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of <h1>Appellant's Appeal Partially Allowed: Guest House Expenses Disallowed, Compensation Claim Approved</h1> <h3>Finolex Cables Limited Versus Deputy Commissioner of Income Tax, Central Circle – 1 (2), Pune</h3> Finolex Cables Limited Versus Deputy Commissioner of Income Tax, Central Circle – 1 (2), Pune - TMI Issues:1. Disallowance of Guest House Expenses.2. Eligibility of compensation towards sale price of cable for claiming deduction u/s. 80IA.Issue 1: Disallowance of Guest House Expenses:The appellant contested the disallowance of Rs. 9,40,919 on account of Guest House Expenses. The Assessing Officer disallowed the claim in the second round, following which the appellant appealed. The appellant's representative admitted that certain expenses claimed were not allowable based on a Supreme Court decision. However, he argued for the allowance of expenses related to telephone, electricity, and other expenses. The Tribunal referred to the Britannia Industries Ltd. case, emphasizing that expenses related to guest houses are generally not allowable. The Tribunal upheld the disallowance of the guest house expenses, including those for telephone, electricity, and other charges.Issue 2: Eligibility of compensation towards sale price of cable for claiming deduction u/s. 80IA:The appellant claimed compensation of Rs. 18,47,51,188 for delayed payments from the Department of Telecommunication (DOT) as part of deferred sales. The Assessing Officer and Commissioner of Income Tax (Appeals) disallowed the claim, stating that the compensation was interest income on deferred sales, not eligible for deduction under section 80IA. The appellant argued that similar income was considered in a subsequent assessment year. The Tribunal analyzed the agreement with DOT, noting that the interest received was part of equated quarterly installments, directly related to the appellant's business activities. Consequently, the compensation received for deferred payments was considered 'derived' from business activities, making the appellant eligible for deduction under section 80IA. Therefore, the Tribunal allowed the appellant's claim regarding the compensation amount.In conclusion, the Tribunal partially allowed the appellant's appeal, disallowing the guest house expenses but allowing the claim for compensation received from the Department of Telecommunication for deferred payments under section 80IA. The general issue raised in ground No. 3 required no adjudication.
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