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2022 (6) TMI 668 - AT - Income TaxPenalty u/s 271(1)(c) - ‘repair and maintenance expenses’ on account of charity and donation on account of part deduction in Section 80IC - HELD THAT:- On perusal of assessment order, it is noticed that no satisfaction has been formed in the course of assessment for committing any default contemplated under Section 271(1)(c) in respect of such addition. Thus, the imposition of penalty on such addition claimed in the books of account is not justified at the first instance. The action of the CIT(A) is accordingly reversed. Deduction under Section 80IC on certain “other income” which inter alia included profit on sale of asset - AO disallowed the claim of deduction under Section 80IC terming it to be incidental income and thus cannot be said to be ‘derived from’ manufacture or produce of any article or thing - Assessing Officer relied upon the judgment rendered in the case of CIT vs. Sterling Foods [1999 (4) TMI 1 - SUPREME COURT] wherein the Court observed that the industrial undertaking itself had to be the source of profit and the business of industrial undertaking had to directly yield that profit. The action of the Assessing Officer is clearly governed by the interpretation rendered by the Hon’ble Supreme Court on expression ‘derived from’ and is based on the stance that while the income so reflected in the books may be attributable to the business undertaking but cannot be equated with the expression ‘derived from’ the manufacturing activity. Thus, the deduction reduced on account of interpretative process cannot per se be equated with furnishing of inaccurate particulars of income. In the absence of any culpability, the imposition of penalty owing to denial of deduction on such interpretation on nicety of law does not warrant imposition of onerous penalty u/s 271(1)(c). The penalty imposed is thus cancelled.- Appeal of assessee allowed.
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