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DCIT Circle-1 (1) , New Delhi Versus American Express India Pvt. Ltd.

2017 (10) TMI 586 - ITAT DELHI

Penalty proceedings u/s 271(1)(c) - netting of interest on account of interest on income tax refund - Held that:- Assessee had furnished and disclosed the entire particulars of the claim for netting of the interest and also the said claim was backed by the aforesaid note. - First appellate authority had allowed the netting-off of the interest, while computing the profits of business eligible for deduction u/s 10B. This order of the first appellate authority has been reversed by the Tribunal .....

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ee had any bonafide belief based on certain judicial precedence or not. Here in this case, such a bonafide belief has been accentuated by the fact that the Ld. CIT (Appeals) had allowed such netting off and decided the issue in favour of the assessee. Under these facts it cannot be held that the assessee had furnished any inaccurate particulars of income so as to warrant levy of penalty u/s 271(1)(c) read with Explanation 1. Appeal filed by the revenue is dismissed. - ITA No. 4422/Del./2014 - Da .....

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as under:- 1. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the penalty of ₹ 54,37,000/- imposed u/s 271 (1 )(c) of the 1.1.Act, 1961, ignoring the fact that patently a wrong claim has been made by the assessee of treating the interest on Income Tax Refund as income derived from the export of articles or things or computer software by a hundred percent export oriented undertaking and thereby it amounts to filing inaccurate particulars of Income. .....

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. 1996-97 to 2005-06. The assessee in its computation of income while claiming of deduction u/s 10B has netted the interest earned on income tax refund of ₹ 1,52,92,404/- against the interest paid. In response to show cause notice issued during the course of assessment proceedings, the assessee had given detailed explanation and reply which can be summarized in the following manner:- (i) Netting of interest income against interest expenditure is to be allowed in view of decisions of Tribun .....

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argued that sections 80HHC and 10B are pari- material and it was further submitted that sec 80HH/80I are different from sections 80HHC and 10B. 3. The Ld. Assessing Officer held that the demand of income tax is required to be paid by the assessee, whether from its own fund or from OD facility, is not material and it cannot be netted with the interest paid by the assessee company for the purpose of its business activities, because the interest on income tax refund has not been earned in the cours .....

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st income of ₹ 1,64,62,391/- is to be treated as income under the head of income from business. He added the netted interest income of ₹ 1,52,29,404/-. 4. In the quantum appeal the Learned CIT (Appeals) had deleted the said addition after observing and holding as under:- 21.1. I have carefully considered the submissions made by the appellant, and the decision of the Hon ble ITAT in appellant's own case for Assessment Year 1996- 97. Respectfully following the above order of the IT .....

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al filed by the department before the Tribunal, the said relief granted by the Ld. CIT(Appeals) was reversed and the addition was sustained, after holding that the interest earned on income tax refund is to be taxed under the head income from other sources and hence was not eligible for deduction u/s 10B. 6. Now the ld. Assessing Officer has levied the penalty on this netting of the interest amount received on income tax refund from interest paid to the bank, after discussing various judicial de .....

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st on incometax refund were made in the notes to computation of income filed with the return of income for the subject year, therefore it cannot be said that the appellant has concealed the particulars of income. The penalty cannot be levied merely because a claim has been made even if the claim is found to be incorrect by the assessing authority. There is no averment in the order that any false claim or wrong fact has been furnished by the assessee. The issue is only as to whether deduction u/s .....

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be levied merely because of rejection of a bona fide claim of the appellant since the assessment proceedings are different from penalty proceedings. It has been held by various Courts that where an assessee genuinely makes a claim after disclosing necessary material facts, there is no concealment or furnishing of inaccurate particulars" even if the claim is rejected. I find that the similar issue arose for my consideration in the appellant's own case for the A.Y. 2003-04. I have decide .....

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(1)(c) without even addressing us as to in what manner these judgments are relevant on the facts of the case. For the sake of ready reference case laws relied upon by him are reproduced here under:- 1. CIT Vs Moser Baer India Ltd. (184 Taxman 8 (SC)/2009 315 ITR 460 (SC)/(2009) 222 CTR 213) 2. CIT Vs Gold Coin Health Food (P.) Ltd (172 Taxman 386 (SC)/(2008) 304 ITR 308 (SC). 3. Union of India v. Dharamendra Textile Processors (2007) 295 ITR 2441 Page 6 of 10 4. MAK Data P. Ltd vs. CIT T38 taxma .....

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(P.) Ltd. [191 Taxman 179 (Delhi)/[2010] 327 ITR 510 (Delhi)/[2010] 233 CTR 465] 11. K.P. Madhusudhanan Vs CIT 2001 118 Taxman 324 (SC)/[2001] 251 ITR 99 (SC)/[2001] 169 CTR 489 (SC)]. He further submitted that penalty has rightly been levied by the Assessing Officer, because interest on income tax refund can never be treated or can be held as income from business activities or profits derived from the undertaking. Accordingly, the penalty levied by the Assessing Officer should be confirmed. 9. .....

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de by the Assessing Officer. Thus in such a situation it cannot be held that the assessee can be liable for penalty u/s 271(1)(c) for furnishing of inaccurate particulars . Lastly, he submitted that exactly on same issue and on similar set of facts, this Tribunal in the case of M/s. Millennium International vs. ACIT in ITA no. 4956/Del/2010 vide order dated 8.8.2013 had deleted the penalty. 10. We have heard the rival submissions and also perused the relevant findings given in the impugned order .....

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exempt under Section 10B and pass consequential order. In terms of the direction of the IT AT the Assessing Officer vide his order dated 22nd July, 2002 (much after close of the year) recomputed the income at NIL & computed a total sum of ₹ 80,792,340 (including interest of ₹ 16,462,391) as refundable. Out of the said sum of interest, a sum of ₹ 15,229,404 has been credited in the books of account having accrued during the year. Since the tax demand had arisen due to the d .....

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ferred in 162 CTR1) wherein the interest was held to be income from business. Further, in any case it is submitted that the company became entitled to receive the interest only after the passing of the order by the Assessing Officer on 22nd July, 2002 and therefore, the same cannot be said to be taxable in the previous year relevant to present assessment year. 7. Thus, the assessee had furnished and disclosed the entire particulars of the claim for netting of the interest and also the said claim .....

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