Tribunal's Decision on Tax Appeals: Partial success for appellant, with specific directions and limitations.

The tribunal partly allowed the appellant's appeals, providing detailed reasoning and directions for various issues raised. The disallowance of provision for expenses in AY 2004-05 and AY 2005-06 was upheld due to lack of evidence. A 2% disallowance of exempt income under section 14A was agreed upon. The disallowance of deduction under section 80-HHC was restricted to a specific amount. The tribunal directed that the disallowance for earning exempt income under section 14A while computing income under section 115JB should not exceed the amount already disallowed. The issue of deduction of eligible profits under section 80-HHC was remitted for re-examination. The taxation of provision of expenses reversed from earlier years was to be verified by the Assessing Officer to avoid double taxation.

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Issues involved:
1. Disallowance of provision for expenses in AY 2004-05 and AY 2005-06.
2. Restriction of disallowance u/s. 14A of the Act.
3. Disallowance of deduction u/s. 80-HHC of the Act.
4. Disallowance of expenses for earning exempt income u/s. 14A while computing income u/s. 115JB of the Act.
5. Disallowance of deduction of eligible profits u/s. 80-HHC of the Act while computing income u/s. 115JB of the Act.
6. Taxation of provision of expenses reversed from earlier years.

Detailed Analysis:
1. The first issue pertains to the disallowance of provision for expenses in AY 2004-05 and AY 2005-06. The appellant contested the disallowance on the grounds of following a mercantile system of accounting and making provisions on an accrual basis. However, the tribunal dismissed the grounds of the appellant citing lack of supporting evidence and failure to prove the accrual of expenses. Consequently, the issue was dismissed for both years.

2. The next issue concerns the restriction of disallowance u/s. 14A of the Act. The appellant argued that Rule 8D was not applicable in the assessment years in question and requested a reasonable disallowance. Both parties agreed to a 2% disallowance of exempt income, which the tribunal directed the Assessing Officer to recompute accordingly.

3. Moving on to the disallowance of deduction u/s. 80-HHC of the Act, the tribunal referred to previous orders in the appellant's case for AY 2003-04. The issue was found to be covered against the appellant, and the tribunal upheld the CIT(A)'s decision to restrict the disallowance to a specific amount, as conceded by the appellant.

4. Regarding the disallowance of expenses for earning exempt income u/s. 14A while computing income u/s. 115JB of the Act, the tribunal directed that the disallowance should not exceed the amount already disallowed u/s. 14A. The appellant's argument to restrict the disallowance was accepted by the tribunal.

5. The issue of disallowance of deduction of eligible profits u/s. 80-HHC of the Act while computing income u/s. 115JB was raised, and the tribunal referred to previous orders, setting aside the matter for re-examination by the Assessing Officer in line with the decision of the Apex Court.

6. Lastly, the taxation of provision of expenses reversed from earlier years was discussed. The tribunal directed the Assessing Officer to verify whether these provisions had been taxed in earlier years. If taxed, the reversed provisions should not be taxed again. The issue was remitted back to the Assessing Officer for verification.

In conclusion, the tribunal partly allowed the appellant's appeals for statistical purposes, providing detailed reasoning and directions for each issue raised.

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