2014 (7) TMI 1270 - AT - Income Tax

Disallowance being written off as irrecoverable - allowable deduction u/s 37 - Held that - CIT(A) has not given cogent reasoning while upholding the order of the Assessing Officer and he has simply stated that the amount in question being TDS cannot be said to be business expenditure of the assessee company and therefore the same could not be allowed. According to us the order of CIT(A) is non-speaking one as it contains no reasoning. In the absence of reasoning the order cannot be upheld - restore this issue to the CIT(A) with a direction to decide the same as per fact and law after providing due opportunity of being heard to the assessee Disallowance out of foreign travel expenses - Held that - The expenses related to foreign travel of Shri Aditya Bhartia his wife Payal Bhartia and his father Radhe Shyam Bhartia. Based upon the findings for A.Y. 2007-08 the Assessing Officer held that there was no justification for foreign travel of Smt Payal Bhartia and Shri Radhe Shyam Bhartia Accordingly he disallowed Rs. 4 lacs treating the same as non-business expenditure which was confirmed by the CIT(A). Taking over all view and in the interest of justice we restrict the disallowance to Rs. 2 lacs. Disallowance of the claim u/s.80IB(3)(ii) - Held that - CIT(A) was justified in rejecting the claim of the assessee following the decision of similar issue decided by the Tribunal in Samruddhi Industries Ltd. (2011 (3) TMI 696 - ITAT PUNE) holding that the assessee is not entitled as it did not continue SSI during the assessment year under consideration. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. Allowability of MAT Credit - Held that - CIT(A) erred in not adjudicating the ground No.6 of the assessee. The learned Departmental Representative could not dispute the same. So in the interest of justice we restore this issue to the file of CIT(A) with a direction to decide the same after providing due opportunity of being heard to the assessee. Allow the deduction u/s.80IA(4)(iv)(a) without deducting brought forward loss or unabsorbed depreciation prior to initial year on notional basis Disallowance of deduction u/s.35(2AB) - Held that - The approval u/s.35(2AB) of the Act has been accorded to R & D unit of assessee company from 01.04.2009 to 31.03.2012 which entitles the assessee to claim weighted deduction u/s 35(2AB) from A.Y. 2010-11. Relying upon clear cut finding of Hon ble Delhi High Court in the case of Apollo Tyres Ltd. (2010 (4) TMI 48 - DELHI HIGH COURT) the action of the Assessing Officer denying the deduction u/s. 35(2AB) of the Act was rightly upheld by the CIT(A). As directed Assessing Officer to restrict the disallowance u/s. 35(2AB) of the Act to Rs. 85, 39, 848/-. This reasoned finding of CIT(A) needs no interference from our side. We uphold the same. Disallowance on account of foreign travel expenses - AO made disallowance on account of non-business expenditure and the same was upheld by the CIT(A)- Held that - A similar issue in assessee s own case for A.Y. 2008-09 has been decided vide para 5 of this order. Facts being similar so following the same reasoning and taking all facts into consideration we restrict this disallowance to 2, 70, 000/-.

Summary

Issues Involved:
1. Treatment of Short Term Capital Gain as Business Income.
2. Disallowance of loss written off as irrecoverable.
3. Disallowance of foreign travel expenses.
4. Disallowance of deduction u/s 80IB(3)(ii).
5. Disallowance of MAT Credit.
6. Acceptance of Income as per Return of Income.
7. Initial assessment year for deduction u/s 80IA.
8. Computation of profit for eligible business u/s 80IA.
9. Treatment of each windmill as independent eligible business.
10. Disallowance of weighted deduction u/s 35(2AB).

Detailed Analysis:

1. Treatment of Short Term Capital Gain as Business Income:
The assessee's profit from the purchase and sale of shares amounting to Rs. 9,27,194/- was treated as business income by the Assessing Officer (A.O.) instead of Short Term Capital Gain. The Tribunal restored the issue to the file of the CIT(A) for fresh consideration, following the precedent set in the assessee's own case for previous years.

2. Disallowance of Loss Written Off as Irrecoverable:
The A.O. disallowed the assessee's claim of Rs. 1,53,269/- written off as irrecoverable, related to TDS paid on technical knowhow fees. The CIT(A) upheld this disallowance, stating it was not a business expense. The Tribunal found the CIT(A)'s order non-speaking and restored the issue for fresh adjudication with a directive to provide reasoning.

3. Disallowance of Foreign Travel Expenses:
The A.O. disallowed Rs. 4,00,000/- out of Rs. 20,00,000/- foreign travel expenses, questioning the business purpose of travel by certain family members of the assessee. The CIT(A) confirmed this, but the Tribunal reduced the disallowance to Rs. 2,00,000/- considering the overall circumstances.

4. Disallowance of Deduction u/s 80IB(3)(ii):
The A.O. disallowed the deduction of Rs. 2,26,97,837/- claimed u/s 80IB(3)(ii), stating the assessee ceased to be a Small Scale Industry (SSI) as its plant and machinery exceeded Rs. 3 crores. The CIT(A) upheld this disallowance, and the Tribunal agreed, referencing the decision in Samruddhi Industries Ltd., which required the SSI status to be maintained throughout the claim period.

5. Disallowance of MAT Credit:
The A.O. disallowed MAT Credit of Rs. 30,60,944/- claimed by the assessee. The CIT(A) did not adjudicate this ground. The Tribunal restored the issue to the CIT(A) for fresh consideration, directing to provide due opportunity to the assessee.

6. Acceptance of Income as per Return of Income:
The A.O. did not accept the income as per the return filed by the assessee. The Tribunal's decision on this issue was not explicitly detailed in the provided text.

7. Initial Assessment Year for Deduction u/s 80IA:
The A.O. disallowed the deduction u/s 80IA(4)(iv)(a) of Rs. 43,93,235/-, treating Sangli and Dhule windmill units as a single business. The CIT(A) allowed the assessee's claim, stating the initial assessment year is the year the assessee chooses to claim the deduction. The Tribunal upheld this, aligning with the Madras High Court's decision in Velayudhaswamy Spinning Mills.

8. Computation of Profit for Eligible Business u/s 80IA:
The A.O. computed the profit by deducting brought forward losses and unabsorbed depreciation. The CIT(A) directed to compute without such deductions. The Tribunal upheld this, referencing the Madras High Court's judgment that losses already set off against other income should not be brought forward notionally.

9. Treatment of Each Windmill as Independent Eligible Business:
The A.O. treated all windmills as a single business for deduction purposes. The CIT(A) and Tribunal held that each windmill should be treated as an independent eligible business, allowing the deduction as claimed by the assessee.

10. Disallowance of Weighted Deduction u/s 35(2AB):
The A.O. disallowed Rs. 1,09,26,167/- claimed as weighted deduction u/s 35(2AB), stating the approval from the Ministry was not obtained. The CIT(A) partly allowed the claim, restricting the disallowance to Rs. 85,39,848/-. The Tribunal upheld the CIT(A)'s decision, emphasizing that the approval process was a statutory requirement and not merely procedural.

Conclusion:
The appeals filed by the assessee were partly allowed, and the appeals filed by the Revenue were dismissed. The Tribunal provided detailed directives for fresh adjudication on certain issues, ensuring compliance with legal precedents and statutory requirements.