The ITO, Ward-4(2), Ahmedabad V. Kiri Dyes & Chemicals (P) Ltd., Ahmedabad

ITA 274/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8623 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-03-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 15-01-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Difference of opinion
• Section: 80IA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM) ITA NO.274/AHD/2004 A. Y.: 2001-02 THE INCOME TAX OFFICER, WARD -4(2), ROOM NO.105, 1 ST FLOOR, NAVJIVANI TRUST BUIRLDING, AHMEDABAD VS KIRI DYES & CHEMICALS PVT. LTD., 53, MANEKBAUG SOCIETY, AMBAWADI, AHMEDABAD PA NO.AAACK 9025 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI C. K. MISHRA, DR RESPONDENT BY SHRI S. N. SOPARKAR, AR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-VII, AHMEDABAD DATE D 31-10-2006 FOR ASSESSMENT YEAR 2001-02 CHALLENGING THE CANCELLATIO N OF THE PENALTY U/S 271 (1) ( C ) OF THE INCOME TAX ACT. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND C ONSIDERED THE MATERIAL AVAILABLE ON RECORD. 3. BRIEFLY, THE FACTS OF THE CASE ARE THAT PENALTY WAS IMPOSED ON THE DISALLOWANCE MADE BY THE AO IN RESPECT OF CLAIM OF DEDUCTION U/S 80IA OF THE IT ACT TO THAT EXTENT CONFIRMED BY THE LEARNED CIT(A). THE ASSESSEE CLAIMED DEDUCTION U/S 80 IA OF THE IT ACT AMOUNTING TO RS.85,38,147/- BEING 30% OF THE PROFIT COMPUTED AT RS.2,84,60,489/ -. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO EXCLUDED OTHER INCOM E AMOUNTING TO RS.6,86,21,185/- AS BEING THE INCOME NOT DERIVED FR OM THE BUSINESS OF UNDERTAKING AND COMPUTED THE PROFIT OF T4HE UNDERTA KING AFTER EXCLUDING THE ABOVE OTHER INCOME OF TRADING PROFIT OF RS.53,0 0,717/-. IT RESULTED ITA NO.274/AHD/2007 KIRI DYES & CHEMICALS PVT. LTD. 2 NEGATIVE FIGURE OF RS.4,54,61,413/-. AS THERE WAS N O PROFIT, DEDUCTION U/S 80 IA OF THE IT ACT WAS DISALLOWED. THE EXCLUSI ON OF OTHER INCOME WHILE COMPUTING PROFITS FOR THE PURPOSE OF DEDUCTIO N U/S 80 IA HAS BEEN CONFIRMED BY THE LEARNED CIT(A) ON SIX ITEMS TOTALI NG TO RS.3,19,42,422/- AS MENTIONED AT PAGE 2 OF THE IMPUGNED ORDER. PENAL TY WAS ACCORDINGLY IMPOSED VIDE SEPARATE ORDER. THE ASSESSEE EXPLAINED BEFORE THE LEARNED CIT(A) THAT EXCLUSION OF OTHER INCOME FOR THE PURPO SE OF COMPUTING PROFIT FOR DEDUCTION U/S 80 IA OF THE IT ACT WAS NOT PROPE R AND THE AO WAS NOT JUSTIFIED IN RELYING UPON THE DECISION OF THE HONB LE SUPREME COURT. IT WAS SUBMITTED THAT THE DECISION RELIED UPON BY THE AO WAS GIVEN IN THE CONTEXT OF PROVISIONS OF SECTION 80 HH AND 80 I OF THE IT ACT. THE LANGUAGE OF THIS SECTIONS ARE DIFFERENT FROM THE LA NGUAGE PROVIDED U/S 80 IA OF THE ACT. BECAUSE UNDER SECTION 80 IA OF THE I T ACT THE DEDUCTION IS AVAILABLE ON PROFIT AND GAINS FROM ANY BUSINESS