EXEDY INDIA LTD, MUMBAI V. DCIT OSD(1), MUMBAI

ITA 1443/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2445 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 16-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN DR SHRI H N MOTIWALLA
• Assessee Lawyers: REJECTING APPEAL OF
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 1443 / MUM/ 20 1 6 ( / ASSESSMENT YEAR: 2007 - 08 ) EXEDY INDIA LTD. (EARLIER KNOWN AS CEEKAY DAIKIN LTD. NKM INTL . HOUSE, 4 TH FLOOR, 178 B.M. CHINAI MARG. MUMBAI - 400020. / VS. DCIT OSD(1), AAYAKAR BHAVAN MUMBAI - 400020. ./ ./ PAN/GIR NO. : AAACA 0200 D ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 18 .0 7 .2018 / DATE OF PRONOUNCEMENT : 29.08 . 201 8 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRE SENT APPEAL AGAINST THE ORDER DATED 31 . 1 2 .201 5 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 2 MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE AY. 20 0 7 - 08 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - 1. THE COMMISSIONER OF I NCOME TAX (APPEALS) ERRED IN CONFIRMING THE C OF ASSESSING OFFICER LEVYING PENALTY OF RS,9,43,550/ - UNDER SECTION 271(1) (C) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2007 - AND REJECTING THE APPEAL OF THE APPELLANT. REVENUE BY: S HRI V. JUSTIN ( DR ) ASS ESSEE BY : SHRI H.N. MOTIWALLA ITA. NO.1443 M/1 6 A.Y.2007 - 08 2 2. THE COMMISSIONER OF INC OME TAX (APPEALS) ERRED IN NOT REFERRING TO WRITTEN SUBMISSIONS AND THE AUTHORITIES CITED BEFORE HIM AND FILED IN COMPILATION SUBMITTED BEFORE HIM AT THE TIME OF HEARING OF THE APP EAL. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) AT THE TIME OF HEARING OF APPEAL GAVE A WRONG IMPRESSION THAT HE WILL BE ALLOWING THE APPEAL F THE APPELLANT. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HOLDING THAT THE TECHNICAL COLLABORATION FEES INSTALMENT PAID OF RS.28,70,000/ - WAS CLAIMED AS REVENUE EXPENDIT URE, AND THE ASSESSING OFFICER HELD IT TO CAPITAL EXPENDITURE, IT AMOUNTS TO DELIBERATE CONCEALMENT OF INCOME THE PENALTY UNDER SECTION 271(1) IS LEVIABLE. 5. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN NOT ADJUDICATING LIVABILITY OF PENALTY UN DER SECTION 271(1} OF THE ACT, ON THE CLUB EXPENSES SAVE AND EXCEPT JUST MENTIONING THE FACTS RELATING TO THAT ISSUE. 6. THE APPELLANT CRAVES LEAVE TO ADD TO AMEND OR RAISE NEW GROUNDS OF APPEAL BEFORE THE HEARING OF THE APPEAL OF THE APPELLANT . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS OF INCOME ON 29.10.2009 DECLARING TOTAL INCOME TO THE TUNE OF RS.46,32,756/ - FOR THE A.Y.2007 - 08. THE ASSESSMENT WAS COMPLETED ON 30.12.2009 U/S 143(3) OF THE I.T. ACT, 1961 ASSESSING THE TOTAL I NCOME TO THE TUNE OF RS.2,68,55,698/ - AFTER MAKING VARIOUS ADDITIONS/DISALLOWANCES IN THE ASSESSMENT ORDER. THE PENALTY WAS INITIATED, THEREFORE, THE PENALTY NOTICE U/S 271(1)(C) R.W.S. 274 OF THE ACT WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE , THE PENA LTY WAS LEVIED ON ACCOUNT OF THE ADDITION OF CLUB EXPENSES TO THE TUNE OF RS.4,25,556/ - AND ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE TO THE TUNE OF RS.28,70,000/ - . THE TOTAL DISALLOWANCE WAS TO THE TUNE OF RS. 30,82,778/ - ON WHICH THE PENALTY TO THE TUNE OF RS.9,43,330/ - WAS LEVIED BY VIRTUE OF ORDER DATED 30.01.2014. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ITA. NO.1443 M/1 6 A.Y.2007 - 08 3 CONFIRMED THE SAID PENALTY , THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4 . WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE L D. REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECORD. UNDER THESE ISSUES THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF THE ORDER OF THE AO BY THE CIT(A) TO LEVY THE PENALTY U/S 271(1)(C) OF THE ACT. THE PENALTY HAS BEEN LEVIED ON ACCOUNT ON ACCOUNT O F DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE TO THE TUNE OF RS. 28,70,000/ - . SO FAR AS THE DISALLOWANCE OF CLUB EXPENSES TO THE TUNE OF RS.4,25,556/ - IS CONCERNED, WE NOTICED THAT THE ASSESSEE COMPANY INITIALLY AN AMOUNT OF RS.4,25,556/ - UNDER THE HEAD CL UB EXPENSES. THE CONTENTION OF THE ASSESSEE IS THAT THE EXPENDITURE WAS ACTUALLY INCURRED BY THE EMPLOYEES THROUGH CREDIT CARD PAYMENT TOWARDS HOTEL , LODGING AND TRAVEL OUTSIDE THE PLACE OF WORK HOWEVER, FINDING NO PR OOF ABOUT THESE EXPENSES FOR THE BUSINE SS PURPOSE , T HE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM TO THE EXTENT OF 50% OF THE TOTAL EXPENSES AND DELETED THE ADDITION TO THE EXTENT OF RS.2,12 ,778/ - DISALLOWANCE OF CLAIM NOWHERE ATTRACT THE PENALTY IN VIEW OF THE PROVISION U/S 271(1)(C) OF THE ACT. IN THIS REGARD, WE ARE ALSO FIND SUPPORT IN LAW SETTLED IN CIT VS. RELIANCE PETROPRODUCT VS. CIT (P) LTD. 322 ITR 158 SC & MEHERJEE CASSINATH HOLDIN GS P. LTD. VS. ACIT, CIRCLE - 4(2) . MOREOVER, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE ON ESTIMATION BASIS WHICH NOWHERE ATTRACT THE PENALTY ALSO. SO FAR AS THE OTHER GROUND TO LEVY THE PENALTY IS CONCERNED, THE PENALTY WAS LEVIED ON ACCOUNT OF DISALLOW ANCE OF DEFERRED REVENUE EXPENSES OF RS.28,70,000/ - . IT IS TO BE SEEN IN WHICH THE ITA. NO.1443 M/1 6 A.Y.2007 - 08 4 CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE HAS BEEN DECLINED. THE COMPANY HAD PA ID PAYMENT TECHNICAL KNOW - HOW FEES OF RS.78.20 LACS UPTO THE F.Y. 2005 - 06 TO THE CO LLABORATOR M/S. EXEDY CORP. JAPAN. W HILE REMITTING THE SAID TECHNICAL KNOW - HOW , THE COMPANY DEDUCTED THE TAX WHICH WAS DEPOSITED IN VIEW OF THE PROVISION U/S 40A(IA) OF THE ACT . A CCORDING TO THE PROCEDURE CONSISTENTLY FOLLOWED BY THE COMPANY , TECHNICAL KNOW - HOW FEE S PAID TO M/S. EXEDY CORP. JAPAN, WAS AMORTISED VALUE A PERIOD OF 4 YEARS IN THE BOOKS OF ACCOUNTS AND ACCORDINGLY THE VALUE OF RS.28,70,000/ - WAS DEBITED TO THE P & L ACCOUNT UNDER THE HEAD DEFERRED REVENUE EXPENSES WRITTEN OFF FOR THE PURPOSE OF INCOME T AX AND THE SAME WAS ADDED TO THE BLOCK OF ASSETS UNDER THE HEAD TECHNICAL KNOW - HOW UPTO A.Y.2005 - 06 AND CLAIM DEPRECIATION @ 25% OF PROVISION U/S 32 OF THE I.T. ACT. HOWEVER, FOR THE RELEVANT ASSESSMENT YEAR , THE SAID AMOUNT TO THE TUNE OF RS.28,70,000/ - WAS NOT ADDED TO THE INCOME . U PON THE NOTICE , THE ASSESSEE AGREED TO ADD THE SAID AMOUNT INTO THE INCOME OF ASSESSEE BY VIRTUE OF LETTER DATED 17.11.2009 . SINCE THE DEPRECIATION HAD ALREADY BEEN ALLOWED ON THE PAYMENT OF TECHNICAL KNOW - HOW THROUGH FURT HER DEPRECIATION UPON THE SAID AMOUNT WAS NOT ALLOWABLE. IT IS PURELY MISTAKE WHICH WAS ACCEPTED BY ASSESSEE IMMEDIATELY, IN VIEW THE LETTER DATED 17.11.2009. THE FACTS ARE ON RECORD WHICH ARE NOT DISPUTED. THE HONBLE SUPREME COURT IN THE CASE OF PRICE WA TERHOUSE COOPERS (P. LTD. VS. CIT (2012) 25 TAXMANN.COM 400 (SC) HAS HELD THAT IN THE CAS E OF BONA FIDE AND INADVERTENT MISTAKE NO PENALTY IS LEVIABLE IN ACCORDANCE WITH LAW. MOREOVER, IT IS NOT A CASE OF FURNISHING INACCURATE PARTICULARS AND ATTEMPT TO CO NCEAL THE INCOME . I N VIEW OF THE SAID CIRCUMSTANCES AND IN VIEW OF THE LAW RELIED BY THE LD. REPRESENTATIVE OF THE ASSESSEE IN THE CASE OF PRICE WATERHOUSE COOPERS (P. ITA. NO.1443 M/1 6 A.Y.2007 - 08 5 LTD. VS. CIT (2012) 25 TAXMANN.COM 400 (SC) WE ARE OF THE VIEW THAT THE PENALTY CONFIRM ED BY THE CIT(A) IS NOT JUSTIFIABLE, THEREFORE, WE DELETE THE PENALTY AND ALLOWED THE CLAIM OF THE ASSESSEE . 5 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HERE BY ORDERED TO BE ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 29.08 .2 01 8 . S D/ - SD/ - ( SHAMIM YAHYA ) ( AMARJIT SINGH ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 29.08 . 201 8 . VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI