M/s. Indian Renewable Energy Development Agency Ltd., New Delhi V. DCIT (LTU), New Delhi

ITA 1183/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 91107 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-05-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-03-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 16-03-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RIS GILL
• Assessee Lawyers: S KRISHNAN V RAJA KUMARADV
• Keywords: Business income; Business expenditure; Earning of tax free income; Wrong claim; Revised return; Revenue expenditure; Capital expenditure
• Section: 263; 28

Judgement Text

ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `C NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.1183/DEL/2010 ASSTT.YEAR: 2003-04 I.T.A.NO.542/DEL/2013 ASSTT.YEAR: 2003-04 INDIAN RENEWABLE ENERGY DEVELOPMENT VS DCIT (LTU), AGENCY LTD., 3 RD FLOOR, SAKET, AUGUST KRANTI BHAWAN, NEW DELHI. BHIKAJI CAMA PLAE, NEW DELHI. (PAN: AAACI1384V) I.T.A.NO.1110/DEL/2010 ASSTT.YEAR: 2003-04 I.T.A.NO.371/DEL/2013 ASSTT.YEAR: 2003-04 DCIT (LTU), VS INDIAN RENEWABLE ENERGY DEVELOPM ENT AGENCY LTD., NBCC PLAZA, NEW DELHI. PUSHP VIHAR, SECTOR-III, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: S/SHRI S. KRISHNAN, V . RAJA KUMAR,ADV. RESPONDENT BY : SHRI R.I.S. GILL, CIT DR DATE OF HEARING: 11.03.2015 DATE OF PRONOUNCEMENT: 29/05/2015 ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 2 O R D E R PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THESE APPEALS HAVE BEEN PREFERRED AGAINST THE ORDER OF CIT(A)-LTU, NEW DELHI DATED 14.01.2010 IN APPEAL NO. 02/08-09 F OR AY 2003-04. SINCE BOTH THE APPEALS HAVE ARISEN FROM ONE ORDER OF THE CIT(A), THEREFORE, WE ARE DISPOSING THEM BOTH BY THIS CONSOLIDATED ORDER. 2. THE REVENUE HAS RAISED SOLE GROUND WHICH READS A S UNDER:- ITA 1110/D/2010 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE INCOME OF THE ASSESSEE IS DERIVED FROM PROVIDING LONG TERM FINANCE TO ENTITLE IT FOR CLAIM OF DEDUCTION U/S 36(1)(VIII). 3. THE ASSESSEE HAS ALSO RAISED FOLLOWED GROUNDS FOR O UR CONSIDERATION:- ITA NO. 1183/DEL/2010 1. DISALLOWANCE OF FILING FEES PAID TO ROC - RS.64,00,000 THE LD.CIT(A)-LTU HAS WRONGLY UPHELD THAT THE FILIN G FEES PAID TO ROC AMOUNTING TO RS.64,00,000 IS OF TH E CAPITAL NATURE. THIS FILING FEES WAS PAID TO ENHANCE FINANC IAL BUSINESS OF IREDA AND WAS FULLY ALLOWABLE. ACCORDINGLY, THE FILING FEES PAID TO ROC IS REQUIRED TO BE ALLOWED AS REVENUE EX PENDITURE. 2. DECREASE IN THE DEDUCTION U/S 36(1)(VIIA)(C) OF THE INCOME TAX ACT, 1961 FROM RS.L,79,29,080 TO RS.93,53,978 R ESULTING IN AN DISALLOWANCE OF RS.85,75,102. ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 3 THE LD. CIT(A) HAS WRONGLY UPHELD THE COMPUTATION O F DEDUCTION U/S 36(1)(VIIA)(C) BY THE DCIT(LTU) AT RS .93,53,978 I.E. 5% OF BUSINESS INCOME. AS PER THE PROVISIONS O F INCOME TAX ACT SUCH DEDUCTION IS ALLOWABLE @ 5% OF THE TOTAL I NCOME AMOUNTING TO RS.1,79,29,080. GROUND NO. 1 OF THE REVENUE AND GROUND NO. 2 OF THE ASSESSEE 4. WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON RECORD. IN THE BEGINNI NG OF THE ARGUMENT, LD. COUNSEL OF THE ASSESSEE SUBMITTED A COPY OF THE ORD ER OF ITAT DELHI C BENCH DATED 21.11.2014 IN ASSESSEES OWN CASES/APPEALS IN ITA NO. 3742/D/2001 FOR AY 1998-99 AND OTHER 16 APPEALS AND SUBMITTED THAT