2011 (3) TMI 1678 - AT - Income Tax

Summary

Issues Involved:
1. Deduction u/s 80IA for Earth Stations
2. Disallowance u/s 43B for Gratuity Provision
3. Allowability of Repairs and Maintenance Expenditure
4. Allowability of Foreign Exchange Fluctuation Expenditure
5. Allowability of Prior Period Expenses
6. Depreciation on Indefeasible Right to Use Undersea Cables
7. Capitalization of Foreign Travel Expenditure
8. Amortization of Leasehold Land

Summary:

1. Deduction u/s 80IA for Earth Stations:
The assessee's appeal regarding the deduction u/s 80IA for Earth Stations was dismissed. The issue was covered against the assessee in its own case for A.Y. 1996-97, reported in 299 ITR (AT) 234 (Mum)(SB).

2. Disallowance u/s 43B for Gratuity Provision:
The assessee's appeal on the disallowance u/s 43B was allowed. The provision for gratuity was based on actuarial valuation and paid to the gratuity trust before the due date of filing the return. The decision of the Hon'ble Supreme Court in CIT Vs. Alom Extrusions Ltd., 319 ITR 306 (SC) was applied, leading to the deletion of the disallowance.

3. Allowability of Repairs and Maintenance Expenditure:
The additional ground raised by the assessee on the allowability of repairs and maintenance expenditure was dismissed as not pressed.

4. Allowability of Foreign Exchange Fluctuation Expenditure:
The revenue's appeal on the allowability of foreign exchange fluctuation expenditure was allowed. The assessee's mistake in conversion and calculation of foreign exchange gains in the previous year should have been rectified in that year, not as prior period expenditure in the current year.

5. Allowability of Prior Period Expenses:
The revenue's appeal on prior period expenses was dismissed. The First Appellate Authority's finding that the liability crystallized during the year was upheld, supported by case laws from the Hon'ble Gujarat High Court and Hon'ble Calcutta High Court.

6. Depreciation on Indefeasible Right to Use Undersea Cables:
The revenue's appeal on the depreciation of indefeasible rights to use undersea cables was dismissed. The assessee was deemed the beneficial owner of the rights, satisfying the conditions for ownership and entitlement to depreciation, as per the decision of the Hon'ble Supreme Court in Mysore Minerals Ltd. Vs. CIT, 239 ITR 775.

7. Capitalization of Foreign Travel Expenditure:
The revenue's appeal on the capitalization of foreign travel expenditure was dismissed. The expenditure was for examining the feasibility of acquiring capacities in undersea cables and was rightly capitalized, with depreciation allowed on the capitalized value.

8. Amortization of Leasehold Land:
The revenue's appeal on the amortization of leasehold land was dismissed. The expenditure was considered advance rent, following the decision of the Hon'ble Karnataka High Court in CIT Vs. HMT Limited, 203 ITR 820, and was consistently allowed in previous years.

Conclusion:
Both the appeals of the assessee and the revenue were allowed in part. The order was pronounced on 30th March 2011.