2002 (8) TMI 272 - AT - Income Tax

Tribunal rulings: Revenue's appeal dismissed for AY 1990-91, partly allowed for AY 1991-92. Assessee's appeals partly allowed.

DEPUTY COMMISSIONER OF INCOME TAX. Versus ASSAM INDUSTRIAL DEVELOPMENT CORPN. LTD.

DEPUTY COMMISSIONER OF INCOME TAX. Versus ASSAM INDUSTRIAL DEVELOPMENT CORPN. LTD. - TTJ 087, 1067, Issues Involved:1. Deletion of addition under the head 'subsidy' for AY 1990-91.2. Restriction of addition on account of liabilities for expenses for AY 1990-91.3. Confirmation of disallowance under the head 'donation and subscription' for AY 1990-91.4. Disallowance under the head 'Silver Jubilee expenses' for AY 1991-92.5. Disallowance under the head 'Udyog Sahayak' for AY 1991-92.6. Addition as unexplained investment under Section 69 of the IT Act, 1961 for AY 1991-92.7. Deletion of disallowance under the head 'interest expenses' for AY 1991-92.8. Deletion of addition under the head 'subsidy' for AY 1991-92.9. Restriction of disallowance of interest expenses for AY 1991-92.10. Restriction of addition on account of unexplained investment for AY 1991-92.Detailed Analysis:1. Deletion of Addition under the Head 'Subsidy' for AY 1990-91:The Revenue contested the deletion of Rs. 1,55,81,667 made under the head 'subsidy.' The AO observed that the liability shown by the assessee as undisbursed subsidy should have been credited to the P&L account. However, the CIT(A) found that the subsidy was received by the assessee as an agent for further disbursement and thus could not be included in the P&L account. The Tribunal upheld the CIT(A)'s decision, noting that no material was presented by the Revenue to contradict the CIT(A)'s findings or to show that the assessee was not liable to disburse the subsidy.2. Restriction of Addition on Account of Liabilities for Expenses for AY 1990-91:The AO made an addition of Rs. 2,48,408 on account of liabilities for expenses without providing reasons. The CIT(A) restricted this addition to Rs. 5,193, identifying specific inadmissible expenses. The Tribunal found no merit in the Revenue's appeal as no evidence was provided to contradict the CIT(A)'s findings. Additionally, the Tribunal found that the CIT(A) was not justified in sustaining the addition of Rs. 5,103, as these amounts were not debited to the P&L account, and no material was provided to show these were fictitious liabilities.3. Confirmation of Disallowance under the Head 'Donation and Subscription' for AY 1990-91:The assessee contested the confirmation of disallowance of Rs. 4,000 under the head 'donation and subscription.' The CIT(A) observed that this amount was spent on Viswakarma Puja and was not related to the business of the assessee. The Tribunal upheld the CIT(A)'s decision, noting that no material was provided to show that the expenses were incurred out of commercial expediency.4. Disallowance under the Head 'Silver Jubilee Expenses' for AY 1991-92:The AO disallowed Rs. 2,28,791 under the head 'Silver Jubilee expenses,' as details were not provided. The CIT(A) confirmed this disallowance. The Tribunal, however, found that the expenses were incurred out of commercial expediency and were verifiable from receipts issued by a committee consisting of reputable individuals. The Tribunal remanded the matter back to the AO for verification of the expenses.5. Disallowance under the Head 'Udyog Sahayak' for AY 1991-92:The AO disallowed Rs. 1,79,722 under the head 'Udyog Sahayak,' considering it non-business expenditure. The CIT(A) confirmed this disallowance. The Tribunal, however, found that the expenses were incurred in the course of the assessee's business as an implementing agency of the Government of Assam. The Tribunal directed the AO to allow the expenses as business expenditure.6. Addition as Unexplained Investment under Section 69 of the IT Act, 1961 for AY 1991-92:The AO added Rs. 10,48,032 as unexplained investment under Section 69. The CIT(A) restricted this addition to Rs. 3,55,262.50. The Tribunal found that the difference between the investment as per the assessee's books and as per PBSL's accounts could not be concluded as undisclosed investment without proper reconciliation. The Tribunal remanded the issue back to the AO for fresh adjudication after obtaining clarification from PBSL.7. Deletion of Disallowance under the Head 'Interest Expenses' for AY 1991-92:The AO disallowed Rs. 7,14,000 as interest expenses, noting that the assessee advanced interest-free loans to Assam Tea Corporation. The CIT(A) deleted this disallowance, finding no nexus between interest-bearing loans and interest-free advances. The Tribunal upheld the CIT(A)'s decision, noting that the interest-free funds available with the assessee exceeded the interest-free advances.8. Deletion of Addition under the Head 'Subsidy' for AY 1991-92:The AO added Rs. 8,90,000 under the head 'undisbursed subsidy.' The CIT(A) deleted this addition, and the Tribunal upheld the CIT(A)'s decision, noting that the facts were similar to the previous year where the issue was decided in favor of the assessee.9. Restriction of Disallowance of Interest Expenses for AY 1991-92:The AO disallowed Rs. 83,55,788 as interest expenses related to advances to PBSL. The CIT(A) restricted this disallowance to Rs. 7,54,705, finding that the advances were made from non-interest-bearing funds. The Tribunal upheld the CIT(A)'s decision, noting that the Revenue could not establish any nexus between interest-bearing loans and the advances.10. Restriction of Addition on Account of Unexplained Investment for AY 1991-92:The AO added Rs. 10,48,032 as unexplained investment. The CIT(A) restricted this addition to Rs. 3,55,262.50. The Tribunal found that the difference could not be concluded as undisclosed investment without proper reconciliation and remanded the issue back to the AO for fresh adjudication.Conclusion:The Tribunal dismissed the Revenue's appeal for AY 1990-91 and partly allowed the assessee's CO. For AY 1991-92, the Tribunal partly allowed the Revenue's appeal and fully allowed the assessee's appeal, remanding certain issues back to the AO for fresh adjudication.