2013 (12) TMI 1699 - HC - Income Tax

Summary

Issues involved:
The judgment involves the following substantial questions of law:
(A) Disallowance of depreciation on multimodal project
(B) Disallowance of bonus and royalty expenses
(C) Disallowance of obsolete stock/stores

Disallowed Bonus and Royalty Expenses:
The Tribunal confirmed the deletion of disallowance of bonus and royalty expenses as they were paid before the due date of filing the income tax return, making the assessee eligible for deduction under section 43(B) of the Income Tax Act. The CIT(A) also supported this decision based on the crystallization of liabilities during the relevant accounting period, as per the decision in Kedarnath Jute Manufacturing Co. Ltd. Vs. CIT. The Court found no error in this decision and dismissed the appeal regarding this issue.

Obsolete Stock/Stores Disallowance:
The Assessing Officer disallowed a portion of the claim for obsolete stock/stores. The assessee had written off the stock as per Schedule XI of the P and L account, supported by reports of technical committees/personnel indicating zero value. The CIT(A) allowed the write-off but considered 25% of the total amount as scrap value, confirming a 75% disallowance. The ITAT upheld the 25% disallowance, leading to the deletion of 75% disallowance. The Court dismissed the appeal against the deletion of 75% disallowance, as both the CIT(A) and ITAT had confirmed the disallowance to the extent of 25%.

Conclusion:
The Court dismissed the appeal regarding the disallowance of bonus and royalty expenses and the deletion of 75% disallowance for obsolete stock/stores. The judgment focused on the application of relevant provisions of the Income Tax Act and the decisions of lower authorities in determining the allowability of expenses and write-offs.