TMI Blog2018 (4) TMI 509X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 271(1)(c) had also been deliberated upon by the Hon'ble High Court of Bombay in the case of CIT vs. Somany Evergreen Knits Ltd. (2013 (4) TMI 154 - BOMBAY HIGH COURT) No penalty under section 271(1)(c) in respect of excess claim of depreciation by the assessee under the aforesaid set of circumstances was liable to be imposed in its hands. We, thus, not finding any infirmity in the order passed by the CIT(A) deleting the penalty - Decided in favour of assessee. - ITA No. 741/MUM/2016 - - - Dated:- 6-4-2018 - SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAVISH SOOD, JUDICIAL MEMBER For The Assessee : Shri Subodh Ratnaparkhi, CA. For The Department : Ms. Pooja Swaroop, DR ORDER PER RAVISH SOOD, JUDICIAL MEMBER The present appeal filed by the Revenue is directed against the order passed by the CIT(A)-16, Mumbai, dated 27/11/2015, which in itself arises from the order passed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (for short Act‟), dated 29/06/2012. The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal:- 1. Whether on the facts and in the circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,94,951/- from different banks. The assessee, on being called upon by the Assessing Officer to furnish the details in respect of the said capital subsidy, submitted that the same was given for assistance towards erection of plant and machinery under TUFS scheme of the Textile Ministry. The assessee submitted before the Assessing Officer that a total subsidy of ₹ 1,88,03,407/- was sanctioned in July, 2007, out of which an amount of ₹ 60.08 lakhs was disbursed by Union Bank in the F.Y. 2007-08, while for an amount of ₹ 73.47 lac and ₹ 54.47 lac were disbursed in the F.Y. 2008-09 by Corporation Bank and Saraswat Cooperative Bank, respectively. The Assessing Officer being of the view that as the capital subsidy given to the assessee was towards assistance for purchase of plant machinery, therefore, the assessee which being a company had to follow mercantile system of accounting, thus remained under an obligation to offer any amount accrued or received for taxation. The Assessing Officer held a conviction that though capital subsidy received by the assessee was not revenue in nature, but however, the same had an indirect bearing on the profits/loss in the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation was accepted by the assessee and not carried in further appeal. 4. The Assessing Officer after the culmination of the assessment proceedings, called upon the assessee to show-cause as to why penalty under section 271(1)(c) of the Act may not be imposed on it in respect of excess depreciation of ₹ 35,92,013/- so claimed by it. The explanation of the assessee wherein its main thrust was on two aspects, viz. (i) that as the subsidy was a conditional subsidy under TUFS scheme, which was refundable on the failure on the part of the assessee to fulfil the requisite conditions, therefore, the same was not reduced from the cost of the fixed assets; and (ii) that as the said treatment on the part of the assessee in not reducing the amount of capital subsidy from the cost of fixed assets in the immediately preceding year, viz. A.Y. 2008-09 was accepted by the Assessing Officer in the assessment framed under section 143(3) of the Act for the said year, therefore, the assessee had no reason to doubt the veracity of its aforesaid claim. The assessee taking support of its aforesaid submissions and placing reliance on a host of judicial pronouncements tried to impress upon th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eatment on the part of the assessee in not reducing the amount of capital subsidy from the cost of the fixed assets, and rather showing the same as a liability in the balance sheet, was accepted by the Assessing Officer while framing assessment under section 143(3) in its own case for the immediately preceding year, viz. A.Y. 2008-09. The ld.A.R in order to fortify his aforesaid contention, took us through the copy of assessment order for A.Y. 2008-09 [Page Nos. 9 13] of the assessee‟s paper book (for short, APB‟). The ld. AR in order to impress upon us that the Assessing Officer while framing the assessment for the immediately preceding year, viz. A.Y. 2008-09 was well conversant with the fact that the capital subsidy was not reduced by the assessee from the cost of the fixed assets, but rather, had been reflected as a capital reserve in the balance sheet, took us through the relevant extracts of the balance sheet for the said preceding year (Page Nos. 38 40) of APB‟. The ld. AR further submitted that as the assessee remained under a bonafide belief that in case of non-compliance of the conditions on which capital subsidy had been sanctioned, the same was sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for both the parties, perused the orders of the lower authorities and the material available on record. We find that our indulgence in the present appeal is sought for adjudicating as to whether the penalty of ₹ 11,09,932/- imposed by the Assessing Officer under section 271(1)(c) in respect of excess claim of depreciation by the assessee is sustainable in the eyes of law, or not. We have deliberated on the facts of the case and find substantial force in the contention of the ld. A.R that as the assessee envisaged the likelihood of reimbursement of the subsidy under the TUFS scheme for failure on its part in payment of instalment and interest, therefore, it was for the said reason that the same was reflected as a liability in the balance sheet and not deducted from the capital cost of plant machinery. We further find that as a similar treatment given by the assessee to the amount of such capital subsidy in the immediately preceding year, viz. A.Y. 2008-09, after thorough scrutiny in the course of the assessment framed under section 143(3) in the said preceding year was accepted by the Assessing Officer, thus, the said fact in itself fortifies the claim of the assessee that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature. We further find that the issue that an excess claim of depreciation by an assessee for bonafide reasons would not justify imposition of penalty under section 271(1)(c) had also been deliberated upon by the Hon'ble High Court of Bombay in the case of CIT vs. Somany Evergreen Knits Ltd. (2013) 352 ITR 592 (Bom.) 8. We, thus, in the backdrop of our aforesaid observations are of the considered view that no penalty under section 271(1)(c) in respect of excess claim of depreciation by the assessee under the aforesaid set of circumstances was liable to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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