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2019 (9) TMI 1072 - AT - Income TaxPenalty u/s 271(1)(c) - non accounting/booking of TDS - HELD THAT:- We are of the view that the non accounting/booking of TDS as income in assessee's books of accounts is due to inadvertent mistake and no penalty u/s 271(1)(c) is attracted in the case of the assessee. Disallowance of interest expense u/s 36(1 )(iii) - we observe that the assessee has given interest free loan to its group concern M/s. Myzus Infotech due to commercial expediency and business exigency. The AO disallowed the proportionate interest expense u/s 36(1 )(iii) of the Act, holding that the interest bearing funds are used for giving interest free advance to group concern. Under the identical facts the Hon'ble Supreme Court of India in the case of S.A. Builders Vs. CIT 2 [2006 (12) TMI 82 - SUPREME COURT] has allowed the interest expense as deductible revenue expense wherein the interest free funds are given by the assessee to its sister concern as a measure of commercial expediency. It cannot be said that the assessee has concealed its income or furnished inaccurate particulars of such income. It is only a case wherein the AO did not accept the legitimate claim of the assessee due to difference of opinion on the same set of facts and hence under the facts and circumstance of the case of the assessee at least no penalty can be levied u/s 271(1)(c) of the Act. Disallowance of interest expense by capitalizing it to Capital work in progress - the interest expense was incurred by the assessee on loans taken for its working capital requirement. The AO allocated the interest expense incurred on working capital requirement to Capital Work in Progress only on the basis of assumption and surmises and disallowed interest expense u/s 36(1)(iii) of the Act. The assessee has not made any borrowing for specific asset or incurred any interest expense for Capital Work in Progress. Thus, there was no concealment of income or furnishing of inaccurate particulars of such interest so as to attract penalty u/s.271(1)(c). In this regard, we observe that the Hon'ble Supreme Court of India in its decision in the case of CIT Vs. Reliance Petroproducts Pvt. Ltd [2010 (3) TMI 80 - SUPREME COURT] has clearly laid down a proposition of law that by no stretch of imagination making an incorrect claim in law, would amount to concealment of income or furnishing of incorrect particulars of income. Thus, levy of penalty was not justified. We hold that it is not a fit case for levy of penalty, accordingly, AO is directed to delete the penalty so imposed u/s.271(1)(c) - Decided in favour of assessee.
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