M/s. ULTRAMARINE & PIGMENTS LTD., MUMBAI V. ACIT CIR - 7(3), MUMBAI

ITA 1328/MUM/2007

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62238 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 09-04-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 12-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation

Judgement Text

ULTRAMARINE & PIGMENTS LTD ITA NO. 1328/MUM/2007 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI F FF F BENCH BENCH BENCH BENCH MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI MUMBAI BENCHES, MUMBAI BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI RAJENDRA RAJENDRA RAJENDRA RAJENDRA SINGH, AM SINGH, AM SINGH, AM SINGH, AM & & & & SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM ITA NO. ITA NO. ITA NO. ITA NO. 1328/MUM/2007 1328/MUM/2007 1328/MUM/2007 1328/MUM/2007 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2001 2001 2001 2001- -- -02 0202 02) )) ) ULTRAMARINE & PIGMENTS LTD THIRUMALAI HOUSE PLOT NO. 10/102 ROAD NO. 29, SION(E) MUMBAI 22 VS THE ASST COMR OF INCOME TAX CIR 7(3), MUMBAI (APPELLANT (APPELLANT (APPELLANT (APPELLANT ) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO. AAACU0718Q AAACU0718Q AAACU0718Q AAACU0718Q ASSESSEE BY SH HIRO RAI REVENUE BY SHRI M RAJAN DT.OF HEARING 9 TH APRIL 2012 DT OF PRONOUNCEMENT 20 TH . APRIL 2012 ORDER ORDER ORDER ORDER PER PER PER PER VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO, , , , JM JMJM JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 4 TH JAN 2007 ARISING FROM THE PENALTY ORDER PASSED U/S 271( 1) ( C) OF THE I T ACT FOR THE ASSESSMENT YEAR 2001-02. 2 THE ASSESSMENT WAS COMPLETED AFTER MAKING INTER-A LIA AN ADDITION OF RS. 1,24,62,367/- ON ACCOUNT OF DISALLOWANCE OF INT EREST AND FURTHER THE ASSESSING OFFICER TREATED THE LEASE RENT OF RS. 10, 02,040/- AS WELL AS INTEREST PORTION OF RS.2,60,528/- AS INCOME FROM OTHER SOURC ES. THE PENALTY PROCEEDINGS U/S 271(1) ( C) WERE ALSO INITIATED WITH RESPECT T O THE DISALLOWANCE OF INTEREST WHICH WAS CONFIRMED BY THE CIT(A) TO THE EXTENT OF RS.78,72,653/- AND TREATMENT OF LEASE RENTAL AND INTEREST AS INCOME F ROM OTHER SOURCES. CONSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY OF RS. 36,12,980/- VIDE ORDER DATED 28.3.2006. ULTRAMARINE & PIGMENTS LTD ITA NO. 1328/MUM/2007 (ASST YEAR 2001-02) 2 2.1 THE ASSESSEE CHALLENGED THE LEVY OF PENALTY BEF ORE THE CIT(A); BUT COULD NOT SUCCEED AS THE CIT(A) UPHELD THE PENALTY IMPOS ED BY THE ASSESSING OFFICER. 3 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE LD AR HAS POINTED OUT THAT AS FAR AS THE DISALLOWANCE OF INTEREST OF RS. 78,72,653/- IS CONCERNED, THE SAME HAS BEEN DELETED BY THE TRIBUNAL IN QUANTUM APPEAL VID E ORDER DATED 30.12.2001. THEREFORE, THE PENALTY AGAINST THE SAID ADDITION IS NOT SUSTAINABLE. THIS FACTUAL POSITION HAS NOT BEEN DISPUTED BY THE LD DR. THE L D AR HAS ALSO FILED A COPY OF THE ORDER DATED 30.12.2011 OF THE TRIBUNAL IN QUANT UM APPEAL. 3.1 THE LD AR HAS FURTHER SUBMITTED THAT AS REGARDS THE TREATMENT OF LEASE RENTAL AND INTEREST COMPONENTS, THE CIT(A), WHILE D ECIDING THE QUANTUM APPEAL FOR THE ASSESSMENT YEAR UNDER CONSIDERATION HAS DI SCUSSED THE FACTS ON THE ISSUE AND OBSERVED THAT THE ASSESSEE HAD PURCHASED THE ASSETS IN QUESTION AND LEASED OUT THE SAME TO M/S DUCKFIN INTERNATIONAL L TD IN THE ASSESSMENT YEAR 1996-97 FOR A PERIOD OF FIVE YEARS. THE ASSESSEE C LAIMED 100% DEPRECIATION ON THE SAME DURING THE ASSESSMENT YEAR 1996-97 AND ADM ITTED THE LEASE RENTAL AS BUSINESS INCOME OF THE ASSESSEE. THE CLAIM OF DEPR ECIATION WAS DISALLOWED BY THE ASSESSING OFFICER FOR THE ASSESSMENT YEAR 1996- 97 AND THE ASSESSEE CARRIED THE MATTER TO THE TRIBUNAL. 3.2 FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE S HOWN THE LEASE RENTAL AS BUSINESS INCOME, WHICH HAS BEEN TREATED BY THE ASSE SSING OFFICER AS INCOME FROM OTHER SOURCES. HE HAS POINTED OUT THAT IN THE QUANTUM APPEAL, THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO TAX ONLY THE INTEREST COMPONENTS COMPRISING LEASE RENT RECEIVED BY THE ASSESSEE. THE REFORE, THE LD AR HAS SUBMITTED THAT THERE IS NO ADDITION ON THIS ACCOUNT ; BUT THE INCOME ADMITTED BY ULTRAMARINE & PIGMENTS LTD ITA NO. 1328/MUM/2007 (ASST YEAR 2001-02) 3 THE ASSESSEE WAS TREATED BY THE ASSESSING OFFICER A S INCOME FROM OTHER SOURCES INSTEAD OF BUSINESS INCOME AND THE CIT(A), IN THE Q UANTUM APPEAL, HAS DIRECTED TO TAX ONLY THE INTEREST COMPONENTS. THUS, IN THE RETURN OF INCOME, THE ASSESSEE HAS OFFERED MORE INCOME WHAT WAS FINALLY DIRECTED T O BE TAXED BY THE CIT(A). 3.3 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 4 AFTER CONSIDERING THE RIVAL CONTENTION AND RELEVA NT MATERIAL ON RECORD, AT THE OUTSET, WE NOTE THAT AS FAR AS THE DISALLOWANCE OF INTEREST AS CONFIRMED BY THE CIT(A) TO THE EXTENT OF RS. 78,72,653/- IS CONC ERNED, THE SAME HAS BEEN DECIDED BY THE TRIBUNAL IN QUANTUM APPEAL AND THE CLAIM OF THE ASSESSEE WAS ALLOWED IN PARA 16 AS UNDER: 16. IN THE LIGHT OF THE ABOVE DISCUSSION, AS NO CO NTRARY DECISIONS ARE CITED BY THE REVENUE, WE ARE BOUND BY THE JUDGMENTS OF HO NBLE JURISDICTIONAL HIGH COURT CITED BY THE ASSESSEE. CONSEQUENTLY, WE ALLOW THE CLAIM OF THE ASSESSEE, THE INTEREST PAID ON BORROWED FUNDS UTILI SED FOR PURCHASED OF SHARES IN TCLIM IS HEREBY ALLOWED. THUS, GROUNDS NO .1 AND 2 OF THE ASSESSEES APPEAL ARE ALLOWED AND GROUND NO.1. IN R EVENUES APPEAL IS DISMISSED. 4.1 IN VIEW OF THE ABOVE FACTS THAT WHEN THE ADDI TION ITSELF HAS BEEN DELETED BY THE TRIBUNAL, WHICH IS THE BASIS FOR THE LEVY OF PENALTY, THEN THE PENALTY TO THE EXTENT OF ADDITION ON ACCOUNT OF DISALLOWANCE OF IN TEREST WOULD NOT SURVIVE AS THE VERY BASIS OF LEVY OF PENALTY, IS NOT IN EXISTENCE . 5 THE SECOND ASPECT AGAINST WHICH THE PENALTY HAS B EEN LEVIED IS ONLY TREATMENT OF LEASE RENTAL AS INCOME FROM OTHER SOUR CES INSTEAD OF BUSINESS INCOME CLAIMED BY THE ASSESSEE. 6 SINCE THE DEPARTMENT HAS NOT ACCEPTED THE CLAIM O F THE ASSESSEE AS LEASING OUT OF THE ASSETS; BUT IT WAS TREATED AS FINANCIAL LEASE AND THE CLAIM OF DEPRECIATION ULTRAMARINE & PIGMENTS LTD ITA NO. 1328/MUM/2007 (ASST YEAR 2001-02) 4 WAS DISALLOWED FOR THE AY 1996-97. ONCE THE DEPART MENT HAS TAKEN A STAND THAT THIS NATURE OF TRANSACTION IS NOT LEASE BUT A FINANCIAL TRANSACTION AND THE CIT(A) HAS DIRECTED THE ASSESSING OFFICER TO TAX ONLY INTEREST COMPONENTS OF THE RECEIPT, THEN THE CLAIM OF THE ASSESSEE, OFFERING THE ENTIRE RECE IPT AS BUSINESS INCOME, WHICH WAS TREATED BY THE ASSESSING OFFICER AS INCOME FROM OTH ER SOURCES, WOULD NOT AMOUNT TO CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. 6.1 IT IS TO BE NOTED THAT THE ASSESSEE HAS OFFERED RS. 12,62,568/- AS BUSINESS INCOME WHEREAS AS PER THE DIRECTIONS OF THE CIT(A ), ONLY THE INTEREST COMPONENTS OF RS. 2,60,528/- IS DIRECTED TO BE TAXED AS INCOME OF THE ASSESSEE. 7 IN VIEWS OF THESE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS THE ABOVE DISCUSSION, THE PENALTY LEVIED U/S 271(1) ( C) IS N OT SUSTAINABLE AND LIABLE TO BE DELETED. ACCORDINGLY, WE DELETE THE PENALTY LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). 8 IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS ORDER PRONOUNCED ON THIS 20 2020 20 TH THTH TH , ,, , DAY OF DAY OF DAY OF DAY OF APRIL APRIL APRIL APRIL 2012 2012 2012 2012 SD/ SD/ SD/ SD/ SD/ SD/ SD/ SD/ ( (( ( RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH RAJENDRA SINGH ) )) ) ACCOUNTANT MEMBER ( (( ( VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO VIJAY PAL RAO ) )) ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 20 TH , APRIL 2012 RAJ* RAJ* RAJ* RAJ* ULTRAMARINE & PIGMENTS LTD ITA NO. 1328/MUM/2007 (ASST YEAR 2001-02) 5 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI