2012 (11) TMI 1266 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of staff welfare and other expenses.
2. Addition u/s 145A.
3. Expenditure on improvement of leasehold properties.
4. Disallowance u/s 14A.
5. Disallowance of bad debts.
6. Disallowance of liquidated damages.
7. Deduction u/s 80HHC.
8. Revised deduction u/s 80HHC for computing book profit u/s 115JA.

Summary:

1. Disallowance of Staff Welfare and Other Expenses:
The CIT(A) deleted the disallowance of Rs. 14,97,379 out of staff welfare expenses and Rs. 6.03 lakhs out of other expenses. The Tribunal upheld this decision, noting that similar disallowances were deleted in the assessee's own case for previous years after verification by the Assessing Officer (A.O.). The Tribunal found no new facts to warrant interference with the CIT(A)'s findings. Ground no.1 was dismissed.

2. Addition u/s 145A:
The CIT(A) deleted the addition of Rs. 4,65,568 made by the A.O. u/s 145A. The Tribunal confirmed this, citing its earlier decision in the assessee's case for the assessment year 1999-2000, where it was held that adjustments required u/s 145A are revenue neutral. The Tribunal also referenced the Delhi High Court's decision in CIT v. Mahavir Aluminium Ltd. Ground no.2 was dismissed.

3. Expenditure on Improvement of Leasehold Properties:
The CIT(A) treated the expenditure of Rs. 1,25,37,044 on leasehold property improvements as revenue expenditure. The Tribunal upheld this, following its earlier decision in the assessee's case for the assessment year 1998-99, where such expenses were deemed revenue in nature. Ground no.3 was dismissed.

4. Disallowance u/s 14A:
The CIT(A) deleted the disallowance of Rs. 5 lakhs u/s 14A, as the investments were made from the company's own funds, not borrowed funds. The Tribunal upheld this, referencing the Bombay High Court's decision in CIT v. Reliance Utility and Power Ltd., which presumes investments are made from own funds unless proven otherwise. Ground no.4 was dismissed.

5. Disallowance of Bad Debts:
The CIT(A) deleted the disallowance of bad debts amounting to Rs. 10,97,891, noting that post-amendment to section 36(1)(vii), the condition for allowability is the actual write-off in the books. The Tribunal upheld this, citing the Supreme Court's decision in TRF Limited v. CIT. Ground no.5 was dismissed.

6. Disallowance of Liquidated Damages:
The CIT(A) deleted the disallowance of liquidated damages amounting to Rs. 13,17,110, as these were taken into income in earlier years. The Tribunal upheld this, following the Supreme Court's decision in TRF Limited v. CIT. Ground no.6 was dismissed.

7. Deduction u/s 80HHC:
The CIT(A) directed the A.O. to consider net receipts for various incomes while computing deduction u/s 80HHC. The Tribunal upheld this, referencing the Supreme Court's decision in ACG Associated Capsules Pvt. Ltd. and the Bombay High Court's decision in CIT v. United Riceland Ltd. Ground no.7 was dismissed.

8. Revised Deduction u/s 80HHC for Computing Book Profit u/s 115JA:
The CIT(A) directed the A.O. to consider the revised deduction u/s 80HHC for computing book profit u/s 115JA. The Tribunal confirmed this, noting that the issue was consequential to the other grounds, which were dismissed. Ground no.8 was dismissed.

Conclusion:
The appeal filed by the Revenue was dismissed. Order pronounced in the open Court on the 26th day of November, 2012.