2002 (2) TMI 307 - AT - Income Tax

Summary

Issues Involved:
1. Exclusion of Rs. 1,96,28,861 transferred from Reserve to Profit & Loss Account for computation of book profit under section 115J.
2. Deductibility of cash subsidy from the cost of diesel generating asset under section 43(1).
3. Proportionate deduction of premium payable on redemption of non-convertible debentures.
4. Allowance of depreciation on tube-well and generator installed at the registered office.
5. Deduction of prospecting expenses for Spong Iron and Hydrogen Peroxide Projects.
6. Deduction for investment in shares written off due to liquidation.
7. Calculation of depreciation based on written down value of assets post-amalgamation.
8. Exclusion of depreciation included in guest house expenses for disallowance under section 37(3).

Detailed Analysis:

1. Exclusion of Rs. 1,96,28,861 Transferred from Reserve to Profit & Loss Account:
The primary issue was whether Rs. 1,96,28,861 transferred from the revaluation reserve created in the same financial year should be excluded from the computation of book profit under section 115J. The Assessing Officer and CIT(A) did not exclude this amount, arguing that the reserve was created without increasing the book profit initially. The Tribunal upheld this view, stating that the book profit should not be decreased on account of transfer from such a reserve since it was not increased when the reserve was created. The Tribunal emphasized that the statute's plain words should be adhered to, and creative interpretations should be avoided, ensuring the provision is not rendered redundant.

2. Deductibility of Cash Subsidy from the Cost of Diesel Generating Asset:
The Tribunal ruled in favor of the assessee, citing the Supreme Court's judgment in CIT v. P.J Chemicals Ltd. [1994] 210 ITR 830. It held that the cash subsidy received should not be excluded from the cost of the asset for computing admissible depreciation. This decision was based on established legal precedent.

3. Proportionate Deduction of Premium Payable on Redemption of Non-Convertible Debentures:
The Tribunal allowed the assessee's claim for proportionate deduction of premiums payable on redemption of non-convertible debentures, following the Supreme Court's judgment in Madras Industrial Investment Corpn. Ltd. v. CIT [1997] 225 ITR 802. This decision was consistent with previous orders in the assessee's own case for earlier assessment years.

4. Allowance of Depreciation on Tube-Well and Generator:
The Tribunal directed the Assessing Officer to allow depreciation on the tube-well and generator installed at the registered office, aligning with previous orders in the assessee's favor for earlier assessment years.

5. Deduction of Prospecting Expenses for Spong Iron and Hydrogen Peroxide Projects:
The Tribunal dismissed the assessee's claim for deduction of prospecting expenses, referencing a previous order in the assessee's own case for the assessment year 1988-89, which ruled against such deductions.

6. Deduction for Investment in Shares Written Off Due to Liquidation:
The Tribunal upheld the authorities' decision not to allow the deduction for investment in shares written off, as the shares were held as capital assets, and no transfer had taken place to realize a loss.

7. Calculation of Depreciation Based on Written Down Value of Assets Post-Amalgamation:
The Tribunal ruled in favor of the assessee, allowing depreciation based on the written down value of assets computed on the basis of actual cost minus depreciation actually allowed, without deducting unabsorbed depreciation from the cost of such assets. This decision was consistent with previous orders in the assessee's favor for earlier assessment years.

8. Exclusion of Depreciation Included in Guest House Expenses for Disallowance Under Section 37(3):
The Tribunal dismissed this ground as the issue was conceded by the assessee's counsel, acknowledging that it was covered against them by the jurisdictional High Court.

Conclusion:
The appeal was partly allowed, with the Tribunal providing relief on several grounds while upholding the authorities' decisions on others. The judgment emphasized adherence to statutory provisions and established legal precedents.