2011 (6) TMI 887 - AT - Income Tax

Issues Involved:

1. Computation of capital gains.
2. Disallowance of interest claimed.
3. Disallowance out of commission expenses and advances written off.
4. Treatment of various expenses as entertainment expenses.
5. Disallowance out of vehicle maintenance expenses and telephone expenses.
6. Disallowance of depreciation.
7. Disallowance of claim u/s 35AB.
8. Disallowance of foreign travel expenses.
9. Disallowance out of leasehold land written off and miscellaneous expenses.
10. Disallowance out of gift distribution expenses.
11. Disallowance out of aircraft expenses and legal and professional expenses.
12. Deduction under Chapter VI-A.
13. Premium payable on redemption of debentures.
14. Treatment of special capital incentive as capital receipt.

Summary:

1. Computation of Capital Gains:
The issue pertains to the computation of capital gains at Rs. 60,75,00,000/- as against Rs. 43,28,11,250/- returned by the assessee. The A.O. computed the capital gains by taking the cost of acquisition of the entire shares at NIL, which was upheld by the CIT(A). The Tribunal found this issue in favor of the assessee, citing the decisions in Heinrich de Fries GmbH Vs. Jt. CIT and Alcan Inc. Vs. Dy. Director of Income-tax (International Taxation). The Tribunal directed the A.O. to recompute the capital gains in light of the legal discussion provided.

2. Disallowance of Interest Claimed:
The issue of disallowance of interest amounting to Rs. 68,58,000/- was remitted back to the A.O. for fresh adjudication to ascertain whether the amount advanced to various companies was made out of borrowed funds. The A.O. was directed to decide the issue as per provisions of law and provide a reasonable opportunity of being heard to the assessee.

3. Disallowance out of Commission Expenses and Advances Written Off:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.

4. Treatment of Various Expenses as Entertainment Expenses:
The CIT(A) confirmed the disallowance of Rs. 2,23,477/- as entertainment expenses. The Tribunal directed the A.O. to decide the issue based on facts and circumstances, including the decision of the Tribunal in the assessee's own case for A.Y. 1995-96 and 1996-97.

5. Disallowance out of Vehicle Maintenance Expenses and Telephone Expenses:
The Tribunal directed the authorities to delete the impugned disallowances, following the decisions of the Gujarat High Court in Sayaji Iron and Engg. Co. Vs. CIT and Dinesh Mills Ltd. Vs. CIT.

6. Disallowance of Depreciation:
The Tribunal directed the A.O. to allow depreciation on the increased W.D.V. of cost as a result of foreign exchange liability accrued at the end of the year, following its earlier decision in the assessee's own case for A.Y. 1992-93.

7. Disallowance of Claim u/s 35AB:
The issue was restored to the A.O. to examine and verify the details of lump sum consideration paid by the amalgamating company for acquiring know-how and ascertain the amount of deduction u/s 35AB allowable in the remaining years.

8. Disallowance of Foreign Travel Expenses:
The Tribunal decided this issue in favor of the assessee and directed the deletion of the disallowance made out of foreign travel expenses, following its earlier decisions.

9. Disallowance out of Leasehold Land Written Off and Miscellaneous Expenses:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.

10. Disallowance out of Gift Distribution Expenses:
The Tribunal directed the deletion of the disallowance of Rs. 4,14,613/- out of gift distribution expenses, following its earlier decision in the assessee's own case for A.Y. 1995-96.

11. Disallowance out of Aircraft Expenses and Legal and Professional Expenses:
These grounds were not pressed by the learned counsel for the assessee and were dismissed as not pressed.

12. Deduction under Chapter VI-A:
This issue was allowed subject to verification by the A.O.

13. Premium Payable on Redemption of Debentures:
This ground was not pressed by the learned counsel for the assessee and was dismissed as not pressed.

14. Treatment of Special Capital Incentive as Capital Receipt:
The Tribunal upheld the CIT(A)'s decision that the special capital incentive amounting to Rs. 20,00,000/- received by the assessee was a capital receipt, following the judgment of the Hon'ble Supreme Court in CIT Vs

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