2012 (10) TMI 1215 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance u/s 14A of the Act.
2. Disallowance of service tax u/s 43B of the Act.
3. Disallowance of payment of software charges.
4. Computation of book profit u/s 115JB of the Act.

Summary:

Issue 1: Disallowance u/s 14A of the Act
The A.O. disallowed Rs. 99,56,933/- u/s 14A read with Rule 8D, considering the complexity of investment decisions and the need for substantial market research. The assessee argued for a prorata basis disallowance, which the CIT(A) accepted, reducing it to Rs. 31,69,778/-. The Tribunal found that the CIT(A) accepted the assessee's working without proper examination, violating Rule 46-A. The matter was remanded to the A.O. to re-examine in light of the Godrej and Boyce Mfg. Co. Ltd. decision.

Issue 2: Disallowance of service tax u/s 43B of the Act
The A.O. disallowed Rs. 90,08,661/- for unpaid service tax. The CIT(A) deleted the disallowance, noting that Rs. 41,97,663/- was paid before the due date of filing the return, and the remaining Rs. 48,10,998/- was not payable as the amounts were not received from parties. The Tribunal upheld the CIT(A)'s decision, referencing the Pharma Search case, which held that service tax liability arises only on receipt by the assessee.

Issue 3: Disallowance of payment of software charges
The A.O. treated software maintenance expenses as capital expenditure, disallowing Rs. 10,68,162/- after allowing depreciation. The CIT(A) deleted the disallowance, finding the expenses were for maintenance and technical support, not for software purchase. The Tribunal upheld the CIT(A)'s decision, noting the absence of contrary material from the Revenue.

Issue 4: Computation of book profit u/s 115JB of the Act
The A.O. added Rs. 99,56,933/- disallowed u/s 14A to the book profit. The CIT(A) directed the A.O. to restrict the addition to Rs. 31,69,778/-. The Tribunal remanded the issue to the A.O., aligning it with the decision on disallowance u/s 14A and considering relevant case laws.

Conclusion:
Both appeals were partly allowed for statistical purposes, with several issues remanded to the A.O. for re-examination in light of relevant judicial precedents and proper procedural adherence.