2002 (8) TMI 850 - AT - Income Tax

Issues Involved:

1. Addition to closing stock on account of MODVAT credit.
2. Disallowance of rural development expenses.
3. Disallowance of rent paid for guest-house.
4. Disallowance of expenditure on presentation articles.
5. Disallowance of entertainment expenditure on employees.
6. Disallowance of project expenses written off.
7. Disallowance of expenditure pertaining to the previous assessment year.
8. Disallowance of investment allowance on data processing equipment.
9. Inclusion of excise duty and sales tax in total turnover for computing deduction u/s 80HHC.
10. Apportionment of expenditure towards dividend income for deduction u/s 80M.
11. Exclusion of 'other income' from profits for computing deduction u/s 80HH.
12. Deduction of losses of specific units from profits of other units for computing deduction u/s 80HH.
13. Deduction u/s 80HH before deducting investment allowance and higher depreciation.
14. Deduction u/s 80-I for a specific unit.
15. Exclusion of 'other income' from profits for computing deduction u/s 80-I.
16. Deduction u/s 80-I before deducting investment allowance and higher depreciation.
17. Grant of interest u/s 244A on refund.
18. Deduction of expenditure pertaining to a previous assessment year.

Summary:

1. Addition to Closing Stock on Account of MODVAT Credit:
The ground was not pressed during the hearing and was accordingly dismissed.

2. Disallowance of Rural Development Expenses:
The CIT(A) upheld the disallowance of Rs. 2,15,000 for rural development expenses, citing the withdrawal of s. 35CC. However, the Tribunal allowed the deduction u/s 37(1), noting the expenses had a direct nexus with the business purpose of the assessee.

3. Disallowance of Rent Paid for Guest-House:
The Tribunal dismissed the ground, aligning with previous decisions that such expenses are not deductible under s. 37(4).

4. Disallowance of Expenditure on Presentation Articles:
The Tribunal allowed the ground, referencing past decisions in the assessee's favor and the Bombay High Court's ruling in CIT vs. Allana Sons Pvt. Ltd.

5. Disallowance of Entertainment Expenditure on Employees:
The Tribunal directed the AO to allow 1/3rd of the expenditure as incurred on employees, following previous Tribunal orders and High Court judgments.

6. Disallowance of Project Expenses Written Off:
The Tribunal allowed the deduction of Rs. 33,19,600, recognizing the projects as extensions of existing business and thus constituting a revenue loss.

7. Disallowance of Expenditure Pertaining to Previous Assessment Year:
The ground was not pressed during the hearing and was accordingly dismissed.

8. Disallowance of Investment Allowance on Data Processing Equipment:
The Tribunal allowed the ground, consistent with previous Tribunal orders in the assessee's favor.

9. Inclusion of Excise Duty and Sales Tax in Total Turnover for Computing Deduction u/s 80HHC:
The Tribunal ruled in favor of the assessee regarding excise duty and sales tax, citing the Bombay High Court decision in CIT vs. Sudarshan Chemicals Inds. Ltd. The issue of 'other income' was remanded to the AO for re-adjudication.

10. Apportionment of Expenditure Towards Dividend Income for Deduction u/s 80M:
The ground was not pressed during the hearing and was accordingly dismissed.

11. Exclusion of 'Other Income' from Profits for Computing Deduction u/s 80HH:
The Tribunal ruled in favor of the assessee, following previous Tribunal orders.

12. Deduction of Losses of Specific Units from Profits of Other Units for Computing Deduction u/s 80HH:
The Tribunal ruled in favor of the assessee, consistent with previous Tribunal decisions.

13. Deduction u/s 80HH Before Deducting Investment Allowance and Higher Depreciation:
The Tribunal decided this issue in favor of the Revenue, following its previous decision.

14. Deduction u/s 80-I for a Specific Unit:
The Tribunal dismissed the ground on technical grounds due to the loss in the current year, despite recognizing the unit's eligibility for deduction.

15. Exclusion of 'Other Income' from Profits for Computing Deduction u/s 80-I:
The Tribunal ruled in favor of the assessee, following consistent past decisions.

16. Deduction u/s 80-I Before Deducting Investment Allowance and Higher Depreciation:
The Tribunal dismissed the ground, following its previous decision against the assessee.

17. Grant of Interest u/s 244A on Refund:
The ground was not

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