2012 (11) TMI 1322 - AT - Income Tax

Issues Involved:
1. Deletion of disallowance on account of proportionate interest attributable to advances given to subsidiary/group companies.
2. Deletion of disallowance on account of interest on share application money.
3. Deletion of addition on account of notional gain on conversion of foreign exchange deposit.
4. Assessee's claim for deduction u/s 80HHC for meals supplied to foreign airlines.
5. Assessee's claim for deduction on account of expenditure incurred on replacement of carpets.
6. Assessee's claim for deduction on account of expenditure incurred on replacement of linen.
7. Interest levied by the AO u/s 234D.
8. Addition on account of interest capitalized in the books treating the same as income.

Summary:

1. Deletion of disallowance on account of proportionate interest attributable to advances given to subsidiary/group companies:
The Tribunal upheld the CIT(A)'s deletion of the disallowance made by the AO on account of proportionate interest attributable to advances given by the assessee to its subsidiary/group companies at concessional or interest-free rates. This was based on the precedent set in earlier years where such advances were made wholly and exclusively for business purposes.

2. Deletion of disallowance on account of interest on share application money:
The Tribunal upheld the CIT(A)'s deletion of the disallowance made by the AO on account of interest on share application money. The CIT(A) accepted the assessee's contention that the share application money was paid out of non-interest-bearing funds, and thus, the disallowance was not justified.

3. Deletion of addition on account of notional gain on conversion of foreign exchange deposit:
The Tribunal upheld the CIT(A)'s deletion of the addition made by the AO on account of notional gain on conversion of foreign exchange deposit. The CIT(A) found that the shareholders' deposit was on capital account and akin to investment in shares, thus not taxable as per AS-11 and judicial precedents.

4. Assessee's claim for deduction u/s 80HHC for meals supplied to foreign airlines:
The Tribunal upheld the CIT(A)'s decision allowing the assessee's claim for deduction u/s 80HHC in respect of sale proceeds of meals supplied by its flight kitchen to foreign airlines, holding that the same constituted export eligible for deduction.

5. Assessee's claim for deduction on account of expenditure incurred on replacement of carpets:
The Tribunal upheld the CIT(A)'s decision allowing the assessee's claim for deduction on account of expenditure incurred on replacement of carpets, following consistent decisions in earlier years and judicial precedents.

6. Assessee's claim for deduction on account of expenditure incurred on replacement of linen:
The Tribunal upheld the CIT(A)'s decision allowing the assessee's claim for deduction on account of expenditure incurred on replacement of linen, following consistent decisions in earlier years.

7. Interest levied by the AO u/s 234D:
The Tribunal set aside the CIT(A)'s decision canceling the interest levied by the AO u/s 234D, noting the retrospective amendment by the Finance Act, 2012, making the provisions applicable to assessments completed after 01-06-2003.

8. Addition on account of interest capitalized in the books treating the same as income:
The Tribunal deleted the addition made by the AO and confirmed by the CIT(A) on account of interest capitalized in the books treating the same as income. The Tribunal found that the reversal of interest was done to comply with AS-10 and did not result in any benefit or cessation of liability.

Conclusion:
The appeals of the Revenue for assessment years 1994-95, 1998-99, 1999-2000, 2000-01, and 2002-03 were dismissed. The appeal of the Revenue for assessment year 2001-02 was partly allowed. The appeal of the assessee for assessment year 1994-95 was partly allowed, and all the cross objections of the assessee were dismissed.

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