2009 (9) TMI 962 - AT - Income Tax

Tribunal decisions favor assessee on interest deduction, obsolete stores, and infrastructure charges

The tribunal partly allowed the assessee's appeal, rejecting the disallowance of interest deduction but favoring the assessee on provisions for obsolete ... - Issues Involved:1. Disallowance of deduction for interest.2. Disallowance of provisions for obsolete stores written off.3. Disallowance of prior expenses.4. Treatment of infrastructure charges as capital expenditure.5. Disallowance of deduction for repossession charges.6. Non-specification of carry forward of unabsorbed business losses and depreciation.Summary:1. Disallowance of Deduction for Interest:The assessee's appeal against the disallowance of interest deduction of Rs. 2,40,000 was rejected. The tribunal followed its earlier decisions against the assessee for assessment years 1982-83 to 85-86 and 1995-96, despite the assessee's reference to judgments from the Hon'ble Allahabad High Court. The tribunal noted that appeals are pending before the Hon'ble Delhi High Court and decided the issue against the assessee.2. Disallowance of Provisions for Obsolete Stores Written Off:The tribunal acknowledged that the issue was previously decided against the assessee for the assessment year 2001-02 due to the absence of actual write-off and non-consideration of scrap value. However, the Hon'ble Delhi High Court's judgment in CIT vs. Hotline Tele Tube & Components Ltd. favored the assessee regarding the provision for diminution in stock value. The tribunal restored the matter to the Assessing Officer to ascertain the scrap value of obsolete items and restrict the disallowance accordingly.3. Disallowance of Prior Expenses:The tribunal noted that the assessee claimed Rs. 15.38 lakhs as prior period expenses while offering Rs. 18.78 lakhs as previous year income. The tribunal found no reason to disallow the expenses since the income offered was higher. However, it directed the Assessing Officer to examine the nature of these expenses to determine their allowability, particularly noting some expenses related to penalties and infrastructure.4. Treatment of Infrastructure Charges as Capital Expenditure:The tribunal overturned the disallowance of Rs. 17,91,345 for infrastructure charges, following the Hon'ble Delhi High Court's judgment in CIT vs. Saw Pipe Ltd. It was determined that the service line was the property of the supplier, not the assessee, thus the expenditure was not capital in nature.5. Disallowance of Deduction for Repossession Charges:The tribunal upheld the disallowance of Rs. 12,00,000 for repossession charges, citing judgments from the Hon'ble Calcutta High Court in Chloride India Ltd. vs. CIT and the Hon'ble MP High Court in CIT vs. Lakki Bharat Garage, which classified similar expenses as capital expenditure. The tribunal found the judgments cited by the assessee inapplicable as they pertained to legal expenses.6. Non-Specification of Carry Forward of Unabsorbed Business Losses and Depreciation:The tribunal agreed with the revenue that no specific direction was required for the carry forward of unabsorbed losses and depreciation. If allowed in earlier years, these would automatically be available for set-off in subsequent years within the prescribed period.Conclusion:The appeal of the assessee was partly allowed, with specific directions for reassessment and examination of certain claims. The tribunal's decisions were based on precedents and judgments from higher courts, ensuring adherence to legal principles and factual accuracy.