Royal Cement Company, Kangra V. ITO, Nurpur

ITA 1070/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86191 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 19-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Business income; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NOS. 1069 TO 1071/CHD/2014 A.YS: 2005-06, 2006-07 & 2007-08 M/S ROYAL CEMENT COMPANY, VS THE INCOME TAX OF FICER PLOT NO. 10 TO 12, NURPUR, PHASE III, INDUSTRIAL AREA, ( H.P. ). SANSARPUR TERRACE, DISTT. KANGRA (HP) PAN: AAIFR0966Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHWANI KUMAR & SHRI PARIKSHIT AGGARWAL RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 19.02.2015 DATE OF PRONOUNCEMENT : 26.02.2015 O R D E R PER BHAVNESH SAINI,JM ALL THE APPEALS BY THE SAME ASSESSEE ARE DIRECTED A GAINST THE COMMON ORDER OF LD. CIT(APPEALS), SHIMLA DATED 07.11.2014 FOR ASSESSMENT YEARS 2005-06, 2006-07 AND 2007-08 CHALLENGING THE LEVY OF PENALTY UNDER SECTION 271(1 )(C) OF THE IT ACT ON THE FOLLOWING COMMON GROUNDS : 1. THAT ON FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT (A) THROUGH HE R ORDER DATED 07.11.2014 HAS ERRED IN PASSING THAT ORDER IN CONTRAVENTION OF THE PROVISIONS OF SECTION 250(6) OF THE INCOME TAX ACT, 1961. 2. THAT ON THE FACTS, CIRCUMSTANCES AND LEGAL POSITION OF THE CASE, THE WORTHY CIT(A) HAS ERRED I N CONFIRMING THE ACTION OF LD. A.O. OF LEVYING PENALT Y OF 2 RS. 5,12,908/- U/S 271(L)(C) OF THE ACT ON CONFIRMATION OF ADDITION ON CLAIM OF DEDUCTION U/S 80-IC ON TRANSPORT SUBSIDY INCOME FOLLOWING THE DECISION OF HON'BLE SC IN LIBERTY INDIA VS. CIT 317 ITR 218 (2O09), EVEN WHEN THE SAID DECISION WAS RENDERED SUBSEQUENT TO FILING OF RETURN BY THE APPELLANT, THERE WERE VARIOUS DECISIONS FAVOURABLE TO THE ASSESSEE AT THAT TIME AND THE DECISION OF HON'B LE SC WAS RENDERED WHEN THE APPEAL ON QUANTUM WAS PENDING ADJUDICATION BEFORE THE HON'BLE ITAT. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PARTNERSHIP FIRM AND RETURNS DECLARING NIL INCOME AFTER CLAIMING DEDUCTION UNDER SECTION 80IC AMOUNTING TO RS. 12,57,849/-, RS. 30,90,575/- AND RS. 52,790/- FOR ASSESSMENT YEARS IN APPEAL WERE FILED ON 31.10.2005, 31.10.200 6 AND 31.10.2007 RESPECTIVELY. THE DEDUCTION CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE ASSESSING OFFICER AN D PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. THE ADDITIONS MADE BY THE ASSESSING OFFICER ON ACCO UNT OF DISALLOWANCE OF CLAIM OF DEDUCTION UNDER SECTION 80 IC ON TRANSPORT SUBSIDY RECEIVED BY THE ASSESSEE WERE CON FIRMED BY LD. CIT(APPEALS), ITAT CHANDIGARH BENCH AND HON'BLE HIMACHAL PRADESH HIGH COURT, SHIMLA. 3. THE ASSESSING OFFICER VIDE SEPARATE ORDER LEVIED THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. THE AS SESSEE SUBMITTED BEFORE LD. CIT(APPEALS) THAT THE ASSESSEE MANUFACTURES CEMENT. THE UNIT IS LOCATED IN HIMACH AL PRADESH AND PROFIT DERIVED FROM THIS UNIT IS ELIGIBLE FOR D EDUCTION UNDER SECTION 80IC OF THE ACT. THE ASSESSEE CLAIMED SAME DEDUCTION EARLIER WHICH HAVE BEEN REGULARLY ALLOWED BY THE AS SESSING OFFICER UNDER SECTION 143(3) OF THE ACT. TILL THE PENDENCY OF APPEAL BEFORE ITAT ON QUANTUM ADDITION, THERE WAS N O 3 JUDGEMENT OF