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2020 (1) TMI 446 - AT - Income TaxDeduction of various expenditure - Community Welfare Expenses - Temple Expenses - Prior Years Expenses - Mines Prospecting Expenses - expenses on Powerline, Marine Structure, Road Railway Sidings - Held that - Following the decision in the earlier years, claim of expenses allowed and additions deleted. Employees stock option expenses - Held that - the assessee has been allowed ESOP expenses as claimed in the Profit Loss Account and therefore, the resultant surplus / gains would be fully taxable, applying the same analogy. Accordingly, the reduction of income by ₹ 5.62 Lacs (including surplus of ₹ 1.10 Lacs) as done by Ld. AO would not be warranted. - to settle the things as per earlier decisions, we direct Ld. AO not to reduce the total income by ₹ 5.62 Lacs. Disallowance u/s 35D being preliminary expenses - Held that - The Ld. CIT(A) allowed the same since in earlier AYs, it was held by first appellate authorities that the expenses were incurred for extension of business and therefore covered by Sec. 35D(2) of the Act. However, it was held that the deduction would start from year in which the project starts commercial production. Since, the project had started commercial production in June, 2002, the deduction of the same would be allowable to the assessee. Credit for MAT for the purposes of Charging interest u/s 234B - Held that - The assessee was found eligible to claim MAT credit of ₹ 585.04 Lacs as per Sec.115JAA and therefore, the credit of the same was allowed. However, interest u/s 234B was computed before adjusting MAT credit. - interest was to be charged only after adjustment of tax credit.
Issues Involved:
1. Deletion of disallowance of community welfare expenses. 2. Deletion of disallowance of temple expenses. 3. Deletion of disallowance of prior year's expenses. 4. Deletion of disallowance of mines prospecting expenses. 5. Foreign exchange gains. 6. Deletion of disallowance of employees' stock option expenses. 7. Deletion of disallowance of expenses on powerline, marine structure, road, and railway sidings. 8. Restriction of disallowance u/s 14A. 9. Deletion of disallowance u/s 35D. 10. Inclusion of excise duty and sales tax in total turnover for computation u/s 80HHC. 11. Credit for MAT for the purpose of charging interest u/s 234B. 12. Disallowance of Puja/function expenses. 13. Disallowance of consultancy charges. 14. Disallowance of service charges. 15. Treatment of interest income and truck hire charges as income from other sources. 16. Disallowance u/s 35D and non-admission of additional ground. 17. Addition of unutilized MODVAT credit. 18. Adjustment of capital gain on sale of investment u/s 115JB. 19. Adjustment of dividend distribution tax u/s 115JB. 20. Additional ground of sales tax incentive/subsidy. Detailed Analysis: 1. Deletion of Disallowance of Community Welfare Expenses: The expenses were incurred for the smooth functioning of the factory and to enable employees to avail basic needs. The Tribunal allowed similar expenses in earlier years. The CIT(A) deleted the disallowance following the Tribunal's consistent decisions. The Tribunal dismissed the revenue's appeal, respecting the consistent view. 2. Deletion of Disallowance of Temple Expenses: These expenses were for the benefit of employees staying in the factory. The Tribunal allowed similar expenses in earlier years. The CIT(A) followed the Tribunal's decisions for AYs 1998-99 to 2002-03. The Tribunal dismissed the revenue's appeal, noting that similar issues were pending before the High Court. 3. Deletion of Disallowance of Prior Year's Expenses: The expenses crystallized during the year due to late submission of bills and disputed bills settled in the current year. The CIT(A) allowed the expenses, noting that similar claims were allowed in earlier years. The Tribunal dismissed the revenue's appeal, following the Tribunal's consistent decisions. 4. Deletion of Disallowance of Mines Prospecting Expenses: The expenses were for checking limestone availability, a major raw material for cement. The Tribunal allowed similar expenses in earlier years. The CIT(A) followed the appellate orders of earlier years. The Tribunal dismissed the revenue's appeal, respecting the consistent view. 5. Foreign Exchange Gains: The assessee offered foreign exchange gains in the Profit & Loss Account. The CIT(A) confirmed that the gains were taxable since forex loss disallowances were deleted in earlier years. The Tribunal dismissed the revenue's appeal as infructuous, noting no grievance for the revenue. 6. Deletion of Disallowance of Employees' Stock Option Expenses: The Tribunal allowed ESOP expenses in earlier years. The CIT(A) granted relief to the assessee. The Tribunal directed the AO not to reduce the total income by the ESOP expenses, following earlier decisions. 7. Deletion of Disallowance of Expenses on Powerline, Marine Structure, Road, and Railway Sidings: The expenses were claimed under Section 37(1). The CIT(A) granted relief, following earlier orders. The Tribunal dismissed the revenue's appeal, respecting the consistent view. 8. Restriction of Disallowance u/s 14A: The CIT(A) estimated the disallowance at ?0.50 Lacs. The Tribunal confirmed the estimation, following earlier decisions. 9. Deletion of Disallowance u/s 35D: The CIT(A) allowed the expenses, noting they were incurred for business extension and covered by Section 35D(2). The Tribunal dismissed the revenue's appeal, following earlier decisions. 10. Inclusion of Excise Duty and Sales Tax in Total Turnover for Computation u/s 80HHC: The CIT(A) directed exclusion of these items while computing deduction u/s 80HHC. The Tribunal upheld the CIT(A)'s stand, following earlier decisions. 11. Credit for MAT for the Purpose of Charging Interest u/s 234B: The CIT(A) held that interest should be charged after adjusting MAT credit, following binding judicial pronouncements. The Tribunal dismissed the revenue's appeal. 12. Disallowance of Puja/Function Expenses: The CIT(A) disallowed the expenses, noting they were not for business purposes. The Tribunal allowed the expenses, following earlier decisions. 13. Disallowance of Consultancy Charges: The CIT(A) held the expenses as capital in nature. The Tribunal allowed the expenses, following earlier decisions. 14. Disallowance of Service Charges: The CIT(A) held the expenses as capital in nature. The Tribunal allowed the expenses, following earlier decisions. 15. Treatment of Interest Income and Truck Hire Charges as Income from Other Sources: The CIT(A) treated these items as income from other sources. The Tribunal remitted the issue back to the AO for re-adjudication, following earlier decisions. 16. Disallowance u/s 35D and Non-Admission of Additional Ground: The CIT(A) declined to admit the additional ground. The Tribunal directed the AO to admit and adjudicate the claim, following the decision in Pruthvi Shares & Stockbrokers Pvt. Ltd. 17. Addition of Unutilized MODVAT Credit: The CIT(A) confirmed the addition. The Tribunal reversed the stand, holding no adjustment was warranted, following earlier decisions. 18. Adjustment of Capital Gain on Sale of Investment u/s 115JB: The CIT(A) added back the gain while computing book profits. The Tribunal confirmed the CIT(A)'s stand, following earlier decisions. 19. Adjustment of Dividend Distribution Tax u/s 115JB: The CIT(A) declined to admit the additional ground. The Tribunal directed the AO to admit and adjudicate the claim, following the decision in Pruthvi Shares & Stockbrokers Pvt. Ltd. 20. Additional Ground of Sales Tax Incentive/Subsidy: The Tribunal admitted the additional ground and remitted it back to the AO for fresh adjudication, following earlier decisions. Conclusion: Both the assessee's and revenue's appeals were partly allowed to the extent indicated in the order. The cross-objection filed by the revenue was dismissed. The AO was directed to recompute the income of the assessee in terms of the Tribunal's adjudication.
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