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Issues Involved:
1. Treatment of Net Present Value (NPV) as Capital Expenditure. 2. Disallowance of Peripheral Development Expenses. 3. Treatment of Prior Period Expenditure. 4. Addition of Outstanding Expenses u/s 41(1). 5. Valuation of Closing Stock. 6. Disallowance of Compensatory Afforestation Expenses. 7. Capitalization of ERP Software Expenses. Summary: Issue 1: Treatment of Net Present Value (NPV) as Capital Expenditure - The Revenue challenged the deletion of Rs. 1,10,37,70,526 added by the AO under the head NPV, treating it as capital expenditure. The Tribunal upheld the CIT(A)'s order, noting that the issue was covered in favor of the assessee by previous ITAT decisions, which considered the payment for environmental protection and not for acquiring proprietary rights. The appeal by the Revenue was dismissed. Issue 2: Disallowance of Peripheral Development Expenses - The assessee contested the disallowance of Rs. 1 crore for constructing a women's hostel, arguing it was a peripheral development expense with a reciprocal arrangement for accommodating employees' children. The Tribunal found that the expenses were incurred at the instance of the Government of Orissa and were for the assessee's business, not charity. The addition was directed to be deleted. Issue 3: Treatment of Prior Period Expenditure - The assessee argued that prior period expenses amounting to Rs. 55.65 lakhs crystallized during the year. The Tribunal found that these expenses, although pertaining to earlier years, crystallized in the current year and were revenue in nature. The part confirmation of the addition by the CIT(A) was directed to be deleted. Issue 4: Addition of Outstanding Expenses u/s 41(1) - The Revenue added Rs. 39.44 crores u/s 41(1) on the grounds that the liabilities ceased to exist. The Tribunal noted that the liabilities were brought forward from earlier years and there was no cessation of liability. The addition was directed to be deleted. Issue 5: Valuation of Closing Stock - The Revenue challenged the deletion of Rs. 3,73,89,55,820 on the issue of valuation of closing stock. The Tribunal upheld the CIT(A)'s order, noting that the assessee consistently followed the method of valuing closing stock at lower of cost or net realizable value, which is an acceptable method of accounting. Issue 6: Disallowance of Compensatory Afforestation Expenses - The Revenue contested the deletion of Rs. 4,69,45,200, arguing it was capital in nature. The Tribunal upheld the CIT(A)'s decision, noting that the expenses were for environmental protection and not for creating a capital asset. Issue 7: Capitalization of ERP Software Expenses - The Revenue argued that Rs. 1,28,91,419 incurred on ERP software expenses should be capitalized. The Tribunal agreed with the CIT(A) that these were recurring expenses for maintaining the ERP system and were allowable as revenue expenditure. Conclusion: 1. ITA No.584/CTK/2012 (Assessment Year 2006-07) filed by the Revenue is dismissed. 2. ITA No.551/CTK/2012 (Assessment Year 2008-09) filed by the assessee is allowed. 3. ITA No.552/CTK/2012 (Assessment Year 2008-09) filed by the Revenue is dismissed.
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