THE ISSUE OF DEDUCTION U/S 36(1)(VII) & 36(1)(VIIA)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) HAVE BEEN SENT BACK TO THE AO FOR TAKING A FRESH DECISIO N FOR SUBSEQUENT AY 2004- 05, THEREFORE, SOLE GROUND NO.1 OF THE REVENUE AND GROUND NO. 2 OF THE ASSESSEE MAY KINDLY BE RESTORED TO THE FILE OF THE AO ON THE SAME LINE AS THE ISSUES ARE SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL (S UPRA) ON THESE ISSUES. LD. DR FAIRLY ACCEPTED THAT THE ISSUE OF SAID DEDUCTION U/ S 36(1)(VII) & 36(1)(VIIA)(C) OF THE ACT HAS BEEN RESTORED TO THE FILE OF THE AO FOR AY 2004-05 AND THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE ALSO SIMILAR TO THE FACTS AND CIRCUMSTANCES ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 4 OF AY 2004-05. THE DEPARTMENT HAS NO SERIOUS OBJEC TION IF THE ISSUE IS RESTORED TO THE FILE OF AO FOR A FRESH ADJUDICATION AS PER L AW. 5. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, W E NOTE THAT ITAT C BENCH DELHI IN ASSESSEES OWN CASE FOR AY 2004-05 H AS RESTORED THE SAME ISSUE TO THE FILE OF AO WITH FOLLOWING OBSERVATIONS AND C ONCLUSION:- THERE ARE TWO CROSS APPEALS - ONE BY THE ASSESSEE AND THE OTHER BY THE REVENUE - WHICH ARISE OUT OF THE O RDER PASSED BY THE AMOUNTING TO CIT(A) ON 14.12.2007. FIRST GRO UND RAISED BY THE REVENUE IS AGAINST THE DIRECTION GIVE N TO THE AO FOR CALCULATING DISALLOWANCE OF EXPENSES RELATING T O EARNING OF EXEMPT INCOME. SECOND GROUND OF THE REVENUES APPE AL IS AGAINST THE DELETION OF DISALLOWANCE OF DEDUCTION U /S 36(1)(VIII) AMOUNTING TO RS.19,13,03,000/-. THE ASS ESSEE IS AGGRIEVED AGAINST THE TREATMENT OF DIFFERENT ITEMS OF INCOME AS DISCUSSED ABOVE BEING CONSIDERED AS 'INCOME FROM OT HER SOURCES' AS AGAINST ITS CLAIM OF 'PROFIT AND GAINS OF BUSINESS OR PROFESSION. THE NEXT ISSUE IS AGAINST THE GRANTI NG OF EXEMPTION U/S 10(23G) AND THE LAST ISSUE IS ABOUT T HE COMPUTATION OF DEDUCTION U/S 36(1)(VIIA)(C). THE FI RST GROUND ABOUT THE FILING OF REVISED RETURN NOT BEARING ANY ACKNOWLEDGEMENT OF DEPARTMENT, WAS NOT PRESSED BY T HE ID. AR. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE AUTHO RITIES BELOW HAVE FOLLOWED THE VIEW TAKEN BY THEM ON THIS ISSUE IN EARLIER YEARS WITHOUT ANY ELABORATE DISCUSSION ABOUT THE NA TURE OF ITEMS OF INCOME CONSIDERED AS 'INCOME FROM OTHER SO URCES' AS AGAINST THE ASSESSEE'S CLAIM OF 'BUSINESS INCOME.' FOLLOWING THE VIEW TAKEN FOR THE ABOVE EARLIER YEARS, WE SET ASIDE THE IMPUGNED ORDER AND REMIT THE MATTER TO THE FILE OF AO FOR TAKING DECISION AS REGARDS EACH OF THE ABOVE ITEMS OF INCOME FALLING UNDER THE, HEAD 'INCOME FROM OTHER SOURCES' OR 'PROFITS AND GAINS OF BUSINESS OR PROFESSION.' IT IS ONLY TH EREAFTER THAT THE QUESTION OF EXEMPTION U/S 10(23G) CAN BE DECIDE D AND THE QUESTION OF DISALLOWANCE OF EXPENSES INCURRED IN RE LATION TO THE EXEMPT INCOME. THE DECISION ABOUT THE DEDUCTION U/S ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 5 36(1)(VIII) AND 36(1)(VIIA)(C) IS, AGAIN, DEPENDENT ON THE NATURE OF THE ITEMS OF INCOME AS DISCUSSED ABOVE. T HIS MATTER IS, THEREFORE, SENT BACK TO THE AO FOR TAKING A DEC ISION AS PER LAW, AFTER ALLOWING A REASONABLE OPPORTUNITY OF BE ING HEARD TO THE ASSESSEE. 6. ON CAREFUL CONSIDERATION OF FACTS AND CIRCUMSTAN CES OF THE PRESENT CASE, WE NOTE THAT THE AO ALSO MADE ADDITION OF RS.85,75, 102 TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE BY HOLDING THAT THE DEDU CTION U/S 36(1)(VIIA) (C) OF THE ACT IS ALLOWABLE IN RESPECT OF BUSINESS INCOME ONLY . DURING FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE ACTION OF THE AO BY HOLDING THAT THE BASE FOR ALLOWING DEDUCTION REFERS TO THE COMPUTATION OF INCOME IN RESPECT OF INCOME AS REFERRED TO IN SECTION 28 OF THE ACT AND THE APP ELLANT WOULD BE ALLOWED DEDUCTION ONLY IN SO FAR AS THE INCOME RELATES TO B USINESS INCOME. 7. WE ALSO NOTE THAT THE SOLE GROUND OF THE REVENUE IS RELATED TO THE ADDITION MADE BY THE AO U/S 36(I)(VIII) OF THE ACT WHEREIN T HE AO HELD THAT THE DEDUCTION UNDER SAID SECTION IS ADMISSIBLE TO A FIN ANCIAL CORPORATION WHICH IS ENGAGED IN PROVIDING LONG TERM FINANCE FOR INDUSTRI AL OR AGRICULTURAL DEVELOPMENT OR DEVELOPMENT OF INFRASTRUCTURE FACILI TY IN INDIA OR BY A PUBLIC COMPANY FORMED AND REGISTERED IN INDIA WITH THE MAI N OBJECT OF CARRYING ON THE BUSINESS OF PROVIDING LONG TERM FINANCE FOR CONSTRU CTION OR PURCHASE OF HOUSES IN INDIA FOR RESIDENTIAL PURPOSES. THE AO HAS SIMP LY FOLLOWED THE DIRECTIONS OF THE CIT IN THE ORDER PASSED U/S 263 OF THE ACT AND HAD MADE ADDITION OF RS.7,48,31,822 TO THE TOTAL INCOME OF THE ASSESSEE. ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 6 8. DURING FIRST APPELLATE PROCEEDINGS, THE CIT(A) H AS DELETED THE SAID ADDITION AFTER DETAILED DELIBERATIONS ON THE FACTS, CIRCUMSTANCES AND RELEVANT PROVISIONS OF THE ACT ON THIS ISSUE. THE CIT(A) HAD ACCEPTED AND FOLLOWED THE ORDER OF HIS PREDECESSOR FOR PREVIOUS ASSESSMENT YE AR I.E. 2003-04 WHICH IS THE YEAR UNDER CONSIDERATION IN THESE APPEALS. THE CIT (A) DELETED THE ADDITION BY FOLLOWING THE ORDER FOR PRECEDING YEAR AND DIRECTED THE AO TO ALLOW DEDUCTION TO THE ASSESSEE AS PER PROVISIONS OF SECTION 36(1)(VII I) OF THE ACT. WE ALSO NOTE THAT THE ITAT C BENCH DELHI IN THE ORDER PASSED FOR AY 2004-05 IN ASSESSEES OWN APPEAL HAS ALSO RESTORED THIS ISSUE TO THE FILE OF AO FOR FRESH CONSIDERATION WITH THE DIRECTIONS AS REPRODUCED HEREINABOVE. THE IMPUGNED ORDER OF THE CIT(A) IN THE PRESENT APPEAL HAS BEEN PASSED ON THE SAME LINE I.E. FOR AY 2004- 05, THEREFORE, IN VIEW OF SUBMISSIONS OF BOTH THE S IDES, THIS ISSUE IS ALSO RESTORED TO THE FILE OF AO FOR A FRESH ADJUDICATION ON SIMIL AR LINES AS WAS DIRECTED BY THE TRIBUNAL IN THE ORDER FOR AY 2004-05 (SUPRA). ACCO RDINGLY, SOLE GROUND OF THE REVENUE AND GROUND NO. 2 OF THE ASSESSEE ARE RESTOR ED TO THE FILE OF AO WITH THESE DIRECTIONS THAT THE AO SHALL TAKE A FRESH DEC ISION ON BOTH THE ISSUES AS PER PROVISIONS OF THE ACT AFTER AFFORDING DUE OPPORTUNI TY OF HEARING FOR THE ASSESSEE AND WITHOUT BEING INFLUENCED WITH THE EARLIER ASSES SMENT AND IMPUGNED ORDER. GROUND NO.1 OF THE ASSESSEE IN ITA NO.1183/DE/2010 9. APROPOS GROUND NO. 2, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON R ECORD. LD. COUNSEL OF THE ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 7 ASSESSEE SUBMITTED THAT THE CIT(A) HAS WRONGLY UPHE LD THE ADDITION MADE BY THE AO ON ACCOUNT OF FILING FEES PAID TO REGISTRAR OF C OMPANIES (ROC) AMOUNTING TO RS. 64 LAKH. LD. COUNSEL FURTHER SUBMITTED THAT THIS FILING FEES WAS PAID TO ENHANCE FINANCIAL BASE OF THE ASSESSEE AND HENCE WA S FULLY ALLOWABLE AS REVENUE EXPENDITURE. REPLYING TO THE ABOVE, LD. DR, SUPPOR TING THE ACTION OF THE AO AND THE IMPUGNED ORDER OF THE CIT(A), SUBMITTED THAT TH E ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORA TION LTD. VS CIT 225 ITR 792 (SC) AND JUDGMENT IN THE CASE OF BROOKE BOND (INDIA) LTD. VS CIT 225 ITR 798 (SC). 10. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, WE NOTE THAT THE AO HAS MADE ADDITION ON ACCOUNT OF FILING FEES PAID TO ROC WITH FOLLOWING OBSERVATIONS:- '1. FILING FEE PAID TO ROC THE FILING FEE OF RS.64,00,000/- WHICH WAS PAID TO THE REGISTRAR OF COMPANIES IN CONNECTION WITH THE EXPAN SION OF THE CAPITAL BASE OF THE ASSESSEE COMPANY FROM RS.300 CR ORES TO RS.400 CRORES DURING THE YEAR UNDER CONSIDERATION A ND CLAIMED IN THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD 'ADMI NISTRATIVE EXPENSES' (SCHEDULE-'O'). THE SAME IS IN THE NATURE OF CAPITAL EXPENDITURE AND IS THEREFORE NOT ALLOWABLE. MOREOVE R, IT CLEARLY CONSTITUTES CAPITAL EXPENDITURE IN VIEW OF THE RATI O OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED VS . CIT 225 ITR 792 AND BROOKE BOND INDIA LIMITED VS. CIT 225 I TR 798. THE ASSESSEE HAS NOT DISTINGUISHED THE AFORESAID JU DICIAL PRONOUNCEMENTS, BUT HAS ATTEMPTED TO MAKE OUT A CAS E THAT IT WAS NECESSARY FOR THE BUSINESS AND THEREFORE, THE S AME SHOULD BE ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 8 ALLOWED. IT IS TO BE SEEN THAT ALL THE EXPENSES WHE THER CAPITAL OR REVENUE CAN BE TERMED AS BUSINESS EXPENDITURE. JUST BECAUSE EXPENDITURE IS FOR THE BUSINESS IT DOES NOT PARTAKE THE CHARACTER OF REVENUE EXPENDITURE. IN FACT, NOTHING TURNS ON I T IN LAW IN DECIDING WHETHER EXPENDITURE IS OF REVENUE NATURE O R OF CAPITAL NATURE. IN VIEW OF THE JUDICIAL PRONOUNCEMENTS CITED ABOVE AND CONSIDERING THE NATURE OF EXPENDITURE, I HOLD THAT THE SAME IS OF CAPITAL NATURE AND HENCE DESERVES TO BE DISALLOWED. 11. DURING FIRST APPELLATE PROCEEDINGS, THE CIT(A) UPHELD THE ADDITION WITH FOLLOWING CONCLUSION:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT , THE FINDINGS OF THE AO AND THE FACTS ON RECORD. THE FILING FEES OF RS. 6400000/- WAS PAID TO THE REGISTRAR OF COMPANY IN CONNECTION WITH THE EXPANSION OF THE CAPITAL BASE OF THE APPELLANT COMP ANY FROM RS. 300.00 CRORES TO RS. 400.00 CRORES DURING THE ASSES SMENT YEAR UNDER CONSIDERATION. THE ONLY SUBMISSION OF THE APP ELLANT IS THAT THE ABOVE EXPENDITURE WAS NECESSARY FOR BUSINESS AN D THEREFORE IT SHOULD BE ALLOWED AS REVENUE EXPENDITURE. I AM IN A GREEMENT WITH TILE VIEWS OF THE AO THAT THE DECISIONS OF THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF PUNJAB STATE I NDL. DEVP.CORP. LTD. VS CIT 225 ITR 792 AND BROOKE BOND INDIA LTD. VS CIT 225 ITR 798 ARE SQUARELY APPLICABLE IN THE A PPELLANTS CASE. THE ACTION OF THE AO IN TREATING THE ABOVE E XPENDITURE AS CAPITAL EXPENDITURE IS AS PER LAW. THIS GROUND OF APPEAL IS DISMISSED. 12. AS PER FACTS OF THE PRESENT CASE, UNDISPUTEDLY AND ADMITTEDLY, THE ASSESSEE PAID FILING FEES OF RS. 64 LAKH TO THE ROC IN CONNE CTION WITH THE EXPANSION OF THE CAPITAL BASE OF THE APPELLANT COMPANY FROM RS.3 00 CRORE TO RS.400 CRORE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. TH E ONLY CONTENTION OF THE ASSESSEE COMPANY IS THAT THE SAID EXPENDITURE WAS N ECESSARY AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE, THEREFORE, THE SAME SH OULD BE ALLOWED AS REVENUE ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 9 EXPENDITURE. AT THE SAME TIME, WE RESPECTFULLY TAK E COGNIZANCE OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF PUNJAB INDU STRIAL DEVELOPMENT CORPORATION LTD. VS CIT (SUPRA) AND JUDGMENT IN THE CASE OF BROOKE BOND (INDIA) PVT. LTD. VS CIT (SUPRA) WHEREIN SPEAKING F OR THE APEX COURT, THEIR LORDSHIPS CATEGORICALLY HELD THAT THE EXPENDITURE I NCURRED BY A COMPANY IN CONNECTION WITH ISSUE OF SHARES WITH A VIEW TO INC REASE ITS SHARE CAPITAL IS DIRECTLY RELATED TO THE EXPANSION OF CAPITAL BASE O F THE COMPANY AND, THEREFORE, THE SAME IS CAPITAL EXPENDITURE, EVEN IT MAY INCIDE NTALLY HELP IN THE BUSINESS OF COMPANY AND IN THE PROFIT MAKING. 13. LD. COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS CITI FINANCIAL CONSUMER FIN.LTD. 335 ITR 29, HONBLE GUJARAT HIGH COURT DEC ISION IN THE CASE OF CIT VS LAXMI TALKIES 275 ITR 125 , WE RESPECTFULLY NOTE THAT THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE ARE CLEARLY DISTI NGUISHABLE FROM THE FACTS AND CIRCUMSTANCES OF THE JUDGMENT OF HONBLE DELHI HIGH COURT AND HONBLE GUJARAT HIGH COURT. PER CONTRA, THE FACTS AND CIRC UMSTANCES OF THE PRESENT CASE ARE SIMILAR TO THE FACTS AND CIRCUMSTANCES OF THE C ASES AS RELIED BY BOTH THE AO AS WELL AS THE CIT(A) VIZ. JUDGMENT OF HONBLE SUPR EME COURT VIZ. PUNJAB STATE INDUSTRIAL CORPORATION (SUPRA) AND BROOKE BOND (IND IA) PVT. LTD. VS CIT (SUPRA) AND THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE REVENUE BY THESE DECISIONS. UNDER ABOVE NOTED FACTS AND CIRCUMSTANCES, WE ARE U NABLE TO SEE ANY INFIRMITY, ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 10 AMBIGUITY OR ANY OTHER VALID REASON TO INTERFERE WI TH THE CONCLUSION OF THE CIT(A) CONFIRMING THE ADDITION MADE BY THE AO. ACC ORDINGLY, GROUND NO. 1 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 14. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 1110/D/2010 AND GROUND NO. 2 OF THE ASSESSEE IN ITA NO.1183/DEL/201 0 IS DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES AND GROUND NO. 1 OF THE AS SESSEE IS DISMISSED. ASSESSEES APPEAL IN ITA NO. 542/D/2013 AND REVENUE S APPEAL IN ITA 371/D/2013 FOR AY 2003-04 15. THESE APPEALS BY THE ASSESSEE AND REVENUE HAVE ARISEN FROM THE ORDER OF CIT(A)-LTU NEW DELHI DATED 7.11.2012 IN APPEAL NO. 15/12-13/CIT(A)-LTU FOR AY 2003-04. THE GROUNDS RAISED BY THE ASSESSEE IN ITA 542/D/2013 READ AS UNDER:- THE LD. CIT(A) HAS WRONGLY UPHELD THE CONTENTION O F ACIT IN IMPOSING THE PENALTY U/S 271(1)( C) OF I.T.ACT, 196 1 OF RS.23,52,000/- BEING 100% TAX SOUGHT TO BE EVADE ON ROC FEES OF RS.64,00,000/- PAID FOR INCREASING THE AUTHORIZE D SHARE CAPITAL. IN THIS REGARD IT HAS BEEN CLARIFIED THAT ALL THE PARTICULARS OF ROC FEE WAS ACCURATELY FURNISHED DURING THE ASSESSM ENT PROCEEDINGS AS WELL AS APPEAL PROCEEDINGS. THE SOLE GROUND RAISED BY THE REVENUE IN ITA 371/D /2013 READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (APPEALS)-LTU HAS ERRED IN DELETING THE PENALTY U/S 271 (1)(C) IN RESPECT OF DISALLOWANCE OF DEDUCTION OF RS. 85,75,103/- U/S 36 (1) (VIIA) (C) MADE BY THE ASSES SING OFFICER AND CONFIRMED BY THE CIT (A) IN QUANTUM APPEALS. ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 11 16. APROPOS SOLE GROUND OF THE ASSESSEE, WE HAVE HE ARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL P LACED ON RECORD. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS WRONG LY UPHELD THE CONTENTION OF ACIT IN IMPOSING THE PENALTY U/S 271(1)(C) OF I.T.A CT, 1961 OF RS.23,52,000/- BEING 100% TAX SOUGHT TO BE EVADED ON ROC FEES OF R S.64,00,000/- PAID FOR INCREASING THE AUTHORIZED SHARE CAPITAL FROM RS. 30 0 CRORE TO RS. 400 CORRE. LD. COUNSEL VEHEMENTLY CONTENDED THAT THE ASSESSEE COMP ANY CLARIFIED BEFORE THE REVENUE AUTHORITIES THAT ALL THE PARTICULARS OF FIL ING FEES DEPOSITED WITH THE ROC WERE ACCURATELY FURNISHED DURING THE ASSESSMENT PRO CEEDINGS AS WELL AS APPELLATE PROCEEDINGS AND THE SAME WERE ALSO FURNIS HED DURING PENALTY AND APPEAL PROCEEDINGS. THEREFORE, IT CANNOT BE HELD T HAT THE ASSESSEE FURNISHED WRONG PARTICULARS OF ITS INCOME OR HAS FURNISHED IN ACCURATE PARTICULARS TO ATTRACT THE PENALTY U/S 271(1)( C) OF THE ACT. 17. LD. COUNSEL HAS DRAWN OUR ATTENTION TOWARDS OPE RATIVE PART OF THE PENALTY ORDER IN THE SECOND PART OF PARA 4.5 AND SUBMITTED THAT FIRSTLY, THE AO NOTED THAT THE ASSESSEE HAS FAILED IN THE GAMBLE OF EVADING TA X AND THE WRONG CLAIM OF THE ASSESSEE WAS DEDUCTED AND THE AMOUNT WAS BROUGHT TO TAX. LD. COUNSEL FURTHER POINTED OUT THAT IN THE LAST SENTENCE AS THE OPERAT IVE PART, THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS FILED WRONG PARTICUL ARS OF INCOME WITHIN THE MEANING OF SECTION 271(1)(C) OF THE ACT AND HENCE, PENALTY IS LEVIABLE. LD. COUNSEL FURTHER POINTED OUT THAT AS PER DECISION OF HONBLE SUPREME COURT IN ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 12 THE CASE OF CIT VS RELIANCE PETROPRODUCTS PVT. LTD. 322 ITR 158 (SC) , THE PENALTY U/S 271(1)( C) OF THE ACT IS NOT LEVIABLE M ERELY BECAUSE THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED OR WAS NOT FOUND TO BE AC CEPTABLE BY THE REVENUE. LD. COUNSEL HAS FURTHER DRAWN OUR ATTENTION TOWARDS PAP ER BOOK PAGE NO. 16-28 AND SUBMITTED THAT THE ASSESSEE PLACED ALL THE RELEVANT PAPERS AND EVIDENCE BEFORE THE AO TO ESTABLISH THIS FACT THAT THE ASSESSEE PAI D RS. 64 LAKH TO THE ROC TOWARDS FILING FEES FOR INCREASING THE AUTHORISED C APITAL OF THE ASSESSEE. 18. REPLYING TO THE ABOVE, LD. DR SUPPORTED THE ACT ION OF THE AO AS WELL AS THE CIT(A) AND SUBMITTED THAT WHEN IT IS A WELL-SET TLED PROPOSITION OF THE ACT AS PER DECISION OF HONBLE SUPREME COURT THAT THE EXPE NDITURE IS INCURRED BY A COMPANY IN CONNECTION WITH THE ISSUE OF SHARES WIT H A VIEW TO INCREASE ITS SHARE CAPITAL AND THE SAME IS CAPITAL EXPENDITURE WHICH I S NOT ALLOWABLE AS REVENUE EXPENDITURE, THEN THE ASSESSEE COMPANY WAS NOT BONA FIDE IN MAKING SUCH CLAIM WHICH WAS NOT ALLOWABLE. LD. AR VEHEMENTLY CONTEND ED THAT IN THIS SITUATION, THE AO AND THE CIT(A) RIGHTLY HELD THAT THE ASSESSE E PLACED A WRONG CLAIM AND FURNISHED WRONG PARTICULARS OF ITS INCOME, THEREFOR E, THE PENALTY WAS RIGHTLY LEVIED U/S 271(1)( C) OF THE ACT. 19. ON CAREFUL CONSIDERATION OF ABOVE SUBMISSIONS, AT THE VERY OUTSET, WE MAY POINT OUT THAT THE REVENUE AUTHORITIES HAVE DISALLO WED THE CLAIM OF THE ASSESSEE TOWARDS FILING FEES PAID TO THE ROC FOR INCREASING AUTHORISED SHARE CAPITAL BUT THE REVENUE AUTHORITIES HAVE NOT DISPUTED THE QUANT UM AND PURPOSE OF THE ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 13 EXPENDITURE WHICH HAS PROPERLY FOUND PLACE IN THE S TATEMENT OF ACCOUNTS OF THE ASSESSEE SUBMITTED BEFORE THE AO. IT IS NOT THE CA SE OF THE REVENUE THAT THE ASSESSEE HAD MADE A CLAIM OF EXPENDITURE WHICH WAS NOT ACTUALLY INCURRED OR THE ASSESSEE CLAIMED AN AMOUNT OF EXPENDITURE WHICH WAS NOT CORRECT. FROM OPERATIVE PART OF THE PENALTY ORDER, THE MAIN ALLEG ATION OF THE AO IS THAT THE ASSESSEE HAS FILED A WRONG CLAIM AND THEREFORE, THE ASSESSEE HAS CLEARLY FILED WRONG PARTICULARS OF INCOME. UNDER ABOVE NOTED FAC TS AND CIRCUMSTANCES, WE DECLINE TO ACCEPT THE CLAIM OF THE AO THAT THE ASSE SSEE HAS FILED WRONG PARTICULARS OF ITS INCOME. AT THE SAME TIME, WE AR E INCLINED TO HOLD THAT THE FACT REMAINS THAT THE ASSESSEE PLACED A CLAIM TOWARDS FI LING FEES PAID TO ROC FOR INCREASING THE AUTHORISED SHARE CAPITAL WHICH WAS N OT FOUND ACCEPTABLE DURING QUANTUM PROCEEDINGS AND THE SAME ATTAINED FINALITY. 20. IN VIEW OF ABOVE, WE RESPECTFULLY TAKE NOTICE O F THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) WHEREIN IT WAS HELD THUS:- IT WAS, THEREFORE, REITERATED BEFORE US THAT THE A SSESSING OFFICER HAD CORRECTLY REACHED THE CONCLUSION THAT SINCE THE ASSESSEE HAD CLAIMED EXCESSIVE DEDUCTIONS KNOWING THAT THEY ARE INCORRECT; IT AMOUNTED TO CONCEALMENT OF INCOME. IT WAS TRIED TO BE ARGUED THAT THE FALSEHOOD IN ACCOUNTS CAN TAKE EITHER OF THE TW O FORMS; (I) AN ITEM OF RECEIPT MAY BE SUPPRESSED FRAUDULENTLY; (II ) AN ITEM OF EXPENDITURE MAY BE FALSELY (OR IN AN EXAGGERATED AM OUNT) CLAIMED, AND BOTH TYPES ATTEMPT TO REDUCE THE TAXAB LE INCOME AND, THEREFORE, BOTH TYPES AMOUNT TO CONCEALMENT OF PART ICULARS OF ONE'S INCOME AS WELL AS FURNISHING OF INACCURATE PA RTICULARS OF INCOME. WE DO NOT AGREE, AS THE ASSESSEE HAD FURNIS HED ALL THE ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 14 DETAILS OF ITS EXPENDITURE AS WELL AS INCOME IN ITS RETURN, WHICH DETAILS, IN THEMSELVES, WERE NOT FOUND TO BE INACCU RATE 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 O R NOT. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, W HICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVEN UE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVEN UE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDME NT OF THE LEGISLATURE. 21. IN VIEW OF ABOVE, WE REACH TO A CONCLUSION THAT THE AO IMPOSED PENALTY ON WRONG PREMISES MERELY BECAUSE THE CLAIM OF THE A SSESSEE WHICH WAS FULLY DISCLOSED IN THE STATEMENT OF INCOME WAS NOT FOUND TO BE ACCEPTABLE BY THE DEPARTMENT BUT IT CANNOT BE HELD THAT THE ASSESSEE EITHER FURNISHED WRONG PARTICULARS OF ITS INCOME OR HAS CONCEALED PARTICUL ARS OF ITS INCOME TO ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HENCE, IMPUGNED PENALTY LEVIED ON THE ASSESSEE IS NOT SUSTAINABLE AND THUS, SOLE GROUND O F THE ASSESSEE IN ITA NO. 452/DEL/2013 FOR AY 2003-04 IS ALLOWED AND THE AO I S DIRECTED TO DELETE THE PENALTY. REVENUES APPEAL IN ITA NO. 371/DEL/2013 FOR AY 200 3-04 22. APROPOS SOLE GROUND OF THE REVENUE, AS REPRO DUCED HEREINABOVE, WE HAVE HEARD ARGUMENTS OF BOTH THE SIDES AND CAREFULLY PER USED THE RELEVANT MATERIAL PLACED ON RECORD BEFORE US, INTER-ALIA, QUANTUM ASS ESSMENT AND APPEAL ORDER, PENALTY AND PENALTY APPEAL ORDER AND PAPER BOOK OF THE ASSESSEE SPREAD OVER 47 PAGES AND CITATIONS AND LEGAL PROPOSITIONS RELIED B Y BOTH THE SIDES. ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 15 23. THE LD. DR POINTED OUT THAT CIT(A) HAS ERRED IN DELETING THE PENALTY U/S 271(1) (C) OF THE ACT IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S 36(1) (VII) (C) OF THE ACT MADE BY THE AO AND CONFIRMED BY THE CIT( A) IN QUANTUM PROCEEDINGS. THE LD. DR FURTHER CONTENDED THAT THE ASSESSEE SHOULD HAVE CLAIMED RS.93,53,977/- INSTEAD OF RS.1,79,29,080/- ON INCOME FROM OTHER SOURCES AND UP TO THIS EXTENT, THE ASSESSEE HAD FU RNISHED WRONG AND INACCURATE PARTICULARS OF ITS INCOME WITHIN THE MEANING OF SEC TION 271(1) (C) OF THE ACT, HENCE PENALTY WAS RIGHTLY LEVIED ON THE ASSESSEE. THE LD. DR VEHEMENTLY CONTENDED THAT THE CIT(A) WAS NOT CORRECT AND JUSTI FIED IN DELETING THE PENALTY MERELY BECAUSE THE ISSUE IS DEBATABLE AND THERE MAY BE A POSSIBILITY OF A DIFFERENT OPINION OR VIEW BY THE HIGHER JUDICIAL FO RUM. THE LD. DR POINTED OUT THIS ISSUE IS VERY CLEAR AND THE ASSESSEE CLAIMED H IGHER AMOUNT WITHOUT ANY BONAFIDE REASON, HENCE, PENALTY WAS LEVIABLE. 24. REPLYING TO THE ABOVE AND SUPPORTING THE IMPUGN ED ORDER, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SAME ISS UE BEING DEBATABLE HAS BEEN REMITTED BACK TO THE FILE FOR FRESH ADJUDICATION FO R A.Y 2004-05 BY THE ITAT BENCH C ORDER DATED 21/11/2014 (SUPRA) AND HENCE, THE QUANTUM ASSESSMENT AND APPEAL ORDER ON THE BASIS OF WHICH THE PENALTY WAS LEVIED DO NOT SURVIVE AND HENCE, THE PENALTY ORDER CANNOT BE HELD AS SUST AINABLE. THE LD. COUNSEL FURTHER POINTED OUT THAT EVEN OTHERWISE WHEN THE IS SUE ON WHICH DISALLOWANCE OR ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 16 ADDITION HAS BEEN MADE IS DEBATABLE HAVING TWO POSS IBLE VIEWS, THEN PENALTY IS NOT IMPOSABLE. 25. ON CAREFUL CONSIDERATION OF ABOVE, AT THE BEGIN NING, WE NOTE THAT UNDISPUTEDLY, THE ISSUE OF ALLOWABILITY OF CLAIM OF THE ASSESSSEE FOR A.Y 2004- 05 HAS BEEN RESTORED TO THE FILE OF THE AO FOR FRES H ADJUDICATION BY THE ORDER OF THE TRIBUNAL DATED 21/11/2014. FURTHER, WE ALSO NO TE THAT ON SIMILAR LINES, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL FO R A.Y 2004-05 (SUPRA), WE HAVE RESTORED THE SAME ISSUE TO THE FILE OF THE AO FOR FRESH CONSIDERATION, WHILE DISPOSING AND ADJUDICATING GROUND NO. 2 OF THE ASSE SSEE IN ITA NO. 1183/DEL/2010 FOR A.Y 2003-04 BY THE EARLIER PART O F THIS ORDER. 26. IN THIS SITUATION, WE HOLD THAT SINCE THE QU ANTUM ASSESSMENT AND APPEAL ORDER FOR A.Y 2003-04, ON THE BASIS OF WHICH PENALT Y WAS LEVIED DO NOT SURVIVE AND THE ORDER OF SECOND ROUND OF ASSESSMENT IS AWAI TED, THEN THE ISSUE OF SUSTAINABILITY OR VALIDITY OF THE PENALTY ORDER AND IMPUGNED ORDER BECOMES ACADEMIC AND INFRUCTUOUS AND HENCE, THE SAME DOES NOT SURVIVE FOR ADJUDICATION BEFORE THIS TRIBUNAL AND THUS, WE DISM ISS THE SOLE GROUND OF THE REVENUE WITHOUT ANY DETAILED DELIBERATIONS ON MERIT . ACCORDINGLY, SOLE GROUND OF THE REVENUE IN ITA NO. 371/DEL/2003 IS DISMISSED AS INFRUCTUOUS. ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 17 27. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO . 542/DEL/2013 IS ALLOWED AND APPEAL OF THE REVENUE IN ITA NO. 371/DEL/2013 I N PENALTY PROCEEDINGS IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.05.2015. SD/- SD/- (S. V. MEHROTRA) (CHANDRAMOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 29TH MAY 2015 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. C.I.T.(A) 4. C.I.T. 5. DR BY ORDER ASSTT.REGISTRAR ITA 1183/D/2010, 542/D/2013 1110/D/D/2010, 371/D/2013 18