Tribunal Ruling: Partial Appeal Success, Deductions Allowed, Recomputation Ordered

The tribunal partly allowed the appeal regarding the disallowance of preliminary expenses under Section 35D(2), confirming them as capital expenses. The disallowance of late payments of Employees' contribution to Provident Fund under Section 2(24)(x) was upheld. However, the tribunal allowed the deduction under Section 80IB, including profits from a windmill unit, and directed the AO to recompute the total income based on the revised return for the assessment year 2011-12. The appeals were decided on 24/01/2019, with one allowed for statistical purposes.

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Issues Involved:
1. Disallowance of preliminary expenses under Section 35D(2).
2. Disallowance of late payments of Employees' contribution to Provident Fund under Section 2(24)(x).
3. Re-computation and disallowance of deduction under Section 80IB.
4. Disallowance of deduction under Section 80IB(5) for Windmill business.
5. Rejection of claim under Section 80IB due to non-filing of revised return.

Detailed Analysis:

Ground No. 1: Disallowance of Preliminary Expenses under Section 35D(2)
The assessee, engaged in the business of manufacturing Vitrified Tiles, claimed Rs. 1,13,068 as preliminary expenses written off, which was disallowed by the Assessing Officer (AO) and confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The expenses were related to ROC charges for increasing share capital, deemed as capital expenses, not deductible as revenue expenses. The decision was supported by the Supreme Court ruling in Brooke Bond India vs. CIT (225 ITR 798) and the Gujarat High Court in M/s. Vareli Textile Ltd. (284 ITR 238). The tribunal upheld the disallowance, confirming it as a capital expenditure not eligible for deduction under Section 35D.

Ground No. 2: Disallowance of Late Payments of Employees' Contribution to Provident Fund under Section 2(24)(x)
The AO disallowed Rs. 55,776 due to late payment of employees' PF contributions, treating it as income under Section 2(24)(x). The CIT(A) upheld this disallowance. The assessee argued that similar disallowances in previous years were deleted by CIT(A). However, the tribunal noted that the payments were made beyond the due dates prescribed in the PF Act, referencing the Gujarat High Court ruling in CIT vs. Gujarat State Road Transport Corporation (265 CTR 64), and confirmed the disallowance.

Ground No. 3, 4 & 5: Re-computation and Disallowance of Deduction under Section 80IB
The assessee claimed Rs. 1,35,24,691 as deduction under Section 80IB, including profits from a windmill unit. The AO recomputed the deduction, excluding the windmill profits, and allowed only Rs. 1,26,86,992, disallowing Rs. 8,37,699. The AO also rejected the claim for additional deduction under Section 80IA(4) for the windmill profits, citing the Supreme Court judgment in Goetze India Ltd. (157 Taxman 1) for not filing a revised return. The tribunal noted that the issue was covered by a previous ITAT decision in the assessee's favor for A.Y. 2009-10, allowing the revised claim without the need for a revised return. Consequently, the tribunal deleted the disallowance of Rs. 8,37,699 and allowed the deduction of Rs. 20,52,724 under Section 80IA(4).

Ground for A.Y. 2011-12: Computation of Total Income Ignoring Revised Return
The assessee filed a revised return declaring income of Rs. 3,69,65,780, but the AO computed the total income as per the original return at Rs. 3,80,52,880. The CIT(A) dismissed the ground as general in nature. The tribunal found this to be an error apparent on record and directed the AO to recompute the total income based on the revised return, setting aside the assessment for de novo proceedings.

Conclusion:
- Appeal in ITA No. 744/Ahd/2015 is partly allowed.
- Appeal in ITA No. 745/Ahd/2015 is allowed for statistical purposes.

Order Pronounced in Open Court on 24/01/2019.

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