2012 (4) TMI 731 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 14A of the Income Tax Act, 1961.
2. Deduction u/s 80IA of the Income Tax Act, 1961.
3. Disallowance of expenditure on maintenance of garden.
4. Treatment of expenses on shelved projects and feasibility studies.
5. Interest u/s 244A of the Income Tax Act, 1961.

Summary:

1. Disallowance u/s 14A of the Income Tax Act, 1961:
The assessee's appeal contested the disallowance made by the AO u/s 14A for expenses incurred in earning exempt income. The AO disallowed 5% of the exempt income, adding Rs. 1,85,26,581/- to the assessee's total income. The CIT(A) had directed the AO to apply Rule 8D. The Tribunal, following the Bombay High Court's decision in Godrej & Boyce, remanded the issue back to the AO for fresh consideration.

2. Deduction u/s 80IA of the Income Tax Act, 1961:
The assessee sought relief for "other income" and "net adjustments in respect of earlier years" for Trombay Unit 7 under section 80IA. The CIT(A) partially allowed relief. The Tribunal accepted the assessee's plea for treating returned materials as income derived by the eligible unit and allowed deduction u/s 80IA.

3. Disallowance of expenditure on maintenance of garden:
The revenue's appeal against the CIT(A)'s decision to allow expenditure on garden maintenance was dismissed. The Tribunal upheld the CIT(A)'s order, referencing its previous decision that such expenditure is incurred wholly, necessarily, and exclusively for business purposes.

4. Treatment of expenses on shelved projects and feasibility studies:
The revenue's appeal against the CIT(A)'s decision to allow expenses on shelved projects and feasibility studies as revenue expenditure was dismissed. The Tribunal, referencing its earlier decisions, held that these expenses were connected with the existing business and should be allowed as deductions.

5. Interest u/s 244A of the Income Tax Act, 1961:
The revenue's appeal against the CIT(A)'s direction to allow interest u/s 244A from April 2002 to February 2005 was dismissed. The Tribunal found that the AO did not seek the opinion of the Chief Commissioner to exclude any period for interest calculation, and there was no delay attributable to the assessee.

Conclusion:
The assessee's appeal was partly allowed, and the revenue's appeal was dismissed. The Tribunal remanded the issue of disallowance u/s 14A to the AO for fresh consideration and upheld the CIT(A)'s decisions on other issues.