2012 (8) TMI 983 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of provision for costs on completed contracts and provision for loss on incomplete contracts.
2. Withdrawal of credit for TDS.
3. Disallowance of software expenses as capital in nature.
4. Disallowance of deduction u/s 80HHB.
5. Levy of interest u/s 234D.

Summary:

1. Disallowance of Provision for Costs on Completed Contracts and Provision for Loss on Incomplete Contracts:
The assessee contested the disallowance of provisions for costs on completed contracts (Rs. 49,978,935) and loss on incomplete contracts (Rs. 6,216,974), totaling Rs. 56,195,909. The Tribunal examined each provision to determine if they were ascertained liabilities. Provisions for Uhde GmbH (Rs. 7,253,588), Larsen & Toubro Ltd. (Rs. 2,220,433 and Rs. 1,255,690), Kanoria Chemicals & Industries Ltd. (Rs. 232,501), Uhde GmbH (Rs. 23,548,956), and Asean Bintulu Fertilizer Sdn. BHD (Rs. 2,581,462) were allowed as they were ascertained. Provisions for Sanjana Cryogenic Storages Ltd. (Rs. 10,158,338 and Rs. 2,332,406), The Andhra Sugars Ltd. (Rs. 543,695), Kirloskar Pneumatic Co. Ltd. (Rs. 146,211), VVF Limited (Rs. 2,694,733), and ISCO-KNPC (Rs. 1,103,204) were disallowed as they were based on estimates.

2. Withdrawal of Credit for TDS:
The assessee challenged the withdrawal of TDS credit amounting to Rs. 3,384,649. The Tribunal upheld the revenue authorities' decision, stating that the TDS did not pertain to the current year, following the precedent set in the assessee's own case in the preceding year.

3. Disallowance of Software Expenses as Capital in Nature:
The Tribunal found that the software expenses of Rs. 5,926,204 were for maintenance, upgradation, and installation of antivirus, which are not capital in nature but necessary for the smooth running of computers. Thus, these expenses were allowed.

4. Disallowance of Deduction u/s 80HHB:
The assessee's claim for deduction u/s 80HHB of Rs. 3,405,207 was disallowed by the CIT(A) on the grounds that interest income and miscellaneous receipts were not derived from business. The Tribunal restored the issue to the AO for fresh examination, directing the assessee to provide necessary details to substantiate the claim.

5. Levy of Interest u/s 234D:
The issue of interest levy of Rs. 1,631,798 u/s 234D was deemed consequential. The AO was directed to give consequential effect in accordance with the law.

Conclusion:
The appeal was partly allowed, with specific directions for the AO to re-examine certain issues and allow or disallow provisions based on the Tribunal's findings.