SIDDHANT ICE CREAM (P) LTD, MUMBAI V. DCIT RG 8(3), MUMBAI

ITA 2383/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7184 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 24-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 15-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMED USMAN
• Assessee Lawyers: ADITYA KUMAR
• Keywords: Business income; Depreciation; Set aside
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I: MUMBAI BEFORE SMT P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NOS. 2382 & 2383/MUM/2009 ASSESSMENT YEARS 2000-01 & 2001-02 M/S SIDDHANT ICE CREAM (P) LTD, 2A, BRIGHTON TOWERS, LOKHANDWALA COMPLEX, MUMBAI -400 049 PAN AABCS 8672 G VS DCIT RANGE 8(3), AAYAKAR BHAVAN, MUMBAI -400 012 (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI ADITYA KUMAR FOR RESPONDENT : SHRI MOHAMMED USMAN ORDER PER RAJENDRA SINGH, AM 1. THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAI NST DIFFERENT ORDERS DATED 15.1.2009 OF CIT (A) FOR THE ASSESSMENT YEAR 2000-01 & 2001-02. THE DISPUTE RAISED BY THE ASSES SEE RELATES TO LEVY OF PENALTY U/S 271(1)(C). 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY, WHICH WAS OWNER OF BRAND NAMED NATURAL IC E CREAM HAD STOPPED MANUFACTURING ACTIVITY DUE TO LABOUR PROBLE MS. THE ASSESSEE, THEREAFTER ALLOWED TO USE OF THE BRAND NAMES AND KN OW-HOW TO SOME OTHER PARTY FROM WHICH ROYALTY WAS RECEIVED. IN AD DITION THE ASSESSEE HAD ALSO LEASED OUT SOME ASSETS FOR SOME COMPENSATI ON. THE ROYALTY INCOME AND THE COMPENSATION ON LEASED ASSETS WERE D ECLARED BY THE ASSESSEE AS BUSINESS INCOME AND AFTER CLAIMING VARI OUS ADMINISTRATIVE EXPENSES AND DEPRECIATION, THE ASSESSEE HAD DECLARE D NET LOSS OF RS M/S SIDDHANT ICE CREAM (P) LTD ITA 2382 & 2383/M/2009 2 5,57,887/- FOR AY 2000-01. SIMILAR WAS THE POSITIO N IN AY 2001-02 IN WHICH THE NET LOSS MENTIONED WAS RS 5,231/-. THE A SSESSING OFFICER, HOWEVER, TREATED THE ROYALTY INCOME AS INCOME FROM OTHER SOURCES AND DISALLOWED THE CLAIM OF EXPENSES. THE CIT (A) CONF IRMED THE ADDITION MADE BY THE ASSESSING OFFICER SUBJECT TO CERTAIN MO DIFICATIONS. IN FURTHER APPEAL BY THE ASSESSEE, THE TRIBUNAL UPHELD THE STAND OF THE ASSESSEE THAT ROYALTY WAS BUSINESS INCOME. THE TRI BUNAL, HOWEVER, DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAI M OF EXPENSES AFTER NECESSARY VERIFICATION AND AS PER LAW. THE ASSESSI NG OFFICER HAD INITIATED PENALTY PROCEEDINGS FOR CONCEALMENT OF IN COME IN RELATION TO THE ADDITION MADE AND IMPOSED PENALTY @ 100% OF TAX SOUGHT TO BE EVADED. IN APPEAL, CIT (A) HELD THAT THE TRIBUNAL HAD ALREADY DIRECTED TO VERIFY THE CLAIM OF EXPENSES AND ALLOW TO AS PER LAW AND, THEREFORE, IN CASE THE EXPENSES ARE NOT ALLOWED, PENALTY WOULD BE LEVIABLE IN RESPECT OF EXPENSES DISALLOWED. AGGRIEVED, BY THE SAID DECISION, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LEARNED AUTHORIZED REPRESENTATIV E FOR THE ASSESSEE SUBMITTED THAT ASSESSING OFFICER HAD MADE THE ADDITION ON THE GROUND THAT ROYALTY WAS NOT A BUSINESS INCOME A ND, THEREFORE, ONCE THE TRIBUNAL ACCEPTED THAT ROYALTY WAS BUSINES S INCOME, THE REVENUE HAD NO CASE FOR IMPOSING PENALTY IN RESPECT OF ADDITION MADE IN THE ORIGINAL ASSESSMENT FOR WHICH PENALTY PROCEE DINGS HAD BEEN INITIATED. THE LEARNED DEPARTMENTAL REPRESENTATIVE , ON THE OTHER HAND, SUPPORTED THE ORDER OF CIT (A). 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING LEVIABILITY OF PENALTY FOR CONCEALMENT OF INCOME U/S 271(1)(C) IN RESPECT OF A DDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENSES. THE ASSESSING OFFICER IN THE ASSESSMENT HAD DISALLOWED THE EXPENSES ON M/S SIDDHANT ICE CREAM (P) LTD ITA 2382 & 2383/M/2009 3 THE GROUND THAT ROYALTY INCOME SHOWN BY THE ASSESSE E WAS NOT A BUSINESS INCOME AND WAS INCOME FORM OTHER SOURCES A ND THE EXPENSES COULD NOT BE ALLOWED UNDER THE HEAD OTHER SOURCES . PENALTY HAD BEEN INITIATED FOR CONCEALMENT OF INCOME IN RESPECT OF ADDITION MADE. THE TRIBUNAL, HOWEVER, HELD THAT ROYALTY WAS RIGHTL Y DECLARED BY THE ASSESSEE AS BUSINESS INCOME AND, THEREFORE, EXPENSE S COULD NOT BE DISALLOWED ON THAT GROUND. HOWEVER, THE TRIBUNAL D IRECTED THE ASSESSING OFFICER TO VERIFY THE CLAIM OF EXPENSES A ND CONSIDER THEM AS PER LAW. THUS, PENALTY HAS BEEN INITIATED BY THE A SSESSING OFFICER IN RESPECT OF ADDITION MADE ON THE GROUND THAT THE ASS ESSEE WAS NOT DOING BUSINESS. THEREFORE, ONCE THE TRIBUNAL HELD THAT ASSESSEE WAS DOING BUSINESS, THE VERY GROUND FOR INITIATING PENA LTY U/S 271(1) DOES NOT EXIST. HOWEVER, IN THE FRESH ASSESSMENT, AS PER THE DIRECTION OF THE TRIBUNAL, IF THE ASSESSING OFFICER DISALLOWS ANY EXPENSES ON THE GROUND THAT THE SAME ARE NOT GENUINE OR NOT ALLOWAB LE, THE ASSESSING OFFICER WILL BE FREE TO INITIATE PENALTY PROCEEDING S IN THE FRESH ASSESSMENT ON THAT ACCOUNT. THE PENALTY IMPOSED IN RESPECT OF ADDITION MADE TO THE ORIGINAL ASSESSMENT CANNOT BE SUSTAINED IN VIEW OF THE CLEAR FINDING OF THE TRIBUNAL THAT ROYALTY I S A BUSINESS INCOME. WE ARE, THEREFORE, UNABLE TO SUSTAIN THE ORDERS OF THE CIT (A) IMPOSING PENALTIES. THE SAME ARE THEREFORE SET ASIDE AND TH E PENALTIES IMPOSED ARE DELETED. 5. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED ON 30TH DAY OF M ARCH 2010. SD/- SD/- (P MADHAVI DEVI) (RAJENDRA SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATE: 30TH MARCH, 2010 . M/S SIDDHANT ICE CREAM (P) LTD ITA 2382 & 2383/M/2009 4 COPY TO :- 1. THE APPELLANT. 2. THE RESPONDENT 4. CIT(A)-XXIX, MUMBAI. 5. CIT 8, MUMBAI. 6. D R I BENCH, MUMBAI. 7. GUARD FILE. BY ORDER / / TRUE COPY / / ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI *CHAVAN/- M/S SIDDHANT ICE CREAM (P) LTD ITA 2382 & 2383/M/2009 5 SNO DATE INITIALS 1 DRAFT DICTATED ON 24-03-2010 SR.P.S 2. DRAFT PLACED BEFORE AUTHOR 25-03-2010 30-03-2010 SR.P.S 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER V.P. 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER A.M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.P.S 6. KEPT FOR PRONOUNCEMENT ON SR.P.S 7. FILE SENT TO THE BENCH CLERK SR.P.S 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER