MPIL Corporation Ltd., Mumbai V. Deputy Commissioner of Income-tax,

ITA 1316/PUN/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 2641 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 19-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Assessee Lawyers: DIVYESH SHAH
• Keywords: Capital asset; Reason to believe; Revenue expenditure
• Section: 143(3); 14A; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, PUN E , , !'#'' $ , % & BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM / ITA NO. 1316/PN/2014 %' ( ')( / ASSESSMENT YEAR : 2001-02 MPIL CORPORATION LTD., THE INTERNATIONAL, 5 TH FLOOR, 16, NEW MARINE LINES CROSS ROAD NO. 1, CHURCHGATE, MUMBAI-400020 PAN : AAACM9326L ....... / APPELLANT ' / V/S. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 9, PUNE / RESPONDENT ASSESSEE BY : SHRI DIVYESH SHAH AND MS. MOKSHA MEHTA REVENUE BY : SHRI MUKESH JHA / DATE OF HEARING : 06-01-2016 / DATE OF PRONOUNCEMENT : 07-03-2016 * / ORDER PER VIKAS AWASTHY, JM : THE APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE OR DER OF COMMISSIONER OF INCOME TAX (APPEALS)-V, PUNE DATED 04-03 -2014 CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) OF THE INCOME TAX ACT, 2 ITA NO. 1316/PN/2014, A.Y. 2001-02 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR THE ASSE SSMENT YEAR 2001-02. 2. THE BRIEF FACTS OF THE CASE AS EMANATING FROM THE RE CORDS ARE: THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF TE XTILE MACHINERY AND FOOD PROCESSING MACHINERY. THE ASSESSMEN T IN THE CASE OF ASSESSEE FOR THE ASSESSMENT YEAR 2001-02 WAS MADE VIDE ORDER DATED 30-12-2008 U/S. 143(3) R.W.S. 264 OF THE ACT. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER D ISALLOWED CERTAIN EXPENSES INCLUDING DEMERGER EXPENSES AMOUNTING T O ` 10,00,000/- CLAIMED BY THE ASSESSEE U/S. 37(1) OF THE ACT. THE ASSESSING OFFICER HELD THE DEMERGER EXPENSES AS CAPITAL EX PENDITURE. PENALTY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE IN RESPECT OF DISALLOWANCE OF THE EXPENDITURE. THE ASSESSING OFFICER VIDE PENALTY ORDER DATED 26-06-2009 LEVIED PENALTY U/S. 271(1)(C) IN RESP ECT OF DISALLOWANCE OF ` 1,94,195/- U/S. 14A OF THE ACT AND THE DEMERGER EXPENSES CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITUR E. THE ASSESSING OFFICER HELD THAT THE CLAIM OF THE ASSESSEE WAS N OT PROPER AND THERE IS CONCEALMENT OF INCOME FOR FURNISHING OF INACCUR ATE PARTICULARS OF INCOME ON THE PART OF THE ASSESSEE. THE AS SESSING OFFICER LEVIED PENALTY OF ` 4,75,000/- U/S. 271(1)(C) OF THE ACT. AGGRIEVED BY THE PENALTY ORDER DATED 26-06-2009, THE A SSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEA LS). THE COMMISSIONER OF INCOME TAX (APPEALS) VIDE IMPUGNED ORDER D ELETED THE PENALTY IN RESPECT OF DISALLOWANCE U/S. 14A AND UPHELD THE PENALTY IN RESPECT OF DISALLOWANCE OF ` 10,00,000/- ON ACCOUNT DEMERGER EXPENSES. NOW, THE ASSESSEE IS IN SECOND APPEAL BEFORE THE TRIBUNAL ASSAILING THE 3 ITA NO. 1316/PN/2014, A.Y. 2001-02 ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) IN CONFIRMING T HE PENALTY ON DEMERGER EXPENSES. 