DCIT, New Delhi V. M/s. PVR Ltd., New Delhi

ITA 1577/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3580 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 12-06-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Capital receipt; Revenue expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DELHI BEFORE SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 1577/DEL/2014 ASSESSMENT YEAR : 2006-07 DCIT, VS MS/ PVR LTD., CIRCLE 14(1), 61, BASANT LOK, VASANT VIHAR, NEW DELHI. NEW DELHI-110057 (PAN NO. AAACP4526D) (APPELLANT) (RESPON DENT) APPELLANT BY : SHRI ATIQ AHMAD, SR. DR RESPONDENT BY : SHRI V.K. GARG, ADVOCATE PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AGAI NST THE ORDER DATED 30.12.2013 PASSED BY THE LD. CIT (A)-XV II, NEW DELHI FOR ASSESSMENT YEAR 2006-07 WHEREIN VIDE THE IMPUGN ED ORDER, THE LD. CIT (A) HAS DELETED THE PENALTY OF RS. 31,3 4,639/- IMPOSED BY THE AO U/S 271(L)(C) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 2. BRIEF FACTS OF THE CASE ARE THAT UNDER THE ASSES SMENT ORDER PASSED U/S 143(3), THE ASSESSING OFFICER HAD MADE T HREE ADDITIONS TO THE INCOME OF THE ASSESSEE:- I) ADDITION ON ACCOUNT OF ENTERTAINMENT SUBSIDY WHICH THE ASSESSEE HAD CLAIMED TO BE A CAPITAL RECEIPT WH ICH ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 2 THE ASSESSING OFFICER HELD THAT IT SHOULD BE REDUCE D FROM THE COST OF ASSETS AND DEPRECIATION SHOULD NOT BE ALLOWED. II) DISALLOWANCE OF RS. 70,08,183/- IN RESPECT OF ESOP AND ESPS SCHEMES AS A CONTINGENT LIABILITY BY THE ASSESSING OFFICER AS AGAINST THE ASSESSEE TREATING IT AS REVENUE EXPENDITURE. III) DISALLOWANCE OF RS. 34,53,218/- U/S 14A OF THE ACT. 2.1 ON APPEAL, THE LD. CIT (A) ENHANCED THE INCOME BY TREATING THE ENTIRE ENTERTAINMENT SUBSIDY AS A REVENUE RECEI PT AND AN ADDITION OF RS. 2,25,41,765/- WAS MADE TO THE INCOM E OF THE ASSESSEE. THE LD. CIT (A) FURTHER CONFIRMED THE AD DITION ON ACCOUNT OF ESOP AND ESPS BY TREATING THE SAME AS CA PITAL EXPENDITURE AND A NOTIONAL CONTINGENT LIABILITY. T HE LD. CIT (A) ALSO CONFIRMED THE DISALLOWANCE OF RS.34,53,218/- O N ACCOUNT OF DISALLOWANCE U/S 14A. 2.2 ON THE ASSESSEE APPROACHING THE ITAT, THE ITAT HELD THAT ENTERTAINMENT SUBSIDY WAS A CAPITAL AND NOT A REVEN UE RECEIPT. THE ITAT ALSO HELD THAT ESOP COULD NOT BE ALLOWED A S A DEDUCTION WITHOUT ACTUALLY PAYING IT TO THE EMPLOYEES AND THE ISSUE OF ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 3 DISALLOWANCE U/S 14A WAS SET ASIDE TO THE FILE OF T HE ASSESSING OFFICER. 2.3 SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED P ENALTY PROCEEDINGS U/S 271(1)(C) AND LEVIED PENALTY OF RS. 31,34,639/- ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS.23 ,04,466/- ON THE AMOUNT OF ENTERTAINMENT SUBSIDY AND ON RS. 70,0 8,183/- DISALLOWED ON ACCOUNT OF ESOP EXPENDITURE. 