MUTHOOT AGRI DEVELOPMENT & HOSPITALITIES PRIVATE LIMITED, MUMBAI V. DCIT 15(2)(2), MUMBAI

ITA 2237/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7892 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2014-2015
• Appeal Filed On: 10-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SREEKAR
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (V I RTUAL COURT DB - II I ) C BENCH, MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI RAM LAL NEGI , JM ITA NO. 2237 /MUM/ 2009 ( ASSESSMENT YEAR : 2002 - 03 ) M/S. PIRAMAL HEALTHCARE LTD., (EARLIER KNOWN AS N ICHOLAS PIRAMAL INDIA LTD.,) NICHOLAS PIRAMAL TOWER GANPATRAO KADAM MARG LOWER PAREL, MUMBAI - 400013 VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1) MUMBAI PAN/GIR NO. AAACN4538P (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI RONAK DOSHI , AR REVENUE BY SHRI V. SREEKAR , CIT DR DATE OF HEARING 24 / 08 /2020 DATE OF PRONOUNCEMENT 28 / 08 /2020 / O R D E R PER M. BALAGANESH (A.M) : THIS APPEAL IN ITA NO. 2237/MUM/2009 FOR A.Y. 2002 - 03 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - VII , MUMBAI IN APPEAL NO. CIT(A)VII/DCIT - 7(1)/IT - 09/2008 - 09 DATED 30/01/2009 (LD. CIT(A) IN SHORT) IN THE MATTER OF IMPOSITION OF PENALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 . ITA NO . 2237 /MUM/ 2009 M/S. PIRAMAL HEALTHCARE LTD., 2 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL I S AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN LEVYING THE PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF EXPENSES MADE U/S.14A OF THE ACT. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE LD. AO IN THE QUANTUM ASSESSMENT ORDER MADE ADHOC DISALLOWANCE OF ADMINISTRATIVE EXPENSES @5% OF DIVIDEND INCOME U/S.14A OF THE ACT, WHICH WAS REDUCED TO 2% OF DIVIDEND INCOME BY THE LD. CIT(A) IN FIRST APPEAL. WE FIND THAT THIS ADDITION WAS MADE ONLY ON AN ESTIMATED BASIS BY BOTH THE LOWER AUTHORITIES AND THERE CANNOT BE ANY LEVY OF PENALTY ON THE ESTIMATED DISALLOWANCE OF EXPENSES. 3.1. WE FIND THAT THE LD. AO HAD NOT BROUGHT ON RECORD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS INGENUINE. THE ENT IRE DISALLOWANCE OF ADMINISTRATIVE EXPENSES MADE U/S.14A OF THE ACT WAS MADE ONLY ON AN ESTIMATED BASIS AS PERCENTAGE OF DIVIDEND INCOME. HENCE, THERE CANNOT BE ANY ALL EGATION THAT COULD BE LEVELLED ON THE ASSESSEE EITHER FOR CONCEALMENT OF INCOME OR FOR F URNISHING INACCURATE PARTICULARS OF INCOME IN THIS REGARD. HENCE, THERE CANNOT BE ANY LEVY OF PENALTY U/S.271(1)(C) OF THE ACT FOR THE SAME. ACCORDINGLY, THE PENALTY LEVIED IN RESPECT OF DISALLOWANCE U/S.14A IS HEREBY DIRECTED TO BE DELETED. 4. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY IN RESPECT OF ADDITION MADE U/S.145A OF THE ACT IN RESPECT OF UNUTILIZED MODVAT CREDIT. 4.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL IN QUANTUM APPELLATE ORDER ITA NO . 2237 /MUM/ 2009 M/S. PIRAMAL HEALTHCARE LTD., 3 IN ITA NO.3927/MUM/2006 AND 4066/MUM/2006 DATED 20/02/2020 HAD REMANDED THIS ISSUE TO THE FILE OF THE LD. AO TO DECIDE THE SAME IN LIGHT OF DIRECTIONS ISSUED BY THE TRIB UNAL FOR A.Y.2009 - 10 IN ASSESSEES OWN CASE. SINCE THE QUANTUM ADDITION IS PENDING ADJUDICATION BEFORE THE LD. AO, THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT WOULD BE PREMATURE AT THIS STAGE AND ACCORDINGLY, CANCELLED. 5. THE NEXT ISSUE TO BE DECIDED I N THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY U/S.271(1)(C) OF THE ACT WITH REGARD TO DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES. 5.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL IN QUANTUM APPELLATE PROCEEDINGS VIDE ORDER DATED 20/02/2020 REFERRED TO SUPRA HAD DELETED THE DISALLOWANCE MADE . S INCE THE QUANTUM DISALLOWANCE IS DELETED, THERE CANNOT BE ANY LEVY OF PENALTY ON THE SAME. ACCORDINGLY, WE DIRECT THE LD. AO TO DELETE THE PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF LEGAL AND PROFESSIONAL FEES. 6. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING LEVY OF PENALTY IN RESP ECT OF WRITE OFF OF STOCKS / RECEIVABLES. 6.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL IN QUANTUM APPELLATE PROCEEDINGS VIDE ORDER DATED 20/02/2020 REFERRED TO SUPRA HAD COMPLETELY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF WRITE OFF OF STOCKS / RECEIVABLES. SINCE THE QUANTUM ADDITION IS DELETED, NO PENALTY ITA NO . 2237 /MUM/ 2009 M/S. PIRAMAL HEALTHCARE LTD., 4 U/S.271(1)(C) OF THE ACT WOULD SURVIVE. HENCE, WE DIRECT THE LD. AO TO DELETE PENALTY LEVIED IN RESPECT OF WRITING OFF OF STOCKS / RECE IVABLES. 7. THE NEXT ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF PRE - PAYMENT CHARGES TREATING IT AS CAPITAL EXPENDITURE. 7.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL IN QUANTUM APPELLATE PROCEEDINGS VIDE ORDER DATED 20/02/2020 REFERRED TO SUPRA HAD COMPLETELY DELETED THE DISALLOWANCE MADE ON ACCOUNT OF PRE - PAYMENT CHARGES . SINCE THE QUANTUM ADDITION IS DE LETED, NO PENALTY U/S.271(1)(C) OF THE ACT WOULD SURVIVE. HENCE, WE DIRECT THE LD. AO TO DELETE PENALTY LEVIED IN RESPECT OF DISALLOWANCE OF PRE - PAYMENT CHARGES TREATING IT AS CAPITAL EXPENDITURE. 8. THE LAST ISSUE TO BE DECIDED IN THIS APPEAL IS AS TO WH ETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE LEVY OF PENALTY IN RESPECT OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES. 8.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ASSESSEE HAD CLAIMED BUSIN E S S PROMOTION EXPENSES AS REVENUE EXPENDITURE WHICH WAS SOUGHT TO BE TREATED BY THE LD. AO AS CAPITAL EXPENDITURE. THIS DISALLOWANCE WAS ULTIMATELY SUSTAINED BY THE TRIBUNAL IN THE QUANTUM APPELLATE PROCEEDINGS. WE FIND THAT THE ISSUE IN DISPUTE WAS WHETHE R THE PARTICULAR EXPENDITURE WAS CAPITAL OR REVENUE IN NATURE. WHETHER THE PARTICULAR EXPENDITURE IS CAPITAL OR REVENUE IN NATURE WOULD SQUARELY FALL WITHIN THE AMBIT OF DEBATABLE ISSUE AND THE LAW IS VERY WELL NOW SETTLED THAT ON A ITA NO . 2237 /MUM/ 2009 M/S. PIRAMAL HEALTHCARE LTD., 5 DEBATABLE ISSUE, NO PEN ALTY U/S.271(1)(C) OF THE ACT COULD BE LEVIED. RELIANCE IN THIS REGARD HAS BEEN RIGHTLY PLACED ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VE G AN INTERNATIONAL LTD., REPORTED IN 2 TAXMA N N.COM 140. RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE LD. AO TO DELETE THE PENALTY U/S.271(1)(C) OF THE ACT IN RESPECT OF DISALLOWANCE OF BUSINESS PROMOTION EXPENSES. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28 / 08 /2020 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( RAM LAL NEGI ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 28 / 08 / 2020 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// ITA NO . 2237 /MUM/ 2009 M/S. PIRAMAL HEALTHCARE LTD., 6