2012 (2) TMI 136 - AT - Income Tax

Disallowance of Sundry balance written off and Traveling Expense as no details were submitted - Held That - Details only gave the name of the party, amount, date and no further details as to whether these were taken into account in computation of income of earlier years etc. is not available. Similarly, in respect of traveling expenses, the details given are only the date wise payments made to Deep Tours & Travels.CAse remanded back to AO for fresh perusal giving an opportunity to assessee. Disallowance of expense in relation to exempt Income - A/Y 06-07 thus Rule 8D not applicable - Held That - In view of Godrej and Boyce Manufacturing Co. Ltd case remanded back. Manufacture - conversion of rough marble blocks into polished and finished marble slabs, tiles, table tops - Held That - The end product was recognized as commercial product distinct from the input.Reliance placed on Lucky Minmat Pvt. Ltd. Vs CIT (2000 - TMI - 5818 - SUPREME Court), decided in favour of assessee.

Summary

Issues:
1. Disallowance of sundry balance written off and traveling expenses.
2. Disallowance of expenses under section 14A of the I.T. Act.
3. Disallowance of claim of deduction under section 80 IB of the Act.

Issue 1: Disallowance of Sundry Balance Written Off and Traveling Expenses:
The dispute revolved around the disallowance of sundry balance written off and traveling expenses by the Assessing Officer (AO) for lack of details and justification provided by the assessee. The Commissioner of Income Tax (Appeals) upheld the disallowance due to insufficient evidence submitted by the assessee. However, the Appellate Tribunal found that the details of expenses were indeed provided by the assessee but lacked certain crucial information regarding their relevance to the income computation of earlier years. The Tribunal set aside the AO's order, instructing a fresh examination with necessary details and an opportunity for the assessee to be heard.

Issue 2: Disallowance of Expenses under Section 14A of the I.T. Act:
The AO disallowed expenses under section 14A as the assessee did not deduct expenses related to exempt income, calculating the disallowance per Rule 8D with retrospective application. However, the Tribunal noted conflicting views on Rule 8D's retrospective application, with the Hon'ble Bombay High Court ruling it as prospective from the assessment year 2008-09. As the assessment in question was for 2006-07, Rule 8D did not apply. The Tribunal set aside the CIT(A)'s order, directing a fresh assessment in line with the High Court's judgment and granting the assessee a hearing opportunity.

Issue 3: Disallowance of Claim of Deduction under Section 80 IB of the Act:
The AO disallowed the deduction claimed under section 80IB, arguing that the process of converting rough marble blocks into polished slabs did not constitute manufacturing. However, the Tribunal referred to previous judgments in the assessee's favor, where it was established that the transformation process qualified as manufacturing. The Tribunal upheld the CIT(A)'s decision to allow the deduction, citing consistency with past rulings and the distinct nature of the end products from the raw materials. Consequently, the appeal by the assessee was allowed for statistical purposes, while the revenue's appeal was dismissed.

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