Tribunal decision on appeal: Disallowance reduced, some upheld.

The Tribunal allowed the assessee's appeal partly, directing the deletion of ad-hoc disallowance and disallowance of depreciation and finance cost, while upholding the disallowance under Section 14A. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of additions for liasoning and survey fees.

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Issues Involved:
1. Ad-hoc disallowance of Rs. 1,93,72,170 from expenditure under "cargo handling, labour and transport charges."
2. Disallowance of depreciation of Rs. 2,53,39,773 claimed on windmill at Rajasthan.
3. Disallowance of finance cost amounting to Rs. 11,101 on account of interest paid on term loan.
4. Disallowance of Rs. 19,552 under Section 14A read with Rule 8D.
5. Addition of Rs. 1,05,84,936 against the liasoning fees paid to M/s. Sahadev Projects Pvt. Ltd.
6. Addition of Rs. 53,17,741 against the survey fees paid.

Detailed Analysis:

1. Ad-hoc Disallowance from Cargo Handling, Labour, and Transport Charges:
The assessee argued that the disallowance was based on assumptions without evidence. The AO applied a net profit rate of 17% based on a survey conducted in a subsequent year, which the CIT(A) partly agreed with but made an ad-hoc disallowance of 5% to Rs. 1,93,72,170. The Tribunal found that the AO's estimation was incorrect as it was based on mid-year data and not on defects in the books of accounts. The Tribunal also noted that the statements of labour contractors were not relevant to the assessment year in question. Therefore, the Tribunal directed the AO to delete the ad-hoc disallowance.

2. Disallowance of Depreciation on Windmill:
The AO disallowed depreciation on the windmill, claiming it was not operational during the year. The assessee provided evidence of power generation and invoices raised in March 2010. The Tribunal found that the windmill was commissioned and operational within the financial year and directed the AO to allow the depreciation claim.

3. Disallowance of Finance Cost:
The AO disallowed the finance cost related to the windmill project, which was linked to the disallowed depreciation. The Tribunal, having allowed the depreciation, also directed the AO to allow the finance cost of Rs. 11,101.

4. Disallowance under Section 14A:
The AO made a disallowance of Rs. 19,552 under Section 14A read with Rule 8D for the dividend income of Rs. 35,800. The Tribunal found the disallowance reasonable as the assessee did not demonstrate that no expenditure was attributable to earning the exempt income. Thus, the disallowance was upheld.

5. Addition of Liasoning Fees:
The AO disallowed 50% of the liasoning fees paid to M/s. Sahadev Projects Pvt. Ltd., claiming it was excessive. The CIT(A) deleted the addition, noting that the services were rendered under a written agreement, payments were made through cheques, and TDS was deducted. The Tribunal upheld the CIT(A)'s decision, finding no evidence of excessive payment or non-genuine transactions.

6. Addition of Survey Fees:
The AO disallowed survey fees based on a telephonic conversation. The CIT(A) deleted the addition, noting that payments were made through cheques, TDS was deducted, and service tax was paid. The Tribunal upheld the CIT(A)'s decision, finding the AO's basis for disallowance unsustainable.

Conclusion:
The Tribunal allowed the assessee's appeal partly, directing the deletion of ad-hoc disallowance and disallowance of depreciation and finance cost, while upholding the disallowance under Section 14A. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of additions for liasoning and survey fees.

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