DCIT 1(2), MUMBAI V. INTERNATIONAL FISHERIES LTD ( NOW MERGED WITH HINDUSTAN UNILEVER LTD), MUMBAI

ITA 117/MUM/2013

• Counselvise Citation: 11719914 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 07-05-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 03-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AIRIJU JAIKARAN
• Keywords: Business income; Depreciation; Difference of opinion
• Section: 56

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI . . , / ! ! ! ! , '# '# '# '# BEFORE S/SH. H.L.KARWA,PRESIDENT & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 117/MUM/2013, $ $ $ $ % % % % / ASSESSMENT YEAR 2002-03 DCIT 1(2) R.NO. 535, 5 TH FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI-400020 VS. INTERNATIONAL FISHERIES LTD. (NOW MERGED WITH HINDUSTAN UNILEVER LTD.) HINDUSTAN LEVER HOUSE, 165- 66, BACKBAY RECLAMATION, MUMBAI-400020 PAN: AAACI1219E ( &' / APPELLANT) ( ()&' / RESPONDENT) &' * / APPELLANT BY : SHRI AIRI JU JAIKARAN ()&' + * / RESPONDENT BY : NONE $ $ $ $ + ++ + ,- ,- ,- ,- / DATE OF HEARING : 07-05-2014 ./% + ,- / DATE OF PRONOUNCEMENT : 28- 05- 2014 $ $ $ $ , 1961 + ++ + 254 )1( ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 22.10.2012 OF THE CIT(A )-2,MUMBAI,ASSESSING OFFICER(AO) HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN HOLDING THAT THERE IS NO SUPPRESSION OF FA CTS OR THERE IS NO FILING OF INACCURATE PARTICULARS OF INCOME AND DIRECTED THE ASSESSING OF FICER TO DELETE THE PENALTY LEVIED. HOWEVER, THE FACTS ARE OTHERWISE? 2.THE APPELLANT CRAVES LEAVE TO MAKE ADD TO, AMEND OR WITHDRAW AFORESAID GROUNDS OF APPEAL. 2 .ASSESSEE-COMPANY,A SUBSIDIARY OF HINDUSTAN LEVER L TD.,FILED ITS RETURN OF INCOME ON 28.10.2002,DECLARING THE TOTAL LOSS AT RS.28.71 LAK HS.AO FINALISED THE ASSESSMENT ON 17. 01.2005,DETERMINING THE INCOME OF THE ASSESSEE AT R S.4.77 LAKHS.HE INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT FOR FURNISHING INACCURATE PARTICULARS OF INCOME. 2.1. DURING THE COURSE OF ASSESSMENT PROCEEDING,AO FOUND THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEAR UNDER A PPEAL, THAT THE ONLY SOURCE OF INCOME WAS LICENSE FEE AMOUNTING TO RS.5.40 LAKHS RECEIVED ON LET OUT OF ITS PLANT AT PALLARUTHY, THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS. 46 .59 LAKHS ON ACCOUNT OF INTEREST DOUBTFUL DEBT DEPRECIATION ETC., THAT LICENSE FEE R ECEIVED BY THE ASSESSEE WAS TREATED BY IT 2 ITA NO. 117/MUM/2013 INTERNATIONAL FISHERIES LTD. AS BUSINESS INCOME.AO HELD THAT LETTING OUT OF THE FACTORY PREMISES WAS NOT A BUSINESS ACTIVITY OF THE ASSESSEE,IT HAD ALREADY STOPPED ALL ITS BUSINESS ACTIVITY IN EARLIER YEARS, THAT THE INCOME WAS TO BE ASSESSED UNDER THE HEAD INCOM E FROM OTHER SOURCES U/S. 56 OF THE ACT, THAT THE CLAIM MADE BY THE ASSESSEE ON ACCOUNT OF INTEREST EXPENSES, AMOUNTING TO RS.31.84 LAKHS WAS NOT AS PER THE PROVISIONS OF THE ACT, THAT THE FUND WAS NOT BORROWED FOR THE PURPOSE OF BUSINESS, IT WAS TAKEN TO SETTLE DISPUTED SALE TAX LIABILITY OF 1997-98, THAT ASSESSEE HAD CLAIMED EXPENSES OF