2012 (8) TMI 989 - AT - Income Tax

Tribunal decisions favor assessee on key tax issues, upholding capital expenditure treatment & deductions

Grasim Industries Ltd. Versus Dy. Commr of Income Tax, Circle 6 (3), Mumbai

The Tribunal ruled in favor of the assessee on various issues, upholding the treatment of legal and professional charges as capital expenditure, allowing ... Expenditure incurred towards legal and professional charges - revenue or capital - Disallowance u/s 43B- Interest on cess I duty/rent/tax - Disallowance u/s 43B - Royalty and interest thereon - 'Contribution to State Govt - Interest received from Income Tax Department - Deduction u/s 800 - Deduction u/s 80 HHC - Interest on securities - Deduction u/s 801A - Debenture Redemption Premium - interest under section 244-A on the refund out of self-assessment tax on the date of payment - disallowance of project expenses - depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tankt - depreciation on shops at Bhiwani - depreciation on false ceiling - proportionate premium payable on redemption of bonds - remuneration paid to Lady Employees - foreign travelling expenses - legal charges in connection with land matter - disallowance u/s 43B (b)(c) and (d) - expenditure on rural development and medical help - exclusion of excise duty and sales tax from total turnover for the purpose of deduction u/s 80HHC - disallowance of profits of the USA branch of M/s Birla consultancy and software services - disallowance u/s 80I/80IA - disallowance of interest u/s 36(1) - disallowance u/s 40A(3) - development allowance on the increased cost of PandM due to exchange fluctuation - exchange fluctuation loss Issues Involved:1. Legal and Professional Charges as capital in nature.2. Disallowance u/s 43B- Interest on cess/duty/rent/tax.3. Disallowance u/s 43B - Royalty and interest thereon.4. Contribution to State Govt.5. Interest received from Income Tax Department.6. Deduction u/s 80-O.7. Deduction u/s 80 HHC.8. Interest on securities.9. Deduction u/s 80IA.10. Debenture Redemption Premium.11. Sales tax exemption benefit.12. Interest u/s 244A on refund arising out of self-assessment tax.13. Depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tank.14. Depreciation on shops at Bhiwani.15. Depreciation on false ceiling.16. Proportionate premium payable on redemption of bonds.17. Remuneration paid to Lady Employees.18. Foreign travelling expenses.19. Legal charges in connection with land matter.20. Disallowance u/s 43B (b)(c) and (d).21. Disallowance of project expenses.22. Other expenses.23. Rural development and medical help.24. Disallowance u/s 80I/80IA.25. Exclusion of excise duty and sales tax from total turnover for the purpose of deduction u/s 80HHC.26. Disallowance of interest u/s 36(1).27. Disallowance u/s 40A(3).28. Disallowance of profits of the USA branch of M/s Birla consultancy and software services.29. Development allowance on the increased cost of Plant and Machinery due to exchange fluctuation.30. Deduction u/s 80IA to Vikram Power Unit.31. Exchange rate fluctuation loss.Issue-Wise Detailed Analysis:1. Legal and Professional Charges as capital in nature:The Tribunal upheld the CIT(A)'s decision treating legal and professional charges as capital expenditure, following the precedent set in previous assessment years.2. Disallowance u/s 43B - Interest on cess/duty/rent/tax:The Tribunal allowed the assessee's claim for interest on welfare cess, electricity duty, surface rent, and service tax, referencing previous decisions in the assessee's favor.3. Disallowance u/s 43B - Royalty and interest thereon:The Tribunal ruled in favor of the assessee, stating that royalty and interest cannot be disallowed under section 43B, following earlier Tribunal decisions and the Supreme Court's judgment in the Kesoram Industries case.4. Contribution to State Govt.:The Tribunal allowed the assessee's claim, treating the contribution to the State Government for constructing a regulator-cum-bridge as revenue expenditure, consistent with previous decisions.5. Interest received from Income Tax Department:The Tribunal upheld the CIT(A)'s decision to tax interest received from the Income Tax Department in the year it was granted, with a provision to reduce the amount if subsequently withdrawn.6. Deduction u/s 80-O:The Tribunal allowed the assessee's claim for deduction under section 80-O without reducing allocated head office expenses, following earlier decisions.7. Deduction u/s 80 HHC:The Tribunal directed the AO to compute the deduction under section 80 HHC for the company as a whole, excluding inter-unit/inter-divisional transfers from the total turnover, following the Supreme Court's decision in ACG Associated Capsules.8. Interest on securities:The Tribunal ruled in favor of the assessee, stating that interest notionally computed on securities should not be taxed if it had not accrued, referencing the Madras High Court's decision in Tamil Nadu Mercantile Bank Ltd.9. Deduction u/s 80IA:The Tribunal allowed the assessee's claim for deduction under section 80IA for Vikram Power Unit, following earlier decisions and the jurisdictional High Court's ruling in Paul Brothers.10. Debenture Redemption Premium:The Tribunal dismissed the assessee's claim for debenture redemption premium as it had been allowed proportionately in earlier years.11. Sales tax exemption benefit:The Tribunal remitted the issue of treating sales tax exemption benefit as a capital receipt to the AO for examination, following the Delhi High Court's decision in Jai Parabolic Springs Ltd.12. Interest u/s 244A on refund arising out of self-assessment tax:The Tribunal remitted the issue to the AO for consideration in light of the Karnataka High Court's decision in Vijaya Bank and the Delhi High Court's decision in Sutlej Industries Ltd.13. Depreciation on Intake Well, Telphers, Storage Tank, Lagoon Tank, Effluent Tank:The Tribunal upheld the CIT(A)'s decision to allow depreciation on these items as plant, following earlier Tribunal decisions.14. Depreciation on shops at Bhiwani:The Tribunal allowed depreciation on shops at Bhiwani, consistent with earlier Tribunal decisions.15. Depreciation on false ceiling:The Tribunal upheld the decision to allow depreciation on false ceiling as plant, following earlier Tribunal decisions.16. Proportionate premium payable on redemption of bonds:The Tribunal allowed the assessee's claim for proportionate premium payable on redemption of bonds, following the Supreme Court's decision in Madras Industrial Investment Corporation Ltd. v. CIT.17. Remuneration paid to Lady Employees:The Tribunal allowed the remuneration paid to lady employees, following the principle of consistency from earlier years.18. Foreign travelling expenses:The Tribunal allowed foreign travel expenses related to business but disallowed expenses where the purpose was not substantiated.19. Legal charges in connection with land matter:The Tribunal upheld the disallowance of legal charges related to land acquisition, treating them as capital expenditure, consistent with earlier decisions.20. Disallowance u/s 43B (b)(c) and (d):The Tribunal directed the AO to follow earlier decisions and allow the claims if payments were made within the grace period provided under the concerned statute.21. Disallowance of project expenses:The Tribunal allowed the assessee's claim for project expenses, treating them as revenue expenditure, following earlier decisions.22. Other expenses:The Tribunal allowed expenses related to helps to employees and contributions to local organizations but disallowed literary help to journalists.23. Rural development and medical help:The Tribunal allowed claims for rural development and medical help expenses, consistent with the Supreme Court's decision in Srivenkat Satyanarayan.24. Disallowance u/s 80I/80IA:The Tribunal allowed the assessee's claim, rejecting the revenue's contention of reducing head office expenses from profits.25. Exclusion of excise duty and sales tax from total turnover for the purpose of deduction u/s 80HHC:The Tribunal directed the AO to exclude excise duty and sales tax from total turnover, following the Supreme Court's decision in Laxmi Machines Works.26. Disallowance of interest u/s 36(1):The Tribunal allowed the assessee's claim for interest on borrowed capital, following the Supreme Court's decision in Core Health Care Ltd.27. Disallowance u/s 40A(3):The Tribunal upheld the disallowance of cash payments exceeding the prescribed limit, consistent with earlier decisions.28. Disallowance of profits of the USA branch of M/s Birla consultancy and software services:The Tribunal allowed the assessee's claim, stating that the profits of the USA branch are not taxable in India under the Indo-USA DTAA.29. Development allowance on the increased cost of Plant and Machinery due to exchange fluctuation:The Tribunal dismissed the issue as it did not arise from the CIT(A)'s order.30. Deduction u/s 80IA to Vikram Power Unit:The Tribunal allowed the deduction, following the jurisdictional High Court's decision in Paul Brothers.31. Exchange rate fluctuation loss:The Tribunal allowed the claim for exchange rate fluctuation loss, following the Supreme Court's decision in Wood Ward Governor India P Ltd.Conclusion:The Tribunal's decisions largely followed precedents set in earlier years and higher court rulings, ensuring consistency and adherence to judicial principles.