THE DCIT CIR 3(1), MUMBAI V. M/S. A.B. COLOR PVT. LTD, MUMBAI

ITA 2655/MUM/2008

• Counselvise Citation: 265519914 RSA 2008
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 10-05-2011
• Assessment Year: 1998-1999
• Appeal Filed On: 15-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAMPAT KUMAR
• Assessee Lawyers: SHRI
• Keywords: Business income; Depreciation; Wrong claim; Unabsorbed depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO.2655/MUM/2008 (ASSESSMENT YEAR: 1998-99) DCIT, CIRCLE -3(1), ROOM NO.607, AAYAKAR BHAVAN, MUMBAI -400 020 ....... APPELLANT VS M/S. A.B. COLOR PVT. LTD., 901, MAKER CHAMBERS V, NARIMAN POINT, MUMBAI -400 021 ..... RESPONDENT PAN: AAACA 3373 K APPELLANT BY: SHRI SAMPAT KUMAR RESPONDENT BY: SHRI PANKAJ TOPRANI O R D E R PER R.S. PADVEKAR, JM THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE I MPUGNED ORDER OF THE LD. CIT (A) 27, MUMBAI DATED 31.01.200 8 FOR THE A.Y. 1998-99. THE REVENUE HAS TAKEN THE FOLLOWING EFFEC TIVE GROUND:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) ERRED IN CANCELLING THE PENALTY LEVIED BY THE A.O. U/S.271(1)(C). ITA NO.2655/MUM/2008 M/S. A.B. COLOR PVT. LTD. 2 2. BRIEFLY STATED, THE FACTS ARE AS UNDER. THE ASS ESSEE IS A MANUFACTURER OF PHOTOGRAPHIC COLOUR PAPERS & FILMS. THE ASSESSEE FILED THE RETURN OF INCOME, DECLARING THE INCOME OF RS 3,11,852/- U/S.115JA FOR THE FOR THE A.Y.1998-99. THE RETURN FILED BY THE ASSESSEE WAS SELECTED FOR SCRUTINY AND ASSESSMENT W AS COMPLETED U/S.143(3) OF THE ACT. THE ASSESSEE HAS CLAIMED TH E DEDUCTION U/S.80HHA AGAINST THE GROSS TOTAL INCOME OF RS 36,5 2,788/-. IT WAS NOTICED BY THE A.O. THAT WITHOUT REDUCING THE BROUG HT FORWARD LOSSES AND UNABSORBED DEPRECIATION, THE ASSESSEE WORKED OU T THE DEDUCTION U/S.80HHA AT 20%. THE A.O. RELIED ON THE DECISION O F THE SUPREME COURT IN THE CASE OF P.K. ZAVERI 181 ITR 79 & KOTAG IRI INDUSTRIAL CO- OPERATIVE TEA FACTORY LTD. 224 ITR 604. THE ASSESS EE ACCEPTED THAT BROUGHT FORWARD LOSS IS TO BE REDUCED BEFORE WORKIN G OUT THE DEDUCTION U/S.8OHHA AND 80I. IN CONSEQUENCES, THE DEDUCTION CLAIMED BY THE ASSESSEE U/S.80HHA WAS REDUCED. IT WAS FURTHER NOTICED BY THE A.O. THAT THE GROSS TOTAL INCOME INC LUDES THE AMOUNT OF THE INTEREST RECEIVED BY THE ASSESSEE PUT TO THE EX TENT OF RS 14,73,869/-. THE SAID INTEREST WAS IN RESPECT OF T HE LOANS GIVEN TO THE SISTER CONCERNS AND OTHER CORPORATIONS. THE A.O. W AS OF THE OPINION THAT INTEREST INCOME IS AN INDEPENDENT INCOME AND N OT DERIVED FROM THE INDUSTRIAL UNDERTAKING AND HENCE FOR WORKING TH E DEDUCTION U/S.80HHA THE SAME IS TO BE REDUCED FROM THE GROSS TOTAL INCOME. HE, THEREFORE, REDUCED THE SAME FROM THE GROSS TOTA L INCOME BROUGHT TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. IN CONSEQUENCE, THE DEDUCTION U/S.80HHA WAS FURTHER REDUCED. IT WA S FURTHER NOTICED BY THE A.O. THAT THE ASSESSEE CLAIMED THE DEDUCTION U/S.80IA AT 25% OF GROSS TOTAL INCOME THEREBY CLAIMING THE SAID DED UCTION AT RS 7,30,558/-. THE A.O. WAS OF THE OPINION THAT THE D EDUCTION U/S.80I IS TO BE CALCULATED AFTER REDUCING BROUGHT FORWARD BUS INESS LOSS AND UNABSORBED DEPRECIATION FROM THE GROSS TOTAL INCOME . THEN THE A.O. WAS OF THE FURTHER OPINION THAT THAT 80IA DEDUCTION WAS AVAILABLE TO THE ASSESSEE AS PER SECTION 80IA(5) FOR A PERIOD OF SEVEN ASSESSMENT YEARS IMMEDIATELY PRECEDING THE INITIAL ASSESSMENT YEAR IN WHICH THE ITA NO.2655/MUM/2008 M/S. A.B. COLOR PVT. LTD. 3 INDUSTRIAL UNDERTAKING BEGINS TO MANUFACTURE OR PRO DUCE THE REQUEST OR OPINION. AFTER EXAMINING THE RECORD, HE FOUND T HAT IN THE ASSESSMENT YEAR 1998-99 THE ASSESSEE WAS NOT ENTITL ED TO CLAIM THE DEDUCTION U/S.80IA. HE, THEREFORE, DISALLOWED THE SAME WHICH WAS RS 7,30,558/-. THE A.O. INITIATED THE PENALTY PROCEEDI NGS U/S.271(1)(C) ON THE FOLLOWING DISALLOWANCES:- (I) EXCESS CLAIM OF DEDUCTION U/S.80HHA OF RS 6, 98,284/-; (II) INADMISSIBLE DEDUCTION U/S.80IA RS 7,30,558 /-; (III) INCOME FROM OTHER SOURCES RS 14,73,869/- 3. SO FAR AS THIRD ITEM IS CONCERNED, THE ASSESSEE HAS CLAIMED THE INTEREST INCOME UNDER THE HEAD BUSINESS INCOME WH ICH A.O. ASSESSED INTEREST INCOME UNDER THE HEAD INCOME FRO M OTHER SOURCES. THE A.O., THEREFORE, LEVIED PENALTY U/S.271(1)(C) F OR FURNISHING THE INACCURATE PARTICULARS OF INCOME CLAIMING BY CLAIMI NG EXCESS DEDUCTION U/S.80HHA AS WELL AS INADMISSIBLE DEDUCTI ON U/S.80I. THE A.O. ALSO HELD THAT BY TREATING THE INTEREST INCOME AS PART OF THE BUSINESS INCOME, WHICH OTHERWISE WAS ASSESSABLE UND ER THE HEAD INCOME FROM OTHER SOURCES AND HENCE, THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME. THE A.O., FINALL Y, LEVIED PENALTY OF RS 10,27,244/- WHICH WAS THE MINIMUM PENALTY LEVIAB LE U/S.271(1)(C) OF THE ACT. THE ASSESSEE CHALLENGED THE PENALTY OR DER BEFORE THE LD. CIT (A) AND FOUND FAVOUR AS PENALTY WAS DELETED. N OW THE REVENUE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORDS. THE LD. D.R. HAS VEHEMENTLY ARGUED TH AT THE ASSESSEE DELIBERATELY CLAIMED MALA FIDE DEDUCTION WHEN HE WA S AWARE THAT WHILE CLAIMING THE DEDUCTION U/S.HHA HE SHOULD HAVE REDUCED THE BROUGHT FORWARD LOSSES AND DEPRECIATION. SAME WAY, THE ASSESSEE CLAIMED THE DEDUCTION 80I WHEN HE WAS NOT ELIGIBLE TO CLAIM THE SAME. HE, FURTHER, ARGUES THAT THE ASSESSEE FULLY AWARE A BOUT THE LEGAL CONSEQUENCES. THE ASSESSEE ALSO TREATED INTEREST IN COME AS BUSINESS ITA NO.2655/MUM/2008 M/S. A.B. COLOR PVT. LTD. 4 INCOME FOR GETTING EXCESS BENEFIT THE BENEFIT OF TH E DEDUCTION U/S.80HHA. HE, THEREFORE, PLEADED THAT THE A.O. WA S JUSTIFIED IN LEVYING THE PENALTY. PER CONTRA, THE LD. COUNSEL S UPPORTED THE ORDER OF THE LD. CIT (A) AND SUBMITS THAT SO FAR AS CLAIM OF THE ASSESSEE U/S.80HHA IS CONCERNED, AT THAT TIME THERE WERE DIF FERENT DECISIONS OF THE HIGH COURTS IN FAVOUR OF THE ASSESSEE. SO FAR AS THE DEDUCTION U/S.80I IS CONCERNED, WHICH WAS A BONA FIDE MISTAKE AS COUNTING THE YEAR AS ADMITTEDLY UP TO A.Y. 1997-98, THE ASSESSEE WAS ELIGIBLE TO CLAIM THE DEDUCTION. SO FAR AS THE DEDUCTION OF TH E INTEREST INCOME IS CONCERNED, HE SUBMITS THAT IT IS ALSO DEBATABLE ISS UE WHETHER THE SURPLUS FUND INVESTED BY THE ASSESSEE GENERATED FRO M THE BUSINESS AND SOME INTEREST IS DERIVED WHETHER IS TO BE ASSES SEE AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES. HE SUBMITS THE CLAIM OF THE ASSESSEE WAS BONA FIDE ALSO DEBATABLE AS SOME OF THE DECISIONS WERE IN FAVOUR OF THE ASSESSEE AND HENCE NO PENALTY CAN BE LEVIED ON THE BONA FIDE SCHEME. HE PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS P. LTD. 322 ITR 158 (SC). 5. WE FIND THAT SO FAR AS THE CLAIM OF DEDUCTION U/ S.80HHA IS CONCERNED, THE ASSESSEE WORKED OUT THE DEDUCTION ON THE GROSS INCOME WITHOUT SETTING OFF THE BROUGHT FORWARD LOSS ES ON DEPRECIATION. THERE WERE CONFLICTING VIEW IN RESPECT OF THE ASSES SMENT YEAR 1998-99 IS CONCERNED. THE ASSESSEE CLAIMED THE SAME IN THE A.Y. 1998-99. THERE IS NO DISPUTE ABOUT THE FACT THAT THE DEDUCTI ON UNDER SEC. 80I WAS ALLOWED UP TO A.Y. 1997-98. IT APPEARS THAT TH OUGH THE WRONG CLAIM IS MADE BY THE ASSESSEE, IT MIGHT BE DUE TO T HE WORKING OF THE NUMBER OF YEARS AND DUE TO THE MISTAKE. THE SAID CL AIM CANNOT BE SAID TO BE MALA FIDE. SO FAR AS THE THIRD ITEM OF INCOME IS CONCERNED I.E. INTEREST INCOME, THE ASSESSEE DECLARED THE SAM E AS A BUSINESS INCOME AND CLAIMED THE DEDUCTION ON THAT. THERE WE RE DIVERGENT VIEWS ON THE ISSUE, AS SUBMITTED BY THE LD. COUNSEL . ON THE TOTALITY OF THE FACTS OF THIS CASE, WE ARE OF THE VIEW THAT THE PRINCIPLES LAID ITA NO.2655/MUM/2008 M/S. A.B. COLOR PVT. LTD. 5 DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF RE LIANCE PETRO PRODUCTS P. LTD. (SUPRA) ARE SQUARELY APPLICABLE CO NSIDERING THE FACT THAT THE CONDUCT OF THE ASSESSEE SHOWS THAT THE CLA IMS MADE WERE BONA FIDE AND BASED ON SOME DECISIONS. MERELY BECA USE CLAIM IS DISALLOWED AND ADDITION IS MADE, WHICH OTHERWISE IS BONA FIDE CLAIM, NO PENALTY CAN BE LEVIED. ACCORDINGLY, WE CONCUR W ITH THE FINDING OF THE LD. CIT (A) AND CONFIRMED THE SAME. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 6 TH MAY 2011. SD/- SD/- ( B. RAMAKOTAIAH ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 16 TH MAY 2011 COPY TO:- 1) THE APPLICANT. 2) THE RESPONDENT. 3) THE CIT (A)27, MUMBAI. 4) THE CIT CITY-III, MUMBAI. 5) THE D.R. H BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN ITA NO.2655/MUM/2008 M/S. A.B. COLOR PVT. LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 13.05.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 14.05.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER