Tribunal dismisses appeal for 1999-2000, partly allows others. Various expenditures upheld/modified. Order pronounced on June 12, 2018.

The Tribunal dismissed the appeal for the assessment year 1999-2000 and partly allowed appeals for other years for statistical purposes. The disallowance of various expenditures, including share issue expenditure, interest income, prior period expenditure, lease rent deposits, software expenditure, improvement of leasehold property, and denial of deduction claims under different sections, was upheld or modified based on the evidence provided by the assessee. The order was pronounced on June 12, 2018, at Chennai.

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Issues Involved:
1. Disallowance of share issue expenditure.
2. Disallowance of interest income for deduction computation u/s.80HHE.
3. Disallowance of prior period expenditure.
4. Disallowance of lease rent deposits written off.
5. Disallowance of software expenditure as revenue outgo.
6. Disallowance of expenditure for improvement of leasehold property.
7. Disallowance of gratuity payments to LIC.
8. Non-exclusion of items deducted from export turnover from total turnover for deduction u/s.10A.
9. Denial of deduction claim u/s.10A for STPI units after setting off losses.

Detailed Analysis:

1. Disallowance of Share Issue Expenditure:
The Tribunal upheld the disallowance of share issue expenditure claimed by the assessee under Section 35D of the Income Tax Act, 1961, due to the assessee's inability to provide evidence that the funds from increased share capital were used for extending its industrial undertaking or setting up a new industrial unit. This decision was consistent across multiple assessment years (1999-2000, 2003-04, and 2004-05).

2. Disallowance of Interest Income for Deduction Computation u/s.80HHE:
The Tribunal dismissed the assessee's claim that interest earned on fixed deposits for meeting margin requirements for LOC and bank guarantees should be considered business income eligible for deduction under Section 80HHE. The assessee failed to substantiate this claim with proper evidence.

3. Disallowance of Prior Period Expenditure:
The Tribunal upheld the disallowance of prior period expenditure, noting that the expenditure did not relate to the assessment year in question. The assessee's argument that such expenditure should be allowed in the earlier years was rejected, as claims should have been filed in the respective years.

4. Disallowance of Lease Rent Deposits Written Off:
The Tribunal upheld the disallowance of lease rent deposits written off, stating that the amount written off was not a trading debt nor money lent in the ordinary course of business. The assessee failed to demonstrate that the rental deposits pertained to any lease which had not materialized.

5. Disallowance of Software Expenditure as Revenue Outgo:
The Tribunal upheld the classification of software expenditure as capital outgo rather than revenue outgo due to the assessee's failure to provide evidence of the nature of the software expenses. However, the Tribunal allowed depreciation at the rate applicable for computers.

6. Disallowance of Expenditure for Improvement of Leasehold Property:
The Tribunal upheld the disallowance of expenditure claimed for the improvement of leasehold property, as the assessee could not provide evidence to prove that the expenditure was for temporary structures. This decision was consistent across multiple assessment years (2003-04, 2007-08, and 2008-09).

7. Disallowance of Gratuity Payments to LIC:
The Tribunal allowed the deduction for gratuity payments made to LIC under a scheme for ensuring gratuity to employees, noting that the payments were not provisions but actual payments under the gratuity scheme. This decision was consistent across multiple assessment years (2003-04, 2004-05, and 2007-08).

8. Non-Exclusion of Items Deducted from Export Turnover from Total Turnover for Deduction u/s.10A:
The Tribunal directed the Assessing Officer to rework the deduction available to the assessee under Section 10A, ensuring parity between export turnover and total turnover, in line with the judgments of the Karnataka High Court and the Supreme Court.

9. Denial of Deduction Claim u/s.10A for STPI Units after Setting Off Losses:
The Tribunal directed the Assessing Officer to allow the deduction under Section 10A on a stand-alone basis without setting off losses from other units, in line with the Supreme Court's judgment in the case of Yokogawa India Ltd. This decision was consistent across multiple assessment years (2007-08 and 2008-09).

Summary of Results:
The appeal of the assessee for the assessment year 1999-2000 was dismissed, whereas appeals for all other years were partly allowed for statistical purposes. The order was pronounced on June 12, 2018, at Chennai.

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