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2015 (5) TMI 1147 - AT - Income TaxPenalty u/s 271(1)(c) - disallowance of interest u/s 36(1)(iii) - Held that:- The assessee has debited interest to the Profit & Loss Account of Dera Bassi Unit whereas the funds, in respect of which the interest was claimed, were used by Baddi manufacturing unit. AO estimated the interest on debit balances and noticed that the estimated interest was working out to more than interest in Dera Bassi unit and so he disallowed the interest claimed ip-so-facto resulted into retention of deduction under section 80IC. Therefore, an issue of proportionate disallowance of interest u/s 36(1)(iii). Since all the particulars of claim of interest were disclosed to the revenue and only proportionate interest have been disallowed, therefore, on mere disallowance of interest on estimate basis, ld. CIT(Appeals) was justified in canceling the penalty. Penalty on addition made on account of Web Software Development Expenses - AO treated the expenditure to be capital in nature and allowed heavy depreciation which resulted into part addition. The assessee claimed the expenditure to be revenue in nature, however Assessing Officer took it to be capital in nature. Therefore, it was mere case of change of opinion and as such would not warrant levy of penalty. The ld. CIT(Appeals), therefore, correctly deleted the penalty on that addition. Disallowance of expenses on account of re-allocation of expenses - assessee made allocation of expenses on actual basis whereas in the opinion of the Assessing Officer, it was done only to reduce taxable profit. With regard to the re-allocation of expenses of various units, there may be a difference of opinion as the Assessing Officer did not accept opinion of the assessee with regard to one unit but certainly it would not give rise for levy of the penalty against the assessee. The ld. CIT(Appeals) by following the decision in the case of Raj Overseas (2010 (7) TMI 553 - PUNJAB AND HARYANA HIGH COURT) and order of ITAT Chandigarh Bench in the case of Perfect Forgings (2011 (6) TMI 451 - ITAT CHANDIGARH) cancelled the penalty on this issue. Levy of penalty on reduction of deduction u/s 80IC - gross tax payable on MAT i.e. 115JB income is higher, therefore, even after making some additions, there is no tax effect against the assessee for levy of the penalty - Held that:- Referring to the calculation sheet filed by the assessee, which is not in dispute, we find that issue is squarely covered in favour of the assessee by judgement of Hon'ble Delhi High Court in the case of Nalwa Sons Investment Ltd. (2010 (8) TMI 40 - DELHI HIGH COURT). Therefore, penalty cannot be levied against the assessee on all the additions maintained even after giving appeal effect of the order of ld. CIT(Appeals) and the Tribunal. We, accordingly set aside the order of ld. CIT(Appeals) and delete penalty even on the addition maintained in a sum of ₹ 62,44,417/. Penalty on disallowance of carry forward of depreciation - Held that:- CIT(Appeals) considered this issue in detail and noted that the assessee had increased the claim of depreciation due to various disallowances because of which entire current year’s depreciation was absorbed in the current year itself. Therefore, it may be a mistake committed by assessee in computing the income. Therefore, penalty was correctly cancelled in the matter on claim of depreciation. Even otherwise, on the basis of computation of income as per MAT provisions, no penalty would be levied against the assessee. Therefore, this ground of appeal of departmental appeal is also dismissed.
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