2013 (1) TMI 1054 - AT - Income Tax

Issues Involved:
1. Nature of transport subsidy.
2. Addition of subsidy relating to electricity/power tariff freeze.
3. Allowability of claim of deduction on account of additional gratuity paid.
4. Deduction on account of compensatory charges.
5. Disallowance of railways and insurance claims written off.
6. Deduction of expenditure incurred in respect of quartz project.
7. Various claims of deduction not pressed by the assessee.
8. Additional grounds raised by the assessee.
9. Disallowance of contribution to Himachal Pradesh State Electricity Board.
10. Allowability of VRS expenditure.
11. Allowability of claim of expenditure in respect of temporary structures.
12. Allowability of expenditure incurred on construction of stadium.
13. Allowability of claim of interest paid on borrowed funds in connection with investment.

Summary:

1. Nature of Transport Subsidy:
The first dispute concerns the nature of transport subsidy amounting to Rs. 13,78,51,483/-. The Tribunal followed its decision in the assessee's own case for the assessment year 1999-00, where the subsidy was treated as a capital receipt based on the judgment of CIT vs. Reliance Industries. Consequently, the Tribunal set aside the order of CIT(A) and allowed the claim of the assessee.

2. Addition of Subsidy Relating to Electricity/Power Tariff Freeze:
The second dispute pertains to the addition of Rs. 2,63,51,000/- related to electricity duty under the H.P. incentive scheme-1991. The Tribunal, following its earlier decision and the judgment of CIT vs. Reliance Industries, held that the subsidy was capital in nature and set aside the order of CIT(A), allowing the claim of the assessee.

3. Allowability of Claim of Deduction on Account of Additional Gratuity Paid:
The third dispute regards the deduction of Rs. 4,53,19,214/- on account of additional gratuity paid. The assessee did not press this ground during the hearing, and thus, it was dismissed as not pressed.

4. Deduction on Account of Compensatory Charges:
The fourth ground involves various compensatory charges. The assessee did not press the grounds relating to the use of diesel and interest on delayed payment of TDS, and these disallowances were upheld. However, the Tribunal found that the issue of payment for not carrying out mining activity required fresh examination and restored it to the AO for a fresh order.

5. Disallowance of Railways and Insurance Claims Written Off:
The fifth dispute concerns the disallowance of Rs. 41,96,766/- on account of unsettled railway and insurance claims. The Tribunal noted that the exact nature of the claims was unclear and required fresh examination by the AO, thus setting aside the order of CIT(A).

6. Deduction of Expenditure Incurred in Respect of Quartz Project:
The sixth dispute involves the deduction of Rs. 73,37,000/- related to the quartz project. The Tribunal found that the matter required fresh examination due to unclear facts and restored it to the AO for a fresh order.

7. Various Claims of Deduction Not Pressed by the Assessee:
Grounds relating to claims of deduction u/s 80HHC, 80IA, and 80IB were not pressed by the assessee and were dismissed as not pressed.

8. Additional Grounds Raised by the Assessee:
The assessee raised several additional grounds, including claims for interest on borrowings, sales tax incentive, provision of additional gratuity, and relief u/s 91. The Tribunal admitted these additional grounds for adjudication, allowing some claims and restoring others to the AO for fresh examination.

9. Disallowance of Contribution to Himachal Pradesh State Electricity Board:
The revenue's appeal concerning the disallowance of contribution to HPSEB was dismissed, with the Tribunal following its earlier decision and confirming the order of CIT(A) in favor of the assessee.

10. Allowability of VRS Expenditure:
The revenue's appeal against the allowability of VRS expenditure of Rs. 29,09,85,056/- was dismissed, with the Tribunal following its earlier decision and confirming the order of CIT(A).

11. Allowability of Claim of Expenditure in Respect of Temporary Structures:
The revenue's appeal against the allowability of expenditure on temporary structures was dismissed. The Tribunal upheld the CIT(A)'s order, noting that the expenditure was reasonable and incurred on land not belonging to the assessee.

12. Allowability of Expenditure Incurred on Construction of Stadium:
The revenue's appeal against the allowability of expenditure on the construction of a stadium was dismissed, with the Tribunal following its earlier decision and confirming the order of CIT(A).

13. Allowability of Claim of Interest Paid on Borrowed Funds in Connection with Investment:
The revenue's appeal concerning the disallowance of interest on borrowed funds was dismissed. The Tribunal upheld the CIT(A)'s order, noting that the assessee had sufficient funds to make investments and following its earlier decision.

Conclusion:
The appeal of the assessee was partly allowed, while the appeal of the revenue was dismissed.

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