2011 (10) TMI 611 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to deduction under sec. 80HHC of the Act for Duty Entitlement Pass Book (DEPB) receipts/income, validity of proceedings initiated u/s 147 of the Act, deduction under sec. 80HHC on interest income, disallowance of gratuity expenses, addition on account of cessation of liability of creditors, and disallowance of foreign travelling expenses.

Deduction under sec. 80HHC for DEPB receipts/income:
The assessee claimed deduction under sec. 80HHC for DEPB receipts, but the AO reduced the deduction after invoking provisions of sec. 80HHC as amended by the Taxation Laws (Amendment) Act, 2005. The CIT(A) confirmed the AO's action based on the turnover exceeding Rs. 10 crores and other conditions. The Tribunal rejected the grounds raised by the assessee, deciding in favor of the revenue.

Validity of proceedings u/s 147 and deduction under sec. 80HHC on interest income:
The ground challenging the validity of proceedings initiated u/s 147 was rejected as not pressed by the assessee. Similarly, the claim of deduction under sec. 80HHC on interest income was not pressed and stood rejected.

Disallowance of gratuity expenses:
The AO disallowed provision for gratuity expenses under sec. 43B as not actually paid during the year. The CIT(A) upheld the disallowance, but the Tribunal found the issue needing further examination and verification by the AO, restoring the matter for fresh adjudication.

Cessation of liability of creditors and foreign travelling expenses:
The AO treated outstanding liability as income, but the Tribunal deleted the addition as there was no evidence of the liability ceasing. Regarding foreign travelling expenses, the AO disallowed a lump sum amount due to lack of supporting bills. The CIT(A) sustained a disallowance, attributing 5% to personal expenditure. The Tribunal reduced the disallowance to Rs. 1,00,000 considering the lack of details and proportion to turnover.

In conclusion, the appeal for the Assessment Year 2000-01 was dismissed, while for the Assessment Year 2004-05, it was partly allowed.