JURISDICTIONAL HIGH COURT ON THE ISSUE OF ALLOWABILITY OF DEDUCTION UNDER SECTION 80IB/IC ON TRANSPORT SUBSIDY. THERE WERE VARIOUS JUDGEMENTS OF NON JURI SDICTIONAL HIGH COURTS WHICH WERE FAVOURABLE TO THE STAND OF T HE ASSESSEE. THE ASSESSEE RELIED UPON DECISION IN THE CASE OF ITO VS KIRAN ENTERPRISES 92 TTJ (CHD) 104 ALLOWING DEDU CTION UNDER SECTION 80IA OF THE INCOME TAX ACT. IT WAS S UBMITTED THAT THIS JUDGEMENT WAS SUBSEQUENTLY REVERSED BY TH E HIMACHAL PRADESH HIGH COURT FOLLOWING THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA. THE AS SESSEE SUBMITTED THAT DURING THE PENDENCY OF APPEAL BEFORE ITAT ON QUANTUM ADDITION, THE HON'BLE SUPREME COURT DELIVER ED A JUDGEMENT IN THE CASE OF LIBERTY INDIA VS CIT 317 I TR 218 IN WHICH IT WAS HELD THAT DEDUCTION UNDER SECTION 80IA , IB AND IC ARE NOT AVAILABLE FOR SECOND DEGREE BUSINESS INCOME . THE ASSESSEE FURTHER SUBMITTED THAT THE DECISION IN THE CASE OF LIBERTY INDIA WAS DELIVERED WHEN THE MATTER WAS SUB JUDICE BEFORE THE ITAT AND THERE WERE NO OTHER JUDGEMENTS AVAILABLE AGAINST THE ASSESSEE. THE CLAIM OF ASSESSEE WAS TH US, NOT BOGUS FOR CLAIMING DEDUCTION UNDER SECTION 80IC ON TRANSPORT SUBSIDY INCOME. THEREFORE, NO PENALTY IS LEVIABLE. THE ASSESSEE RELIED UPON DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ARISUDANA SPINNING MILLS LTD. 326 ITR 429 (P&H), DECISION OF HON'BLE PUNJAB & HAR YANA HIGH COURT IN THE CASE OF CIT VS RAJ OVERSEAS 336 ITR 26 1, BALDEV WOOLLEN INTERNATIONAL VS ITO 39 DTR 12 AND OTHER DE CISIONS ON THE PROPOSITION THAT PENALTY IS NOT LEVIABLE IN SUC H CIRCUMSTANCES. 4 4. HOWEVER, LD. CIT(APPEALS) CONFIRMED THE LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND DISMISSED AL L THE APPEALS OF THE ASSESSEE. THE FINDINGS OF LD. CIT(APPEALS) IN PARA 5 AND 5.1 OF THE IMPUGNED ORDER ARE REPRODUCED AS UNDER : 5. I HAVE GONE THROUGH THE FACTS OF THE CASE, SUBMI SSION BY APPELLANT, THE RELEVANT PRO VISIONS OF LAW AND T HE VARIOUS CASE LAWS RELIED UPON. 5.1 THE MAIN ISSUE IN THIS CASE IS WHETHER DISALLOW ANCE OF DEDUCTION U/S 80IC ON TRANSPORT SUBSIDY ATTRACTS PE NALTY U/S 271(1}(C) OR NOT, ASSESSEE HAS ARGUED THAT SINC E CLAIM OF DEDUCTION ON THE AFORESAID SUM IS DEBATABLE ISSU E SO PENALTY 271(1)(C) SHOULD NOT BE IMPOSED. HOWEVER, W RONG CLAIM OF DEDUCTION UNDER INCOME TAX ACT HAD BEEN SU BJECT MATTER OF PENALTY AND RELIANCE IS PLACED ON THE DEC ISION OF CIT VS. ZOOM COMMUNICATION PVT. LTD. (DEL) 327 ITR 510 AND CIT VS. ESCORT FINANCE LTD. (DEL) 328 ITR 44, T HE ASSESSEE HAS CLAIMED DEDUCTION U/S 801C ON THE CENT RAL TRANSPORT SUBSIDY IN THE RETURN OF INCOME TREATING IT AS PART OF PROFITS AND GAINS DERIVED FROM THE INDUSTRIAL UN DERTAKING. THIS ISSUE OF CLAIM OF DEDUCTION U/S 80IC ON TRANSP ORT SUBSIDY IN EARLIER YEARS (A.Y, 2005-06 & 2006-07) S TANDS DECIDED AGAINST THE ASSESSEE BY ITAT'S ITA NO. 704 & 705/CHANDIGARH/2009. IN THIS CASE ASSESSEE HAS FAIL ED TO SUBSTANTIATE THE CLAIM OF DEDUCTION U/S 80IC, THUS ATTRACTING PENALTY U/S 271(1)(C). MOREOVER THIS INC ORRECT CLAIM OF DEDUCTION U/S 80IC IS INCORRECT CLAIM OF F ACTS. THUS THERE IS NO INFIRMITY IN THE ACTION OF THE A.O. AND THE APPEALS OF THE ASSESSEE ARE DISMISSED IN THE RESULT, THE APPEALS ARE DISMISSED. 5. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE AUTHORITIES BELOW AND LD. DR RELIED UPON ORDER OF T HE LD. CIT(APPEALS). THE HON'BLE PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT VS RAJ OVERSEAS (SUPRA) HELD AS UNDER : THE ASSESSEE CLAIMED DEDUCTION UNDER SECTION 80-IB O F THE INCOME- TAX ACT, 1961, IN RESPECT OF INCOME FROM DUTY DRAW BACK. THE ASSESSING OFFICER DISALLOWED THE CLAIM ON THE GROUND THAT THE INCOME DERIVED FROM DUTY DRAW BACK WAS NOT INCOME DE RIVED FROM THE INDUSTRIAL UNDERTAKING. PENALTY WAS ALSO LEVIED. THE 5 COMMISSIONER (APPEALS) UPHELD THE VIEW OF THE ASSES SING OFFICER BUT THE TRIBUNAL DELETED THE PENALTY. ON APPEAL TO THE HIGH COUR T: HELD, DISMISSING THE APPEAL, THAT IN VIEW OF THE FACTUAL F INDING OF THE TRIBUNAL, IT COULD NOT BE DISPUTED THAT THE ISSUE WAS DEBATABLE AND DEDUCTION CLAIMED BY THE ASSESSEE DID N OT LACK BONA FIDES. PENALTY COULD NOT BE IMPOSED UNDER SECTI ON 271(L)(C). 6. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE C ASE OF CIT VS GURDASPUR CO-OPERATIVE SUGAR MILLS LTD. & AN OTHER 354 ITR 27 HELD AS UNDER : HELD, THAT THERE WAS NO DISPUTE ABOUT THE QUANTUM O F RECEIPT OF GRANT-IN-AID FROM THE STATE GOVERNMENT. THE ASSE SSEE REFLECTED THE RECEIPT AS CAPITAL RECEIPT, WHEREAS I T HAD BEEN TREATED AS A REVENUE RECEIPT. THE ISSUE, WHETHER TH E AMOUNT OF GRANT-IN-AID WAS A CAPITAL RECEIPT OR A REVENUE RECEIPT, WAS A DEBATABLE ISSUE. THERE WAS NO FURNISHING OF INACC URATE PARTICULARS. PENALTY COULD NOT BE IMPOSED. 7. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE ABOVE DECISIONS, WE ARE OF THE VIEW PENALTY IS NOT LEVIAB LE. THE ASSESSEE MADE CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT ON TRANSPORT SUBSIDY. ACCORDING TO THE SUBMISSION OF ASSESSEE, SIMILAR CLAIM WAS ALLOWED BY ASSESSING OFFICER IN P AST. THE AUTHORITIES BELOW, FOLLOWING THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF LIBERTY INDIA (SUPRA) DECLINED THE CLAIM OF DEDUCTION AGAINST THE ASSESSEE. THIS DECIS ION IS DELIVERED ON 31.08.2009 AND BY THAT TIME, THE RETUR NS OF INCOME OF THE ASSESSEE WERE ALREADY FILED CLAIMING DEDUCTION UNDER SECTION 80IC OF THE ACT AS PER PAST PRACTICE. THERE WERE CERTAIN DECISIONS IN FAVOUR OF THE ASSESSEE MAKING CLAIM OF DEDUCTION UNDER SECTION 80IC OF THE ACT. THUS, AT THE STAGE OF LEVY OF PENALTY, THE ISSUE WAS DEBATABLE. THE ASSES SEE DISCLOSED ALL THE PARTICULARS OF INCOME IN THE RETURN OF INCO ME ON THE BASIS OF THE PAST PRACTICE AS WELL AS CERTAIN DECIS IONS IN FAVOUR 6 OF THE ASSESSEE. THEREFORE, CLAIM OF ASSESSEE COUL D NOT BE SAID TO BE BOGUS AND ASSESSEE HAS NOT CONCEALED ANY PART ICULARS OF INCOME AS WELL AS DID NOT FILE ANY INACCURATE PARTI CULARS OF INCOME. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW PENALTY UNDER SECTION 271(1)(C) OF THE ACT SHOULD N OT BE LEVIED AGAINST THE ASSESSEE IN THESE ASSESSMENT YEARS. WE , ACCORDINGLY SET ASIDE THE ORDERS OF AUTHORITIES BEL OW AND CANCEL THE PENALTY. 8. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH FEBRUARY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26 TH FEBRUARY, 2015 POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH