of deduction under section 10B relying on the aforesaid CBDT Circular has taken a similar view and it would be relevant to refer to the findings of the Co-ordinate Bench which read as under:- 7. We have heard the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48,73,455/- are to be allowed, while, with respect to the 4th person Mr. John Blyzinskyj, the payment of ₹ 1,35,556/- without deduction of tax at source had remained unsubstantiated and the ld. DRP confirmed the addition of ₹ 135,556/- by issuing directions u/s. 144C(5) of the Act, which additions were confirmed by the AO in his assessment order dated 17.12.2014 passed u/s. 143(3) of the Act r.w.s. 144C(13) of the Act in pursuance of directions of DRP.. We have observed that the CBDT has issued Circular No. No. 37/2016 dated 2nd November, 2016, which is reproduced below:- SECTION 80-IB, READ WITH SECTIONS 32, 40(a)(ia), 40A(3) 43B, OF THE INCOME-TAX ACT, 1961 - DEDUCTIONS - PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS - CHAPTER VIA DEDUCTIONS ON ENHANCED PROFITS CIRCULAR NO. 37/2016 [F.NO. 279/MISC./140/2015/ITJ], DATED 2-11- 2016 Chapter VI-A of the Income-tax Act, 1961 ( the Act ), provides for deductions in respect of certain incomes. In computing the profits and gains of a business activity, the Assessing Officer may make certain disallowances, such as disallowances pertaining to sections 32, 40( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... henceforth, appeals may not be filed on this ground by officers of the Department and appeals already filed in Courts/Tribunals may be withdrawn/not pressed upon. The above may be brought to the notice of all concerned. The sum, substance and spirit of the afore-stated circular is that the Revenue does not want to continue the litigation with respect to disallowance made by the Revenue u/s. 32,40(a)(ia), 40A(3), 43B etc. of the Act, which ultimately led to increase in profits which are otherwise eligible for profit linked deduction under Chapter VI-A of the Act. The Board has accepted that the disallowance made u/s. 32, 40(a)(ia), 40A(3), 43B etc. of the Act and other disallowance out of specific expenditure related to the business activity may be made by Revenue which led to enhancement of profits against which Chapter -VIA profit linked deductions has been claimed and it is accepted that enhanced profit linked deduction under Chapter VI-A is admissible on the profits so enhanced by the said disallowance made by the Revenue. We find that the Revenue's appeal and the assessee's cross objection are duly covered by the CBDT circular although Section 10B of the Act is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of purchases where are held as non-genuine and disallowed by the Assessing officer relates to the same business activity of manufacture and export in respect of which assessee is held eligible for deduction under section 10AA of the Act. The deduction under section 10AA therefore needs to be allowed on the enhanced profits after taking into consideration the disallowance of ₹ 2,80,500 in light of accepted legal position by the CBDT and following the consistent position taken by the Co-ordinate Benches. The Assessing Officer is therefore directed to recompute the deduction u/s 10AA taking into consideration the addition of ₹ 2,80,500/. In the result, the Ground No. 5 of the assessee s appeal is allowed. 4. Per contra, the ld. DR submitted that the addition have been made u/s 69C which is a deeming provision and the same cannot be considered for benefit u/s 10AA which is restricted to the profit and gains derived from export. It was further submitted that the Circular No. 37/2016 dated 21.01.2016 referred by the AR is in the context of deduction on enhanced profits under chapter VIA whereas in the present case, the assessee has claimed deduction u/s 10AA which falls ..... X X X X Extracts X X X X X X X X Extracts X X X X
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