1998 (9) TMI 136 - AT - Income Tax

Issues:
1. Inclusion of sales-tax and excise duty in computation of total turnover for deductions u/s 80HHC.
2. Inclusion of Kherthala contract receipts in total turnover u/s 80HHC.
3. Treatment of investment in generator set as capital expenditure and depreciation allowance.
4. Disallowance of depreciation on Madri Building.
5. Treatment of fees paid to Registrar of Companies as capital expenditure.
6. Non-inclusion of dividend income in computing business income for deduction u/s 80HHC.
7. Treatment of expenditure on staff welfare as revenue expenditure.
8. Disallowance u/s 37(4) of the IT Act.
9. Exclusion of interest received from IT Department for deduction u/s 80HHC.
10. Treatment of interest paid to IT Department as non-deductible.
11. Allowance of interest paid to IT Department as deduction from interest received.
12. Overall decision on the appeals.

1. Sales-tax and Excise Duty Inclusion:
The appeals concern the inclusion of sales-tax and excise duty in total turnover for deductions u/s 80HHC. The Tribunal directs the AO to follow a previous decision on this matter.

2. Kherthala Contract Receipts:
The issue of including Kherthala contract receipts in total turnover u/s 80HHC is addressed, with the AO directed to follow a previous decision.

3. Investment in Generator Set:
The Tribunal considers the investment in a generator set as capital expenditure, allowing depreciation at 25% and dismissing the claim for 100% depreciation.

4. Disallowance of Depreciation on Madri Building:
Depreciation amount on Madri Building is disputed, with the Tribunal directing allowance of depreciation based on the usage and additions made to the building.

5. Treatment of Fees Paid to Registrar of Companies:
Fees paid to Registrar of Companies are deemed as capital expenditure, following a decision related to capital base expansion.

6. Non-Inclusion of Dividend Income:
Dividend income exclusion in computing business income for deduction u/s 80HHC is upheld based on a previous decision.

7. Expenditure on Staff Welfare:
Expenditure on staff welfare is considered allowable as it is for business activities and maintaining good relations with staff.

8. Disallowance u/s 37(4) of the IT Act:
The Tribunal directs the AO to follow a previous decision regarding disallowance u/s 37(4) of the IT Act.

9. Exclusion of Interest Received from IT Department:
Interest received from the IT Department is held to be part of business income for deduction u/s 80HHC, contrary to the AO's disallowance.

10. Treatment of Interest Paid to IT Department:
Interest paid to the IT Department is not allowed as a deduction as it is considered part of total tax payable and not an expenditure for earning income.

11. Allowance of Interest Paid to IT Department:
The Tribunal directs the AO to treat net income from interest as business income and include it in total turnover for deduction u/s 80HHC.

12. Overall Decision:
Both appeals are partly allowed based on the Tribunal's findings on the various issues discussed.

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