ACIT, Pune V. Symantec Software India Pvt Ltd., Pune

ITA 1684/PUN/2012

• Counselvise Citation: 168424514 RSA 2012
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 14-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Difference of opinion
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 1684 /PN/20 12 ASSESSMENT YEAR : 200 3 - 04 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 7, PUNE VS. SYMANTEC SOFTWARE INDIA PVT. LTD., ICON, S. NO. 3/8, BANER ROAD, PUNE (APPELLANT) (RESPONDENT) PAN NO. AAACV6015F APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: SHRI RAJENDRA AGIWAL DATE OF HEARING : 1 9 - 0 2 - 2014 DATE O F PRONOUNCEMENT : 27 - 0 2 - 2014 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL , THE REVENUE HAS CHALLENG ED THE IMPUGNED ORDER OF THE LD. CIT(A) - III, P UNE DATED 31 - 05 - 2011 F OR THE A.Y. 200 3 - 04 , DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S. 271(1 )(C) OF THE INCOME - TAX ACT. THE REVENUE HAS TAKEN THE FOLLOWING GROUND IN THE APPEAL: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW THE C.I.T.(A) WAS NOT JUSTIFIED IN DELETING THE PENALTY OF RS.35,23,730/ - IMPOSED BY THE A.O. ON THE BA SIS OF QUANTUM APPEAL DECIDED BY THE ITAT THAT HAS BEEN CHALLENGED IN THE HIGH COURT. 2. THE BRIEFLY STATED FACTS ARE UNDER. THE ASSESSEE IS A 100% EXPORT ORIENTED WHICH IS ENGAGED IN THE BUSINESS OF DESIGNING AND DEVELOPING SOFTWARE PRODUCTS. THE A SSESSEE HAD CLAIMED THE DEDUCTION U/S. 10B FOR AN AMOUNT OF RS.17,44,41,015/ - . THE ASSESSING OFFICER HAD MADE THE ADDITION TO THE EXTENT OF FOLLOWING ITEMS: I . EXCHANGE RATE : RS.66,82,416/ - II . INTEREST : RS.11,04,009/ - III . MISCELLANEOUS INCOME : RS.29,05,964/ - 2 ITA NO. 1684 /PN/2012, SYMANTEC SOFTWARE INDIA PVT. LTD., PUNE 3. THE ASSESSING OFFICER RESTRICTED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S. 10B BY EXCLUDING THE ABOVE AMOUNTS AND INITIATED THE PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE INCOME - TAX ACT IN RESPECT OF TWO ADDITIONS I.E. THE EXCHANGE RAT E OF RS. 66,82,416/ - AND TOWARDS MISCELLANEOUS INCOME OF RS.29,05,964/ - . SO FAR AS THE DISALLOWANCE OF INTEREST INCOME OF RS.11,04,009/ - IS CONCERNED , THE SAID WAS NOT SUBJECTED TO ANY PENALTY . B OTH THE ADDITIONS WERE CARRIED IN QUANTUM APPEAL BEFORE THE TRIBUNAL I.E. DISALLOWANCE RELATING TO THE FOREIGN EXCHANGE GAIN OF RS. 66,82,416/ - AS WELL AS DISALLOWANCE OF RS.29,05,964/ - IN WHICH THE AMOUNT OF RS.27,63,816/ - IN RESPECT OF CREDIT NOTE RECEIVED FROM VSCG (ASSOCIATED COMPANY) FOR COMMUNICATION CHARGES IS INCLUDED. THE TRIBUNAL DELETED THE ADDITION IN RESPECT OF THE FOREIGN EXCHANGE GAIN OF RS.66,82,416/ - AND THE ADDITION TOWARDS THE REVERSAL OF COMMUNICATION CHARGES OF RS.27,63,816/ - IN THE APPEAL FILED BY THE ASSESSEE BEING ITA NO. 135/PN/2006 ORDER D ATED 30 - 04 - 2009 , W HEN THE PENALTY MATTER WAS CARRIED BEFORE THE LD. CIT(A), HE DELETED THE ENTIRE PENALTY OF RS.35,23,730/ - LEVIED BY THE ASSESSING OFFICER U/S. 271(1)(C) OF THE ACT ON THE ABOVE TWO ADDITIONS. 4. SO FAR AS PENALTY RELATING TO THE FOREIG N EXCHANGE GAIN OF RS.66,82,416/ - AND AMOUNT OF RS.27,63,816 RELATING TO REVERSAL OF COMMUNICATION CHARGES AS THE TRIBUNAL HAD ALLOWED THE CLAIM OF THE ASSESSEE APPEAL IN THE QUANTUM APPEAL , T HE LD. CIT(A) DELETED THE PENALTY ON BOTH THE ITEMS LEVIED BY TH E ASSESSING OFFICER U/S. 271(1)(C) BY QUOTING THE RELEVANT PART OF THE TRIBUNAL ORDER. SO FAR AS ADDITION O N ACCOUNT OF OTHER INCOME WHICH HAS THE FOLLOWING COMPONENTS: A. SALE OF NEW PAPER : RS.4,036/ - B. CHARGES OF ISSUE OF SWIPE CARDS : RS.4,700/ - C. OTHER IN COME : RS.1,59,165/ - 5. THE LD. CIT(A) WAS OF THE OPINION THAT THE EXPRESSION INACCURATE PARTICULARS OF INCOME DO NOT EXTEND TO THE ISSUES WHICH ARE CAPABLE OF 3 ITA NO. 1684 /PN/2012, SYMANTEC SOFTWARE INDIA PVT. LTD., PUNE DIFFERENT INTERPRETATION UNDER THE LAW. HE FURTHER HELD THAT THE SAID DISALLOWANCE CANNOT B E SUBJECTED TO PENALTY PROCEEDINGS. THE OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) FOR DELETING THE PENALTY IN RESPECT OF AMOUNT OF OTHER INCOME, SWIPE CARDS AND NEWSPAPER ARE AS UNDER: 5.2. THE OTHER COMPONENTS OF ADDITIONS IN RESPECT OF WHICH PENA LTY HAVE BEEN LEVIED BY THE ASSESSING OFFICER ARE AS FOLLOWS: - A. SALE OF NEW PAPER : RS.4,036/ - B. CHARGES OF ISSUE OF SWIPE CARDS : RS.4,700/ - C. OTHER INCOME : RS.1,59,165/ - THE MAJOR ADDITION INVOLVED IS ON ACCOUNT OF OTHER INCOME AT RS.1,59,165/ - WHILE T HE OTHER AMOUNTS ARE PALTRY SUMS. THE CHARGE OF THE ASSESSING OFFICER IS THAT THESE INCOMES WERE NOT DERIVED BY THE APPELLANT FROM THE ACTIVITY OF EXPORT OF COMPUTER SOFTWARE OR ARTICLES OF THINGS AND THEREFORE, BY CLAIMING DEDUCTION U/S.LOB ON SUCH COMPON ENTS OF RECEIPTS, THE APPELLANT FURNISHED INACCURATE PARTICULARS OF ITS INCOME. 5.2.1. THE NECESSARY PRECONDITION FOR IMPOSITION OF PENALTY UNDER THE MAIN PROVISIONS OF SEC. 271(L)(C) IS THAT THE A.O. SHOULD SATISFY HIMSELF THAT THE APPELLANT CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE EXPRESSION 'CONCEALMENT OF INCOME' HAS - NOT BEEN DEFINED IN THE ACT, BUT THE NATURAL MEANING OF THE EXPRESSION 'CONCEALMENT' IS 'TO KEEP FROM BEING SEEN, FOUND, OBSERVED, OR DISCOVERED'. IT WOULD, T HEREFORE, FOLLOW THAT THE EXPRESSION CONCEALMENT OF INCOME, IN ITS NATURAL SENSE AND GRAMMATICAL MEANING, IMPLIES AN INCOME IS BEING HIDDEN, CAMOUFLAGED OR COVERED UP SO THAT IT CANNOT BE SEEN, FOUND, OBSERVED OR DISCOVERED. IN THE PRESENT CASE, IT CANNOT BE SAID THAT THE APPELLANT CONCEALED SAID ITEMS OF OTHER INCOME. THIS IS A CASE WHERE THE APPELLANT HAS DISCLOSED ALL THE DETAILS OF THE OTHER INCOME IN THE RETURN OF INCOME AND THE STATEMENTS ACCOMPANYING THE RETURN OF INCOME. THE DEDUCTION U/S. 10B WAS C LAIMED BY THE APPELLANT ON THE ABOVE COMPONENTS OF INCOME ON THE PREMISE THAT IT HAD DIRECT NEXUS WITH THE BUSINESS ACTIVITIES OF THE APPELLANT, WHICH, ACCORDING TO THE ASSESSING OFFICER, WAS NOT CORRECT AND THUS IT IS A CASE OF A DIFFERENCE OF OPINION ON A LEGAL ISSUE AS TO WHETHER THE SAID ITEMS OF OTHER INCOME ARE 'DERIVED FROM' THE EXPORT ACTIVITY. 4 ITA NO. 1684 /PN/2012, SYMANTEC SOFTWARE INDIA PVT. LTD., PUNE UNDER SUCH CIRCUMSTANCES, IT IS DIFFICULT TO SAY THAT THE APPELLANT HAD CONCEALED ITS INCOME. 5.2.2. THE OTHER EXPRESSION 'FURNISHING OF INACCURATE PARTICULA RS OF INCOME 1 HAS ALSO NOT BEEN DEFINED IN THE ACT. THE PENALTY WAS LEVIED ON THE PREMISE THAT THE APPELLANT FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE CONTEXT OF I 'FURNISHING OF INACCURATE PARTICULARS', THE EXPRESSION 'INACCURATE' REFERS TO 'NOT IN CONFORMITY WITH THE FACT OR TRUTH'. THE EXPRESSION 'PARTICULARS' REFERS TO 'FACTS, DETAILS, SPECIFICS, OR INFORMATION ABOUT SOMEONE OR SOMETHING'. THEREFORE, THE PLAIN MEANING OF THE EXPRESSION 'FURNISHING OF INACCURATE PARTICULARS OF INCOME 1 IMPLIES FU RNISHING OF DETAILS OR INFORMATION ABOUT INCOME WHICH ARE NOT IN CONFORMITY WITH THE FACTS OR TRUTH. IN THE PRESENT CASE, THE ASSESSING OFFICER HAS APPARENTLY PROCEEDED TO TREAT APPELLANT'S MAKING A LEGAL CLAIM OF INCOME AS FURNISHING OF INACCURATE PARTICU LARS. RAISING A LEGAL CLAIM, EVEN IF IT IS ULTIMATELY FOUND TO BE LEGALLY UNACCEPTABLE, CANNOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME. 'INACCURATE' DENOTES SOMETHING FACTUALLY INCORRECT AND INTERPRETATION OF LAW CAN NEVER BE A FACTUAL ASP ECT. JUST BECAUSE AN AO DOES NOT ACCEPT AN INTERPRETATION, SUCH AN INTERPRETATION IS NOT RENDERED INCORRECT. EVEN THE JUDGMENTS OF HON'BLE SUPREME COURT ARE REVERSED BY THE LARGER BENCHES OF HON'BLE SUPREME COURT. IN SUCH CIRCUMSTANCES, A BONA FIDE L EGAL CLAIM MADE BY THE APPELLANT CANNOT BE VISITED WITH PENAL CONSEQUENCES MERELY BECAUSE IT HAS NOT BEEN ACCEPTED THUS FAR BY THE TAX AUTHORITIES, IN THE PRESENT CASE, NO INFORMATION OR STATEMENT GIVEN IN THE RETURN OR DURING THE ASSESSMENT PROCEEDINGS IS FOUND TO BE FACTUALLY INCORRECT OR INACCURATE. IN ANY EVENT, EXPRESSION 'INACCURATE PARTICULARS OF INCOME' DO NOT EXTEND TO THE ISSUES, WHICH ARE CAPABLE OF DIFFERENT INTERPRETATIONS UNDER LAW AND THEREFORE THE CASE OF THE APPELLANT CANNOT BE SAID TO BE A CASE OF 'FURNISHING OF INACCURATE PARTICULARS OF INCOME' EITHER. HENCE, AT LEAST, P RIMA FACIE, THE ASSESSEE COULD NOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. 5.2.3. NOW THE CASE OF THE APPELLANT IS EXAMINED UNDER THE DEEMING PROVISIONS OF EX PLANATION 1 TO SECTION 271(L)(C). THIS DEEMING FICTION COMES INTO PLAY WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (I) WHEN THE ASSESSEE FAILS TO PROVIDE AN EXPLANATION, (II) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH IS FOUND TO BE FALSE, AND (III) WHEN THE ASSESSEE PROVIDES AN EXPLANATION WHICH HE FAILS TO 5 ITA NO. 1684 /PN/2012, SYMANTEC SOFTWARE INDIA PVT. LTD., PUNE SUBSTANTIATE AND HE FAILS TO PROVE THAT THE EXPLANATION WAS BONA FIDE AND THAT ALL THE FACTS NECESSARY FOR THE SAME AND MATERIAL FOR COMPUTATION OF INCOME HAVE BEEN DULY DISCLOSED BY THE ASSESSEE. 5.2.4. IN THE INSTANT CASE, CONDITION (I) IS NOT SATISFIED AS THE ASSESSEE HAS FILED AN EXPLANATION THAT HE WAS OF THE BONA FIDE VIEW THAT THE OTHER INCOME HAD DIRECT NEXUS WITH THE BUSINESS A CTIVITIES OF THE APPELLANT WHICH WOULD MAKE IT ELIGIBLE FOR DEDUCTION UNDER SECTION 10B. IN THE INSTANT CASE, NO FACTUAL INFORMATION GIVEN IN THE RETURN WAS FOUND TO BE INCORRECT OR INACCURATE. IT WAS NOT AS IF ANY STATEMENT MADE OR ANY DETAIL SUPPLIED WAS FOUND TO BE FACTUALLY INCORRECT. THUS, THE CONDITION (II) IS ALSO NOT SATISFIED AS THERE IS NO FINDING IN THE PENALTY ORDER THAT THE EXPLANATION FURNISHED BY THE APPELLANT IS FALSE. SIMILARLY, THE CONDITION (III) IS ALSO NOT ATTRACTED IN THE CASE OF THE A PPELLANT AS THE ASSESSING OFFICER HAS FAILED TO PROVE THAT THE EXPLANATION OFFERED BY THE APPELLANT IS NOT BONAFIDE AND ALL DETAILS MATERIAL TO COMPUTATION OF TOTAL INCOME OF THE APPELLANT WERE NOT FURNISHED IN THE RETURN OF INCOME. THUS, THE CASE OF THE A PPELLANT IS ALSO NOT COVERED UNDER THE DEEMING PROVISIONS OF EXPLANATION 1 TO SECTION 271(1)(C). 5.2.5 FOR THE REASONS SET OUT ABOVE, I AM OF THE CONSIDERED OPINION THAT THIS IS NOT A FIT CASE FOR THE IMPOSITION OF PENALTY EITHER UNDER THE MAIN PART OF SEC TION 271(1)(C) OR UNDER THE DEEMING PROVISIONS OF EXPLANATION 1 TO SECTION 271(L)(C) IN RESPECT OF THE COMPONENTS OF INCOME INCLUDED UNDER THE HEAD 'OTHER INCOME'. ACCORDINGLY, THE PENALTY IMPOSED OF RS.35,23,730/ - BY THE ASSESSING OFFICER UNDER SEC. 271(L )(C) IS HEREBY DELETED. IN SUM AND SUBSTANCE THE LD. CIT(A) DELETED THE ENTIRE PENALTY. NOW BEING AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE FACTS ARE NARRATED HERE - IN - ABOVE. SO FAR AS THE Q UANTUM ADDITION S OF RS.66,82,416/ - RELATING TO FOREIGN EXCHANGE GAIN AND RS.27,63,816/ - RELATING TO REVERSAL OF COMMUNICATION CHARGES RECEIVED FROM VSCG (ASSOCIATED COMPANY) , T HE TRIBUNAL HAS ACCEPTED THE CONTENTION OF THE ASSESSEE IN THE QUANTUM APPEAL (I TA NO. 135/PN/2006 ORDER DATED 30 - 04 - 2009) AND DELETED THE ADDITIONS HENCE, THERE IS NO CAUSE TO SUPPORT THE ASSESSING OFFICER TO THE EXTENT OF DELETION OF THE ADDITION MADE BY 6 ITA NO. 1684 /PN/2012, SYMANTEC SOFTWARE INDIA PVT. LTD., PUNE THE ASSESSING OFFICER WHICH WERE SUBJECTED TO PENALTY U/S. 271(1)(C) OF THE ACT . SO FAR AS OTHER SMALL DISALLOWANCES ARE CONCERNED THOSE ARE TOWARDS SALE OF NEWSPAPER, CHARGES OF ISSUE OF SWIPE CARDS AND OTHER INCOME OF RS.1,59,165/ - , I N OUR OPINION THE FINDING OF THE LD. CIT(A) HAS TO BE CONFIRMED . A DMITTEDLY ALL THE ABOVE AMOUNTS WERE DISCLOSED BY THE ASSESSEE AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNISHED IN HIS INACCURATE PARTICULARS OF INCOME. MOREOVER , WHILE CLAIMING THE DEDUCTION U/S. 10B , THE ABOVE ITEMS WERE INCLUDED BY THE ASSESSEE BUT ULTIMATELY BEING IT IS THE STATUTORY DEDUCTION , DIFFERENT INTERPRETATIONS ARE POSSIBLE WHETHER THE ABOVE AMOUNTS CAN BE INCLUDED IN ELIGIBLE PROFIT FOR CLAIMING THE DEDUCTION U/S. 10B OF THE ACT OR NOT. THE LAW IS WELL SETTLED THE ADDITIONS WHICH ARE DEBATABLE AND CAN BE SUBJE CT OF INTERPRETATION, THERE IS NO JUSTIFICATION TO LEVY THE PENALTY U/S. 271(1)(C). IN OUR OPINION NO INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD. CIT(A) FOR DELETING THE ENTIRE PENALTY FOR THE REASONS GIVEN HERE - IN - ABOVE. WE, ACCORDINGLY, DISMISS THE GROUND TAKEN BY THE REVENUE. 7. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 27 - 02 - 201 4 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 27 TH FEBRUARY, 2014 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - III, PUNE 4 THE CIT - III, PUNE 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBU NAL PUNE