DCIT, New Delhi V. M/s C&S Electric Limited, New Delhi

ITA 2473/DEL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3478 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 27-07-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 25-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: ASHOK MALIK
• Keywords: Depreciation; Speculation loss; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 271(1)(c); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI R.P.TOLANI, JM AND SHRI R.C.SHARMA, AM ITA NO.2473/DEL/2010 ASSESSMENT YEAR : 2003-04 DY.COMMISSIONER OF INCOME TAX, CIRCLE-3(1), NEW DELHI. VS. M/S C&S ELECTRIC LIMITED, (FORMERLY KNOWN AS CONTROLS & SWITCHGEAR CO.LTD.), 222, OKHLA INDUSTRIAL ESTATE, NEW DELHI. PAN NO.AAACC0900K. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANISH GUPTA, SR.DR. RESPONDENT BY : SHRI ASHOK MALIK, CA. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 30.3.2010 FOR THE AY 2003-04, IN THE MATTER OF PENA LTY IMPOSED U/S 271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT WHILE MAKING SCRUTINY ASSESSMENT, THE AO DISAL LOWED PAYMENT ON ACCOUNT OF TECHNICAL KNOW-HOW FEE WHICH WAS CLAIMED AS REVENUE EXPENDITURE. THE AO TREATED THE SAME AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION THEREON. IN AN APPEAL FILED BY THE ASSESSEE, THE DISALLOWANCE WAS UPHELD BY THE CIT(A). IN THE FURTHER APPEAL FILED BY THE ASSESSEE BEFORE THE TRI BUNAL WITH REGARD TO PAYMENT MADE TO M/S SIMELECTRO FRANCE AMOUNTING TO RS.20,60 ,010/-, 25% OF THE EXPENDITURE WAS UPHELD AS CAPITAL IN NATURE WHEREAS BALANCE 75% WAS ALLOWED BY THE TRIBUNAL AS REVENUE EXPENDITURE. THUS, TO THE EXTENT THE ADDITION WAS DELETED BY THE TRIBUNAL, THE PENALTY SO IMPOSED HAS NO LEGS TO STAND. WITH REGARD TO BALANCE ADDITION ON ACCOUNT OF ROYALTY PAYMENT, THE ISSUE INVOLVED IS WHETHER PARTICULAR EXPENDITURE IS CAPITAL OR REVENUE IN NAT URE. THE CIT(A) DELETED THE 2 PENALTY SO IMPOSED BY RELYING ON THE DECISION OF HO N'BLE DELHI HIGH COURT IN THE CASE OF H.M.A.UDYOG (P) LTD. 159 TAXMAN 394, WHER EIN IT WAS HELD THAT QUESTION AS TO WHETHER EXPENDITURE INCURRED BY THE ASSESSEE IS A REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE IS A DEBATABLE ISSUE AND EVEN IF IT IS ULTIMATELY DECIDED AGAINST THE ASSESSEE, IT CANNOT BE SAID THA T ASSESSEE HAS ATTEMPTED TO CONCEAL PARTICULARS OF HIS INCOME OR FURNISH INACCU RATE PARTICULARS SO AS TO ATTRACT PENALTY PROVISIONS OF SECTION 271(1)(C). RECENTLY, HON'BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCTS (P) LTD. 322 ITR 158 WHILE CONFIRMING THE ORDER OF HONBLE HIGH COURT DELETING THE PENALTY IMPOSED U/S 271(1)(C) FOR DENIAL OF ASSESSEES CLAIM OF DEDUCTION OF INTEREST EXPENDITU RE, HAS CATEGORICALLY OBSERVED THAT BY ANY STRETCH OF IMAGINATION, MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS . ACCORDINGLY, IT WAS HELD THAT DECLINE OF ASSESSEES CLAIM OF INTEREST AGAINS T THE LOAN UTILIZED FOR MAKING INVESTMENT IN TAX FREE SECURITIES, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS SO AS TO ATTRACT PENALTY U/S 271(1)(C) OF THE ACT. HON'BLE SUPREME COURT IN THIS CASE AFTER CONSIDERING THE PROPOSITIO N OF LAW LAID DOWN IN THE CASE OF DILIP N.SHROFF 291 ITR 519 (SC) AND DHARMENDER TE XTILE PROCESSORS 306 ITR 277 (SC), HELD AS UNDER:- A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINAB LE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDI TURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT, IN OUR OPINION, ATTRACT THE PENAL TY UNDER SECTION 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVE NUE THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTE D BY ASSESSING OFFICER FOR ANY REASON, THE ASSESSEE WILL INVITE PE NALTY UNDER SECTION 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF T HE LEGISLATURE. 3. RECENTLY, HON'BLE DELHI HIGH COURT IN THE CASE O F ARETIC INVESTMENT PVT.LTD., VIDE ORDER DATED 18.2.2010 IN ITA 264/200 9 OBSERVED THAT WHERE THE LOSS CLAIMED BY THE ASSESSEE ON ACCOUNT OF TRADING IN SH ARES WAS NOT ACCEPTED BY THE 3 AO AND WAS TREATED AS A SPECULATION LOSS IN TERMS O F EXPLANATION TO SECTION 73 OF THE ACT, DID NOT AUTOMATICALLY RESULT IN THE INFERE NCE OF CONCEALMENT OF INCOME JUSTIFYING IMPOSITION OF PENALTY U/S 271(1)(C) OF T HE ACT. SIMILARLY, IN THE CASE OF AURIC INVESTMENT & SECURITIES LTD. 163 TAXMAN 533 , IT WAS OBSERVED BY THE HON'BLE DELHI HIGH COURT THAT WHERE ASSESSEE HAS DE CLARED HIS INCOME FROM BROKERAGE AND OTHER INCOME AGAINST WHICH IT HAD CLA IMED SHARE TRADING LOSS, THE AO FOUND THAT LOSS WAS SPECULATIVE IN NATURE AND CO ULD NOT BE ADJUSTED AGAINST ASSESSEES NORMAL INCOME, ACCORDINGLY THE AO HELD T HAT ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME TO THE EXTENT OF M AKING A WRONG CLAIM OF SHARE TRADING LOSS AGAINST THE NORMAL INCOME AND IMPOSED PENALTY U/S 271(1)(C) OF THE ACT. THE HONBLE HIGH COURT HELD THAT MERE TREATME NT OF BUSINESS LOSS AS A SPECULATION LOSS BY THE AO DID NOT AUTOMATICALLY WA RRANT INFERENCE OF CONCEALMENT OF INCOME, ACCORDINGLY PENALTY WAS NOT LEVIABLE. 4. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY IMPOSED U/S 271(1)( C) OF THE ACT. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 27 TH JULY, 2010. SD/- SD/- (R.P.TOLANI) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 27.07.2010. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR 4