Assessee's Appeal Partly Allowed, Revenue's Appeal Dismissed. Tribunal Directs AO on Deductions.

The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The Tribunal directed the AO to allow the deductions and depreciation claims as per the findings.

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Issues Involved:
1. Claim under section 80IA of the Act.
2. Disallowance of deduction under section 35D of the Act.
3. Disallowance of deduction under section 37(1) of the Act for provisions of salaries.
4. Disallowance of deduction for provision of OFC charges.
5. Depreciation on new earth stations at Ernakulam and Jalandhar.
6. Depreciation on ownership of FLAG Project.

Issue-wise Detailed Analysis:

1. Claim under section 80IA of the Act:
The assessee's claim under section 80IA for new undertakings commissioned after 1-4-1995 was dismissed. The counsel conceded that similar issues had been decided against the assessee in previous assessment years (1996-97 and 1997-98).

2. Disallowance of deduction under section 35D of the Act:
The assessee's claim for amortization of preliminary expenses under section 35D was dismissed. The counsel did not press this ground as the Revenue had allowed the claim from the assessment year 2000-2001, considering it the first year of eligibility.

3. Disallowance of deduction under section 37(1) of the Act for provisions of salaries:
The assessee's provision for arrears of salary amounting to Rs.40.71 lakhs was disallowed by the Assessing Officer (AO) and confirmed by the CIT(A). The AO argued that the liability was not determinable during the previous year but arose in June 1999. The Tribunal, however, allowed the claim, citing that the liability had a definite origin in the accounting year and was not contingent, following the Supreme Court's decision in Bharat Earth Movers vs. CIT.

4. Disallowance of deduction for provision of OFC charges:
The AO disallowed the provision of Rs.8,44,12,000/- for prior period expenses, which the CIT(A) upheld. The Tribunal reversed this, stating the liability crystallized in the current financial year when the bill was received from DOT, following the Gujarat High Court's decision in Sourashtra Cement and Chemical Industries Ltd. vs. CIT.

5. Depreciation on new earth stations at Ernakulam and Jalandhar:
The AO disallowed the depreciation claim of Rs.5,32,73,618/- on the grounds that the earth stations were not put to commercial use. The CIT(A) allowed the claim, noting the assets were used for trial runs. The Tribunal upheld the CIT(A)'s decision, referencing the Gujarat High Court's decision in ACIT vs. Ashima Syntex Ltd., which allowed depreciation on assets used for trial runs.

6. Depreciation on ownership of FLAG Project:
The AO disallowed the depreciation claim of Rs.9,92,18,603/- on the FLAG Project, arguing it was an intangible right acquired before April 1, 1998. The CIT(A) allowed the claim, stating the assessee was a part owner of the asset. The Tribunal upheld the CIT(A)'s decision, following its earlier ruling in the assessee's case for the assessment year 1997-98.

Conclusion:
The assessee's appeal was partly allowed, and the Revenue's appeal was dismissed. The Tribunal directed the AO to allow the deductions and depreciation claims as per the findings. The order was pronounced in the open Court on 05.12.2012.

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