2013 (5) TMI 1019 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of addition on account of provision for bad and doubtful debt.
2. Disallowance of prior period expenditure.
3. Addition on account of salary payment to employees to maintain records of employees trust.
4. Disallowance out of depreciation.
5. Deletion of addition on account of miscellaneous expenditure and repair & maintenance.
6. Disallowance out of interest expenditure u/s 43B.
7. Disallowance of TDS on installation, commission, and erection.
8. Disallowance of prior period expenses.

Summary:

1. Deletion of addition on account of provision for bad and doubtful debt:
The assessee claimed a provision for bad and doubtful debts amounting to Rs. 14,43,84,206/-. The A.O. disallowed this under section 36(1)(vii) of the Income Tax Act, 1961, as it was only a provision made in the books. The CIT(A) deleted the addition, but the ITAT sent the issue back to the CIT(A) for verification of whether the bad debt amount was written off as irrecoverable in the accounts of the assessee, referencing the TRF Limited vs. CIT case.

2. Disallowance of prior period expenditure:
The assessee claimed prior period expenditure amounting to Rs. 1,02,59,311/-. The A.O. disallowed it as it was not related to the year under consideration. The CIT(A) deleted the addition, but the ITAT sent the issue back to the CIT(A) for a fresh decision after verifying the allowability under section 35D of the Act.

3. Addition on account of salary payment to employees to maintain records of employees trust:
The A.O. disallowed Rs. 18,11,180/- claimed for maintaining records of employees' PF/Gratuity/Trust, as a separate trust was already made. The CIT(A) deleted the addition, stating the expenses were incurred wholly and exclusively for the assessee's business. The ITAT confirmed the CIT(A)'s order.

4. Disallowance out of depreciation:
The A.O. disallowed Rs. 69,55,61,698/- out of total depreciation claimed, as the assets transferred under the scheme were not identifiable or being used. The CIT(A) deleted the addition, referencing earlier years' decisions where similar disallowances were deleted and confirmed by the ITAT. The ITAT confirmed the CIT(A)'s order.

5. Deletion of addition on account of miscellaneous expenditure and repair & maintenance:
The A.O. disallowed 5% of miscellaneous expenditure and repair & maintenance expenses, amounting to Rs. 16,37,269/- and Rs. 4,46,32,848/- respectively, as they were not verifiable. The CIT(A) deleted the additions, stating there was no provision for disallowance on the ground of non-verifiability and no finding that the expenditure was not incurred for business purposes. The ITAT confirmed the CIT(A)'s order.

6. Disallowance out of interest expenditure u/s 43B:
The A.O. disallowed Rs. 22,51,93,495/- out of interest expenditure claimed under section 43B, as the assessee failed to furnish proof of payment before filing the return. The CIT(A) deleted the addition, accepting the assessee's contention that the interest payable was adjusted against the subsidy received from the U.P. Government. The ITAT confirmed the CIT(A)'s order, referencing judgments from the Rajasthan and Gujarat High Courts.

7. Disallowance of TDS on installation, commission, and erection:
The A.O. disallowed Rs. 12,19,547/- for non-deduction of TDS on installation, commission, and erection. The CIT(A) deleted the addition, directing the A.O. to verify the tax challan as the amount was deposited in April 2009. The ITAT confirmed the CIT(A)'s order.

8. Disallowance of prior period expenses:
The A.O. disallowed Rs. 71,75,671/- on account of prior period expenses. The CIT(A) deleted the addition, but the ITAT sent the issue back to the CIT(A) for a fresh decision with identical directions as in the case of A.Y. 2007-08.

Conclusion:
- ITA No.228/A/2011 for A.Y. 2007-08 is partly allowed for statistical purposes.
- ITA No.229/A/2011 for A.Y. 2008-09 is dismissed.
- ITA No.272/A/2012 for A.Y. 2009-10 is partly allowed for statistical purposes.