2012 (12) TMI 635 - AT - Income Tax

Cost of generator and transformer - miscellaneous structures v/s electrical equipment CIT(A) deleted the addition - Held that - The CBDT vide Instruction No. 3 of 2011 dated 9.2.2011 has revised the monitory limit for filing the appeals by the Department before the ITAT as raised to Rs. 3 lakhs

Issues Involved:
1. Valuation of generator and transformer costs.
2. Rejection of objections to the valuation report.
3. Discount on CPWD rates.
4. Self-supervision discount rate.
5. Deduction of irrecoverable advances/investments.
6. Deduction under section 80IB for housing projects.
7. Levy of interest under section 234B.

Issue-wise Detailed Analysis:

1. Valuation of Generator and Transformer Costs:
The revenue appealed against the CIT(A)'s decision, arguing that the valuation officer included the costs of a generator and transformer under 'miscellaneous structures,' while the assessee accounted for them under 'electrical equipment.' The revenue contended that the costs were not separately recorded by the assessee. However, the tribunal noted that the tax effect was less than Rs. 3 lakhs, making the appeal non-maintainable per CBDT Instruction No. 3 of 2011. Consequently, the appeal was dismissed.

2. Rejection of Objections to the Valuation Report:
The assessee objected to the valuation report used to determine the cost of construction of a club building, arguing that the estimated cost as of 31/03/2004 could not be used for the assessment year 2002-03. The CIT(A) rejected these objections, stating the valuation was for the correct period. The tribunal remanded the issue to the Assessing Officer to address the alternate grounds and obtain a corrected report from the valuation cell.

3. Discount on CPWD Rates:
The assessee argued for a 15% discount on CPWD rates, citing a decision by the ITAT, Visakhapatnam Bench. The tribunal agreed, allowing the discount and following the precedent set by the Visakhapatnam Bench.

4. Self-supervision Discount Rate:
The assessee contended that the CIT(A) erred by allowing a 7.5% discount for self-supervision instead of 10%, as per the ITAT, Visakhapatnam Bench's decision. The tribunal upheld the assessee's argument, granting a 10% discount.

5. Deduction of Irrecoverable Advances/Investments:
The assessee claimed deductions for irrecoverable advances written off, arguing they were business losses deductible under sections 28/29. The CIT(A) and tribunal both held that these were capital investments, and their non-recovery constituted capital losses, not deductible as bad debts. This position was supported by decisions from the Supreme Court and Bombay High Court.

6. Deduction under Section 80IB for Housing Projects:
The assessee claimed deductions under section 80IB for a housing project, which the CIT(A) rejected, noting no approval from HUDA for the project. The tribunal upheld this decision, referencing the case of Dr. Mrs. Renuka Datla Vs. CIT, which required explicit approval for such deductions.

7. Levy of Interest under Section 234B:
The assessee contested the levy of interest under section 234B. The tribunal noted that the interest charge is consequential and directed the Assessing Officer to adjust accordingly.

Conclusion:
- Appeals ITA No. 520/Hyd/10, 650/Hyd/07, 568/Hyd/09, and 290/Hyd/07 were dismissed.
- Appeal ITA No. 534/Hyd/10 was partly allowed for statistical purposes.

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