2014 (4) TMI 348 - AT - Income Tax

Rectification of mistake u/s 254 of the Act Typographical error - Disallowance of expenses u/s 37(2) of the Act Held that - A typographical error has occurred which needs to be rectified the AO is directed - to allow the business meeting expenses and expenses on AGM which expenses cannot come under the category of entertainment expenses - We direct the AO to add only Rs. 2,00,000/- out of total canteen expenses and lunch expenses on employees during the course of outdoor duty Decided partly in favour of Assessee. Allowance of proportionate amount - Premium paid on non-convertible debentures Held that - As decided in assessee s own case for the previous year, it has been held that the decision in Madras Industrial Investment Corporation Limited Versus Commissioner of Income-Tax 1997 (4) TMI 5 - SUPREME Court followed - the Tribunal allowed proportionate claim of the premium payable on the debentures to be spread over to the period of debenture -the AO is directed to allow proportionate claim of the premium payable Decided in favour of Assessee. Disallowance of depreciation on WDV Foreign visitor s expenses disallowed as capital expenses Held that - As decided in assessee s own case for the previous year, it has been held that the expenditure incurred on foreign visitors form part of the cost of the project therefore would be eligible for depreciation as per Sec. 32 of the Act thus, the AO is directed to allow the claim of depreciation Decided in favour of Assessee. Disallowance of VRS expenses Held that - - As decided in assessee s own case for the previous year, it has been held that the liability is well supported by the actuary valuation and the agreements between the company and the employees were not examined by the AO - The Tribunal s direction relates to the verification of the liability of VRS, being supported by actuary valuation certificate, viz-a-viz agreements with the company and the employees Decided partly in favour of Assessee. Disallowance of provision of expenses at year end Held that - There is no error in the finding of the Tribunal which needs rectification - In so far as an excess provision is concerned, the assessee has rightly reversed the excesses in subsequent years under respective head of expenditure - In so far as shortfall in provisions is concerned, considering the method of accounting which is mercantile, it is the duty of the assessee to make proper provisions and if the assessee has fallen short on certain heads of expenditures the same cannot be allowed Decided against Assessee. Depreciation in respect of Kantla plant Held that - There is an apparent mistake in the directions of the Tribuna - The AO is directed to verify whether the plant was actually in use in earlier years and if satisfied, the depreciation will be allowed Decided in favour of Assessee.

Summary

Issues Involved:
1. Rectification of errors in the Tribunal's order regarding lunch expenses on personnel and canteen expenses.
2. Decision on the allowance of the proportionate amount of premium paid on redemption of non-convertible debentures.
3. Allowance of depreciation on the written down value of foreign visitors' expenditure disallowed as capital expenditure.
4. Disallowance of VRS expenses and ambiguity in the Tribunal's findings.
5. Disallowance of provisions of expenses made at the year-end and clarification needed for short provisions.
6. Depreciation in respect of the Kantla plant.

Analysis:

1. The assessee raised concerns about errors in the Tribunal's order regarding lunch expenses on personnel and canteen expenses. The Tribunal acknowledged a typographical error and clarified its finding, directing the AO to allow certain expenses not categorized as entertainment expenses. The issue was partly allowed.

2. The Tribunal addressed the allowance of the proportionate amount of premium paid on redemption of non-convertible debentures. Following previous decisions, the Tribunal directed the AO to allow the proportionate claim of the premium payable in line with earlier findings, thereby allowing additional ground No. 16.

3. Regarding the allowance of depreciation on the written down value of foreign visitors' expenditure disallowed as capital expenditure, the Tribunal relied on previous decisions and directed the AO to allow the claim of depreciation in line with earlier findings, allowing additional ground No. 17.

4. The dispute over the disallowance of VRS expenses arose, with the Tribunal noting ambiguity in its findings. After careful consideration, the Tribunal clarified its direction relating to the verification of the VRS liability supported by actuarial valuation and agreements, allowing the ground only to that extent.

5. The issue of disallowance of provisions of expenses made at the year-end was discussed. The Tribunal examined the excess and shortfall in provisions, ultimately dismissing the grievance related to the shortfall in provisions, emphasizing the duty of the assessee to make proper provisions.

6. Lastly, the Tribunal considered the issue of depreciation in respect of the Kantla plant. After reviewing the facts, the Tribunal modified its directions, allowing the ground if the plant was actually in use in earlier years. The Tribunal directed the AO to verify this aspect and allow depreciation accordingly.

In conclusion, the Miscellaneous application filed by the assessee was partly allowed, addressing various issues raised by the assessee and providing detailed clarifications and directions for each matter discussed in the judgment.