2014 (4) TMI 1112 - AT - Income Tax

Tribunal's Rulings on Income-tax Act Expenditures: Mix of Allowances and Disallowances

The Tata Iron & Steel Co. Ltd. Versus DCIT Circle 2 (2) Mumbai and vice-versa

The Tata Iron & Steel Co. Ltd. Versus DCIT Circle 2 (2) Mumbai and vice-versa - TMI Issues Involved:1. Expenditure on maintenance of certain buildings.2. Recovery of guest house expenses under Rule 6D.3. Disallowance of AGM expenses.4. Expenditure on business meetings and conferences.5. Disallowance of Tata Steel Rural Development Society expenditure.6. Contributions to Tata Sports Board.7. Contributions to various institutions at Jamshedpur.8. Fees paid to consultants for feasibility studies.9. Right share issue expenses.10. Contributions to Institute for Metal and Mineral Workers.11. Disallowance under Rule 6B for calendars and diaries.12. Disallowance of expenditure on tea and coffee served to visitors.13. Disallowance of expenditure on payments made to clubs.14. Expenditure on partly convertible debenture.15. Foreign travel expenses.16. Expenditure on digging of wells.17. Loss on valuation of foreign currency convertible bonds.18. Provision for leave salary.19. 20% of initial contribution to approved superannuation fund.20. Payment for holiday plan at hotels as guest house expenses.21. Exclusion of sales tax and excise duty for 80HHC deduction.Detailed Analysis:1. Expenditure on Maintenance of Certain Buildings:The Tribunal upheld the disallowance of expenditure on maintenance of certain buildings under Section 37(4) of the Income-tax Act, 1961, following its decision in earlier assessment years (AYs) 1987-88, 1989-90, and 1990-91.2. Recovery of Guest House Expenses Under Rule 6D:The Tribunal decided in favor of the assessee, allowing the deduction of recoveries from parent departments as traveling expenses as per Rule 6D of the Income-tax Rules, 1962, based on earlier Tribunal decisions.3. Disallowance of AGM Expenses:The Tribunal upheld the disallowance of AGM expenses, treating them as entertainment expenditure under Section 37(2A)/37(2), in line with earlier decisions for AYs 1987-88, 1989-90, and 1990-91.4. Expenditure on Business Meetings and Conferences:The Tribunal upheld the disallowance of expenditure on business meetings and conferences, treating them as entertainment expenditure, following its earlier decisions.5. Disallowance of Tata Steel Rural Development Society Expenditure:The Tribunal allowed the expenditure on Tata Steel Rural Development Society, recognizing it as business expenditure, based on its earlier decisions and the Memorandum of Settlement (MOS) with workers.6. Contributions to Tata Sports Board:The Tribunal allowed the contributions to Tata Sports Board as business expenditure, following its earlier decisions in favor of the assessee.7. Contributions to Various Institutions at Jamshedpur:The Tribunal allowed the contributions to various institutions at Jamshedpur, recognizing them as business expenditure, based on its earlier decisions.8. Fees Paid to Consultants for Feasibility Studies:The Tribunal allowed the fees paid to consultants for feasibility studies as revenue expenditure, following its earlier decisions.9. Right Share Issue Expenses:The Tribunal upheld the disallowance of right share issue expenses as capital expenditure, following the Supreme Court decisions in Brooke Bond India Ltd. and Punjab State Industrial Development Corporation Ltd.10. Contributions to Institute for Metal and Mineral Workers:The Tribunal upheld the FAA's order to verify the contributions to the Institute for Metal and Mineral Workers, directing the AO to allow the claim if it was for training employees.11. Disallowance Under Rule 6B for Calendars and Diaries:The Tribunal upheld the disallowance of expenditure on calendars and diaries under Rule 6B, following its earlier decisions.12. Disallowance of Expenditure on Tea and Coffee Served to Visitors:The Tribunal directed the AO to restrict the disallowance to 25% of the expenditure on tea and coffee served to visitors, following its earlier decisions.13. Disallowance of Expenditure on Payments Made to Clubs:The Tribunal upheld the disallowance of expenditure on payments made to clubs as entertainment expenditure, following its earlier decisions.14. Expenditure on Partly Convertible Debenture:The Tribunal allowed the expenditure on partly convertible debentures as revenue expenditure, following the Rajasthan High Court decision in Secure Meters.15. Foreign Travel Expenses:The Tribunal upheld the FAA's order for AY 1994-95, disallowing part of the foreign travel expenses due to lack of evidence of employee participation, but allowed the expenses for AY 1995-96, recognizing employee participation.16. Expenditure on Digging of Wells:The Tribunal allowed the expenditure on digging of wells as business expenditure, recognizing it as part of the MOS with workers.17. Loss on Valuation of Foreign Currency Convertible Bonds:The Tribunal allowed the loss on valuation of foreign currency convertible bonds as revenue expenditure, following the Supreme Court decision in Woodward Governor India P. Ltd.18. Provision for Leave Salary:The Tribunal upheld the FAA's order allowing the provision for leave salary, following its earlier decisions and the Supreme Court decision in Bharat Earthmovers Ltd.19. 20% of Initial Contribution to Approved Superannuation Fund:The Tribunal upheld the FAA's order allowing the entire initial contribution to the approved superannuation fund, following its earlier decisions and the Supreme Court decision in Sirpur Paper Mills.20. Payment for Holiday Plan at Hotels as Guest House Expenses:The Tribunal upheld the FAA's order allowing the payment for holiday plan at hotels as guest house expenses, following its earlier decisions.21. Exclusion of Sales Tax and Excise Duty for 80HHC Deduction:The Tribunal decided in favor of the assessee, excluding sales tax and excise duty from total turnover for 80HHC deduction, following the Supreme Court decisions in Catapharma (India) P. Ltd. and Lakshmi Machine Works.Conclusion:The Tribunal's decisions largely followed precedents set in earlier years and higher court rulings, resulting in a mix of allowances and disallowances for the assessee's claims. The appeals filed by the assessee were partly allowed, while the appeals of the AO were dismissed.