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2019 (10) TMI 291 - AT - Income TaxLevy of penalty u/s 271(1)( c) - Defective notice - AO had not mentioned the specific charge of offence in the penalty notice by striking off the irrelevant portion - HELD THAT:- Hon’ble Telangana & Andhra Pradesh High Court in PCIT vs Smt Baisetty Revathi [2017 (7) TMI 776 - ANDHRA PRADESH HIGH COURT] also held that when penalty proceedings are sought to be initiated by the revenue u/s 271(1)(c ) of the Act, the specific ground which forms the foundation, therefore, has to be spelt out in clear terms. Otherwise, an assessee would not have proper opportunity to put forth his defence. When the proceedings are penal in nature, resulting in imposition of penalty ranging from 100% to 300% of the tax liability, the charge must be unequivocal and unambiguous. When the charge is either concealment of particulars of income or furnishing of inaccurate particulars thereof, the revenue must specify as to which one of the two is sought to be pressed into service and cannot be permitted to club both by interjecting one or between the two. Respectfully no hesitation in cancelling the levy of penalty on the technical ground of non-striking off of the irrelevant portion in the show cause notice for penalty by the revenue. Accordingly, the additional ground raised by the assessee for the Asst Year 1998-99 is allowed. In view of this decision, the other grounds raised by the assessee on merits need not be gone into and the arguments advanced by both the sides are left open and no decision is rendered herein on the same. Levy of penalty u/s 271(1)(c) - HELD THAT:- Asst Year 1998-99 on this technical issue of not striking off the irrelevant portion in the penalty notice would hold good for this asst year also except with variance in figures. Hence we have no hesitation in cancelling the levy of penalty on the technical ground of non-striking off of the irrelevant portion in the show cause notice for penalty by the revenue. Accordingly, the additional ground raised by the assessee for the Asst Year 2002-03 is allowed. In view of this decision, the other grounds raised by the assessee on merits need not be gone into and the arguments advanced by both the sides are left open and no decision is rendered herein on the same. Disallowance of lease rentals - HELD THAT:- We find that the issue in dispute is fully settled in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of ICDS Ltd [2013 (1) TMI 344 - SUPREME COURT] wherein it was held that depreciation on leased assets is allowable in the hands of the lessor who is the owner. Though this decision has been rendered on the allowability of depreciation on leased assets from the angle of the lessor, the principle laid down could be made very much applicable to the facts of the instant case conversely for allowability of lease rentals in the hands of the assessee (lessee). Hence respectfully following the said decision , we hold that the assessee is entitled for deduction of ₹ 42,48,067/- towards lease rentals paid on cars and we direct the ld AO accordingly. Disallowance u/s 14A read with Rule 8D of the Rules under normal provisions of the Act - HELD THAT:- Additional grounds contesting the point that no satisfaction was recorded by the ld AO before resorting to computation mechanism provided in Rule 8D(2) of the Rules and also on the point that the ld AO erred in considering all the investments instead of considering only dividend bearing investments. Disallowance u/s 14A of the Act read with Rule 8D of the Rules while computing book profits u/s 115JB - HELD THAT:- We direct the ld AO to delete the disallowance made u/s 14A of the Act in the sum both under normal provisions of the Act as well as in the computation of book profits u/s 115JB of the Act. Hence the additional ground raised by the assessee on non-recording of satisfaction is allowed in this regard. Disallowance of advertisement expenses - HELD THAT:- The revenue cannot be allowed to disallow the expenditure on one hand as incurred for non- business purposes and incurred on capital account and correspondingly tax the income on other hand which is nothing but the recoveries of the said expenditure. This would result only in double jeopardy to the assessee and also result in contradictory stand taken by the revenue. It is not in dispute that the assessee had indeed recovered group support fees of ₹ 27,60,00,000/- which also includes recovery made on account of advertisement expenses and this sum is duly offered to tax by the assessee. Assessee had effectively claimed only a sum of ₹ 21,46,63,119/- ( 23,20,51,011 – 1,73,87,892 disallowed voluntarily by assessee) as deduction in the return of income. This goes to prove that the assessee had effectively made a surplus / profit of ₹ 6,13,66,881/- out of rendering the group support services, which goes to prove that the assessee had recovered the entire group support fees including advertisement expenses with a mark up. Hence there cannot be any separate disallowance of group support fees including advertisement expenses. We direct the ld AO to delete the disallowance towards advertisement expenses.
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