Income Tax Appellate Tribunal - Mumbai
Protech Engineering Industries Pvt. ... vs Dcit, Cit- 3(2), Mumbai on 17 May, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
"F" BENCH, MUMBAI
BEFORE SHRI D.T GARASIA, JUDICIAL MEMBER AND
SHRI MANJUNATHA G, ACCOUNTANT MEMBER
ITA no.3779/Mum./2015
(Assessment Year: 2010-11)
Protech Engineering Industries Pvt. Ltd.
C/o. G.P. Mehta & Co. CAS, 807, Tulsiani
Chambers, 212, Nariman Point, ................ Appellant
Mumbai 400021
PAN AAACP7376B
v/s
DCIT, Circle 3(2)
6th Floor, Aayakar Bhavan ................ Respondent
Mumbai 400020
Assessee by : Shri. G.P. Mehta
Revenue by : M.s. Pooja Swaroop
Date of Hearing -17.05.2017 Date of Order -14.06.2017
ORDER
PER: MANJUNATHA G. This appeal filed by the assessee is directed against order of the CIT(A)-8, Mumbai dated 27.03.2015 and it pertains to the assessment year 2010-11.
Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015
2. The brief facts of the case are that the assessee is a company engaged in the business of manufacture of bulk rolls aluminium foil, printing thereon, filed its return of income for the assessment year 2010-11 on 01.10.2010 declaring total income of Rs.43,62,074/-. The case was selected for scrutiny and accordingly, notice u/s. 143(2) was issued. In response to notice, the authorised representative to the assessee appeared from time to time and furnished relevant details as called for. The A.O completed assessment u/s. 143(3) on 21.02.2013, determining the total income of Rs.69,55,610/-, inter alia making additions towards disallowance of expenditure u/s. 40(a)(ia) of the Act, disallowance of unpaid bonus u/s. 43B and disallowances of proportionate expenses of Baddi unit.
3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has filed written submissions. The CIT(A) for the detailed discussion in his order dated 21.02.2013, partly allowed appeal filed by the assessee, wherein deleted additions made by the A.O towards disallowance of expenditure u/s.40(a)(ia) and disallowance of proportionate expenditure of Baddi unit, however confirmed additions made towards disallowance of unpaid bonus u/s. 43B of the Act. The CIT(A), further, rejected the claim of the assessee for deduction 2 Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015 towards enhanced profits u/s. 80IC of the Act. Aggrieved by the CIT(A) order, the assessee is in appeal before us.
4. The Ld. A.R for the assessee, submitted that the Ld. CIT(A) was erred in confirming the additions made by the A.O towards disallowance of unpaid bonus u/s. 43B of the Act, and also rejection of deduction claimed u/s. 80IC of the Act, towards enhanced profits of the eligible unit. The Ld. A.R further submitted that once disallowance is made towards any expenditure, the profit of the assessee would increase which is eligible for deduction u/s. 80IC of the Act. In this regard, relied upon the decision of Hon'ble High Court of Bombay, in the case of CIT vs. Sunil Vishwambharnath Tiwari (2015) 63 Taxmann.com 241 (BOM) and also CBDT circular no. 37 of 2016 dated 2nd Nov, 2016. On the other hand, the Ld. D.R strongly supported order of the CIT(A).
5. We have heard both the parties and perused the materials available on record. The A.O disallowed unpaid bonus u/s. 43B of the Act, and also denied deduction claimed u/s. 80IC of the Act, for enhanced profits, on the ground that the legal fiction created by virtue of Section 43B, cannot be extended to determine the profit of the business for the purpose of computing deduction u/s. 80IC of the Act. It is the contention of the assessee that enhanced profit on 3 Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015 account of any disallowance of expenditure u/s. 32, 40(a)(ia), 40A(3), 43B etc., is eligible for deduction provided, under chapter VI-A. We find force in the arguments of the assessee, for the reason that the Hon'ble High Court of Bombay, in the case of CIT vs. Sunil Vishwambharnath Tiwari (Supra), has observed that where assessing officer had disallowed certain expenditure u/s. 40(a)(ia) of the Act, and added back same to total income of the assessee, deduction u/s. 80IB(10) claimed by assessee needed to be allowed on entire gross total income of the assessee. We further observed that the CBDT vide its circular no. 37 of 2016 dated 2nd Nov, 2016 clarified that the disallowances made u/s. 32, 40(a)(ia), 40A(3), 43B etc., of the Act, and other specific disallowances, related to the business activity against which chapter VI-A deduction has been claimed, result in enhancement of the profits of eligible business, and that deduction under chapter VI-A is admissible on the profits so enhanced by the disallowance. Therefore, in view of the decision of the Hon'ble High Court of Bombay, in the case of CIT vs. Sunil Vishwambharnath Tiwari (supra) and also circular of the CBDT, the legal position stands clear that where any disallowances made towards certain expenditure u/s. 32, 40(a)(ia), 40A(3), 43B etc., of the Act, related to the business activity against which chapter VI-A deduction has been claimed, then the enhanced profit on account of 4 Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015 disallowance of any expenditure is admissible for deduction under chapter VI-A of the Act and hence, the assessee is eligible for deduction towards enhanced profits u/s. 80IC of the Act. Therefore, we direct the A.O, to allow deduction towards enhanced profits u/s. 80IC of the Act, on account of disallowance of unpaid bonus u/s. 43B of the Act.
6. In the result, appeal filled by the assessee is allowed.
Order pronounced in the Open Court on 14.06.2017
Sd/- Sd/-
D.T. GARASIA MANJUNATHA G
JUDICIAL MEMBER ACCOUNTANT MEMBER
MUMBAI, DATED: 14.06.2017
Copy of the order forwarded to:
(1) The Assessee;
(2) The Revenue;
(3) The CIT(A);
(4) The CIT, Mumbai City concerned;
(5) The DR, ITAT, Mumbai;
(6) Guard file.
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Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015 By Order Nishant Verma Sr. Private Secretary (Dy./Asstt.Registrar) ITAT, Mumbai 6 Protech Engineering Industries Pvt. Ltd.
ITA no.3779/Mum./2015 7