2009 (9) TMI 999 - AT - Income Tax

Taxation and Expenses Reviewed: Exchange Fluctuation Deduction Allowed, Expense Disallowances Partially Remanded.

JK Paper Ltd. Versus Assistant Commissioner of Income Tax, Circle 1 (1), Surat.

JK Paper Ltd. Versus Assistant Commissioner of Income Tax, Circle 1 (1), Surat. - TMI Issues Involved:1. Taxation of sum u/s 41(1) of the Income-tax Act, 1961.2. Disallowance of various expenses.3. Deduction of liability on account of exchange fluctuation.4. Disallowance of expenses related to agricultural activities.5. Disallowance under Section 145A.6. Computation of Book Profit for the purposes of Section 115JB.7. Liability to pay interest u/s 234B.8. Penalty proceedings u/s 271(1)(c).Summary Issue-wise:1. Taxation of sum u/s 41(1) of the Income-tax Act, 1961:The assessee's ground relating to taxing a sum of Rs. 3,35,11,413 u/s 41(1) was dismissed as not pressed.2. Disallowance of various expenses:The Tribunal adjudicated several disallowances made by the Assessing Officer (AO) and confirmed or restored some issues for further verification. For instance, the disallowance of Rs. 8,80,315 as overdue interest was restored to the AO to verify if it was offered for taxation in earlier years. Similarly, other disallowances like discounts to debtors, audit recovery, and warehousing charges were either confirmed or restored for further verification based on the details provided.3. Deduction of liability on account of exchange fluctuation:The Tribunal allowed the assessee's claim for deduction of Rs. 32,80,212 on account of exchange fluctuation, holding that the assessee is entitled to this claim as per the decision in Commissioner of Income-tax Vs. Woodward Governor India P. Ltd (2009) 312 ITR 254 (SC).4. Disallowance of expenses related to agricultural activities:The Tribunal held that only the expenses directly related to agricultural operations over the land should be disallowed. Expenses on supervision and other activities not directly related to agricultural operations were allowed. The disallowance was restricted to Rs. 17.17 lakhs out of the total claim of Rs. 316.12 lakhs.5. Disallowance under Section 145A:The Tribunal upheld the addition made by the AO under Section 145A but directed that the modified value of closing stock of the current year be taken as the opening stock of the next year.6. Computation of Book Profit for the purposes of Section 115JB:The Tribunal held that the computation of deduction u/s 80HHC should be based on book profit as per the provisions of the Companies Act, not as per normal provisions of the I.T. Act. It also ruled that no disallowance under Section 14A can be made while computing book profit u/s 115JB. The Tribunal allowed the assessee's claim for deduction of Rs. 1,39,72,192 being the profit eligible for deduction u/s 80HHC.7. Liability to pay interest u/s 234B:The Tribunal held that the provisions of Section 115JB imposed liability for payment of advance tax, and the provisions of sections 234B and 234C for interest on defaults in payment of advance tax and deferment of advance tax would also be applicable to companies governed by section 115JB.8. Penalty proceedings u/s 271(1)(c):The ground relating to penalty proceedings u/s 271(1)(c) was not pressed and hence dismissed.Separate Judgments:There were no separate judgments delivered by the judges in this case.