TMI Blog2011 (11) TMI 504X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of penalty is justified - Decided against the Revenue - IT Appeal Nos. 809, 810, 816 & 817 (Mds.) of 2011 - - - Dated:- 25-11-2011 - ABRAHAM P. GEORGE, GEORGE MATHAN, JJ. P. Madhana Sekaran for the Appellant. Smt. Pushya Sitaraman for the Respondent. ORDER Abraham P. George, Accountant Member These are all appeals of the Revenue in respect of two assessees. While the first two appeals for assessment year 2003-04 are in respect of M/s Pentasoft Technologies Ltd., the other two appeals for assessment years 2002-03 and 2003-04 are in respect of M/s Pentamedia Graphics Ltd. Through these appeals, Revenue assails orders of ld. CIT(Appeals) deleting penalties levied on the assessees under Section 271(1)(c) of Income-tax Act, 1961 (in short "the Act") and under Section 271AA of the Act. 2. Let us first take up the Revenue's appeals in the case of M/s Pentasoft Technologies Ltd. for assessment year 2003-04. 3. Penalty levied on the assessee under Section 271(1)(c) of the Act was deleted by ld. CIT(Appeals) holding that there was no wrong or incorrect claim for depreciation on non-compete fees and difference in the claim of deduction under Section 10A of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2007 held in favour of assessee and ruled that whatever was excluded from the export turnover was also required to be excluded from total turnover. In so far as the second issue was concerned, the question is whether non-compete fee would fall within the definition of intangible assets given under Section 32(1)(ii) of the Act and whether such a claim is totally untenable in law. No doubt, the Tribunal had held against assessee by relying on the decision of co-ordinate Bench in the case of A.B. Mauria India (P.) Ltd. v. Asstt. CIT in I.T. Appeal No.1293/Mds/2006 dated 23.11.2007. Nevertheless, the said decision of the Tribunal was in relation to an issue whether revision under Section 263 was justified or not and not directly on the issue regarding depreciation on non-compete fee. The question whether non-compete fee is an intangible asset falling within Section 32(1)(ii) of the Act is not without doubt. Merely because assessee had made a claim in this regard, it could not be considered equivalent to a concealment. Assessee also cannot be held guilty of furnishing inaccurate particulars. As held by Hon'ble Apex Court in the case of Reliance Petroproducts ((P.) Ltd. (supra), making a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive satisfaction of his own but had merely followed the recommendation of TPO. 10. Now before us, learned D.R. submitted that assessee had failed to maintain records as mentioned in Rule 10D of the Rules and such failure warranted penalty under Section 271AA of the Act. Reliance was placed on the decision of Hyderabad Bench of this Tribunal in the case of G.I. Systems Org. India (P.) Ltd. v. ITO [2011] 45 SOT 145 (URO)/11 taxmann.com 99. 11. Per contra, learned A.R., supporting the order of ld. CIT(Appeals), submitted that there was no failure which could be pointed out by the Revenue that would warrant levy of penalty under Section 271AA of the Act. 12. We have perused the orders and heard the rival contentions. A cursory glance of the order passed by TPO placed at paper-book pages 45 and 46 would clearly show that the reason for initiation of penalty was non-maintenance of information as envisaged under Rule 10D of the Rules. Relevant paras of the order of TPO are reproduced hereunder:- "4. Though the assessee had mentioned Cost Plus Method as the most appropriate method, he has not gathered and maintained information as envisaged under Rule 10D. At the last stage of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ports in prescribed Form No.3CEB for the international transaction entered into by it. As against this, here, para 1 of the order of TPO dated 16th March, 2006 (paper-book page 45) clearly shows that Form No.3CEB was filed by the assessee. Hence, we are of the opinion that the decision of Hyderabad Bench would not have any application in the given case. We find that Ld. CIT(Appeals) was justified in deleting the penalty levied under Section 271AA of the Act. No interference is called for. 14. Appeals of the Revenue for assessment year 2003-04, in the case of M/s Pentasoft Technologies Ltd. stand dismissed. 15. Now let us take appeals of the Revenue for assessment years 2002-03 and 2003-04 in the case of M/s Pentamedia Graphics Ltd. First appeal is against deletion of penalty levied under Section 271(1)(c) of the Act. 16. Short facts apropos are that assessee's claim for deduction under Section 10B of the Act came to be reduced substantially in the assessment, on account of three reasons. First was with regard to treatment of interest income of Rs. 10,34,39,000/-. Assessee had claimed it to be a part of the profits derived from exports, for a reason that the deposits from whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made a false claim and therefore, decision of Hon'ble Apex Court would not have any relevance. According to him, penalty was rightly levied on the assessee. 20. Per contra, learned A.R. supporting the order of ld. CIT(Appeals), submitted that there was no case for levying of penalty under Section 271(1)(c) of the Act since there was no inaccurate particulars furnished by the assessee. 21. We have perused the orders and heard the rival contentions. In so far as exclusion of foreign exchange expenditure from export turnover, ld. CIT(Appeals) had ruled in favour of assessee while holding that such amount had to be excluded also from total turnover for working out deduction under Section 10B of the Act. Once it is excluded from total turnover and export turnover, the effect on deduction under Section 10B of the Act would be negligible. In so far as other two items, viz. the interest income and miscellaneous income are concerned, assessee was an undertaking engaged in 100% exports. Therefore, if it had made a claim that interest income which arose out of deposits of margin money with banks was a part of the profits derived from exports, we cannot say that such a claim was not a bon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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