ACIT, CHENNAI V. M/s. Sundaram Non-Conventional Energy Systems Ltd., CHENNAI

ITA 1707/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57785 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 17-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RANGARAJAN JUNIOR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Wrong claim

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NOS. 1706 & 1707/MDS/2011 (ASSESSMENT YEARS : 2003-04 & 2004-05) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE VI(4), CHENNAI 600 034. (APPELLANT) V. M/S SUNDARAM NON- CONVENTIONAL ENERGY SYSTEMS LTD., 98A, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004 PAN : AABCS5036L (RESPONDENT) APPELLANT BY : SHRI K.E.B. RANGARAJAN, JUNIOR STANDING COUNSEL RESPONDENT BY : SHRI R. VIJAYA RAGHAVAN, ADVOCATE DATE OF HEARING : 05.01.2012 DATE OF PRONOUNCEMENT : 05.01.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEALS FILED BY THE REVENUE FOR ASSESS MENT YEARS 2003-04 AND 2004-05, AGAINST ORDERS DATED 4.8.2011 OF COMMISSIONER OF INCOME TAX (APPEALS)-VI, CHENNAI, D ELETING PENALTY I.T.A. NOS. 1706 & 1707/MDS/11 2 LEVIED UNDER SECTION 271(1)(C) OF INCOME-TAX ACT, 1 961 (IN SHORT THE ACT). 2. FACTS FOR BOTH YEARS LIE IN THE SAME COMPASS. A SSESSEE HAD TAKEN WINDMILLS ON LEASE FROM ITS ASSOCIATED COMPAN IES ENGAGED IN MANUFACTURING. THE COMPANIES FROM WHICH ASSESSEE H AD LEASED THE WINDMILLS HAD ACQUIRED THE WINDMILLS AND LEASED IT OUT TO THE ASSESSEE. AS PER THE ASSESSEE, IT WAS THE FIRST US ER OF THE WINDMILLS AND THOUGH IT WAS HOLDING THE WINDMILLS UNDER A LEA SE, IT WAS ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80-IA OF THE A CT WITH REGARD TO THE PROFITS EARNED ON SUPPLY OF ELECTRICITY GENERAT ED BY SUCH WINDMILLS. ASSESSEE HAD CLAIMED DEDUCTION UNDER SE CTION 80-IA OF THE ACT FOR BOTH THE YEARS. SIMILAR CLAIMS WERE TH ERE FROM ASSESSMENT YEAR 1994-95 ONWARDS. ASSESSING OFFICER WAS OF THE OPINION THAT LEASE OF THE WINDMILLS BY THE ASSESSEE FROM ITS ASSOCIATED COMPANIES WAS IN EFFECT A TRANSFER OF SU CH WINDMILLS TO THE ASSESSEE BY VIRTUE OF SECTION 53A OF TRANSFER OF PR OPERTY ACT. FURTHER, ACCORDING TO A.O., THE LESSORS OF THE WIND MILLS HAD MADE FIRST USE OF WINDMILLS BY VIRTUE OF THE TRANSACTION OF LE ASING OF SUCH WINDMILLS TO THE ASSESSEE. ASSESSEES CONTENTION T HAT LEASE DID NOT I.T.A. NOS. 1706 & 1707/MDS/11 3 RESULT IN A TRANSFER AND WINDMILLS WERE FIRST PUT T O USE BY THE ASSESSEE AS LESSEE AND THEREFORE, ELIGIBLE FOR CLAIM OF DEDU CTION UNDER SECTION 80-IA, DID NOT FIND ACCEPTANCE WITH THE ASSESSING O FFICER. AS ALREADY MENTIONED, SIMILAR CLAIMS WERE THERE FOR EARLIER YE ARS AND REASSESSMENTS WERE ALSO DONE FOR ASSESSMENT YEARS 1 997-98 TO 2002-03 WITHDRAWING THE DEDUCTION GIVEN UNDER SECTI ON 80-IA OF THE ACT. 3. ASSESSEE MOVED IN APPEAL AGAINST ORDERS OF ASSES SING OFFICER AND LD. CIT(APPEALS) IN QUANTUM PROCEEDINGS HELD AS SESSEE TO BE ELIGIBLE FOR CLAIM UNDER SECTION 80-IA OF THE ACT W ITH RESPECT TO ELECTRICITY GENERATED AND SUPPLIED TO ITS ASSOCIATE D COMPANIES. HOWEVER, REVENUE MOVED IN FURTHER APPEAL BEFORE THI S TRIBUNAL AND THIS TRIBUNAL VIDE ITS ORDER DATED 11 TH FEBRUARY, 2009, FOR ASSESSMENT YEAR 2004-05 SET ASIDE THE ORDER OF LD. CIT(APPEALS ) AND REINSTATED THE ORDER OF A.O. DENYING THE CLAIM OF DEDUCTION UN DER SECTION 80-IA OF THE ACT. THE A.O. THEREAFTER ISSUED NOTICE TO T HE ASSESSEE TO SHOW CAUSE WHY PENALTY SHOULD NOT BE LEVIED UNDER SECTIO N 271(1)(C) OF THE ACT. IN RESPONSE TO SUCH NOTICE, IT WAS SUBMIT TED BY THE ASSESSEE THAT THERE WAS NO CONCEALMENT NOR FURNISHING OF ANY INACCURATE OR I.T.A. NOS. 1706 & 1707/MDS/11 4 FALSE PARTICULARS. AS PER THE ASSESSEE, THE CLAIM FOR DEDUCTION UNDER SECTION 80-IA OF THE ACT WAS SUPPORTED BY TAX AUDIT REPORT IN FORM 3CD AND AUDIT REPORT IN FORM 10CCB AS PRESCRIBED UN DER SECTION 80-IA OF THE ACT. ASSESSEE POINTED OUT THAT LD. CI T(APPEALS) IN QUANTUM PROCEEDINGS ACCEPTED THE CASE OF THE ASSESS EE THAT IT WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA OF THE A CT IN RESPECT OF ITS INCOME FROM GENERATION AND DISTRIBUTION OF ELECTRIC ITY. ASSESSEE ALSO POINTED OUT THAT IT HAD DISCLOSED FULL AND PROPER P ARTICULARS WITH REGARD TO ITS CLAIM AND IT WAS NOT A FICTITIOUS CLAIM. HO WEVER, THE A.O. WAS NOT APPRECIATIVE OF THIS ARGUMENT. ACCORDING TO HI M, THE CONSTITUENT COMPANIES OF THE ASSESSEE HAD INSTALLED WINDMILLS F OR THEIR OWN CAPTIVE CONSUMPTION OF POWER FOR MUTUAL BENEFITS, T HE LEASE RENTALS WERE VERY LOW AND PLANT AND MACHINERY LEASED TO THE ASSESSEE WERE ALREADY USED. JUST BECAUSE FORM NO.10CCB WAS FILED , THE CLAIM COULD NOT BE ACCEPTED. LEARNED A.O. NOTED THAT THE TRIBUNAL HAD REVERSED THE FINDING OF LD. CIT(APPEALS) IN QUANTUM ASSESSMENT RESULTING IN DENIAL OF SUCH DEDUCTION UNDER SECTION 80-IA OF THE ACT AND THEREFORE, IT BECAME MANDATORY TO INITIATE PENA LTY PROCEEDINGS. FINALLY, HE CAME TO A CONCLUSION THAT ASSESSEE WAS UNABLE TO I.T.A. NOS. 1706 & 1707/MDS/11 5 ESTABLISH ITS BONAFIDE WITH REGARD TO THE CLAIM AND LEVIED PENALTY FOR BOTH THE YEARS AT THE MINIMUM LEVEL PRESCRIBED UNDE R THE ACT. 4. IN ITS APPEALS BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE CLAIM WAS BONAFIDE AND JUST B ECAUSE THE CLAIM WAS FOUND BY THE ASSESSING OFFICER NOT SUSTAINABLE, ASSESSEE COULD NOT BE CONSIDERED TO HAVE CONCEALED ANY INCOME OR F URNISHED ANY INACCURATE PARTICULARS. AS PER THE ASSESSEE, IT HA D GIVEN ALL PARTICULARS IN ITS RETURNS OF INCOME AND THE CLAIM WAS GENUINE. THE CLAIM WAS TO BE DISALLOWED ONLY FOR A REASON THAT L EASING OF THE WINDMILLS FROM THE LESSEE COMPANIES WAS ITSELF CONS IDERED TO BE FIRST USE OF WINDMILLS, WHEREAS, IN FACT, THE WINDMILLS W ERE FIRST USED BY THE ASSESSEE AS LESSEE AND ELECTRICITY GENERATED WAS SU PPLIED TO SISTER CONCERNS. ASSESSEE ALSO ARGUED THAT THERE WAS NO T RANSFER OF PROPERTY COMING WITHIN THE AMBIT OF SECTION 53A OF TRANSFER OF PROPERTY ACT BY THE LEASE. LD. CIT(APPEALS) WAS AP PRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HIM, DECISION OF H ON'BLE APEX COURT IN THE CASE OF CIT V. RELIANCE PETROPRODUCTS PVT. L TD. (322 ITR 158) AND THAT OF DELHI HIGH COURT IN THE CASE OF CIT V. NATH BROTHERS (288 I.T.A. NOS. 1706 & 1707/MDS/11 6 ITR 670) WENT IN FAVOUR OF ASSESSEE. HE, THEREFORE , DELETED THE LEVY OF PENALTY FOR BOTH THE YEARS. 5. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT ASSES SEE HAD MADE A FALSE CLAIM AND WAS TRYING TO JUSTIFY SUCH C LAIM STATING THAT THE CLAIM WAS LEGAL. ACCORDING TO LEARNED D.R., ASSESS EE WAS WELL AWARE THAT IT WAS NOT ELIGIBLE FOR CLAIM SINCE THE MACHINERY WAS PUT TO USE EARLIER. ACCORDING TO LEARNED D.R., LD. CIT(AP PEALS) HAD ERRED IN DELETING THE PENALTY WHEN THE CLAIM ITSELF WAS ILLE GAL. 6. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDERS OF LD. CIT(APPEALS) AND SUBMITTED THAT ORIGINALLY THOUGH I T WAS DENIED DEDUCTION UNDER SECTION 80-IA OF THE ACT ON ELECTRI CITY GENERATED AND DISTRIBUTED, LD. CIT(APPEALS) HAD ALLOWED THE APPEA LS OF THE ASSESSEE AND DIRECTED THE A.O. TO ALLOW SUCH CLAIM. LEARNED A.R. CONCEDED THAT THE ORDER OF LD. CIT(APPEALS) WAS REVERSED BY THE TRIBUNAL HOLDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR DEDU CTION UNDER SECTION 80-IA OF THE ACT IN RESPECT OF THE ELECTRIC ITY GENERATED AND DISTRIBUTED. BUT THIS BY ITSELF WOULD ESTABLISH TH AT THE CLAIM WAS CONSIDERED BY DIFFERENT AUTHORITIES AND DIFFERENT V IEWS WERE TAKEN ON I.T.A. NOS. 1706 & 1707/MDS/11 7 THIS ISSUE. THEREFORE, THIS CLAIM WAS NOT A MALAFI DE ONE AND IT WAS GENUINE. LEARNED A.R. ALSO POINTED OUT THAT ASSESS EE HAD MOVED IN APPEAL BEFORE HON'BLE JURISDICTIONAL HIGH COURT AGA INST THE DECISION OF TRIBUNAL AND HON'BLE JURISDICTIONAL HIGH COURT HAD ADMITTED SUCH APPEALS IN TCA 358 AND 359 OF 2009. RELIANCE WAS A GAIN PLACED ON THE DECISION OF HON'BLE APEX COURT IN THE CASE OF R ELIANCE PETROPRODUCTS PVT. LTD. (SUPRA). 