Appeal allowed for A.Y. 2004-05 & partly for 2005-06, remanding deduction under section 80IB. Disallowances upheld.

The appeal for A.Y. 2004-05 was allowed for statistical purposes, remanding the deduction under section 80IB to the AO for fresh consideration. For A.Y. 2005-06, the appeal was partly allowed for statistical purposes, remanding the deduction under section 80IB for fresh consideration. The disallowances under sections 36(1)(va) and 36(1)(iii) were upheld in favor of the assessee.

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Issues Involved:
1. Disallowance of assessee's claim for deduction under section 80IB of the Income Tax Act, 1962 for Karaikal Unit.
2. Disallowance made under section 36(1)(va) on account of delayed deposit of employees' contribution to PF/ESIC.
3. Disallowance of interest attributable to borrowed funds utilized for acquiring office premises.

Detailed Analysis:

1. Disallowance of Deduction under Section 80IB for Karaikal Unit:
- The main issue was whether the Karaikal Unit, purchased by the assessee from EID Parry (India) Ltd., was eligible for deduction under section 80IB of the Income Tax Act, 1962.
- The assessee claimed the unit was eligible for the deduction as it was established in 1996 and was in its 9th year of operation.
- The AO disallowed the claim, noting that there was no evidence that EID Parry (India) Ltd. had claimed the deduction in prior years, and the assessee failed to prove the unit's eligibility.
- The CIT(A) allowed the claim, stating that the unit was purchased as a running concern and met the conditions of section 80IB.
- The Tribunal observed that eligibility must be established with reference to the initial year and the onus was on the assessee to provide relevant documentary evidence. The matter was remanded to the AO for fresh consideration with specific directions to provide the assessee with an opportunity to furnish the required evidence.

2. Disallowance under Section 36(1)(va) on Account of Delayed Deposit of Employees' Contribution to PF/ESIC:
- The issue involved the disallowance of employees' contribution to PF/ESIC deposited beyond the due date but within the grace period.
- The CIT(A) deleted the disallowance, relying on judicial precedents which held that the due date under the relevant Act includes the grace period.
- The Tribunal upheld the CIT(A)'s decision, following the judicial pronouncements of the Hon'ble Kerala High Court and Hon'ble Madras High Court, and dismissed the Revenue's ground on this issue.

3. Disallowance of Interest Attributable to Borrowed Funds Utilized for Acquiring Office Premises:
- The AO disallowed the interest attributable to the borrowed funds used for acquiring office premises, stating that the premises had not been put to use during the year and capitalized the interest.
- The CIT(A) deleted the disallowance, noting that the office premises were acquired for the existing business and not for the extension of the business, thus the proviso to section 36(1)(iii) was not applicable.
- The Tribunal agreed with the CIT(A), emphasizing that the allowability of interest expenditure is governed by section 36(1)(iii) and since the asset was acquired for the existing business, the interest was allowable as revenue expenditure. The Tribunal dismissed the Revenue's ground on this issue.

Conclusion:
- The appeal for A.Y. 2004-05 was allowed for statistical purposes, with the matter remanded to the AO for fresh consideration of the deduction under section 80IB.
- The appeal for A.Y. 2005-06 was partly allowed for statistical purposes, with the deduction under section 80IB remanded for fresh consideration, while the disallowances under sections 36(1)(va) and 36(1)(iii) were upheld in favor of the assessee.

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