2.4 ON APPEAL BEFORE THE LD. CIT (A) AGAINST THE PE NALTY, THE LD. CIT (A) HELD THAT SINCE THE ITAT HAD DELETED THE AD DITION ON ACCOUNT OF ENTERTAINMENT SUBSIDY, BY HOLDING IT AS A CAPITAL RECEIPT, NO PENALTY WAS LEVIABLE ON THE AMOUNT. ON THE ISSUE OF DISALLOWANCE ON ESOP, THE LD. CIT(A) NOTED THAT ALT HOUGH THE ADDITION HAD BEEN CONFIRMED BY THE ITAT IN ASSESSEE S OWN CASE, THE ITAT BANGALORE SPECIAL BENCH HAD DELETED A SIMI LAR DISALLOWANCE IN THE CASE OF BIOCON LTD. VS DCIT RE PORTED IN (2013) 35 TAXMANN.COM 335. THE LD. CIT (A) ALSO NO TED THAT THE ASSESSEE HAD FURNISHED ALL PARTICULARS DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AND THAT THE ASSESSING OFFIC ER HAD NOWHERE STATED THAT THE PARTICULARS FURNISHED WERE INCORRECT OR INACCURATE. THE LD. CIT (A) ALSO NOTED THAT SINCE TWO DIFFERENT BENCHES OF THE ITAT HAD HELD TWO DIFFERENT VIEWS ON THE ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 4 DEDUCTIBILITY OF ESOP EXPENSES AS REVENUE EXPENDITU RE, THE ISSUE WAS A DEBATABLE ONE AND, THEREFORE, NO PENALTY WAS LEVIABLE ON THAT COUNT ALSO. 2.5 NOW, THE DEPARTMENT HAS APPROACHED THE ITAT AND HAS CHALLENGED THE DELETION OF PENALTY BY THE LD. CIT ( A). 3. THE LD. SR. DR, WHILE SUPPORTING THE ORDER OF TH E ASSESSING OFFICER, VEHEMENTLY ARGUED THAT PENALTY WAS LEVIABL E ON BOTH THE ISSUES. 4. IN RESPONSE, THE LD. AR PLACED RELIANCE ON THE O RDER OF THE LD. CIT (A) AND SUBMITTED THAT THE LD. CIT (A) HAD ADJUDICATED THE ISSUE KEEPING IN MIND THE TOTALITY OF FACTS AND THE SETTLED JUDICIAL PRECEDENTS AND SUBMITTED THAT THE ORDER OF THE LD. CIT (A) BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS PENALTY ON ADDITION OF RS. 23,04,466/- IN RESPECT OF ENTERTAINMENT SUBSIDY IS CONCERNED, THE ITAT HAS DELETED THE ENTIRE QUANTUM IN THE QUANTUM APPEAL AND THUS, WE AGREE WITH THE LD. CIT(A) THAT NO PENALTY IS LEVIABLE ON THE SAME AS QUANTUM ADDITION ITSELF HAS BEEN DELETE D. 5.1 AS FAR AS THE SECOND ISSUE RELATING TO DISALLOW ANCE OF RS.70,08,183/- ON ACCOUNT OF ESOP EXPENDITURE IS CO NCERNED, IT ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 5 IS UNDISPUTED THAT ACCOUNTS OF THE ASSESSEE WERE DU LY AUDITED, TAX AUDIT REPORT, COMPUTATION OF INCOME AND INCOME TAX RETURN WERE NOT AT VARIANCE AND RELEVANT DETAILS WERE FILE D BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S AGAINST WHICH THE ASSESSING OFFICER HAS NOT MADE ANY ADVERS E OBSERVATION. IT IS ALSO UNDISPUTED THAT THE AMOUNT OF EXPENDITURE CLAIMED ON ESOP WAS DULY REFLECTED IN THE P&L ACCOU NT AND ALSO IN THE NOTES TO ACCOUNTS. IT IS ALSO UNDISPUTED TH AT THE CHENNAI BENCH OF THE ITAT AND BANGALORE SPECIAL BENCH OF TH E ITAT HAVE TAKEN A VIEW THAT SUCH EXPENDITURE WAS A DEDUCTIBLE EXPENDITURE WHEREAS ITAT DELHI BENCH IN THE ASSESSEES CASE AND IN OTHER CASES HAS HELD THAT THE SAME WAS NOT A DEDUCTIBLE E XPENDITURE. THUS, ALTHOUGH THE ITAT DELHI HAS HELD THE QUANTUM ISSUE AGAINST THE ASSESSEE IN THE ASSESSEES OWN CASE, TH E FACT REMAINS THAT THE ISSUE IS A DEBATABLE LEGAL ISSUE AND, FURT HER, NO INSTANCE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME HAS BEEN POINTED OUT EITHER BY THE ASSESS ING OFFICER OR BY THE LD. SR. DR DURING THE COURSE OF PROCEEDINGS BEFORE US. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT PE NALTY WILL NOT BE LEVIABLE ON THIS ISSUE AS MERE MAKING OF A CLAIM , WHICH IS NOT OTHERWISE ACCEPTABLE IN LAW, WILL NOT TANTAMOUNT TO CONCEALMENT ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 6 OF INCOME OR FURNISHING INACCURATE PARTICULARS, ESP ECIALLY WHEN THE BONA FIDES OF THE ASSESSEE ARE NOT UNDER DOUBT. 