ASST CIT 15(1)(2), MUMBAI vs. CREDIT SUSSE BUSINESS ANALYTICS (I) P.LTD, MUMBAI

On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in holding that the assessee is entitled to claim deduction u/s 10A on the additions/disallowances made u/s 40(a) (ia) of the Income Tax Act.”

Before us, the Ld. DR relying on the assessment order submitted that the Ld. CIT(A) wrongly allowed the deduction claimed by the assessee, therefore the impugned order is liable to be dismissed.

On the other hand the Ld. Counsel for the assessee submitted that the assessee’s case is covered by the decision of Hon’ble Jurisdictional High Court passed in CIT vs. Gem Plus Jewellery India Ltd. (2011) 330 ITR 175(Bom) and the decision of Hyderabad Bench of the ITAT rendered in for the A.Y. 2007-08 and cross appeal ITA No. 2040/Hyd/2011. The Ld. counsel further submitted that since Ld. CIT(A) has passed the impugned order in accordance with the law laid down by the Hon’ble Jurisdictional High Court in CIT vs. Gem Plus Jewellery Ltd. (supra),

We have heard the rival submissions and also perused the material placed on record including the decisions relied upon by the parties. The Ld. CIT(A) has decided this ground of appeal holding as under:-

By reason of the judgment of the Supreme Court in CIT v. Alom Extrusions Limited [2009] 319 ITR 306 the employer's contribution was liable to be allowed, since it was deposited by the due date for the filing of the return. The peculiar position, however, as it obtains in the present case arises out of the fact that the disallowance which was effected by the Assessing Officer has not, the court is informed, been challenged by the assessee. As a matter of fact the question of law which is formulated by the Revenue proceeds on the basis that the assessed income was enhanced due to the disallowance of the employer's as well as the employees contribution towards provident fund/ESIC and the only question which is can-vassed on behalf of the Revenue is whether on that basis the Tribunal was justified in directing the Assessing Officer to grant the exemption under section 10A. On this position, in the present case it cannot be disputed that the net consequence of the disallowance of the employer's and the employees' contribution is that the business profits have to that extent been enhanced. There was, as we have already noted, an add back by the Assessing Officer to the income. All profits of the unit of the assessee have been derived from manufacturing activity. The salaries paid by the assessee, it has not been disputed, relate to the manufacturing activity. The disallowance of the provident fund/ESIC payments has been made because of the statutory provisions-section 43B in the case of the employer's contribution and section 36(v) read with section 2(24) (x) in the case of the employees' contribution which has been deemed to be the income of the assessee. The plain consequence of the disallowance and the add back that has been made by the Assessing Officer is an increase in the business profits of the assessee. The contention of the Revenue that in computing the deduction under section 10A the addition made on account of the disallowance of the provident fund/ESIC payments ought to be ignored cannot be accepted. No statutory provision to that effect

We also notice that the ITAT Hyderabad Bench has decided the similar issue in favour of the assessee in the case of and cross appeal (supra). 2007-08. We find that the Ld. CIT(A) has passed the impugned order in accordance with the law laid down by the Hon’ble Jurisdictional High Court in CIT vs. Gem Plus Jewellery India Ltd. (supra). Hence, we do not find any infirmity in the impugned order passed by the Ld. CIT(A) to interfere with the same. We therefore, uphold the order passed by the Ld. CIT(A) and dismiss the sole ground of appeal of the revenue.

In the result, appeal filed by the revenue for assessment year 2011-2012 is dismissed.