2013 (10) TMI 1535 - AT - Income Tax

2020 (3) TMI 942 - AT

Issues Involved:
1. Disallowance of rural development expenditure.
2. Disallowance of depreciation on roll over charges.
3. Depreciation on goodwill.
4. Buy-back of shares expenses.
5. Debenture issue expenditure.
6. Deduction u/s 36(1)(iii) for interest on loans.
7. Addition u/s 40A(9).
8. Addition u/s 14A.
9. Premium on pre-redemption of debentures.
10. Expenditure on acquisition of marketing and technical know-how.
11. Deduction u/s 80HHC under MAT provisions.
12. Interest charged u/s 234D.

Summary:

Assessment Year 2000-01:

1. Disallowance of Rural Development Expenditure:
The ITAT allowed the expenditure of Rs. 5,85,508/- incurred on rural development, following the precedent set in earlier years.

2. Disallowance of Depreciation on Roll Over Charges:
The issue became infructuous as the expenditure was allowed as revenue expenditure in earlier cases; hence, the ground was rejected.

3. Depreciation on Goodwill:
The ITAT directed the AO to allow the claim of depreciation on goodwill acquired from Madura Garments, following the Supreme Court decision in CIT vs Smifs Securities Ltd.

4. Buy-Back of Shares Expenses:
The ITAT directed the AO to allow the entire expenditure of Rs. 98,69,185/- incurred on buy-back of shares as revenue expenditure, following the Bombay High Court decision in CIT vs Hindalco Industries Ltd.

5. Debenture Issue Expenditure:
The alternative grounds became infructuous as the expenses were allowed as revenue expenditure and under section 35D in earlier years. Hence, the ground was rejected.

6. Deduction u/s 36(1)(iii) for Interest on Loans:
The ground was rejected as the issue was allowed under section 36(1)(iii) in earlier years.

Additional Ground:
The ITAT admitted the additional ground regarding the exclusion of sales tax exemption benefit from taxable profits and directed the AO to adjudicate the issue as per law.

Department's Appeal:

7. Addition u/s 40A(9):
The ITAT sustained the CIT(A)'s order allowing the expenditure of Rs. 16,66,132/- paid to schools, following the precedent in earlier years.

8. Addition u/s 14A:
The ITAT accepted the disallowance made by the AO at 1% of exempt income.

9. Premium on Pre-Redemption of Debentures:
The ITAT sustained the CIT(A)'s order allowing the entire expenditure, following the decision in ACIT vs Grind Well Norton Ltd.

10. Expenditure on Acquisition of Marketing and Technical Know-How:
The ITAT sustained the CIT(A)'s order allowing the expenditure as revenue expenditure.

11. Buy-Back of Shares Expenses:
The ITAT rejected the department's ground, following its own decision in ITA No. 5421/Mum/2005.

Assessment Year 2001-02:

12. Disallowance of Rural Development Expenditure:
The ITAT allowed the expenditure of Rs. 5,72,764/- incurred on rural development, following its own decision in ITA No. 5421/Mum/2005.

13. Disallowance of Depreciation on Roll Over Charges:
The ground was rejected as the expenditure was allowed as revenue expenditure in earlier cases.

14. Deduction u/s 80HHC on MAT Provisions:
The ITAT set aside the CIT(A)'s order and directed the AO to recompute the deduction under section 80HHC under MAT provisions as per the Supreme Court decision in CIT vs Bhari Information Tech. Systems Pvt. Ltd.

15. Interest Charged u/s 234D:
The ITAT directed the AO to recompute the interest as per law.

16. Debenture Issue Expenditure:
The ground was rejected as the expenses were allowed as revenue expenditure and under section 35D in earlier years.

17. Depreciation on Interest Capitalization on Loan:
The ground was rejected as the issue was allowed under section 36(1)(iii) in earlier years.

Additional Grounds:

18. Deduction u/s 80HHC from Book Profits:
The ITAT restored the issue to the AO for fresh adjudication, following the precedent in earlier years.

19. Computation of Deduction u/s 80HHC for MAT Provisions:
The ITAT refrained from admitting the ground as it did not emanate from the impugned order.

Department's Appeal:

20. Addition u/s 14A:
The ITAT sustained the disallowance made by the AO at Rs. 4,56,257/-.

21. Deduction u/s 80HHC as per Section 115JB:
The ITAT sustained the CIT(A)'s order allowing the deduction, following the decision in Shirke Construction.

Conclusion:
- Assessee's appeals in ITA 5421/Mum/2005 and ITA 5422/Mum/2005 are partly allowed.
- Revenue's appeals in ITA 5561/Mum/2005 and ITA 5530/Mum/2005 are partly allowed.

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