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TMI Blog2012 (9) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... lacement of 15 Air conditioners and stabilizers under buyback scheme aggregating to Rs.3,97,500 was claimed as revenue expenditure under the head "plant and machinery repairs". This claim, however, was not accepted by the Assessing Officer as he took the expenditure to be capital in nature being the amount incurred not on account of repair of plant and machinery, but the same having been spent on the replacement of Air conditioners. He also initiated penalty proceedings under section 271(1)(c) of the Act. 3. In response to show cause notice issued under section 271(1)(c) of the Act, the assessee tendered an explanation contending that there are two opinions on the issue of claim of deduction and it had disclosed all the particulars of clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessee has preferred an appeal before the Hon'ble Allahabad High Court in ITA No. 238 of 2007 whereby the following substantial question of law stands admitted:- "Whether the Tribunal was justified in treating replacement of air conditioners under exchange offer, which does not create new asset in the block of asset, as capital expenditure?" 6. The said question of law has been admitted in view of the judgments in Commissioner of Income Tax & Another vs. Sagar Talkies (2008) 217 CTR (Kar) 74 (DB) and a better view taken by Punjab and Haryana High Court in Commissioner of Income Tax vs. Industrial, Cables (India) Ltd. (2007) 209 CTR (P&H) 167 relying upon Empire Jute Co. Ltd vs. CIT (1980) 124 ITR 1 (SC) holding:...."It is not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, that the Tribunal came to the conclusion that the assessee had neither concealed the income nor filed inaccurate particulars thereof. In recording this finding, the Tribunal felt that if two views of the claim of the assessee were possible, the explanation offered by it could not be said to be false. This, however, is not the factual position in the case before us. The facts of the present case thus are distinguishable. 19. It is true that mere submitting a claim which is incorrect in law not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Expln. 1 to s. 271(1) would come i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e laws brought to our notice. Essentially the expenditure on replacement being not for renewal or restoration but for preserving or maintaining the existing asset is not a current repairs. Such a view finds support from the judgment by Hon'ble Apex Court in the case of Commissioner of Income-tax v. Sri Mangayarkarasi Mills P. Ltd. [2009] 315 ITR 114 (SC). In the appellant's case before us the assessee made claim as revenue expenditure on account of replacement of old Air conditioners in their hotel by equal number of new Air conditioners under buyback scheme, for which an exchange offer was available. At the relevant time when the claim was made and particulars thereof were furnished in the return of income, the deduction of such claim as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iculars regarding income of the assessee and as such that by itself would not attract penalty under section 271(1)(c) of the Act. In view of the above and in the absence of any finding that the explanation tendered by the assessee is false, the judgment rendered by the ld. CIT(A) in the case of CIT v. Zoom Communication (P.) Ltd. (supra) and also by the Revenue in the cases of Commissioner of Income-tax v. Mohd. Mohtram Farooqui (supra) which was on surrender of income and Electrical Agencies Corporation v Commissioner of Income-tax (supra) being on the claim not being tenable will not hold the field in a case like this. Since this is not a case of furnishing inaccurate particulars, penalty under section 271(1)(c) of the Act is not exigible ..... X X X X Extracts X X X X X X X X Extracts X X X X
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