Appeal allowed for statistical purposes. Assessee contests disallowance of various deductions. CIT(A) directed to reconsider.

The appeal was allowed for statistical purposes. The disallowance of amortization of investments under the 'Head to Maturity' category, disallowance under section 14A of the Income-tax Act, employees' contribution to Provident Fund, contingent liability relating to employees compensation expenses, capital expenditure on purchase of software, loss on acquisition of land, depreciation on leased assets, deduction under section 80M, and interest under section 234D were all contested by the assessee. The CIT(A) was directed to pass an order on merit except for grounds considered by the CIT in the revision order under section 263.

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Issues involved: Appeal against common order of CIT(A) for assessment years 2003-04 and 2004-05.

Amortisation of investments under 'Head to Maturity' category:
- Assessee challenged disallowance of Rs.3,13,61,004 as amortization of investments.
- Claimed investments under 'Held to Maturity' category represent stock-in-trade, hence amortization is expenditure.
- Referred to Bangalore Tribunal decision in own case for AY 1993-94 where similar claim allowed.

Disallowance under section 14A of the Income-tax Act, 1961:
- Disallowance of Rs.3,22,65,853 as estimated expenditure attributable to exempt income.
- Contended all investments funded by own funds, no specific expenditure for earning income.

Employees' contribution to Provident Fund:
- Disallowance of Rs.6,45,560 for employees' PF contribution.
- Submitted contribution made before due date for filing return, no addition required.

Contingent liability relating to employees compensation expenses:
- Disallowance of Rs.19,32,385 for employee compensation expenses under ESOS.
- Claimed treatment as per SEBI guidelines, not contingent liability but allowable revenue expenditure.
- Cited Madras Tribunal decision supporting allowance as revenue expenditure.

Capital expenditure on purchase of software:
- Disallowance of Rs.4,75,61,599 for software purchase treated as capital expenditure.
- Argued software doesn't provide enduring benefit, should be revenue expenditure.
- Referred to judicial decisions supporting treatment as revenue expenditure.

Loss on acquisition of land:
- Disallowance of Rs.1,05,73,978 for land portion written off.
- Asserted as business loss, allowable revenue expenditure u/s 37 of the Act.

Depreciation on leased assets:
- Disallowance of Rs.45,11,260 as depreciation on leased assets.
- Mentioned valuation report by departmental valuation officers for assessment years 1994-95 to 1997-98.

Deduction under section 80M:
- Reduction of Rs.6,45,800 from deduction claimed under section 80M.
- Contended no actual expenditure incurred for earning dividend income, adjustment unjustified.
- Cited Calcutta High Court decision on allowance of relief under section 80M.

Interest under section 234D:
- Levying of Rs.35,64,327 interest under section 234D of the Act.

Separate Judgement:
- Learned CIT passed order under section 263 disallowing certain claims while appeal was pending before CIT(A).
- CIT(A) directed to pass order on merit except for grounds considered by CIT in revision order under section 263.
- Appeals allowed for statistical purposes.

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