7. FACTS STATED ABOVE WOULD LEAD TO AUTOMATIC RESOL UTION OF THE DISPUTE, IN OUR VIEW. ASSESSEE HAD MADE CLAIM UNDE R SECTION 80-IA OF THE ACT ON ELECTRICITY GENERATED AND DISTRIBUTED . BUT, THE ASSESSING OFFICER DENIED IT. THE REASONS GIVEN BY THE ASSESS ING OFFICER WERE THAT THE WINDMILLS WERE TAKEN NOT ON LEASE BUT ON T RANSFER AND THERE WAS EARLIER USE OF SUCH WINDMILLS. HOWEVER, THESE REASONINGS WERE NOT FOUND ACCEPTABLE BY THE LD. CIT(APPEALS). NO DOUBT, THE TRIBUNAL HAD REVERSED THE ORDER OF LD. CIT(APPEALS) AND REIN STATED THE ORDERS OF A.O. IN QUANTUM ASSESSMENTS. APPEALS AGAINST SU CH ORDERS OF THE TRIBUNAL HAVE BEEN ADMITTED BY THE HON'BLE HIGH COU RT. THIS BY ITSELF, IN OUR OPINION, SHOWS THAT THE CLAIM OF THE ASSESSE E WAS BONAFIDE. THE CLAIM WAS SUPPORTED BY FORM NO. 10CCB. ASSESSE E HAD NOT I.T.A. NOS. 1706 & 1707/MDS/11 8 CONCEALED ANY PARTICULARS IN ITS RETURNS. THE LEAS E WAS NOT DOUBTED BUT THE LEASE ITSELF WAS CONSIDERED TO BE A TRANSFE R. THE LEASE TRANSACTION BY ITSELF WAS ALSO CONSIDERED TO BE A F IRST USE OF THE MACHINERY. ALL THESE ARE DEBATABLE ISSUES WITHOUT DOUBT. IN SUCH CIRCUMSTANCES, TO SAY THAT THE CLAIM ITSELF WAS MAL AFIDE WILL BE FAR FETCHED. ADMISSION OF THE APPEALS OF ASSESSEE BY H ON'BLE JURISDICTIONAL HIGH COURT BY ITSELF SHOW THAT THERE WAS SUBSTANCE IN THE CLAIM OF THE ASSESSEE. A LOOK AT THE DECISION OF HON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LT D. (SUPRA) WOULD CLEARLY SHOW THAT WHEN AN APPEAL WAS ADMITTED BY AN HIGH COURT, BONAFIDE NATURE OF THE EXPLANATION GIVEN BY THE ASS ESSEE STOOD PROVED. IF THERE CAN BE TWO OPINIONS ABOUT THE CLA IM OF THE ASSESSEE, THE EXPLANATION OFFERED BY THE ASSESSEE CANNOT BE R EGARDED AS FICTITIOUS ONE. JUST BECAUSE A CLAIM FOR DEDUCTION WAS NOT PALATABLE TO THE AUTHORITIES, WE CANNOT SAY THAT THE CLAIM IT SELF WAS NOT SUPPORTED OR WITHOUT SUBSTANCE. WE ARE OF THE OPIN ION THAT LD. CIT(APPEALS) WAS JUSTIFIED IN DELETING THE PENALTY FOR BOTH THE YEARS UNDER SUCH CIRCUMSTANCES. INTERFERENCE IS NOT CALL ED FOR. I.T.A. NOS. 1706 & 1707/MDS/11 9 8. IN THE RESULT, APPEALS FILED BY THE REVENUE FOR BOTH THE YEARS STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 5 TH JANUARY, 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH JANUARY, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-VI, CHENNAI (4) CIT-III, CHENNAI (5) D.R. (6) GUARD FILE