2014 (1) TMI 188 - AT - Income Tax

Assessee's Appeal Partly Allowed for Statistical Purposes, Disallowances Upheld or Remanded

M/s Housing & Urban Development Corporation Limited (HUDCO) Versus Additional Commissioner of Income Tax

M/s Housing & Urban Development Corporation Limited (HUDCO) Versus Additional Commissioner of Income Tax - TMI Issues Involved:1. Disallowance of Rs. 35,57,615/- being reversal of income.2. Disallowance of Rs. 1,45,00,000/- as prior period expenditure.3. Disallowance of Rs. 15,53,43,413/- being interest accrued but not due on foreign loans.4. Disallowance of Rs. 17,79,63,672/- being financial charges written off.5. Disallowance of Rs. 1,32,822/- being depreciation in respect of assets added to the block after 30.09.2001.6. Disallowance of Rs. 500/- being fee for raising share capital.7. Disallowance of Rs. 38,81,222/- being depreciation on estimated increase in cost of properties.8. Disallowance of Rs. 61,000/- being disallowance u/s 14A.Detailed Analysis:1. Disallowance of Rs. 35,57,615/- being reversal of income:The assessee reversed the income of Rs. 35,57,615/- credited on account of overhead charges on the Andrews Ganj project, arguing that overhead charges were not applicable to general pool accommodation. The Assessing Officer (AO) and the CIT(A) did not accept this explanation, stating that the minutes of the meeting indicated that administrative and overhead charges of 1.5% were applicable to the computed cost of the entire project, including general pool accommodation. The Tribunal upheld the lower authorities' decision, finding no justification to interfere with their orders.2. Disallowance of Rs. 1,45,00,000/- as prior period expenditure:The assessee claimed prior period expenses amounting to Rs. 1,45,00,000/-, which included various expenses such as traveling, rates and taxes, repairs, maintenance, and stamp duty charges. The AO and CIT(A) disallowed these expenses, stating that the assessee, following the mercantile system of accounting, failed to establish that these expenses crystallized during the year under consideration. The Tribunal set aside the orders of the lower authorities and remanded the matter back to the AO for fresh examination, directing the assessee to furnish complete details and explanations regarding the crystallization of these expenses.3. Disallowance of Rs. 15,53,43,413/- being interest accrued but not due on foreign loans:The Tribunal found this issue to be covered in favor of the assessee by its own decisions in previous assessment years. The Tribunal cited the decision in the assessee's case for AY 2000-01 & 2001-02, where it was held that interest accruing on foreign currency loans is deductible even if not yet payable, as the liability had crystallized. The Tribunal directed the AO to allow the deduction of interest accrued on such foreign loans.4. Disallowance of Rs. 17,79,63,672/- being financial charges written off:The Tribunal noted that this issue was also covered in favor of the assessee by its previous orders. The Tribunal had earlier restored similar issues to the AO for fresh examination, considering relevant judicial decisions. Following the precedent, the Tribunal set aside the issue to the AO with directions to decide afresh, ensuring adequate opportunity for the assessee to be heard.5. Disallowance of Rs. 1,32,822/- being depreciation in respect of assets added to the block after 30.09.2001:The Tribunal found this issue to be covered by its previous decision in the assessee's own case, where it was held that depreciation on books is allowable at 60% for non-professionals and non-lending libraries. The Tribunal directed the AO to allow depreciation at 60%.6. Disallowance of Rs. 500/- being fee for raising share capital:This ground was not pressed by the assessee during the hearing, and accordingly, it was rejected.7. Disallowance of Rs. 38,81,222/- being depreciation on estimated increase in cost of properties:The Tribunal held that depreciation should be allowed on the actual cost of assets, not on an estimated increase in their value. The Tribunal found no infirmity in the AO's order disallowing depreciation on the estimated increase in the cost of properties.8. Disallowance of Rs. 61,000/- being disallowance u/s 14A:The Tribunal found this issue to be covered by the decision of the Hon'ble Jurisdictional High Court in the case of Maxopp Investment Ltd. & Ors. Vs. CIT. The Tribunal set aside the orders of the lower authorities and remanded the matter to the AO for readjudication in light of the High Court's decision.Conclusion:The appeal of the assessee was partly allowed for statistical purposes, with several issues remanded to the AO for fresh consideration and others upheld or dismissed based on precedents and established legal principles. The decision was pronounced in open court on 20th December 2013.