5.2 THE HONBLE APEX COURT HAS HELD THAT THE FINDIN GS RECORDED IN THE ASSESSMENT PROCEEDINGS MAY CONSTITUTE EVIDEN CE IN THE COURSE OF PENALTY PROCEEDINGS BUT THEY CANNOT BE RE GARDED AS CONCLUSIVE. IN THE INSTANT APPEALS, IT CANNOT BE SA ID THAT THE ASSESSEE HAD WITHHELD ANY RELEVANT INFORMATION REGA RDING ITS RECEIPTS AND INCOME FROM THE AO. WITH REGARD TO THE PROVISIONS OF SECTION 271 (1) (C) OF THE ACT PERTAINING TO PENALT Y, THE HONBLE APEX COURT HAS LAID DOWN THAT MAKING OF A CLAIM BY THE ASSESSEE WHICH IS NOT SUSTAINABLE WILL NOT AMOUNT TO FURNISH ING INACCURATE PARTICULARS. IN THE CASE OF CIT VERSUS RELIANCE PETROPRODUCTS (P) LTD REPORTED IN 322 ITR 158 (SC), THE HONBLE APEX COURT HELD AS FOLLOWS A GLANCE AT THIS PROVISION WOULD SUGGEST THAT IN O RDER TO BE COVERED, THERE HAS TO BE CONCEALMENT OF THE PARTICU LARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE PRESENT IS NOT A CASE OF CONCEALMENT OF INCOME. THAT IS NOT TH E CASE OF THE REVENUE EITHER. HOWEVER, THE LD. COUNSEL FOR TH E REVENUE SUGGESTED THAT BY MAKING INACCURATE CLAIM FOR THE EXPENDITURE ON INTEREST, THE ASSESSEE HAS FURNISHED ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 7 INACCURATE PARTICULARS OF THE INCOME. AS PER LAW LE XICON, THE MEANING OF THE WORD PARTICULAR IS A DETAIL OR DET AILS (IN PLURAL SENSE); THE DETAILS OF A CLAIM, OR THE SEPAR ATE ITEMS OF AN ACCOUNT. THEREFORE, THE WORD PARTICULARS USED IN THE SECTION 271 (1) (C) WOULD EMBRACE THE MEANING OF TH E DETAILS OF THE CLAIM MADE. IT IS AN ADMITTED POSITION IN TH E PRESENT CASE THAT NO INFORMATION GIVEN IN THE RETURN WAS FO UND TO BE INCORRECT OR INACCURATE. IT IS NOT AS IF ANY STATEM ENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCOR RECT. HENCE, AT LEAST, PRIMA FACIE, THE ASSESSEE CANNOT B E HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. THE LD . COUNSEL ARGUED THAT SUBMITTING AN INCORRECT CLAIM IN LAW F OR THE EXPENDITURE ON INTEREST WOULD AMOUNT TO GIVING INAC CURATE PARTICULARS OF SUCH INCOME. WE DO NOT THINK THAT S UCH CAN BE THE INTERPRETATION OF THE CONCERNED WORDS. THE WORD S ARE PLAIN AND SIMPLE. IN ORDER TO EXPOSE THE ASSESSEE T O THE PENALTY UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY ANY STR ETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNO T TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. IN CIT VERSUS ATUL MOHAN BINDAL (2009) 9 SCC 589, WHERE THIS COUR T WAS CONSIDERING THE SAME PROVISION, THE COURT OBSERVED THAT THE ASSESSING OFFICER HAS TO BE SATISFIED THAT A PERSON HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. THIS COURT R EFERRED TO ANOTHER DECISION OF THIS COURT IN UNION OF INDIA VE RSUS DHARAMENDRA TEXTILE PROCESSORS (2008) 13 SCC 369 AS ALSO, ITA NO. 1577/DEL/2014 ASSESSMENT YEAR 2006-07 8 THE DECISION IN UNION OF INDIA VERSUS RAJASTHAN SPG . & WVG. MILLS (2009) 13 SCC 448 AND REITERATED IN PARAGRAPH 13 THAT (PAGE 13 OF 317 ITR): 13. IT GOES WITHOUT SAYING THAT FOR APPLICABILITY OF SECTION 271 (1) (C), CONDITIONS STATED THEREIN MUST EXIST. 5.3 THEREFORE, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT (A) ON THIS ISSUE ALSO AND WE UPHOLD TH E SAME. 6. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1/11/ 2017. SD/- SD/- (PRASHANT MAHARISHI) (SUDHA NSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 01/11/ 2017 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER