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2014 (1) TMI 188 - AT - Income TaxDisallowance of reversal of income Held that - The Assessing Officer has reproduced the relevant portion of the minutes from which it is evident that the assessee is entitled to overhead charges of one and half percent on the computed cost of the project - The computed cost of the project would include cost of the entire project including general pool accommodation Decided against assessee. Prior period expenditure Held that - It is a settled law that when the assessee is following mercantile system of accounting, the prior period expenses can be allowed in the subsequent year in which such expenses have crystallized - none of the lower authorities had examined this aspect - The assessee has also not given complete details of the prior period expenses and has not explained how such expenses have crystallized during the accounting year relevant to the assessment year under consideration The issue was restored for fresh adjudication. Interest accrued but not due on foreign loans Held that - Following assessee s own case for AY 2001-02 - Interest accruing on loans obtained in foreign currency from Asian Development Bank and Japan Bank of International Cooperation is deductible in computing the income even though it has not become payable - Whether liability did not crystallize in the year under consideration or not, the interest is deductible since the assessee is following mercantile system of accounting - Following Bharat Earth Movers Vs. CIT 2000 (8) TMI 4 - SUPREME Court - Deduction of interest accrued on such foreign loans is allowable decided in favour of assessee. Financial charges written off Held that - Following assessee s own case for earlier years - Assessing Officer had not examined the issue in the light of material filed before him - He has simply disallowed the claim of the assessee on the grounds that the relevant details were not filed by the assessee - The matter was restored to the file of the AO for fresh adjudication. Depreciation on assets added to the block after 30.09.2001 Held that - Following assessee s own case for earlier year - Hundred per cent depreciation is deductible on books owned by lending libraries and professionals, the rate of 60% is applicable in respect of other cases - The assessee is neither a lending library nor a professional, it is held that the learned CIT(Appeals) was right in allowing depreciation @ 60% Decided against assessee. Depreciation on estimated increase in cost of properties Held that - It is a settled law that depreciation is to be allowed on the actual cost of assets to the assessee and not on the basis of enhanced cost of the assets on estimate basis Decided against assessee. Disallowance u/s 14A Held that - Following Maxopp Investment Ltd. & Ors. Vs. CIT 2011 (11) TMI 267 - Delhi High Court The issue was restored for fresh adjudication.
Issues Involved:
1. Disallowance of Rs. 35,57,615/- being reversal of income. 2. Disallowance of Rs. 1,45,00,000/- as prior period expenditure. 3. Disallowance of Rs. 15,53,43,413/- being interest accrued but not due on foreign loans. 4. Disallowance of Rs. 17,79,63,672/- being financial charges written off. 5. Disallowance of Rs. 1,32,822/- being depreciation in respect of assets added to the block after 30.09.2001. 6. Disallowance of Rs. 500/- being fee for raising share capital. 7. Disallowance of Rs. 38,81,222/- being depreciation on estimated increase in cost of properties. 8. Disallowance of Rs. 61,000/- being disallowance u/s 14A. Detailed Analysis: 1. Disallowance of Rs. 35,57,615/- being reversal of income: The assessee reversed the income of Rs. 35,57,615/- credited on account of overhead charges on the Andrews Ganj project, arguing that overhead charges were not applicable to general pool accommodation. The Assessing Officer (AO) and the CIT(A) did not accept this explanation, stating that the minutes of the meeting indicated that administrative and overhead charges of 1.5% were applicable to the computed cost of the entire project, including general pool accommodation. The Tribunal upheld the lower authorities' decision, finding no justification to interfere with their orders. 2. Disallowance of Rs. 1,45,00,000/- as prior period expenditure: The assessee claimed prior period expenses amounting to Rs. 1,45,00,000/-, which included various expenses such as traveling, rates and taxes, repairs, maintenance, and stamp duty charges. The AO and CIT(A) disallowed these expenses, stating that the assessee, following the mercantile system of accounting, failed to establish that these expenses crystallized during the year under consideration. The Tribunal set aside the orders of the lower authorities and remanded the matter back to the AO for fresh examination, directing the assessee to furnish complete details and explanations regarding the crystallization of these expenses. 3. Disallowance of Rs. 15,53,43,413/- being interest accrued but not due on foreign loans: The Tribunal found this issue to be covered in favor of the assessee by its own decisions in previous assessment years. The Tribunal cited the decision in the assessee's case for AY 2000-01 & 2001-02, where it was held that interest accruing on foreign currency loans is deductible even if not yet payable, as the liability had crystallized. The Tribunal directed the AO to allow the deduction of interest accrued on such foreign loans. 4. Disallowance of Rs. 17,79,63,672/- being financial charges written off: The Tribunal noted that this issue was also covered in favor of the assessee by its previous orders. The Tribunal had earlier restored similar issues to the AO for fresh examination, considering relevant judicial decisions. Following the precedent, the Tribunal set aside the issue to the AO with directions to decide afresh, ensuring adequate opportunity for the assessee to be heard. 5. Disallowance of Rs. 1,32,822/- being depreciation in respect of assets added to the block after 30.09.2001: The Tribunal found this issue to be covered by its previous decision in the assessee's own case, where it was held that depreciation on books is allowable at 60% for non-professionals and non-lending libraries. The Tribunal directed the AO to allow depreciation at 60%. 6. Disallowance of Rs. 500/- being fee for raising share capital: This ground was not pressed by the assessee during the hearing, and accordingly, it was rejected. 7. Disallowance of Rs. 38,81,222/- being depreciation on estimated increase in cost of properties: The Tribunal held that depreciation should be allowed on the actual cost of assets, not on an estimated increase in their value. The Tribunal found no infirmity in the AO's order disallowing depreciation on the estimated increase in the cost of properties. 8. Disallowance of Rs. 61,000/- being disallowance u/s 14A: The Tribunal found this issue to be covered by the decision of the Hon'ble Jurisdictional High Court in the case of Maxopp Investment Ltd. & Ors. Vs. CIT. The Tribunal set aside the orders of the lower authorities and remanded the matter to the AO for readjudication in light of the High Court's decision. Conclusion: The appeal of the assessee was partly allowed for statistical purposes, with several issues remanded to the AO for fresh consideration and others upheld or dismissed based on precedents and established legal principles. The decision was pronounced in open court on 20th December 2013.
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