9911796707
TMI Blog2014 (3) TMI 1037X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation amounting to Rs. 22,45,85,291/-; b) Disallowance of prior period expenses amounting to Rs. 45,44,691/-; c) Disallowance of depreciation on generator amounting to Rs. 5,54,391/-; d) Restricting the claim of deduction u/s 80IA by Rs. 2,69,96,242/-; e) Disallowance of claim of deductions u/s 80HHC amounting to Rs. 1,33,19,595/-. 4. The Revenue has raised the following ground of appeal : "1. That the Ld.CIT(A) erred in law and on facts in deleting the penalty levied u/s 271 (1) (c) of the IT Act, 1961 by AO on account of treatment of sales tax subsidy and interest free advances to sister concern by holding that since the appeal of the assessee has been admitted by Hon'ble Supreme Court the issue is debatable without appreciating the fact that the Hon'ble jurisdictional High Court has already decided the issue in favour of the revenue in the assessee's own case for AY 1993-94 in 286 ITR 1 and without appreciating that the Hon'ble High Court in the same case had also held the order of ITAT to be perverse it was made without application of judicial mind." 5. The issues raised in the present appeals are that during the year under consideration certain ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the assessee was on account of non adjustment of brought forward losses and depreciation. It was pointed out by the learned A.R. for the assessee that the said losses were worked out by treating the subsidy receipt by the assessee as capital receipt, whereas the Revenue treated the same as revenue receipt and consequently there was reduction in the brought forward losses. It was submitted by the learned A.R. for the assessee that no facts were concealed as is evident from the note No.3 and 5 in the computation of income placed at page 17 of the Paper Book and consequently no inaccurate particulars were furnished by the assessee in this regard. The learned A.R. for the assessee placed reliance in the case of ACIT Vs. A.H.Wheelers & Co.(P)Ltd. [132 ITD 34 (Trib)(All)] and CIT & Anr. Vs. Makino Asia (P) Ltd. (2013) 95 DTR (Kar) 9]. 10. The second disallowance was made on account of prior period expenses and it was pointed out by the learned A.R. for the assessee that a note to the effect of claim was appended as note No.2 to the computation of income which is placed at pages 16 to 18 of the Paper Book. The learned A.R. for the assessee further pointed out that the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80IA of the Act and hence the same had to be excluded from the profits of business. The learned A.R. for the assessee pointed out that the above said claim was made on the basis of the report of the Chartered Accountant and non allowance of such claim could not be held to be furnishing of inaccurate particulars of income. 13. The next disallowance on which penalty under section 271(1)(c) of the Act was levied was the recomputation of deduction under section 80HHC of the Act under which the assessee had claimed deduction of Rs. 5.70 crores and was allowed deduction of Rs. 2.42 crores. The first item of recomputation of deduction under section 80HHC of the Act was the scrap sale which issue was not pressed before the Tribunal in the quantum proceedings. The second aspect was the sales tax subsidy received by the assessee which has been decided in favour of the assessee vide para 24 of the order of the Tribunal. The next claim was misc. income being excluded from the profits of business eligible for deduction under section 80HHC of the Act at Rs. 1.27 lacs, which issue was not pressed before the Tribunal. 14. The next item of income was insurance claim which was also not allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sales tax subsidy, whether capital or revenue and disallowance of interest attributable to interest free advance made to the sister concern. The learned D.R. for the Revenue pointed out that both the issues were covered against the assessee by the ratio laid down by the Hon'ble Punjab & Haryana High Court in assessee's own case reported in CIT Vs. Abhishek Industries [286 ITR 1(P&H)]. 17. The learned A.R. for the assessee pointed out that SLP was admitted and was pending before the Hon'ble Supreme Court. It was further pointed out that once SLP has been admitted in the case, the issue being debatable no penalty was leviable under section 271 (1) (c) of the Act. Reliance was placed on the decision of Ahmedabad Bench of the Tribunal in the case of Rupam Mercantiles Ltd. Vs DCIT 91 ITD 237 (TM)(Ahd). Further it was pointed out by the learned A.R. for the assessee that similar issue of penalty under section 271 (1) (c) of the Act on additions made on account of sales tax subsidy arose before the Tribunal in case of DCIT Vs. M/s Bhushan Power & Steel Ltd. in ITA Nos.70 & 71/Chd/2012 relating to assessment years 2005-06 and 2006- 07, order dated 25.9.2013 and the said penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. We proceed to dispose of the present appeal raised by the assessee and also by the Revenue by addressing the issue of additions made in the hands of the assessee. 