2008 (11) TMI 430 - AT - Income Tax

Issues Involved:
1. General ground of appeal.
2. Disallowance u/s 14A towards investments in shares.
3. Deduction u/s 33AC on interest amount.
4. Non-pressed ground.
5. Disallowance of bare boat charter hire charges.
6. Depreciation of ship "Nand Neeti" and hire charges as revenue expenditure.
7. Depreciation on capitalization of foreign exchange fluctuation.
8. Allowance of lease rental.
9. Deduction u/s 33AC on revised reserve.
10. Deductibility of expenses on non-convertible debentures.

Summary:

1. General Ground of Appeal:
The learned counsel for the assessee stated that ground No. 1 of its appeal was general and does not require any adjudication. Therefore, it was dismissed.

2. Disallowance u/s 14A towards Investments in Shares:
The second ground is against the confirmation of disallowance of Rs. 7,91,71,243 made by the Assessing Officer u/s 14A towards investments in shares. The Tribunal set aside the impugned order and directed the Assessing Officer to decide this issue afresh in accordance with the view taken by the Special Bench in the case of Daga Capital Management (P.) Ltd. and the order passed in the assessee's own case.

3. Deduction u/s 33AC on Interest Amount:
Ground No. 3 of the assessee's appeal is against not allowing of deduction u/s 33AC on the interest amount of Rs. 2,10,79,785. The Tribunal dismissed this ground following the view taken in the assessee's own case in previous assessment years.

4. Non-pressed Ground:
Ground No. 4 was not pressed by the learned Counsel for the assessee and was dismissed.

5. Disallowance of Bare Boat Charter Hire Charges:
Ground No. 5 is against the confirmation of disallowance of Rs. 22,24,314 of bare boat charter hire charges. The Tribunal held that the assessee's working of arm's length price as per CUP Method does not merit acceptance. The cost plus method was accepted by the authorities for the determination of the arm's length price. The Tribunal held that the learned CIT(A) was not justified in reducing US Dollars 274 per day from the lease rental by taking it as provision for dividend instead of the normal gross profit mark-up.

6. Depreciation of Ship "Nand Neeti" and Hire Charges as Revenue Expenditure:
The first ground of the Revenue's appeal is towards allowance of depreciation of ship "Nand Neeti" and also hire charges amounting to Rs. 1,82,55,527 as revenue expenditure. The Tribunal upheld the impugned order and dismissed this ground of appeal.

7. Depreciation on Capitalization of Foreign Exchange Fluctuation:
Ground No. 2 is against the allowance of depreciation on capitalization of foreign exchange fluctuation in respect of foreign currency loans taken for acquisition. The Tribunal decided this issue in favour of the assessee following the earlier years' decisions.

8. Allowance of Lease Rental:
Ground No. 3 is against the allowing of lease rental. The Tribunal upheld the learned CIT(A)'s decision to accept the assessee's claim based on the past practice and dismissed the revenue's ground.

9. Deduction u/s 33AC on Revised Reserve:
Ground No. 4 is against the allowance of deduction u/s 33AC on the basis of revised reserve created by reopening the account. The Tribunal approved the impugned order following the decision in the assessee's favour in the earlier assessment year.

10. Deductibility of Expenses on Non-convertible Debentures:
The last effective ground is against the direction given by the learned CIT(A) for allowing expenses of Rs. 31,54,967 incurred on non-convertible debentures as revenue expenses. The Tribunal upheld the impugned order, allowing the expenditure as revenue expenditure.

Conclusion:
In the result, the appeal of the revenue is dismissed and that of the assessee is partly allowed.

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