RS. 2.09 LAKH S UNDER THE HEAD OPERATING GENERAL EXPENSES THAT EXCEPT FOR THE AUDITORS REMUNERATION OF RS. 63,000/- NO OTHER EXPENSES WAS INCURRED FOR BUSINESS OF THE ASSESSEE.MEANWHILE , ASSESSEE HAD FILED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)WHO DISMISSED THE APP EAL AND HIS ORDER WAS UPHELD BY THE TRIBUNAL IN ITS ORDER DATED 17.07.2009 SUBSEQUE NTLY AO TOOK UP THE PENALTY PROCEEDI -NGS AND ASKED THE ASSESSEE TO EXPLAIN AS TO WHY TH E PROVISIONS OF SECTION 271(1)(C) OF THE ACT SHOULD BE INVOKED.AFTER CONSIDERING THE SUB MISSION OF THE ASSESSEE,AO LEVIED A PENALTY OF RS. 15 LAKHS VIDE HIS ORDER DATED 30.03. 2010. 3. ASSESSEE CHALLENGED THE PENALTY ORDER BEFORE THE FA A.IT WAS ARGUED BEFORE HIM THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF LICENSING I TS TRADEMARK, THAT THE TRADEMARKS WERE BUSINESS ASSETS OF THE ASSESSEE,THAT THE AO HAD CON SISTENTLY TAXED THE ROYALTY INCOME UNDER THE HEADS PROFIT & GAINS OF BUSINESS FROM 199 7-98 TO 2001-02, THAT DURING THE PREVIOUS YEAR RELEVANT TO AY-2001-02 IT HAD SOLD TR ADEMARK,THAT AFTER SELLING IT THE ASSESSEE WAS GETTING INCOME OF LICENSE FEES FOR USE OF PREMISES OF PALLARUTHY PLANT, THAT IT HAD NOT STOPPED ITS BUSINESS ACTIVITY,THAT THE INTE REST PAID PAYABLE ON UNSECURED LOAN TAKEN FROM HLL AND THE EXPENSES INCURRED WERE BUSIN ESS EXPENDITURE, THAT ASSESSEE HAD FURNISHED FULL PARTICULARS OF INCOME,THAT THERE WAS NO MATERIAL IN POSSESSION OF THE AO ON THE BASIS OF WHICH DISALLOWANCE WAS MADE, THAT THE INCOME FROM PALLARUTHY PLANT WAS BEING ASSESSED AS BUSINESS INCOME BY THE AO FOR SEV ERAL YEARS UP TO AY 2001-02, THAT AO HAD CHANGED ITS OPINION IN THE YEAR UNDER APPEAL AND HAD TAXED IT UNDER THE HEAD INCOME FROM OTHER SOURCES, THAT THE QUANTUM APPEAL HAD BEEN AGITATED BEFORE THE HONBLE BOMBAY HIGH COURT,THAT THE DISALLOWANCE MADE BY THE AO WERE SOLELY ON ACCOUNT OF DIFFERENT VIEW TAKEN ON SAME SET OF FACTS,THAT BECA USE OF THE DIFFERENCE OF OPINION AO HAD LEVIED PENALTY U/S 271(1)(C), THAT THE AO HAD F AILED TO APPRECIATE THAT MERE DISALLOW - ANCE OF A CLAIM IN THE ASSESSMENT PROCEEDINGS COULD NOT BE THE SOLE BASIS FOR LEVYING CONCEALMENT PENALTY,THAT ASSESSEE HAD DISCLOSED FUL L PARTICULARS AS IT WAS DISCLOSING IN THE EARLIER YEARS. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE,A SSESSMENT ORDER AND THE PENALTY ORDER OF THE AO,FAA HELD THAT ASSESSEE HAD RETURNED THE L EASE RENTAL INCOME FROM PALLARUTHY PLANT UNDER THE HEAD BUSINESS OR PROFESSION,THAT TH E AO HAD TREATED THE SAID INCOME AS INCOME FROM OTHER SOURCES,THAT THE INTEREST PAID TO HLL AND THE OTHER ADMINISTRATIVE EXPENSES INCURRED BY THE ASSESSEE WERE NOT ALLOWED TO BE SET OF OUT OF THE LEASE RENTAL INCOME,THAT IN EARLIER YEARS THE INCOME FROM PALLAR UTHY PLANT WAS RETURNED AND ASSESSED 3 ITA NO. 117/MUM/2013 INTERNATIONAL FISHERIES LTD. AS BUSINESS INCOME,THAT THE CLAIM MADE UNDER BONAFI DE VIEW THAT THE INCOME WAS ASSESS - ABLE UNDER THE HEAD BUSINESS,THAT THERE WAS NO SUPP RESSION OF FACTS OR FILING OF INACCURATE PARTICULARS OF INCOME. FINALLY, HE DELETED THE PENA LTY LEVIED BY THE AO. 4. BEFORE US,DEPARTMENTAL REPRESENTATIVE(DR)ARGUED THA T ASSESSEE HAD CONCEALED THE PARTICULARS OF INCOME, THAT ASSESSEE WAS NOT CARRYI NG OUT ANY BUSINESS, THAT CLAIM MADE BY THE ASSESSEE WITH REGARD TO THE INTEREST PAYMENT WAS NOT RELATABLE TO ITS BUSINESS, THAT IT HAD FURNISHED INACCURATE PARTICULARS OF INCOME.A R ARGUED THAT PENALTY WAS LEVIED BECAUSE THERE WAS A CHANGE IN THE OPINION OF THE AO ,THAT THE HONBLE HIGH COURT HAD ADMITTED THE APPEAL OF THE ASSESSEE WITH REGARD TO QUANTUM APPEAL.HE RELIED UPON THE CASES OF RELIANCE PETRO PRODUCTS INDIA LTD.(322ITR1 58) 5 .WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.UNDISPUTED FACTS ARE THAT THE INCOME OF LICENSE FEE FROM PLAN T WAS OFFERED BY THE ASSESSEE AS BUSINESS INCOME IN THE EARLIER YEARS AND AO HAD ASS ESSED IT UNDER THE SAME HEAD.SO, THE ASSESSEE WAS UNDER A BONA FIDE BELIEF THAT IN THE Y EAR UNDER APPEAL SAME WOULD BE ASSESSED UNDER THE SAME HEAD.BUT,AO DECIDED THAT IN COME FOR LICENSE FEE SHOULD BE ASSESSED AS INCOME FROM OTHER SOURCES.IN OUR OPINIO N,CHANGE IN HEAD OF INCOME CANNOT BE TERMED CONCEALMENT OF INCOME OR FURNISHING OF IN ACCURATE PARTICULARS OF INCOME. INCOME RECEIVED BY THE ASSESSEE FROM A PARTICULAR S OURCE WAS DISCLOSED BY IT ,MAY UNDER ANOTHER HEAD,BUT SUCH DISCLOSURE CANNOT BE TAKEN CO NCEALMENT.IT IS ALSO A FACT THAT THE HONBLE HIGH COURT HAD ADMITTED THE APPEAL OF THE A SSESSEE WHEREIN DECISION OF THE QUANTUM HAS BEEN CHALLENGED.THUS,IT IS DEBATABLE MA TTER.COURTS ARE OF THE OPINION THAT CONCEALMENT PENALTY SHOULD NOT BE LEVIED WHERE THE ISSUES ARE DEBATABLE. SIMILARLY, ADDITION OF ANY ITEM TO THE INCOME OF AN ASSESSEE S HOULD NOT RESULT IN AUTOMATIC LEVY OF PENALTY U/S.271(1)(C)OF THE ACT.CONCEALMENT OF INCO ME OR PART OF INCOME IS THE BASIC REQUIREMENT FOR INVOKING THE PROVISIONS OF THE SAID SECTION.IN THE CASE UNDER CONSIDERA - TION THE ASSESSEE HAS NOT CONCEALED THE PARTICULARS OF INCOME-IT HAD OFFERED THE INCOME EARNED BY IT.AO AND THE ASSESSEE HAD DIFFERENCE OF OPINION ABOUT THE HEAD UNDER WHICH IT SHOULD BE ASSESSED.IN THESE CIRCUMSTANCES, WE ARE O F THE OPINION THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.SO,CON FIRMING HIS ORDER, EFFECTIVE GROUND OF APPEAL IS DECIDED AGAINST THE AO. AS A RESULT,APPEAL FILED BY THE AO STANDS DISMISSED. 2,3 2,3 2,3 2,3 $4, $4, $4, $4, - - - - 5 5 5 5 '6 '6 '6 '6 + ++ + 0 0 0 0 $7 + , 89 $7 + , 89 $7 + , 89 $7 + , 89. .. . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY,2014. '1 + ./% ; <'$ 28 , 2014 / + 0 = SD/- SD/- ( . . / H.L.KARWA ) ( ! / RAJENDRA ) / PRESIDENT '# '# '# '# /ACCOUNTANT MEMBER / MUMBAI, <'$ /DATE: 28 . 05.2014 4 ITA NO. 117/MUM/2013 INTERNATIONAL FISHERIES LTD. SK '1 '1 '1 '1 + ++ + (,> (,> (,> (,> ?>%, ?>%, ?>%, ?>%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / @ A , 4. THE CONCERNED CIT / @ A 5. DR I BENCH, ITAT, MUMBAI / >B0 (,$ , . . . 6. GUARD FILE/ 0 2 )>, )>, )>, )>, (, (,(, (, //TRUE COPY// '1$ / BY ORDER, C / 8 DY./ASST. REGISTRAR , /ITAT, MUMBAI