21. Penalty for concealment is leviable under section 271 (1)(c) of the Act in case any one of the two pre-conditions are satisfied. The pre- conditions for levy of penalty are either the assessee had concealed the particulars of its income or in the alternative, the assessee had furnished inaccurate particulars of income. Either of the two conditions needs to be fulfilled before levy of penalty under section 271 (1)(c) of the Act. The provisions of the Act envisages an opportunity of hearing to be afforded to the assessee to prove its bonafides and where the assessee is able to prove the bonafides of his claim, with regard to the particulars of income furnished in the return of income, in such circumstances no penalty is leviable for concealment of income or for furnishing inaccurate particulars of income under section 271 (1) (c) of the Act. The expressions 'concealment' and 'inaccurate particulars' under section 271 (1)(c) of the Act has been deliberated upon in plethora of judgments by various Courts. The Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le in law, by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the Return cannot amount to inaccurate particulars. (underlined supplied by us) 23. The Hon'ble Supreme Court in CIT, Ahemdabad Vs. Reliance Petroproducts Pvt Ltd (supra) further noted that in the facts of the case before it, there were no findings that any details supplied by the assessee in its return of income were not incorrect or erroneous or false nor any statement made or any details supplied was found to be factually incorrect. The Court thus held that merely because the assessee had claimed the expenditure, which was not accepted or was not acceptable to the Revenue, that by itself would not, attract penalty under section 271 (1)(c) of the Act. It was also laid down by the Court that the intendment of the Legislature is not to levy penalty under section 271 (1)(c) of the Act in case of every non acceptance of claim made by the assessee in the return of income. 24. The Hon'ble Supreme Court in CIT Vs Reliance Petroproducts P.Ltd. (supra) further held as under : Reading the words "inaccurate" and "particulars" in conjunction, they mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see is not the revenue expenditure but the capital expenses. There is fine distinction as to when an expenditure can be treated as a revenue or a capital expenditure. Therefore, merely for the reason that the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. The order passed by the Tribunal does not give rise to the questions of law sought by the revenue. 26. Similar ratio has been laid down by the Hon'ble Punjab & Haryana High Court in CIT Vs. Shahbad Cooperative Sugar Mills Ltd [322 ITR 73 (P&H)], wherein it has been observed that making wrong claim for deduction, does not amount to concealment or giving of inaccurate particulars within the meaning of section 271 (1)(c) of the Act. 27. The Hon'ble Punjab & Haryana High Court in CIT Vs. Sidhartha Enterprises [(2010) 228 CTR (P&H) 579 ] held that "the judgment of the Hon'ble Supreme Court in Dharmendra Textile (supra) cannot be read as laying down that every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under section 276C and penalty under s. 271(1)(c) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the reports made by various officers of the Corporation. This estimation was not accepted mainly on the ground that the reports were made and resolution passed by the board after the assessment year was over and therefore they could not be given retrospective benefit. It has not been found that the claim of the assessee that the wood had rotted and deteriorated is false. It is nobody's case that the assessee fudged the amounts, the books of accounts or tried to create false evidence. The claim made by the assessee may not have been accepted by the Revenue but it cannot be said that the assessee furnished inaccurate particulars to such an extent that penalty should be imposed upon it. There does not appear to be falsehood in the accounts though the system of calculating the depreciation may have been improper. We also cannot lose sight of the fact that assessee is a Government Corporation. Its accounts are duly audited and even the CAG has gone through and approved the accounts of the Corporation. In such circumstances, we are of the view that merely because the assessee had claimed depreciation which claim was not accepted by the Revenue that by itself would not, in our opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent under section 271 (1) (c) of the Act in the hands of the assessee as the claim of the assessee was on the basis of one possible view. 33. The Hon'ble Punjab & Haryana High Court in CIT Vs. Tek Ram (HUF) 300 ITR 354 (P&H) had held that where the issue is highly debatable in as much as two views were possible on the said issue and where the claim of the assessee on the issue was based on one possible view, the making of such bonafide claim on the basis of a possible view could not be treated as concealment of its income by the assessee or furnishing of inaccurate particulars of income so as to attract the penal provisions of section 271 (1)(c) of the Income Tax Act. 34. Further, the Hon'ble Punjab & Haryana High Court in CIT Vs Raj Overseas (2011) 306 ITR 261 (P&H) also adjudicating the issue of levy of penalty under section 271(1)(c) of the Act on disallowance of claim of deduction under section 80IB of the Act in respect of income from Duty Drawback held as under : The assessee is manufacturer and derived income from exports. The assessee claimed deduction under s. 80-IB of the Act in respect of income from duty draw back. The AO disallowed the said claim on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various particulars demanded, the Assessing Officer was left with no alternative but to estimate such expenditure in the ratio of proportion of foreign income to the total income." 4. In the present case, there is no dispute about the quantum of receipt of grant- in-aid from the State Government. The assessee reflected the same as capital receipt, whereas it has been treated as to be revenue receipt. The issue whether the amount of grant-in-aid is capital receipt or a revenue receipt, is a debatable issue. The findings returned in the judgment relied upon is on feet of non-furnishing of details of expenses. The issue was not debatable as in the present case. Therefore, the reliance on the Division Bench judgment is misconceived. 5. In view of the above, we do not find any error in the findings recorded by the Tribunal while setting aside the penalty. Consequently, we do not find that the order of the Tribunal gives rise to any substantial question of law for the opinion of this court." 36. Now coming to the facts of the present case, penalty under section 271 (1) (c) of the Act had been levied on various additions and we proceed to address the same. During the course of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idy received by the assessee as revenue receipt as against the claim of the assessee that the same was capital receipt. The assessee had furnished a note No.3 in the computation of income placed at pages 16 to 18 of the Paper Book under which it was reported that: "3. The figure of brought forward loss/depreciation amounting to Rs. 22,45,85,291 has been worked out after taking into account the claim of Sales Tax Subsidy in earlier years on the basis of ITAT's orders in its own case for the assessment year 1993-94." 40. The issue arising before us is whether in the above said facts and circumstances, the assessee could be said to have furnished inaccurate particulars of income making it exigible to the levy of penalty under section 271 (1) (c) of the Act. Penalty for concealment under section 271 (1) (c) of the Act is attracted where the assessee has concealed its income or furnished inaccurate particulars of income. The claim of set off of brought forward losses was made by the assessee in its return of income by considering the losses returned in the earlier years. However, under the provisions of the Act the said set off of brought forward losses are to be allowed by the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here cannot be any dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In the present case, it cannot be said that the assessee furnished any inaccurate particulars of his income in the return and hence the liability would not arise. It is true, the propriety demands that an assessee who is otherwise not entitled to claim set off of the loss carried forward of the business, should avoid making such claim. But such claim would not attract levy of penalty." 42. Similar view has been laid down by Allahabad Bench of the Tribunal in ACIT Vs. A.H.Wheelers & Co.(P) Ltd. (supra). Following the above said ratio we find no merit in the order of the CIT (Appeals) in upholding the penalty leviable on such non allowance set off of brought forward losses and depreciation in the case of the assessee and the penalty relatable to such disallowance is deleted. 43. The next item of addition is the assessability of sales tax subsidy of Rs. 6,80,61,977/- received by the assessee during the year under consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case was admitted for adjudication before the Higher Forums, makes the issue debatable issue. The addition in the present case has been made on the basis of such debatable issue that whether the sales tax subsidy received by the assessee was capital in nature or not. We further find that similar issue of receipt of subsidy under the West Bengal Incentive Scheme has been held to be capital receipt in the case of CIT Vs. Rasoi Ltd.(supra) by the Hon'ble Calcutta High Court. The unit of the assessee had been established in the State of West Bengal and the case of the assessee is that it is governed by the said scheme as before the Hon'ble Calcutta High Court. In view thereof, the issue raised before us is where addition has been made in relation to such debatable issue, the assessee could be said to have furnished inaccurate particulars of income making it exigible to levy of penalty u/s 271(1)(c) of the Act. 19. The Hon'ble Punjab & Haryana High Court in CIT Vs. M/s Gurdaspur Cooperative Sugar Mills (supra) on the issue whether the amount of grant-in-aid was capital receipt or revenue receipt being debatable issue held that the penalty u/s 271(1)(c) of the Act was not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to furnishing inaccurate particulars regarding the income of the assessee". 22. In the totality of the above said facts and following the ratio laid down by the Hon'ble Supreme Court in CIT, Ahemdabad Vs. Reliance Petroproducts Pvt. Ltd (supra) and the Hon'ble Punjab & Haryana High Court in CIT Vs. M/s Gurdaspur Cooperative Sugar Mills (supra) and CIT Vs. Tek Ram (HUF) (supra) we hold that in view of the debatable issue raised, the assessee is not exigible to levy of penalty u/s 271 (1) (c) of the Act in the facts of the present case where the claim of the assessee that the receipts were capital in nature was rejected and the receipts were held to be revenue in nature and hence taxable. Upholding he order of the CIT (Appeals) we dismiss the grounds of appeal raised by the Revenue in ITA No.70/Chd/2012." 46. Following the same finding, we find no merit in holding the assessee to have furnished inaccurate particulars of income in respect of such debatable issue. The assessee is not exigible to levy of penalty under section 271(1)(c) of the Act on the aforesaid treatment of sales tax subsidy as revenue in the hands of the assessee and we uphold the order of the CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on such asset during the period under consideration. The assessee has made a false claim of additional depreciation and the assessee is exigible to levy of penalty under section 271 (1) (c) of the Act on such wrong claim of depreciation. 49. The next addition made in the hands of the assessee was on account of recomputation of deduction under section 80IA of the Act. The assessee was held to be eligible for the aforesaid addition. However, certain items of income on which deduction under section 80IA of the Act was claimed by the assessee was found to be incorrect. The first such item of income was the misc. income of Rs. 2,32,124/-. In the quantum appeal filed by the assessee, the Tribunal (supra) vide para 9 at pages 4 and 5 of the order held that the misc. income claimed by the assessee was not derived from any industrial undertaking. The assessee was held not entitled to claim deduction under section 80IA of the Act in respect of such misc. income following the ratio laid down by the Hon'ble Supreme Court in Liberty India Vs. CIT [317 ITR 218 (SC)]. The assessee having claimed deduction under section 80IA of the Act on the aforesaid misc. income by including the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income. Accordingly, we uphold the order of the CIT (Appeals) in this regard. 51. The third item of income included by the assessee as being derived from the industrial undertaking was the insurance claim amounting to Rs. 2,00,61,091/- received by the assessee being eligible for the deduction under section 80IA of the Act. The Tribunal vide para 18 at page 11 of the order have applied the ratio laid down by the Hon'ble Jurisdictional High Court in CIT Vs. Khemka Containers (P) Ltd. [275 ITR 559 (P&H)] in holding that the insurance claim is to be excluded from the eligible profits of business for computing deduction under section 80IA of the Act. However, the Tribunal has also noted the fact that the Hon'ble Delhi High Court in CIT vs. Sportking India Ltd. (2010) [324 ITR 283 (Del)] had decided the issue in favour of the assessee. In view of the above said diversion in views on the said issue of treatment of the receipts from insurance claim being includible or not being includible in the profits of business, while computing deduction under section 80IA of the Act i.e. whether the same is derived or not derived from the industrial undertaking, makes the issue debatable is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee did not press the said grounds of appeal before the Tribunal in the quantum proceedings and hence the same was dismissed. As regards insurance claim of Rs. 2.00 crores the Tribunal held that the same could not be considered as profits of the business and hence such receipts had to be excluded from the profits of business while computing deduction under section 80HHC of the Act. 53. Further the amount of DEPB receipt was also held to be not eligible for deduction under section 80HHC of the Act in view of the decision of Hon'ble Bombay High Court in CIT Vs. Kalapatru Chemicals [328 ITR 451 (Bom)]. Accordingly deduction @ 90% on such receipts was denied to the assessee. 54. From the perusal of the order levying penalty under section 271 (1) (c) of the Act by the Assessing Officer and the consequent appellate order by the CIT (Appeals), we find that though the recomputation of deduction under section 80HHC of the Act was made on various accounts but the reference is only made to the scrap sale disallowed i.e. sum of Rs. 1.33 crores from the profits of business for computing deduction under section 80HHC of the Act while holding the assessee to have furnished inaccurate part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee not to have disclosed complete particulars or information required to compute the income for the year under consideration. The question which arises in the present case was whether the claim made by the assessee for deduction under section 80IB of the Act in the above said facts and circumstances was a bonafide claim and whether the rejection of such a claim would attract penalty leviable u/s 271 (1) (c) of the Act. We find that the assessee had discharged its onus in respect of its claim of deduction under section 80IB of the Act. Firstly by making such a claim vide disclosure in its return of income and accompanying documents and also its bonafides of claiming such deduction in the year under appeal after installation of the machinery. In the facts and circumstances of the case where the assessee had acquired new plant & machinery over a period of years, though the unit was started in the year 1995, the appellant could claim the deduction in assessment year 2002-03 only after the value of machinery installed reached 80%, merely because the claim of deduction under section 80IB of the Act was disallowed, being a debatable issue, there is no merit in the levy of penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eligible profits, the said recomputation would not tantamount to furnishing of inaccurate particulars of income making the assessee exigible levy of penalty under section 271 (1) (c) of the Act. Accordingly, we direct the Assessing Officer to delete penalty levied under section 271 (1) (c) of the Act on the recomputed deduction under section 80HHC of the Act.
58. The Tribunal had held that 90% of receipts sales tax subsidy is not to be excluded from profits of business, while computing deduction under section 80HHC of the Act, hence no recomputation is necessary on this account and the penalty levied under section 271(1)(c) of the Act is thus directed to be deleted.
59. In line with our observations in paras hereinabove the penalty under section 271(1)(c) of the Act is upheld on the following additions/disallowances made in the hands of the assessee:
(a) Additional depreciation on asset.
(b) Deduction under section 80IA of the Act on interest income of Rs. 67,03,027/-.
60. In the result, the appeal of the assessee is partly allowed and the appeal of the Revenue is dismissed.
Order pronounced in the open court on this day of 6th March, 2014. X X X X Extracts X X X X X X X X Extracts X X X X
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