3. SHRI DIVYESH SHAH AND MS. MOKSHA MEHTA APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD INCURRED DEMERGER EXPENSES FOR THE EFFICIENT CONDUCT OF BUSINESS. THE SCHEM E OF DEMERGER WAS APPROVED BY THE HON'BLE BOMBAY HIGH COURT VIDE ORD ER DATED 31-07-2001. AS PER THE SCHEME OF ARRANGEMENT THE EXP ENSES INCLUDING STAMP DUTY AND REGISTRATION FEE OF ANY DEED DOCUMENTS ETC. WAS TO BE BORNE BY THE ASSESSEE COMPANY. THE LD. AR REFERRED TO THE ORDER PASSED BY THE HON'BLE BOMBAY HIGH COURT SANCTIONING THE SCHEME OF ARRANGEMENT AT PAGES 46 TO 55 OF THE PAPER BOOK. THE LD. AR FURTHER SUBMITTED THAT THIS FACT WAS BROUGHT TO THE NOTICE OF T HE ASSESSING OFFICER VIDE LETTER DATED 15-12-2004 WHICH IS AT PAGE 44 O F THE PAPER BOOK. HOWEVER, THE SAME WERE NOT CONSIDERED BY THE A UTHORITIES BELOW. THE LD. AR FURTHER CONTENDED THAT THE ASSESSEE HAD BON AFIDE REASON TO BELIEVE THAT THE DEMERGER EXPENSES TOWARDS PAYMENT OF STAMP DUTY ARE REVENUE IN NATURE IN VIEW OF THE FOLLOWING DECISIONS: I. COMMISSIONER OF INCOME TAX VS. BOMBAY DYEING AND MANUFACTURING CO. LTD., 219 ITR 521 (SC); II. COMMISSIONER OF INCOME TAX VS. AKME ELECTRONICS AND CONTR OL PVT. LTD., 267 ITR 396 (GUJ); III. COMMISSIONER OF INCOME TAX VS. BUSH BOAKE ALLEN (INDIA) LIMITED, 135 ITR 306 (MAD); IV. MADRAS RACE CLUB VS. COMMISSIONER OF INCOME TAX, 151 ITR 675 (MAD); V. COMMISSIONER OF INCOME TAX VS. GUJARAT URJA VIKAS LTD.; 22 9 TAXMAN 46 (GUJ). 4 ITA NO. 1316/PN/2014, A.Y. 2001-02 IN ALL THE ABOVE MENTIONED CASES, THE HON'BLE COURTS HAV E HELD THAT THE LEGAL/PROFESSIONAL CHARGES PAID FOR THE AMALGAMAT ION OF THE COMPANY ARE ALLOWABLE AS REVENUE EXPENDITURE. THE LD. AR FURTHER SUBMITTED THAT WHERE THE EXPENDITURE HAS BEEN CLAIMED IN A BONAFIDE MANNER AND THERE IS NO CONCEALMENT OF INCOME, PENALTY IS N OT LEVIABLE. THE LD. AR CONTENDED THAT PENALTY CANNOT BE LEVIED MEREL Y ON THE GROUND THAT THE EXPENDITURE HAS BEEN WRONGLY CLAIMED. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS: I. COMMISSIONER OF INCOME TAX VS. RELIANCE PETROPRODUCTS (P.) L TD., 322 ITR 158 (SC); II. DEPUTY COMMISSIONER OF INCOME TAX VS. BOSTON CONSULTING GROUP (INDIA) (P.) LTD., 7 ITR (T) 417; III. UNION OF INDIA VS. RAJASTHAN SPG. & WVG. MILLS, 224 CTR 1 (SC); IV. COMMISSIONER OF INCOME TAX VS. DHARAMCHAND L. SHAH, 204 I TR 462 (BOM). 4. ON THE OTHER HAND SHRI MUKESH JHA REPRESENTING THE DEPARTMENT VEHEMENTLY SUPPORTED THE FINDINGS OF COMMISSIO NER OF INCOME TAX (APPEALS) IN CONFIRMING THE LEVY OF PENALTY IN RESP ECT OF DISALLOWANCE OF ` 10,00,000/- ON ACCOUNT OF DEMERGER EXPENSES. THE LD. DR CONTENDED THAT FROM THE PERUSAL OF THE RECORDS IT IS EVIDENT THAT THE EXPENDITURE ` 10,00,000/- CLAIMED AS REVENUE HAS BEEN INCURRED ON STAMP DUTY FOR THE TRANSFER OF CAPITAL ASSETS CARRIED OUT IN THE PROCESS OF DEMERGER. THEREFORE, THERE CANNOT BE TWO OPINIONS ABO UT THE NATURE OF EXPENDITURE. IN QUANTUM APPEAL, THE ASSESSEE HAS ACC EPTED THE ADDITION. THEREFORE, THE COMMISSIONER OF INCOME TAX (APPEALS ) WAS WELL JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY U/S. 271(1)(C) IN R ESPECT 5 ITA NO. 1316/PN/2014, A.Y. 2001-02 OF DEMERGER EXPENSES WRONGLY CLAIMED BY THE ASSESSEE A S REVENUE EXPENDITURE. 5. WE HAVE HEARD THE SUBMISSIONS MADE BY THE REPRESEN TATIVES OF RIVAL SIDES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIE S BELOW. THE PENALTY U/S. 271(1)(C) HAS BEEN LEVIED IN RESPECT OF DEMERG ER EXPENSES ` 10,00,000/- CLAIMED BY THE ASSESSEE U/S. 37(1) OF THE ACT. ACCORDING TO THE REVENUE THE AFORESAID DEMERGER EXPENSES ARE TO WARDS STAMP DUTY FOR THE TRANSFER OF CAPITAL ASSETS IN THE SCHEME OF D EMERGER. THEREFORE, THE DEMERGER EXPENSES ARE CAPITAL IN NATURE. THE CONTENTION OF THE LD. AR IS THAT, WHETHER DEMERGER EXPENDITURE IS REV ENUE OR CAPITAL IN NATURE, IS A DEBATABLE ISSUE. THEREFORE, NO PENA LTY CAN BE LEVIED. IN SUPPORT OF HIS SUBMISSIONS, THE LD. AR HAS PLACED RELIANCE ON CERTAIN DECISIONS TO SHOW THAT THE HON'BLE SUPREME COUR T AND THE HON'BLE HIGH COURTS HAVE HELD THAT THE LEGAL EXPENDITURE INCURRED DURING THE COURSE OF AMALGAMATION IS REVENUE IN NATURE. 6. THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE IN THE COURSE OF DEMERGER AND THE NATURE OF EXPENDITURE IN THE VARIOUS DECISIONS ON WHICH THE LD. AR HAS PLACED RELIANCE ARE ENTIRELY DIFFERENT IN CHARACTER, ALTHOUGH BOTH THE EXPENDITURES HAVE BEEN INCURRED DURIN G RESTRUCTURING OF THE COMPANIES IN THE COURSE OF AMALGAMAT ION / DEMERGER. IN ALL THE CASE LAWS ON WHICH THE LD. AR HAS PLA CED RELIANCE TO SUBSTANTIATE HIS CLAIM, THE EXPENDITURE IS TOWARDS PAYM ENT OF LEGAL/PROFESSIONAL CHARGES. IN THE PRESENT CASE, THE ASSE SSEE HAD INCURRED DEMERGER EXPENSES TOWARDS PAYMENT OF STAMP D UTY FOR TRANSFER OF CAPITAL ASSETS. 6 ITA NO. 1316/PN/2014, A.Y. 2001-02 7. BE THAT AS IT MAY, THE ASSESSEE HAS SHOWN THE NATU RE OF EXPENDITURE IN ITS BOOKS OF ACCOUNT. MERELY CLAIMING OF EXP ENDITURE UNDER WRONG HEAD WOULD NOT MAKE THE ASSESSEE LIABLE FOR PENALTY U NDER THE PROVISIONS OF SECTION 271(1)(C) OF THE ACT. IT IS NOT TH E CASE OF REVENUE THAT THE ASSESSEE HAS NOT DISCLOSED THE DETAILS OF EXPENDITURE CLAIMED. THE HON'BLE APEX COURT IN THE CASE OF COMMISSION ER OF INCOME TAX VS. RELIANCE PETROPRODUCTS (P.) LTD. (SUPRA) HAS HELD THAT PENALTY U/S. 271(1)(C) CANNOT BE LEVIED MERELY BECAUSE THE ASSESSEE HAD CLAIMED EXPENDITURE WHICH WAS NOT ACCEPTED BY THE REVENUE. THE RELEVANT EXTRACT OF THE JUDGMENT OF THE HON'BLE APEX CO URT READS AS UNDER: A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICULARS OF T HE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHE D INACCURATE PARTICULARS OF HIS INCOME. PRESENT IS NOT THE CASE OF CONCEALMENT OF THE INCOME. THAT IS NOT THE CASE OF THE REVENUE EITHER. HOWEVER, THE LEARNED COUNSEL FOR REVENUE SUGGESTED THAT BY MAKING INCORR ECT CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF THE INCOME. AS PER LAW LEXICON, THE MEANING OF THE WORD 'PARTICULAR' IS A DETAIL OR DETAILS (IN PLURAL SENS E); THE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD 'PARTICULARS' USED IN THE SECTION 271(1)(C) WOULD EMBRACE THE MEA NING OF THE DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN THE P RESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INC ORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPL IED WAS FOUND TO BE FACTUALLY INCORRECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. T HE LEARNED COUNSEL ARGUED THAT 'SUBMITTING AN INCORRECT CLAIM IN LAW F OR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INACCURATE PARTICUL ARS OF SUCH INCOME'. WE DO NOT THINK THAT SUCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORDS ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE TO THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS 7 ITA NO. 1316/PN/2014, A.Y. 2001-02 8. THUS, IN VIEW OF THE FACTS OF THE CASE AND LAW LAID DOWN BY THE HON'BLE SUPREME COURT OF INDIA, WE ARE OF THE CONSIDERED OPINION THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. THEREFORE, THE IMPUGNED ORDER IS SET ASIDE AND THE APPEAL OF THE AS SESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON MONDAY, THE 07 TH DAY OF MARCH, 2016. SD/- SD/- ( . . / R.K. PANDA) ( ! ' / VIKAS AWASTHY) #' / ACCOUNTANT MEMBER $ % #' / JUDICIAL MEMBER / PUNE; &# / DATED : 07 TH MARCH, 2016 RK *+,%-.#/#)- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. ' () / THE CIT(A)-V, PUNE 4. ' / THE CIT-V, PUNE 5. !*+ %%,- , ,- , . ./0 , / DR, ITAT, B BENCH, PUNE. 6. + 1 23 / GUARD FILE. // ! % // TRUE COPY// #4 / BY ORDER, %5 ,0 / PRIVATE SECRETARY, ,- , / ITAT, PUNE