Tribunal Partly Allows Appeals for AY 1997-98; Assessee's Appeals Allowed for AYs 1998-99 & 1999-00, COs Allowed.

The Tribunal's decision resulted in the appeals for AY 1997-98 being partly allowed for both the AO and the assessee. For AYs 1998-99 and 1999-00, the assessee's appeals were allowed, while the AO's appeals were partly allowed. The assessee's COs for all three AYs were allowed for statistical purposes.

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Issues Involved:
1. Disallowance on account of incremental liability for payment of pension.
2. Disallowance of foreign travelling expenses.
3. Disallowance of entertainment expenses.
4. Disallowance of hotel expenses and airfares of foreign visitors.
5. Reduction of loss on export of trading goods from deduction under section 80HHC.
6. Deduction under section 80-O on net research income.
7. Entitlement to interest under section 244A on Self Assessment tax.
8. Depreciation on assets transferred during demerger.
9. Expenditure incurred on amalgamation/demerger.
10. Disallowance of advertisement and publicity expenses.
11. Expenditure on computer software.
12. Addition on account of estimated freight components in closing stock.
13. Expenditure on transit houses.
14. Exclusion of sales tax and excise duty for computing deduction under section 80HHC.
15. Disallowance on account of expenditure incurred in connection with earning of interest income exempt under section 10(15).
16. Deduction under section 43B on delayed payment of ESIC.

Detailed Analysis:

1. Disallowance on Account of Incremental Liability for Payment of Pension:
The Tribunal referenced its previous decision for AY 1995-96, where it restored the issue back to the AO to verify the actuarial valuation certificate and agreement with the company and employee. The Tribunal directed the AO to allow the claim if the liability was calculated on a scientific basis. Following this precedent, the Tribunal decided the issue in favor of the assessee.

2. Disallowance of Foreign Travelling Expenses:
The Tribunal referred to its decisions for AYs 1991-92 to 1996-97, where it had allowed similar claims. The Tribunal found that the disallowance was made on assumptions and presumptions and directed that the disallowance sustained by the CIT(A) be deleted. Consequently, the Tribunal decided this issue in favor of the assessee.

3. Disallowance of Entertainment Expenses:
The Tribunal followed its previous decision for AY 1995-96, where it had allowed lunch expenses on employees during outdoor duty and business meeting expenses, while confirming a partial disallowance of canteen expenses. The Tribunal directed the AO to allow lunch expenses, business meeting expenses, and AGM expenses fully, while confirming a partial disallowance of canteen expenses. This issue was partly allowed in favor of the assessee.

4. Disallowance of Hotel Expenses and Airfares of Foreign Visitors:
The Tribunal referenced its decision for AY 1996-97, where it had allowed similar claims, stating that the expenses were wholly and exclusively for business purposes. Following this precedent, the Tribunal decided the issue in favor of the assessee.

5. Reduction of Loss on Export of Trading Goods from Deduction under Section 80HHC:
The Tribunal followed the Supreme Court judgment in Ipca Laboratories, which decided the issue in favor of the department. Consequently, the Tribunal decided this issue against the assessee.

6. Deduction under Section 80-O on Net Research Income:
The Tribunal noted that the issue was covered against the assessee by previous decisions, including those of Asian Cable, Petroleum India International, and M.N. Dastur & Co. Thus, the Tribunal decided this issue against the assessee.

7. Entitlement to Interest under Section 244A on Self Assessment Tax:
The Tribunal referenced its decision for AY 1998-99, where it had allowed interest under section 244A on self-assessment tax, following previous Tribunal orders. Consequently, the Tribunal decided this issue in favor of the assessee.

8. Depreciation on Assets Transferred During Demerger:
The Tribunal noted that the assessee did not receive any money from the demerger, and the shareholders received shares in pursuance of the merger. The Tribunal found that the assets were not sold or discarded and reversed the FAA's order, deciding the issue in favor of the assessee.

9. Expenditure Incurred on Amalgamation/Demerger:
The Tribunal referenced the Supreme Court decision in Bombay Dyeing & Mfg. Co. Ltd., which held that such expenditure was revenue in nature and deductible. Respectfully following this decision, the Tribunal decided this issue against the AO.

10. Disallowance of Advertisement and Publicity Expenses:
The Tribunal noted that the issue had been consistently decided in favor of the assessee in previous years and upheld by the Bombay High Court. Consequently, the Tribunal dismissed the AO's ground.

11. Expenditure on Computer Software:
The Tribunal referenced its previous decisions for AYs 1991-92, 1995-96, and 1996-97, where it had treated such expenditure as revenue in nature. Following these precedents, the Tribunal decided this issue against the AO.

12. Addition on Account of Estimated Freight Components in Closing Stock:
The Tribunal followed its previous decisions for AYs 1992-93 to 1996-97, where it had consistently decided the issue in favor of the assessee. Respectfully following these orders, the Tribunal dismissed the AO's ground.

13. Expenditure on Transit Houses:
The Tribunal referenced its decisions for AYs 1991-92 to 1996-97, where it had partly allowed the expenditure on food and beverages while disallowing other expenses. The Tribunal remitted the issue back to the AO for fresh adjudication regarding food and beverages expenses. This issue was partly allowed in favor of the AO.

14. Exclusion of Sales Tax and Excise Duty for Computing Deduction under Section 80HHC:
The Tribunal followed the Supreme Court and Jurisdictional High Court judgments in Sudershan Chemicals Industries Ltd. and Laxmi Machine Works, which held that sales tax and excise duty cannot be included for computing the 80HHC deduction. Respectfully following these judgments, the Tribunal dismissed the AO's ground.

15. Disallowance on Account of Expenditure Incurred in Connection with Earning of Interest Income Exempt under Section 10(15):
The Tribunal noted that the FAA had referred to a previous order for AY 1995-96, where the issue was of deduction under section 80M. The Tribunal decided to restrict the disallowance to 0.05% of the exempt income, deciding the issue partly in favor of the AO.

16. Deduction under Section 43B on Delayed Payment of ESIC:
The Tribunal found that the assessee had paid the dues before the due date of filing the return, with only a one-day delay. The Tribunal saw no need to interfere with the FAA's order, deciding the issue against the AO.

Conclusion:
The appeals filed by the AO and the assessee for AY 1997-98 were partly allowed. The appeals of the assessee for AYs 1998-99 and 1999-00 were allowed, and the appeals of the AO for those years were partly allowed. The COs filed by the assessee for all three AYs were allowed for statistical purposes.

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