2010 (9) TMI 1248 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are the disallowance of management charges paid to a sister concern u/s 40A(2)(b) and the denial of claim of exemption u/s 80IA for development charges.

Disallowance of management charges u/s 40A(2)(b):
The Revenue filed an appeal against the order of the CIT(Appeals) restricting the disallowance of management charges paid to a sister concern. The AO disallowed the charges as the sister concern had no experience in power generation. The CIT(Appeals) granted partial relief, reducing the disallowance to &8377; 10 lakhs from &8377; 30 lakhs. The Revenue contended that the sister concern did not render services and that fresh evidence was admitted without allowing the AO to examine it. The Tribunal upheld the CIT(Appeals) order, stating that the sister concern had capabilities for the project and the disallowance was restricted to &8377; 10 lakhs.

Denial of claim of exemption u/s 80IA:
The Revenue challenged the CIT(Appeals) decision not to uphold the disallowance of deduction u/s 80IA for development charges. The Revenue argued that the charges were not derived from eligible business activities. The CIT(Appeals) directed the AO to verify the nature of the development charges. The Tribunal noted that the CIT(Appeals) had no power to set aside the issue but decided to restore it to the AO for fresh adjudication. The Tribunal allowed the Revenue's appeal for statistical purposes.