2004 (6) TMI 589 - AT - Income Tax

Tribunal Partially Allows Revenue's Appeal: Key Deductions and Disallowances Examined, Some Grounds Dismissed and Remanded.

Deputy Commissioner of Income-tax Versus Indian Hotels Co. Ltd.

Deputy Commissioner of Income-tax Versus Indian Hotels Co. Ltd. - [2005] 276 ITR (A. T.) 104, [2005] 92 ITD 97 Issues Involved:1. Disallowance u/r 6B of I.T. Rules2. Deduction for proportionate premium on debentures3. Deduction u/s 32AB on interest income from advances4. Deletion of addition due to concessional interest rate on advances to subsidiary5. Calculation of depreciation on assets with central subsidy6. Deduction u/s 80HHD for services to foreign tourists on business tripsSummary:Disallowance u/r 6B of I.T. Rules:The issue pertains to the deletion of disallowance of Rs. 50,000 made u/r 6B of I.T. Rules. The Tribunal held that the issue stands covered in favor of the assessee by previous judgments, including CIT v. Allana Sons (P.) Ltd., First ITO v. French Dyes & Chemicals I. (P.) Ltd., and CIT v. Indian Aluminium Cables Ltd. Consequently, the Tribunal declined to interfere and dismissed this ground.Deduction for Proportionate Premium on Debentures:The Tribunal found that the issue of allowing deduction for proportionate premium on debentures is covered in favor of the assessee by previous judgments, including Madras Industrial Investment Corpn. Ltd. v. CIT, National Engg. Industries Ltd. v. CIT, and Universal Cables Ltd. v. CIT. Therefore, the Tribunal dismissed this ground.Deduction u/s 32AB on Interest Income from Advances:The Tribunal addressed whether interest income on advances to subsidiaries and other companies should be treated as business profits or income from other sources for deduction u/s 32AB. The CIT(A) had directed to treat the interest as business income, supported by decisions in CIT v. Favre-Leuba & Co. Ltd. and Addl. CIT v. Snam Progetti S.P.A. The Tribunal, however, restored the issue to the Assessing Officer for re-examination in light of the Supreme Court's decision in Apollo Tyres Ltd. v. CIT.Deletion of Addition Due to Concessional Interest Rate on Advances to Subsidiary:The CIT(A) deleted the addition of Rs. 25,11,807 for concessional interest rate on advances to the subsidiary, citing business expediency and commercial prudence. The Tribunal upheld this decision, distinguishing it from other cases like Shankar Theatres v. CIT and Doctor & Co. v. CIT. The Third Member also concurred, emphasizing the business purpose and benefits derived from the advances.Calculation of Depreciation on Assets with Central Subsidy:The Tribunal held that the issue of whether central subsidy should be deducted from the cost/Written Down Value while calculating depreciation is covered in favor of the assessee by judgments in CIT v. P.J. Chemicals Ltd., CIT v. Goving Poy Oxygen-s, and CIT v. Elys Plastic (P.) Ltd. Thus, the Tribunal dismissed this ground.Deduction u/s 80HHD for Services to Foreign Tourists on Business Trips:The Tribunal addressed whether the Assessing Officer was justified in estimating 10% of foreign currency receipts as pertaining to foreigners on business trips and denying the claim u/s 80HHD. The CIT(A) held that the term 'foreign tourists' includes visitors on business trips. The Tribunal agreed, citing Butter Worth's 'Words and Phrases Legally Defined' and noting that the law does not distinguish between business and pleasure trips for foreign tourists. Therefore, the Tribunal dismissed this ground.Conclusion:The appeal filed by the Revenue was allowed in part, with specific issues being dismissed or restored for re-examination as per the detailed judgments.