ACIT RG 9(2), V. OTIS ELEVATOR CO. (I) LTD, MUMBAI

ITA 1307/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75196 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 07-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FIROZE ANDHYARUJINA
• Keywords: Capital asset; Depreciation; Wrong claim; Difference of opinion; Revenue expenditure; Capital expenditure
• Section: 6

Judgement Text

, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL C CC C BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.1307/M/2012 1307/M/2012 1307/M/2012 1307/M/2012 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2005-06) DCIT RANGE 9(2), AAYAKAR BHAVAN, R. NO. 218, 2 ND FLOOR, M. K. ROAD, MUMBAI-400020 % % % % / VS. M/S OTIS ELEVATOR CO. (INDIA) LTD., MAGNUS TOWERS, 9 TH FLOOR, MINDSPACE LINK ROAD, MALAD(W), MUMBAI-400064 #' ! ./ ( ./ PAN/GIR NO. :AAACO0481E ( ') / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( *+') / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) $% $%$% $% ,- ,- ,- ,- . / . / . / . / /ASSESSEE BY : SHRI FIROZE ANDHYARUJINA # # # # . / . / . / . / / REVENUE BY : SHRI RAVI PRAKASH % % % % . .. . -! -! -! -! / DATE OF HEARING : 7 TH JANUARY 2014 01& 01& 01& 01& . .. .-! -! -! -! /DATE OF PRONOUNCEMENT: 10 TH JANUARY 2014 ' 2 / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 29.12.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) A RISING FROM THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE INCOME TA X ACT FOR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LD. CIT(A) WAS CORRECT IN DELETING THE PENALTY LEVIED U/S 271(1)(C) ON THE WRONG CLAIM, OF THE EXP ENDITURE INCURRED ON TRANSFER OF A CAPITAL ASSET, AS REVENUE EXPENSES? 2. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSING OFFI CER BE RESTORED. ITA NO.1307/M/2012 OTIS ELEVATOR CO. (INDIA) LTD. 2 3. THE ASSESSING OFFICER HAS LEVIED THE PENALTY U/S 271(1)(C) OF THE INCOME TAX ACT IN RESPECT OF DISALLOWANCE OF THE CL AIM OF DEDUCTION OF ` 3,82,18,689/- ON ACCOUNT OF EX-GRATIA PAYMENT AND S ECONDLY AGAINST THE DISALLOWANCE OF AMOUNT OF ` 27,00,000/- BEING TRANS FER CHARGES ON SALE OF BUPATHI CHAMBERS. THE ASSESSEE CHALLENGED THE ACTIO N OF THE A.O FOR LEVY THE PENALTY OF ` 1,49,73,170/- VIDE ORDER DATED 29. 3.2011 BEFORE THE CIT(A). THE CIT(A) HAS DELETED THE PENALTY BY RECOR DING THE FACT THAT THE ISSUE OF DISALLOWANCE OF EX-GRATIA PAYMENT HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THIS TRIBUNAL AS WELL AS BY THE HON BLE HIGH COURT. AS REGARDS, THE PENALTY ON DISALLOWANCE OF TRANSFER FE E OF ` 27,00,000/- THE CIT(A) NOTED THAT IN THE QUANTUM APPEAL THE FIRST A PPELLATE AUTHORITY HAS HELD THAT THE SAID AMOUNT SHOULD BE REDUCED FROM TH E GROSS SALES CONSIDERATION OF THE ASSET WHILE COMPUTING THE DEPR ECIATION ON BUILDING RESULTING IN ALLOWING DEDUCTION OVER SUBSEQUENT YEA RS. FURTHER IT WAS NOTED THAT THIS IS AN ISSUE WHERE THERE COULD BE A BONAFIDE DIFFERENCE OF OPINION AND THEREFORE, LEVY OF PENALTY IS NOT JUSTI FIED. 4. WE HAVE HEARD THE LD. D.R AS WELL AS LD. A.R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AS REGARDS, THE PENALT Y IN RESPECT OF DISALLOWANCE OF EX-GRATIA PAYMENT WE NOTE THAT THE CLAIM OF THE ASSESSEE HAS BEEN ALLOWED BY THIS TRIBUNAL AND FURTHER THE H ONBLE HIGH COURT HAS CONFIRMED THE ORDER OF THIS TRIBUNAL THEREFORE IN V IEW OF THE FACT THAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE QUANTUM APPEAL THE PENALTY DOES NOT SURVIVE IN THIS RESPECT. SO FA R AS THE DISALLOWANCE OF TRANSFER FEE WHICH WAS CLAIMED BY THE ASSESSEE AS L EGAL AND PROFESSIONAL ITA NO.1307/M/2012 OTIS ELEVATOR CO. (INDIA) LTD. 3 FEE AND DISALLOWED BY THE A.O BY TREATING AS A CAPI TAL EXPENDITURE, WE NOTE THAT THE CIT(A) IN THE QUANTUM APPEAL HELD THA T THIS AMOUNT SHOULD BE REDUCED FROM THE SALE CONSIDERATION AND ACCORDIN GLY THE RETURN DOWN VALUE OF BLOCK OF ASSET OF BUILDING WOULD BE INCREA SED FOR THE PURPOSE OF DEPRECIATION RESULTING ALLOWING THE DEDUCTION OF TH E SAID AMOUNT OVER THE SUBSEQUENT YEARS. WE FURTHER NOTE THAT THIS ISSUE I S A HIGHLY DEBATABLE IN NATURE AS INVOLVING THE QUESTION WHETHER THE LEGAL AND PROFESSIONAL FEE PAID IN THE MATTER OF TRANSFER OF ASSET WOULD BE AL LOWABLE REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE. THEREFORE, WH EN THE ASSESSEE HAS DISCLOSED ALL RELEVANT FACTS AND DETAILS OF THE CLA IM THEN IT CANNOT BE DENIED THAT IT WAS BONAFIDE CLAIM OF THE ASSESSEE B ECAUSE OF DIFFERENCE OF OPINION AND DISALLOWANCE OF THE SAME WOULD NOT ATTR ACT THE PENALTY U/S 271(1)(C). ACCORDINGLY, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTY IN QUESTION. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF JANUARY 2014 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 10 TH JANUARY 2014 SUBODH ITA NO.1307/M/2012 OTIS ELEVATOR CO. (INDIA) LTD. 4 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI 1. DRAFT DICTATED ON 7 TH JANUARY 2014 DICT PAD PLACED IN THE ORG. FILE SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 8 TH JANUARY 2014 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DESPATCH SR PS