The Asst.CIT, Circle-3(2), Hyderabad V. M/s SKS Microfinance Limited, Hyderabad

ITA 123/HYD/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4839 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMISHA S GUPT
• Assessee Lawyers: K C DEVADAS
• Keywords: Depreciation; Wrong claim; Difference of opinion

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 123/HYD/2013 ASSESSMENT YEAR : 2006-07 ASST. COMMISSIONER OF INCOME-TAX, APPELLANT CIRCLE 3(2), HYDERABAD. VS. M/S SKS MICRO FINANCE LTD., RESPONDE NT HYDERABAD. (PAN AAICS2940J) APPELLANT BY : SMT. AMISHA S. GUPT RESPONDENT BY : SHRI K.C. DEVADAS DATE OF HEARING : 21/08/2013 DATE OF PRONOUNCEMENT : 21/08/2013 ORDER PER CHANDRA POOJARI, A.M.: THIS APPEAL FILED BY THE REVENUE IS DIREC TED AGAINST THE ORDER PASSED BY THE CIT(A)-IV, HYDERABAD ON 14/11/ 2012, FOR ASSESSMENT YEARS 2006-07 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MICRO FINANCE LE NDING. IT HAD FILED RETURN OF INCOME FOR THE AY 2006-07 ON 15/11/ 2006 DECLARING TOTAL INCOME OF RS. 12,79,373/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND ASSESSMENT WAS COMPLETED BY DETERM INING TOTAL 2 ITA NO. 123/HYD/13 M/S SKS MICROFINANCE LTD. INCOME AT RS. 1,50,10,193/-. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED FROM THE DEPRECIATION STATEMENT FILED ALONG WITH THE RETURN OF INCOME THA T THE ASSESSEE COMPANY CLAIMED DEPRECIATION AT 25% IN RESPECT OF I NTANGIBLE ASSET AMOUNTING TO RS. 99,25,284/-. IT WAS DESCRIB ED BY THE ASSESSEE COMPANY THAT IT HAD INCURRED CLIENT CREATI ON COST OF RS. 3,97,01,135/- PAID TO SWAYAM KRISHI SANGAM AND WRIT TEN OFF 25% OF THAT INTANGIBLE ASSET AMOUNTING TO RS. 99,25,284 /- TO THE P&L ACCOUNT. AFTER VERIFICATION OF THE CLAIM, THE ASSES SING OFFICER CONCLUDED THAT NO INTANGIBLE ASSET HAS COME INTO TH E POSSESSION OF THE ASSESSEE AND HENCE NO DEPRECIATION CAN BE AL LOWED AND THEREFORE THE CLAIM OF RS. 99,25,284/- WAS DISALLOW ED. ON APPEAL, THE CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER. 3. THEREAFTER, THE ASSESSING OFFICER INITIATED PENA LTY PROCEEDINGS U/S 271(1)(C) OF THE ACT, ON THE GROUND THAT THE ASSESSEE HAD DELIBERATELY FURNISHED INACCURATE PART ICULARS OF INCOME TO THE EXTENT OF RS. 99,25,284/- BEING THE D ISALLOWANCE OF DEPRECIATION MADE. ACCORDINGLY, THE ASSESSING OFFIC ER LEVIED A PENALTY OF RS. 50,11,275/- U/S 271(1)(C) BEING 150% OF TAX SOUGHT TO BE EVADED. 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE CIT(A) AND BEFORE THE CIT(A) THE ASSESSEE HAD M ADE DETAILED SUBMISSIONS ON WHY THE CLAIM OF THE ASSESSEE FOR DE PRECIATION WAS A VALID CLAIM. THE AR HAD ALSO SUBMITTED THAT T HE CLAIM FOR DEPRECIATION ON CLIENT CREATION COST WAS A BONAFIDE CLAIM, SUPPORTED BY VARIOUS JUDICIAL DECISIONS AND PENALTY COULD NOT BE LEVIED ON ITS DISALLOWANCE ON A MERE DIFFERENCE OF OPINION. BEFORE THE CIT(A), THE AR OF THE ASSESSEE HAD RELIED ON VA RIOUS DECISIONS 3 ITA NO. 123/HYD/13 M/S SKS MICROFINANCE LTD. INCLUDING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD., [2010] 32 2 ITR 158(SC). 5. THE CIT(A) FOLLOWING THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) DELETED THE PENALTY OF RS. 50,11,275/- LEVI ED BY THE ASSESSING OFFICER U/S 271(1)(C) OBSERVING AS UNDER: 7............THE APPELLANT HAS MADE A CLAIM OF DEPR ECIATION ON INTANGIBLE ASSETS WHICH HAS BEEN FOUND INADMISSI BLE BY THE ASSESSING OFFICER. HOWEVER, THE ASSESSING OFFIC ER HAS NOT BROUGHT ON RECORD ANY SPECIFIC FACTS OR DETAILS WHICH WERE FOUND BY THE ASSESSING OFFICER TO BE INCORRECT , INACCURATE OR FALSE. WHETHER NOR NOT THE ASSETS IN QUESTION CONSTITUTE INTANGIBLE ASSETS ELIGIBLE FOR DEPRECI ATION IS A LEGAL ISSUE THAT DOES NOT IMPLY ANY INACCURACY IN T HE PARTICULARS FURNISHED BY THE APPELLANT. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE REVENU E IS IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUN DS OF APPEAL: 1. THE LEARNED CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE. 2. THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE PENA LTY U/S 271(1)(C) AND SHOULD NOT HAVE EQUATED THE CASE WITH A CASE OF WRONG CLAIM OF DEDUCTION. 3. THE LEARNED CIT(A) SHOULD HAVE APPRECIATED THAT SECTION 29 OF THE ACT ENVISAGES COMPUTATION OF BUSINESS INC OME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 30 TO 43D AND SECTION 32 BEING INTEGRAL PART OF THESE SECTIONS SH OULD BE ALLOWED AUTOMATICALLY EVEN IF CLAIMED OR NOT. AS SU CH, THE LEARNED CIT(A) OUGHT TO HAVE RECOGNIZED THAT KNOWIN GLY CLAIMING DEPRECIATION WHICH IS NOT AT ALL ALLOWABLE TANTAMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 4. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THA T IT IS NEITHER A CASE OF CLAIMING A DEDUCTION (AS DEFINED UNDER CHAPTER VIA) NOR A CASE OF CLAIMING EXEMPTION (AS D EFINED UNDER CHAPTER III) SO AS TO HAVE A LEGAL IMPLICATIO N AND AS SUCH OUGHT TO HAVE HELD THAT THE ASSESSEE OUGHT NOT TO HAVE MADE SUCH A WRONG COMPUTATION OF INCOME CONSCIOUSLY . 7. BEFORE US, THE LEARNED AR OF THE ASSESSEE HAS CA NVASSED 4 ITA NO. 123/HYD/13 M/S SKS MICROFINANCE LTD. THAT THE QUANTUM ADDITION OF RS. 99,25,284/-, IN RE SPECT OF DEPRECIATION CLAIM OF THE ASSESSEE, MADE BY THE ASS ESSING OFFICER AND CONFIRMED BY THE CIT(A) HAS BEEN DELETED BY THE ITAT VIDE ORDER DATED 21/06/2013 IN ITA NO. 435/HYD/2010 AND OTHERS. A COPY OF THE SAID ORDER IS AVAILABLE ON RECORD. HE, THEREFORE, SUBMITTED THAT SINCE THE QUANTUM ADDITION ITSELF IS DELETED BY THE ITAT, PENALTY LEVIED ON SUCH NON-EXISTENT ADDITION CANNOT WITHSTAND IN THE EYES OF LAW. THE LEARNED DR HAS FA IRLY CONCEDED THE ARGUMENT OF THE LEARNED AR. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. WE ARE OF THE VIEW THAT SINCE THE QUANTUM ADDITION ITS ELF HAS BEEN DELETED BY THE ITAT, LEVYING PENALTY ON SUCH NON EX ISTENT ADDITION CANNOT HAVE LEGS TO WITHSTAND IN THE EYE O F LAW. THEREFORE, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY OF RS. 50,11,275/- LEVIED BY T HE AO U/S 271(1)(C) OF THE ACT AND, THEREFORE, WE UPHOLD THE ORDER OF THE CIT(A) ON THIS COUNT DISMISSING THE GROUNDS RAISED BY THE REVENUE IN THIS REGARD. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21/08/2013. SD/- SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 21 ST AUGUST, 2013 KV 5 ITA NO. 123/HYD/13 M/S SKS MICROFINANCE LTD. COPY TO:- 1) ACIT, CIRCLE 3(2), HYDERABAD. 2) M/S SKS MICROFINANCE LTD., 301, BABUKHAN ESTATES , BASHEERBAG, HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT-III, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.