2012 (10) TMI 1113 - AT - Income Tax

Issues Involved:
1. Disallowance u/s 43B for various statutory duties.
2. Disallowance of software expenses as capital expenditure.
3. Classification of interest income and rent as business income or income from other sources.
4. Deduction u/s 80HHC.
5. Levy of interest u/s 234B.
6. Deduction for VRS payments.
7. Sales-tax subsidy as capital receipt.
8. Custom Duty on goods for export purposes.
9. Excise Duty on inputs.
10. Custom Duty on closing inventory with vendors.
11. Custom Duty on closing stock.
12. Custom Duty paid in advance on goods in transit.
13. Excise Duty paid under protest.
14. Central and Local Sales Tax paid under protest.
15. Excess claim of consumption of stock.
16. MODVAT on input differences.
17. Loss on account of foreign exchange fluctuation.
18. Depreciation on enhanced liability.
19. Disallowance u/s 14A.
20. Disallowance u/s 40(a)(i).
21. Loss on sale of shares.
22. Depreciation on Foreign Exchange Fluctuation.
23. Membership fee.

Summary:

1. Disallowance u/s 43B for various statutory duties:
The assessee claimed deductions for various statutory duties paid during the year u/s 43B. The Tribunal upheld the disallowance of excise duty on inputs based on the Special Bench decision in Glaxo Smithkline Consumer Health Care Ltd. but allowed the deduction for the opening balance of RG23A. Sales tax paid on components and sales tax recoverable were disallowed as per earlier ITAT decisions. Excise duty on spare parts was allowed following the decision in Modipon Ltd.

2. Disallowance of software expenses as capital expenditure:
The Tribunal allowed the software expenses as revenue expenditure, citing the decision in CIT v. Asahi India Safety Glass Ltd., which held that expenditure on application software is allowable as a revenue deduction.

3. Classification of interest income and rent:
The Tribunal upheld the classification of interest income and rent from land as income from other sources, based on the decision of the Delhi High Court in the assessee's own case for AY 1985-86.

4. Deduction u/s 80HHC:
The Tribunal dismissed the ground for reclassifying interest income and rent from land as business income for computing deduction u/s 80HHC, following the decision of the Delhi High Court in the assessee's own case.

5. Levy of interest u/s 234B:
The Tribunal held that the levy of interest u/s 234B is mandatory and consequential.

6. Deduction for VRS payments:
The Tribunal dismissed the additional ground for the entire VRS payment as revenue expenditure, as the assessee was entitled to 1/5th of the total claim as per section 35DDA.

7. Sales-tax subsidy as capital receipt:
The Tribunal restored the issue of sales-tax subsidy to the Assessing Officer for deciding as per law, considering the additional evidences and the decision in CIT vs. Ponni Sugars and Chemicals Ltd.

8. Custom Duty on goods for export purposes:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for custom duty paid on goods imported for export purposes, following earlier ITAT decisions.

9. Excise Duty on inputs:
The Tribunal upheld the disallowance of excise duty on inputs, following the decision in Glaxo Smithkline Consumer Health Care Ltd.

10. Custom Duty on closing inventory with vendors:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for custom duty paid on closing inventory with vendors, following earlier ITAT decisions.

11. Custom Duty on closing stock:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for custom duty paid on closing stock, following earlier ITAT decisions.

12. Custom Duty paid in advance on goods in transit:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for custom duty paid in advance on goods in transit, following earlier ITAT decisions.

13. Excise Duty paid under protest:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for excise duty paid under protest, following earlier ITAT decisions.

14. Central and Local Sales Tax paid under protest:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for Central and Local Sales Tax paid under protest, following earlier ITAT decisions.

15. Excess claim of consumption of stock:
The Tribunal upheld the CIT (A)'s decision deleting the addition for excess claim of consumption of stock, following earlier ITAT decisions.

16. MODVAT on input differences:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for MODVAT on input differences, following earlier ITAT decisions.

17. Loss on account of foreign exchange fluctuation:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for loss on account of foreign exchange fluctuation, following earlier ITAT decisions and the Supreme Court decision in CIT v Woodward Governor India P. Ltd.

18. Depreciation on enhanced liability:
The Tribunal upheld the CIT (A)'s decision allowing the depreciation on enhanced liability due to custom duty paid and capitalized on plant and machinery, following earlier ITAT decisions.

19. Disallowance u/s 14A:
The Tribunal remanded the issue of disallowance u/s 14A to the Assessing Officer to be decided in view of the recent decision of the Delhi High Court in Maxopp Investment Ltd.

20. Disallowance u/s 40(a)(i):
The Tribunal upheld the CIT (A)'s decision deleting the disallowance u/s 40(a)(i) for payments made outside India, following earlier ITAT decisions and the Supreme Court decision in G E India Technology Cen. P. Ltd. v. CIT.

21. Loss on sale of shares:
The Tribunal upheld the CIT (A)'s decision treating the loss on sale of shares as long-term capital loss, not speculative loss, following earlier ITAT decisions.

22. Depreciation on Foreign Exchange Fluctuation:
The Tribunal upheld the CIT (A)'s decision allowing the depreciation on foreign exchange fluctuation, following earlier ITAT decisions and the Supreme Court decision in CIT v Woodward Governor India P. Ltd.

23. Membership fee:
The Tribunal upheld the CIT (A)'s decision allowing the deduction for membership fee, following earlier ITAT decisions and the decisions in Otis Elevators Co. (India) Ltd v CIT and American Express International Banking Corporation v CIT.

Conclusion:
Both the appeal of the assessee and the appeal of the revenue were partly allowed.

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