OF ANY INDUSTRIAL UNDERTAKING OR HOTELS OR OPERATION OF A SHIP. THE SCOPE OF DEDUCTION U/S 80IA OF THE IT ACT HAS BEEN ENLARGED BY THE LEGISLA TURE TO MAKE THE OTHER INCOME OF THE INDUSTRIAL UNDERTAKE FOR CLAIMING DED UCTION U/S 80 IA OF THE IT ACT. SEVERAL DECISIONS OF THE DIFFERENT BENC HES OF THE TRIBUNAL WERE RELIED UPON IN SUPPORT OF THE CLAIM INCLUDING DECIS ION OF BOMBAY BENCH IN THE CASE OF M/S. SUDITI INDUSTRIES LTD. IT WAS F URTHER SUBMITTED THAT SINCE THE ASSESSEE HAS NEITHER CONCEALED PARTICULAR S OF INCOME NOR FILED INACCURATE PARTICULARS OF INCOME. THEREFORE, PENALT Y WOULD NOT BE JUSTIFIED IN THE MATTER. HE HAS FURTHER SUBMITTED T HAT THE AO HAS NOT GIVEN ANY INDEPENDENT FINDINGS THAT THE ASSESSEE HA S CONCEALED THE PARTICULARS OF INCOME OR FILED INACCURATE PARTICULA RS OF INCOME. THE LEARNED CIT(A) CONSIDERING THE SUBMISSION OF THE AS SESSEE AND MATERIAL ON RECORD AND CONSIDERING THE DIFFERENCE IN THE LAN GUAGE OF THE PROVISIONS OF LAW HELD THAT THE ISSUE IS DEBATABLE. THEREFORE, ON SUCH A MATTER PENALTY IS NOT JUSTIFIED. PENALTY WAS ACCORDINGLY C ANCELLED. THE FINDINGS OF THE LEARNED CIT(A) ARE REPRODUCED BELOW: ITA NO.274/AHD/2007 KIRI DYES & CHEMICALS PVT. LTD. 3 6. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT. THE AO HAS MADE THE DISALLOWANCE OF DEDU CTION U/S 80 IA MAINLY RELYING ON THE DECISION OF THE HON BLE S. C. IN THE CASES OF: 1. PANDIAN CHEMICALS LTD. VS CIT (262 ITR 278) 2. CIT VS STERLING FOODS, 237 ITR 579 3. HINDUSTAN LEVER LTD. VS CIT, 239 ITR 297 IN THESE CASE HONBLE S.C. HAVE INTERPRETED THE WOR D INCOME DERIVED FROM THE UNDERTAKING FOR THE PURPO SE OF DEDUCTION U/S 80I AND U/S 80 HH. HOWEVER, IN THE CA SE OF CLAIM OF DEDUCTION U/S 80IA, THE COURTS HAVE HELD T HAT ABOVE DECISIONS OF THE APEX COURT ARE NOT APPLICABLE BECA USE OF DIFFERENCE IN LANGUAGE USED IN SECTION 80I AND 80HH AND SECTION 80IA. BY USING THE WORD PROFIT AND GAINS D ERIVED FROM ANY BUSINESS OF ANY UNDERTAKING IN PLACE OF PROFIT AND GAINS DERIVED FROM INDUSTRIAL UNDERTAKING, IN THE SECTION 80IA. THE SCOPE OF DEDUCTION HAS BEEN ENLARGED TO INCLUDE ALL OTHER INCOME. THIS VIEW IS SUPPORTED BY THE DECISION RELI ED UPON BY THE APPELLANT IN THE FOLLOWING CASES: (I) JCIT VS M/S. SUDITI INDUSTRIES LTD. (ITA NO.3490/MUM/2000 DT. 11.4.05) (II) ACIT VS MAXCARE LABORATORIES LTD., 92 ITD 11 (273 I TR (AT) (CUT) (III) DCIT VS CHAMAN LAL & SONS (2005) 93 TTJ 132 (ASR) (IV) ITO VS KIRAN ENTERPRISES , 92 TJ 104 (CHD) 6.1 IN VIEW OF THIS, IT IS TO BE SEEN WHETHER DISAL LOWANCE OF THE CLAIM OF DEDUCTION U/S 80IA CAN AMOUNT TO CONCEALME NT OF INCOME. IT IS NOT THE CASE OF THE AO THAT APPELLANT HAS FURNISHED ANY INACCURATE PARTICULARS OR SUPPRESSED ANY FACTUAL INFORMATION WHILE CLAIMING THE DEDUCTION U/ S 80 IA. THE ISSUE OF EXCLUSION OF OTHER INCOME FROM THE PRO FIT FOR THE PURPOSE OF DEDUCTION U/S 80 IA IS BASED ON A QUESTI ON OF LAW AS IS APPARENT FROM ORDERS OF ITAT MENTIONED IN PRE CEDING PARAGRAPHS. THEREFORE, DISALLOWANCE OF APPELLANTS CLAIM CANNOT BE SAID TO BE A CASE OF CONCEALMENT OF INCOM E OR FILING OF INACCURATE PARTICULARS. THE AO IN HIS ORDER HAS MENTIONED THAT AT THE TIME OF FILING THE RETURN WHERE CLAIM U /S 80 IA HAS BEEN MADE, THE ABOVE THREE DECISIONS OF S. C. WERE AVAILABLE. ACCORDINGLY TO THE AO, THE APPELLANT COMPANY SHOULD HAVE MADE A CLAIM ON THE BASIS OF HONBLE SUPREME COURT S DECISIONS. HOWEVER, IN THE THREE CASES OF ITAT AS M ENTIONED EARLIER, IT HAS BEEN HELD THAT THE DECISIONS OF SUP REME COURT ITA NO.274/AHD/2007 KIRI DYES & CHEMICALS PVT. LTD. 4 REGARDING INTERPRETATION OF THE PHRASE INCOME DERI VED FROM UNDERTAKING IS NOT APPLICABLE TO A CASE OF DEDUCTI ON 80IA. IN ANY CASE, IN VIEW OF THE ABOVE DECISIONS OF THE HON BLE ITAT, THE ISSUE HAS BECOME DEBATABLE ON WHICH TWO OPINION S ARE POSSIBLE. IN THE CASE OF CIT VS HARSHVARDHAN CHEMIC ALS & MINERAL LTD., 259 ITR 212, THE HONBLE RAJASTHAN HI GH COURT (JAIPUR BENCH_ HAVE HELD AS UNDER: FROM THE FOREGOING DISCUSSION IT FOLLOWS THAT SUCH A DEDUCTION COULD AN ARGUABLE, CONTROVERSIAL OR A DEBATABLE QUESTION. IN SUCH A SITUATION THE CLAIM C OULD NOT BE SAID TO BE FALSE. IF THIS WERE NOT SO, IT WO ULD BECOME IMPOSSIBLE FOR ANY ASSESSEE TO RAISE ANY CLA IMS OR CLAIM ANY DEDUCTIONS WHICH ARE DEBATABLE. IT IS NOT CERTAINLY THE INTENTION OF THE LEGISLATURE TO MAKE PUNISHABLE SUCH CLAIMS OR DEDUCTIONS UNDER SECTION 271(1) ( C ), IF THEY ARE NOT ACCEPTED. AFFIRMING THE DECISION OF THE APPELLATE TRIBUNAL, THE HONBLE COURT IN THIS CASE HAVE HELD THAT NO PENALT Y IS LEVIABLE WHEN THE ASSESSEE HAS CLAIMED DEDUCTION OF AN AMOUNT THAT WAS DEBATABLE. IT COULD NOT BE SAID THA T THE ASSESSEE HAS CONCEALED ANY INCOME OR FURNISHED INAC CURATE PARTICULARS FOR EVASION OF TAX. 5.4 WHERE ASSESSEE CLAIMS A DEDUCTION, WHICH IS NOT PERMITTED BY ACT, IT DOES NOT TANTAMOUNT TO CONCEAL MENT [DEVIDASS SUKHANI VS ITO (JODH) ITA NO.387 OF 2005 DT. 21.4.2006]. 5.5 WHERE THE ASSESSEE HAD DISCLOSED ALL MATERIAL F ACTS PERTAINING TO THE COMPUTATION OF INCOME AND THE SAM E WERE NOT FOUND FALSE BUT THE ADDITIONS/DISALLOWANCES WER E MADE ON ACCOUNT OF DIFFERENCE OF OPINION, IT COULD NOT B E SAID THAT HE EITHER CONCEALED THE PARTICULARS OF INCOME OR FURNI SHED INACCURATE PARTICULAR THERE OF (NUCHEM LTD. VS DCIT (1993) 47 ITD 487 (DELHI). 6. THE APPELLANTS CASE IS SQUARELY COVERED BY THE ABOVE DECISIONS. ON CONSIDERATION OF THE FACTS OF THE CAS E AND FOLLOWING THE DECISIONS CITED ABOVE, I HOLD THAT PE NALTY CANNOT BE LEVIED IN THE CASE OF APPELLANT WHERE ITS CLAIM OF DEDUCTION U/S 80IA HAS BEEN DISALLOWED. ACCORDINGLY, THE PENA LTY LEVIED BY THE AO IS CANCELED. ITA NO.274/AHD/2007 KIRI DYES & CHEMICALS PVT. LTD. 5 4. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE REITERATED T HE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND RELIED UPON THE OR DER OF ITAT AHMEDABAD BENCH IN THE CASE OF M/S. PYRAMID PLASTIC S VS ACIT IN ITA NO.382/AHD/2007 DATED 30-04-2007 IN WHICH ON ACCOUN T OF DEDUCTION U/S 80 IB OF THE IT ACT, PENALTY WAS CANCELLED. COP Y OF THE ORDER IS PLACED ON RECORD. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. WE DO NOT FIND ANY JU STIFICATION TO INTERFERE WITH THE ORDER OF THE LEARNED CIT(A) IN CANCELING T HE PENALTY. THE LEARNED CIT(A) HAS RIGHTLY APPRECIATED THE DIFFERENCE IN TH E LANGUAGE PROVIDED U/S 80 I AND 80 HH OF THE IT ACT AS COMPARED TO DED UCTION PROVIDED U/S 80 IA OF THE IT ACT. THE FINDINGS OF THE LEARNED CI T(A) ARE SUPPORTED BY SEVERAL DECISIONS OF DIFFERENT BENCHES OF THE TRIBU NAL. IT WOULD, THEREFORE, BE A ISSUE ON WHICH TWO VIEWS ARE POSSIBLE. SINCE T HE MATTER IS HIGHLY DEBATABLE, THEREFORE, IT IS DIFFICULT TO BELIEVE TH AT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FILED INACCU RATE PARTICULARS OF INCOME. THE ASSESSEE DISCLOSED ALL THE PARTICULARS FOR CLAIMING DEDUCTION U/S 80 IA OF THE IT ACT BEFORE THE AO AND THE AO WA S OF THE VIEW THAT THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION OF CERTAIN I TEMS U/S 80 IA OF THE IT ACT. THE AO HAS, THEREFORE, NOT GIVEN ANY SPECIFIC FINDINGS IN THE PENALTY ORDER THAT THE ASSESSEE HAS CONCEALED PARTICULARS O F INCOME OR FILED INACCURATE PARTICULARS OF INCOME. SINCE ALL THE PAR TICULARS WERE BEFORE THE AUTHORITIES BELOW AND THE ISSUE WAS DEBATABLE BEING DIFFERENCE IN THE LANGUAGE U/S 80 IA AND 80 I OF THE IT ACT ON WHICH THE AO HAS PLACED RELIANCE FOR THE PURPOSE OF DISALLOWING CLAIM OF TH E ASSESSEE U/S 80IA OF THE IT ACT, WE ARE OF THE VIEW THAT IT WAS NOT A FI T CASE FOR IMPOSITION OF PENALTY AGAINST THE ASSESSEE. THE SAME VIEW IS TAKE N BY THE ITAT AHMEDABAD BENCH IN THE CASE OF M/S. PYRAMID PLASTIC S (SUPRA) IN WHICH THE APPEAL OF THE ASSESSEE WAS ALLOWED CANCELING TH E PENALTY U/S 271 (1) ITA NO.274/AHD/2007 KIRI DYES & CHEMICALS PVT. LTD. 6 ( C ) OF THE IT ACT. CONSIDERING THE FACTS AND CIRC UMSTANCES OF THE CASE AND THE FINDINGS OF THE LEARNED CIT(A) WE DO NOT FI ND IT TO BE A FIT CASE FOR INTERFERENCE. WE CONFIRM THE FINDINGS OF THE LEARNE D CIT(A) AND DISMISS THE DEPARTMENTAL APPEAL. 6. AS A RESULT, DEPARTMENTAL APPEAL IS DISMISSED. ORDER PRONOUNCED ON 12-03-2010. SD/- SD/- (N. S. SAINI) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 12-03-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD