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2016 (5) TMI 1320 - AT - Income TaxDisallowance of inventory written off - Held that - We are of the view that it will be just and proper to set aside this issue to the file of Assessing Officer for verification to the limited extent and the assessee shall put before him necessary details which can prove that some process has been followed for selling such scrap items and specific scrap value of the inventory written off has been accounted for as an income in the books of account. Ld. AR agreed to the same and no objection was raised by the ld. DR to this fact and accordingly, we set aside this issue to the file of Assessing Officer as discussed and needless to say that proper opportunity of being heard to the assessee would be given by Assessing Officer. This ground is allowed for statistical purposes. Disallowance on account of depreciation on plant and machinery covered under sale lease back transaction with RSEB - Held that - We find that in the case before us the invoices are in the name of the assessee as is clear copy of these invoices therefore, transaction in question is held to be genuine one and , therefore, we set aside the order of the CJT(A) and direct the assessing officer to allow depreciation to the assessee. Disallowance on account of proportionate interest and administrative expenses - Held that - Calculation of disallowance u/s 14A as per Rule 8D of the IT Rules, is applicable w.e.f. Asst. Year 2007-08 and we are dealing with appeal for Asst. Year 2005-06 and accordingly the decision of the co-ordinate bench squarely applies on this ground taken up by Revenue and therefore, in the given circumstances, when there is no satisfaction placed on record by Assessing Officer during assessment proceedings nor any specific defect has been pointed out, disallowance made by assessee at its own ₹ 6 lacs. should have been accepted by the Assessing Officer and no further disallowance was called for. Accordingly this ground of Revenue is dismissed. Disallowance on account of reimbursement of holiday home expenses - Held that - CIT(A) has rightly observed that expenditure on holiday home has been incurred for the purposes of keeping healthy relation with its employees and therefore the same is purely business expenses. Ld. Assessing Officer has not been able to substantiate the claim of such disallowance and could not prove the same as bogus or non-business expenses. Accordingly in these circumstances, when there is no specific detection of any mistake in the books of account of assessee, such estimated disallowance is uncalled for. We, therefore, find no reason to interfere with the order of ld. CIT(A). Accordingly this ground of Revenue is dismissed. Disallowance on account of Gas day expenses and Family meet expenses - Held that - Disallowance of 20% was made by ld. Assessing Officer on estimate basis, without pointing out any defect in the books of account of assessee. Applying our decision of ground no.3 on this issue, the ground raised by the Revenue is dismissed. Addition on account of unutilized modvat/cenvat credit - Held that - Unutilized modvat payment is in the nature of advance payment and should not be treated as income and, therefore, we find no reason to interfere with the order of ld. CIT(A) and uphold the same. Disallowance on account of provision of traveling expenses - Held that - From going through the submissions made by ld. AR, we find that at the time of finalizing of accounts at the end of the year some provisions are required in respect of expenses which have been incurred in the last month of the financial year but the bills/claim in respect thereof are still awaited and, therefore, provisions of such expenses are necessary to be made. Certainly the provisions involve some elements of estimation but in the next year such provisions are reversed and actual expenses are booked and accordingly if there is any expenditure the same is adjusted in the next year. This accounting practice has been followed consistently by the assessee. We are, therefore, of the view that ld. CIT(A) has rightly deleted the disallowance. Addition on account of project loss in relation to amount receivable from Mahanagar Gas Ltd. - Held that - We are of the view that regular books are being maintained by the assessee and accounting policies and standards are consistently followed and looking to the past history of assessments of assessee, we understand that such claim was allowed by the Revenue in the past also. We, therefore, find no reason to interfere with the order of ld. CIT(A) who has rightly deleted the disallowance made on account of project loss from MGL. Disallowance u/s 14A should be sustained at ₹ 6,00,000/- only which has been suo moto accepted by the assessee as disallowance u/s 14A of the Act while furnishing of income tax return. As the ground of revenue has already been dismissed, the Cross Objection raised by the assessee has become infractuous and is dismissed accordingly.
Issues Involved:
1. Disallowance of inventory written off. 2. Consequential depreciation for fees paid in AY 2002-03. 3. Depreciation on plant and machinery under sale lease back transaction with RSEB. 4. Disallowance of proportionate interest and administrative expenses. 5. Disallowance of holiday home expenses. 6. Disallowance of Gas day expenses. 7. Disallowance of family meet expenses. 8. Addition on account of unutilized MODVAT/CENVAT credit. 9. Disallowance of provision for traveling expenses. 10. Addition on account of project loss from Mahanagar Gas Ltd. 11. Consequential depreciation on software license fee of AY 2002-03. Detailed Analysis: 1. Disallowance of Inventory Written Off: The assessee claimed a deduction for inventory written off amounting to ?12,80,536 due to technical obsolescence and customer safety reasons. The Assessing Officer (AO) disallowed this claim because no scrap value was realized. The Tribunal set aside this issue to the AO for verification to ensure that the scrap value of the inventory written off was accounted for as income in the books. The ground was allowed for statistical purposes. 2. Consequential Depreciation for Fees Paid in AY 2002-03: This ground was not pressed by the assessee and hence dismissed as not pressed. 3. Depreciation on Plant and Machinery under Sale Lease Back Transaction with RSEB: The issue was whether the depreciation on assets leased back to Rajasthan State Electricity Board (RSEB) should be allowed. The Tribunal noted that similar issues had been decided in favor of the assessee in previous years. The Tribunal upheld the CIT(A)'s order allowing the depreciation, referencing past Tribunal decisions and Gujarat High Court's dismissal of the Revenue's appeal. 4. Disallowance of Proportionate Interest and Administrative Expenses: The AO disallowed ?25,41,310 on account of proportionate interest and administrative expenses under Section 14A. The CIT(A) reduced the disallowance to ?4,54,333 after considering the disallowance already made by the assessee. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide specific reasons for rejecting the assessee's claim and that Rule 8D was not applicable for the assessment year in question. 5. Disallowance of Holiday Home Expenses: The AO disallowed 20% of holiday home expenses on an estimated basis. The CIT(A) deleted the disallowance, stating that the expenses were incurred for maintaining healthy relations with employees and were purely business expenses. The Tribunal upheld the CIT(A)'s decision, finding no specific detection of any mistake in the books of accounts. 6. Disallowance of Gas Day Expenses: Similar to the holiday home expenses, the AO disallowed 20% of Gas day expenses on an estimated basis. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, applying the same rationale as for the holiday home expenses. 7. Disallowance of Family Meet Expenses: The AO disallowed 20% of family meet expenses on an estimated basis. The CIT(A) deleted the disallowance, and the Tribunal upheld this decision, applying the same rationale as for the holiday home expenses. 8. Addition on Account of Unutilized MODVAT/CENVAT Credit: The AO added ?56,08,089 on account of unutilized MODVAT/CENVAT credit, treating it as income. The CIT(A) deleted the addition, considering it as an advance payment to the excise department. The Tribunal upheld the CIT(A)'s decision, referencing past Tribunal decisions that unutilized MODVAT/CENVAT credit does not constitute income. 9. Disallowance of Provision for Traveling Expenses: The AO disallowed ?1,06,796 as a provision for traveling expenses. The CIT(A) deleted the disallowance, noting that such provisions are routine and necessary for accrual accounting. The Tribunal upheld the CIT(A)'s decision, agreeing that the provision was necessary and consistently followed by the assessee. 10. Addition on Account of Project Loss from Mahanagar Gas Ltd.: The AO disallowed the write-off of ?7,49,000 as a project loss from Mahanagar Gas Ltd. The CIT(A) deleted the disallowance, noting that the corresponding income had been offered in earlier years and the write-off was justified. The Tribunal upheld the CIT(A)'s decision, finding no reason to interfere. 11. Consequential Depreciation on Software License Fee of AY 2002-03: The CIT(A) allowed consequential depreciation on software license fees for AY 2002-03. The Tribunal noted that the issue had been decided in favor of the assessee in AY 2002-03, making this ground infructuous and dismissed it accordingly. Conclusion: The assessee's appeal was partly allowed for statistical purposes, the Revenue's appeal was dismissed, and the Cross Objection of the assessee was dismissed as infructuous.
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