AKTIEBOLAGET ELECTROLUX, MUMBAI V. DDIT (IT) 1(1), MUMBAI

ITA 2764/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3707 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 234B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , !' #$, % , & BEFORE SHRI R.C.SHARMA, AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO.2764/MUM/2014 ( %' ( / ASSESSMENT YEAR: 2007-08) M/S. AKTIEBOLAGET ELECTROLUX C/O. SRBC AND ASSOCIATES LLP, 14 TH FLOOR, THE RUBY, 29, SENAPATI BAPAT MARG, DADAR (W), MUMBAI - 400028 ' / VS. DEPUTY DIRECTOR OF INCOME TAX INTERNATIONAL TAXATION CIRCLE 1(1) MUMBAI ./ ./ PAN/GIR NO. : AADCA9239R ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 12.05.2016 !' /DATE OF PRONOUNCEMENT: 12.08.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE ASSESSEE HAS FILED THE PRESENT APPEAL AGAINST T HE ORDER DATED 06.11.2013 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) 10, MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO THE ASSESSEE BY: SHRI KIRIT KAMDAR DEPARTMENT BY: SHRI SANJAY BAHADUR ITA NO.2764/M/2014 A.Y. 2007-08 2 A.Y.2007-08 WHEREIN THE SAID AUTHORITY HAS CONFIRME D THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S.271(1)(C) OF TH E INCOME TAX ACT, 1961 ( IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ERRED IN CONFIRMING THE PENALTY OF RS.2,83,44, 514/- LEVIED BY THE DEPUTY DIRECTOR OF INCOME TAX, INTERNATIONAL TAXATION 1(1), MUMBAI (AO) UNDER SECTION 271(1) FO THE ACT. 2. WAS NOT JUSTIFIED IN CONFIRMING THE PENALTY WITH OUT APPRECIATING THE ENTIRE FACTS AND CIRCUMSTANCES UND ER WHICH THE APPELLANT, BEING A FOREIGN COMPANY, DECID ED TO EXIST INDIA BY SELLING THE SHARES AFTER OBTAINING A LL REGULATORY AND GOVERNMENT APPROVALS, THEREFORE, INC ORRECT TO HOLD THAT LOSS WAS BOOKED WITH AN INTENTION TO C ONCEAL INCOME. 3. ERRED IN CONFIRMING THE ACTION OF THE AO IN LEVY ING PENALTY ALLEGING, WITHOUT ANY BASIS, THAT THE APPELLANT HAD CLAIMED LONG TERM AND SHORT TERM CAPITAL LOSS WITH THE INTE NTION TO DEFRAUD THE REVENUE WITHOUT APPRECIATING THAT THE A PPELLANT HAD SUBMITTED ALL THE PAPERS / DOCUMENTS DURING THE ASSESSMENT PROCEEDINGS. 4. ERRED IN CONFIRMING THE PENALTY WITHOUT APPRECIA TING THE FACT THAT THE TRANSACTIONS WERE WITH UNRELATED PART IES WHEREIN THE APPELLANT, A NON RESIDENT COMPANY, WANT ED TO EXIT FROM INDIA ON ACCOUNT OF HEAVY LOSSES SUFFERED BY THE INDIAN COMPANY AND THERE WAS NO INTENTION TO CLAIM LONG TERM CAPITAL LOSS AND SHORT TERM CAPITAL LOSS WHICH INFACT HAS NEVER BEEN CLAIMED OR LIKELY TO BE SET OFF. 5. FAILED TO APPRECIATE THAT PENALTY UNDER SECTION 271(1)(C) CANNOT BE LEVIED UNLESS IT IS ESTABLISHED THAT ASSE SSEE HAS CONCEALED INCOME OR FURNISHED INACCURATE PARTICULAR S LEADING TO CONCEALMENT OF INCOME AND SINCE BOTH THI NGS ARE ITA NO.2764/M/2014 A.Y. 2007-08 3 ABSENT IN THE CASE OF APPELLANT, THERE IS NO QUESTI ON OF LEVY OF PENALTY. 6. FAILED TO APPRECIATE THAT APPELLANT HAD SUFFERED LOSS ON ACCOUNT OF SALE OF SHARES, ON ACCOUNT OF LOSSES SUF FERED BY THE INDIAN COMPANY, WHICH IS NOT LIKELY TO BE CLAIM ED BEFORE IT GETS TIME BARRED AS THE APPELLANT IS NOT LIKELY TO HAVE INCOME TO SET OFF SUCH LOSS. 7. FAILED TO APPRECIATE THAT THE ASSESSMENT PROCEED INGS ARE DIFFERENT FROM PENALTY PROCEEDINGS AND MERELY BECAU SE LOSS IS NOT ALLOWED IN THE ASSESSMENT ORDER, IT DOES NOT AUTOMATICALLY RESULT IN CONCEALMENT OF INCOME LEADI NG TO LEVY OF PENALTY. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN OF INCOME ON 24.10.2007 DECLARING TOTAL INCOME TO T HE TUNE OF RS.20,36,099/-. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S.143(2) OF THE ACT WAS ISSUED ON 02.09.2008 AND DULY SERVED UPON THE ASSESSEE. ORDER U/S.143(3) R.W.S 144C(13) OF T HE ACT WAS PASSED ON 07.10.2010 DETERMINING TOTAL TAXABLE INCOME AT L OSS OF RS.20,36,099/-. IN THE ORDER OF ASSESSEES CLAIM O F LONG TERM CAPITAL GAIN (LTCG) AND SHORT TERM CAPITAL GAIN (STCG) WAS THOROUGHLY EXAMINED AND AFTER EXAMINATION THE SAME DISALLOWED AS IT WAS A CONTRIVED LOSS. AFTER CONCLUDING THE ASSESSMENT, T HE PENALTY PROCEEDINGS U/S.271(1)(C) OF THE ACT WAS INITIATED BY THE ASSESSING OFFICER AND LEVIED THE PENALTY TO THE TUNE OF RS.2, 83,44,514/- BY VIRTUE OF ORDER DATED 16.03.2011. BEING AGGRIEVED THE ASS ESSEE FILED THE ITA NO.2764/M/2014 A.Y. 2007-08 4 APPEAL BEFORE CIT(A) WHO CONFIRMED THE SAID ORDER, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D CAREFULLY. THE ASSESSEE HAS RAISED MANY GROUND IN HIS APPEAL BUT B ASICALLY HE CHALLENGED THE LEVY OF PENALTY CONFIRMED BY THE CIT (A) BY VIRTUE OF ORDER DATED 06.11.2013. THE LEARNED REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ADDITION FOR THE A.Y.2007-08 HA S BEEN DELETED BY THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH IN VIEW OF THE ORDER DATED 21.10.2015 IN ITA NO. 8695/MUM/2010, T HEREFORE IN THE SAID CIRCUMSTANCES THE PENALTY IS NOT LIABLE TO BE SUSTAINABLE IN THE EYES OF THE LAW. 5. HOWEVER, ON THE OTHER HAND THE LEARNED REPRESENT ATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE FINDING OF THE CIT(A) IN QUESTION. IN THE PRESENT CASE THE PENALTY WAS LEVI ED BY THE ASSESSING OFFICER IN CONNECTION WITH THE A.Y.2007-08. THE AS SESSING OFFICER CONCLUDED THE ASSESSMENT BY VIRTUE OF ORDER DATED 0 7.10.2010 WHICH WAS CONFIRMED BY THE CIT(A). SUBSEQUENTLY, THE ASS ESSEE CHALLENGED THE ORDER BEFORE THE INCOME TAX APPELLATE TRIBUNAL IN ITA NO.8695/MUM/2010, WHEREIN THE ASSESSEE HAS RAISED T HE FOLLOWING ISSUES:- ITA NO.2764/M/2014 A.Y. 2007-08 5 DISALLOWANCE OF CLAIM OF LONG TERM CAPITAL LOSS 1. ERRED IN DISALLOWING THE CLAIM OF LONG TERM CAPITAL LOSS AMOUNTING TO INR 25,03,89,402 AND SHORT TERM CAPITA L LOSS AMOUNTING TO INR 69,06,751, ARISING ON SALE OF SHAR ES OF ELECTROLUX KELVINATOR LIMITED (EKL), AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME FILED FOR THE SUB JECT ASSESSMENT YEAR. NON GRANT OF CREDIT OF TDS 2. ERRED IN NOT FOLLOWING THE DIRECTIONS OF THE DRP A ND DENYING THE CLAIM OF TAX DEDUCTED AT SOURCE (TDS) O N ROYALTY PAYMENTS FROM VIDEOCON INDUSTRIES LIMITED, AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME FO R THE SUBJECT ASSESSMENT YEAR BY HOLDING THAT CREDIT FOR TDS WILL BE GRANTED IN THE YEAR OF LOSS WITHOUT APPRECIATING THE FACT THAT TDS CREDIT IS ARISING OUT OF ROYALTY INCOME WH ICH IS OFFERED TO TAX IN THE SUBJECT ASSESSMENT YEAR. 6. SINCE THE MATTER OF CONTROVERSY IS VERY MUCH CON FINED TO THE ISSUE NO.1, THEREFORE THE FINDING OF THE TRIBUNAL I N THIS REGARD IS HEREBY REPRODUCED BELOW:- THE ENTIRE CHAIN OF EVENTS-INCLUDING DELISTING OF SHARES, PERMISSIONS OF SEBI AND RBI, AGREEMENT WITH THIRD A ND UNRELATED PARTY, LOSSES SUFFERED BY ELK, EROSION OF VALUE ITA NO.2764/M/2014 A.Y. 2007-08 6 OF SHARES OF ELK, VALUATION BY INDEPENDENT VALUER WE HOLD THAT THE TRANSACTION ENTERED INTO BY THE ASSE SSEE WAS GENUINE AND LTCL AND STCL SUFFERED BY IT ON SALE OF SHARES AND ON REDEMPTION OF PREFERENCE SHARES OF EK L HAS TO BE ALLOWED. GROUNDS NO.2-3 ARE DECIDED IN F AVOUR OF THE ASSESSEE. 7. HOWEVER THIS FINDING WAS GIVEN FOR THE A.Y.2006 -07 BUT THE HONBLE INCOME TAX APPELLATE TRIBUNAL HAS APPLIED T HE SAME FOR THE A.Y.2007-08 WHICH HAS BEEN REPRODUCED IN PARA 6 BEL OW: 6. FIRST THREE GROUND OF APPEAL RAISED BY THE ASSE SSEE, DEAL WITH DISALLOWANCE OF CLAIM OF LONG TERM & SHORT TER M CAPITAL LOSS, NON GRANT OF CREDIT OF TDS AND LEVY O F INTEREST UNDER SECTION 234B AND 234C. WHILE DECIDI NG THE APPEAL FOR THE EARLIER YEAR, WE HAVE ADJUDICATE D THE IDENTICAL ISSUES. FOLLOWING THE SAME GROUND PERTAI NING TO DISALLOWANCE OF STCL AND LTCL IS DECIDED IN FAVOUR OF THE ASSESSEE. THE AO IS DIRECTED TO VERIFY THE CLA IM ABOUT THE TAX DEDUCTED AT SOURCE AND ALLOW THE CLAI M MAID BY THE ASSESSEE. AS DECIDED THE ISSUE OF LEVY OF INTEREST U/S.234 IS CONSEQUENTIAL IN NATURE AND HEN CE IS NOT BEING ADJUDICATED. ITA NO.2764/M/2014 A.Y. 2007-08 7 8. SINCE THE BASE UPON WHICH THE PENALTY WAS LEVIED HAS BEEN DELETED BY THE TRIBUNAL IN ITA NO.8695/MUM/2010 FOR THE A.Y.2007- 08. THEREFORE, IN THE SAID CIRCUMSTANCES NO PENALT Y IS LEVIABLE IN ACCORDANCE WITH LAW. ACCORDINGLY, WHEN THE QUANTUM HAS BEEN DELETED, THEREFORE THE PENALTY IS HEREBY ORDER TO B E SET ASIDE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH AUGUST , 2016. SD/- SD/- (R.C.SHARMA) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED :12 TH AUGUST, 2016 MP MP MP MP * +%'#, -,(' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ' / BY ORDER, - & //TRUE COPY// ./$ ! /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI