2001 (12) TMI 204 - AT - Income Tax

Issues Involved:
1. Disallowance on account of travelling expenses.
2. Disallowance of depreciation due to exchange rate fluctuation.
3. Deduction for expenditure pertaining to axle project.
4. Deduction of alleged discount allowed.
5. Deduction of expenses incurred on issue of partly convertible debentures.
6. Disallowance u/s 43B.
7. Disallowance u/s 35(1)(iv).
8. Computation of deduction u/s 80-I.

Summary:

1. Disallowance on account of travelling expenses:
The CIT(A) restricted the disallowance to Rs. 1,06,864 against Rs. 1,85,282 disallowed by the AO. Both parties agreed that this issue is covered in favor of the assessee based on the Tribunal's decision for the assessment year 1991-92. Therefore, it was decided in favor of the assessee.

2. Disallowance of depreciation due to exchange rate fluctuation:
The CIT(A) deleted the disallowance of Rs. 32,43,114 on addition to plant and machinery due to exchange rate fluctuation. Both parties agreed that this issue is covered in favor of the assessee based on the Tribunal's decision for the assessment year 1991-92. Therefore, it was decided in favor of the assessee.

3. Deduction for expenditure pertaining to axle project:
The CIT(A) allowed the deduction of Rs. 1,16,16,792. Both parties agreed that this issue is covered in favor of the assessee based on the Tribunal's decision for the assessment year 1991-92. Therefore, it was decided in favor of the assessee.

4. Deduction of alleged discount allowed:
The CIT(A) allowed the deduction of Rs. 45 lacs on account of discount. The Tribunal found that the issue was not decided by the CIT(A) in the right perspective and set aside the order of the CIT(A). The matter was restored to the file of AO for fresh adjudication based on material/evidence furnished by the assessee.

5. Deduction of expenses incurred on issue of partly convertible debentures:
The CIT(A) allowed the deduction of Rs. 33,89,393. The Tribunal held that the expenditure on public issue of debentures is allowable as revenue expenditure. However, since the issue was partly convertible debentures, the Tribunal directed the AO to allow 37.5% of the total expenditure as revenue expenditure.

6. Disallowance u/s 43B:
The CIT(A) rejected the claim of Rs. 95,66,232 under s. 43B. The Tribunal accepted the assessee's contention and allowed the deduction under s. 43B. However, the AO was given liberty to make an addition in the subsequent year in accordance with law.

7. Disallowance u/s 35(1)(iv):
The CIT(A) upheld the AO's disallowance of Rs. 39,63,018. The Tribunal set aside the order of the CIT(A) and restored the matter to the file of AO for fresh adjudication, directing the AO to refer the matter to the prescribed authority if there was any doubt regarding the use of machinery/equipment for R&D activity.

8. Computation of deduction u/s 80-I:
The CIT(A) allowed the deduction on net income after adjusting the loss from the axle unit. The Tribunal noted conflicting views on the interpretation of s. 80AB and preferred the view in favor of the assessee, as expressed by the Andhra Pradesh High Court. The matter was restored to the file of AO to verify whether the steering unit and axle unit were functioning independently. The AO was directed to allow the deduction without setting off the losses of the other unit if they were found to be functioning independently, considering the provisions of s. 80A(2).

Conclusion:
Both the appeals were partly allowed.

← Previous Next →