2010 (1) TMI 1161 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of claim of deduction u/s 80HH, 80-I, and 80-IA.
2. Disallowance of expenditure incurred on horticulture.
3. Disallowance on account of amortizing the cost of land.
4. Disallowance of investment allowance claimed on additional cost of plant & machinery.
5. Disallowance u/s 43B.
6. Addition on account of interest and miscellaneous income.
7. Disallowance of interest expenditure alleged to be pertaining to the prior period.

Summary:

1. Disallowance of claim of deduction u/s 80HH, 80-I, and 80-IA:
The assessee's appeals for AY 1997-98, 1998-99, and 1999-2000 involved common grounds regarding the disallowance of deductions u/s 80HH, 80-I, and 80-IA. The Tribunal had previously restored similar issues to the AO for fresh consideration in earlier assessment years. Following this precedent, the Tribunal restored the matter back to the AO for fresh adjudication.

2. Disallowance of expenditure incurred on horticulture:
The AO had disallowed horticulture expenditure as capital in nature. The Tribunal, following its earlier order for AY 1996-97, restored the issue back to the AO for fresh examination, directing the AO to give due opportunity to the assessee.

3. Disallowance on account of amortizing the cost of land:
The Tribunal confirmed the lower authorities' decision that the cost incurred for land is capital in nature and no depreciation is allowable. Thus, there is no question of allowing amortization of such cost.

4. Disallowance of investment allowance claimed on additional cost of plant & machinery:
The AO declined the claim for investment allowance on additional costs incurred for plant & machinery. The Tribunal, referencing the Hon'ble Supreme Court's decisions in similar cases, restored the matter back to the AO to verify the facts and recompute the eligible amount of investment allowance.

5. Disallowance u/s 43B:
The AO disallowed Rs. 1,70,09,450/- u/s 43B, treating the productivity-linked incentive as bonus. The Tribunal held that such incentive is not covered by u/s 36(1)(ii) and directed the AO to verify the actual date of payment and allow the same if paid before the last date of filing the return.

6. Addition on account of interest and miscellaneous income:
The AO taxed interest and miscellaneous income related to projects under implementation as income from other sources. The Tribunal, applying the Hon'ble Supreme Court's decisions in Bokaro Steels and Karnal Cooperative Sugar Mills, held that such income should reduce the capital work in progress and cannot be assessed as income from other sources.

7. Disallowance of interest expenditure alleged to be pertaining to the prior period:
The AO disallowed Rs. 13,07,71,000/- as prior period interest expenditure. The Tribunal restored the matter back to the AO for fresh consideration, directing the assessee to provide documentary evidence and the AO to verify the assessment particulars for AY 2007-08.

Decision:
The appeals of the assessee for all the years were allowed in part, with directions for fresh adjudication by the AO on several issues. Decision pronounced in the open Court on 22nd January, 2010.