AT&T Communication Services India (P) Ltd, V. DCIT Circle-2(1),

ITA 2788/DEL/2006

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5497 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 02-02-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 06-09-2006
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAJANAND MEENA
• Assessee Lawyers: SYAL
• Keywords: Capital asset; Double taxation relief; Bonafide belief; Wrong claim; Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER & SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ITA NO. 2788/DEL/2006 ASSESSMENT YEAR : 2001-02 AT&T COMMUNICATION SERVICES INDIA PVT. LTD. MOHAN DEV HOUSE, 13, TOLSTOY MARG, NEW DELHI-110001. VS. DCIT, CIRCLE 2(1), NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M.S. SYAL, SR. ADV. & SHRI TARANDEEP SINGH, C.A. RESPONDENT BY : SHRI GAJANAND MEENA, CIT(DR) O R D E R PER: C.L. SETHI, J.M. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER-DATED 31.07.2006 PASSED BY THE LD. CIT(A) IN THE MATTER OF AN PENALTY LEVIED BY TH E A.O. U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 PERTAINING TO THE ASSESSMENT Y EAR 2001-02. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED GROUND T HAT BOTH THE A.O. AND THE LD. CIT(A) HAVE ERRED ON FACTS AND IN LAW IN IMPOSING P ENALTY U/S 271(1)(C) OF THE ACT. 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE TH AT THE ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S 143(3) OF THE ACT WHEREI N THE A.O. MADE FOLLOWING ADDITIONS:- 2 (I) RS. 1,31,58,290/- ON ACCOUNT OF DISALLOWANCE OF EXPENSES CLAIMED IN RESPECT OF PAYMENT MADE TO AT&T, SINGAPORE; (II) RS. 33,333/- BEING DISALLOWANCE OF EXPENSES PA ID TO ROC; AND (III) RS. 3,98,36,108/- BEING AMOUNT RECEIVED FROM BIRLA, AT&T. 4. DURING THE ASSESSMENT PROCEEDINGS, IT WAS OBSERV ED BY THE A.O. THAT THE ASSESSEE COMPANY HAD CREDITED AN AMOUNT OF RS. 1,31 ,58,290/- ON 31.03.2001 IN THE ACCOUNT OF AT&T WORLDWIDE COMMUNICATION SINGAPO RE PVT. LTD. AND THE SAME WAS CLAIMED AS EXPENSES DEBITED TO THE PROFIT AND LOSS ACCOUNT. IT WAS NOTICED BY THE A.O. THAT THE CONCERN BILL RAISED BY THE SAID AT&T, SINGAPORE WAS DATED 27.11.2001, AND THE TAX DEDUCTED AT SOURCE FR OM THAT AMOUNT WAS DEPOSITED IN THE GOVERNMENT ACCOUNT ON 23.11.2001 AS WOULD BE EVIDENT FROM FORM NO. 16A ITSELF. THUS, ACCORDING TO THE A.O., THE ASSES SEE HAD WRONGLY MADE CLAIM IN RESPECT OF THE AFORESAID PAYMENT. THE A.O. DISALLO WED THE ASSESSEES CLAIM AND ADDED THE SAME TO THE ASSESSEES TOTAL INCOME. 5. SIMILARLY, IT WAS NOTICED BY THE A.O. THAT THE A SSESSEE HAD CLAIMED SUM OF RS. 33,333/- AS REVENUE EXPENSES BEING 1/3 RD OF RS. 1 LAKH INCURRED FOR FEES PAID TO INCREASE AUTHORIZED CAPITAL OF THE ASSESSEE COMP ANY. THE ASSESSEE CLAIMED THE SAME AS REVENUE EXPENSES. THE A.O. TREATED THE SAME TO BE OF CAPITAL IN NATURE AND, THUS, DISALLOWED THE SAME WHILE MAKING THE ASS ESSMENT. 6. FURTHER, IT WAS OBSERVED BY THE A.O. THAT ASSESS EE HAD SHOWN AN AMOUNT OF RS. 3,95,06,026/- UNDER THE HEAD LIABILITY ON ACCOU NT OF BRAND BUILDING FUND. AS 3 PER NOTE TO THE ACCOUNTS, THE SAID AMOUNT WAS SHOWN AS RECEIVABLE FROM BIRLA AT&T COMMUNICATION LTD. ACCORDING TO THE A.O., THI S AMOUNT SHOULD HAVE BEEN INCLUDED AS INCOME OF THE ASSESSEE. THE A.O., THEREFORE, INCLUDED THE AMOUNT OF RS. 3,98,36,108/- AS INCOME OF THE ASSESS EE. 7. IN RESPECT OF THESE THREE ITEMS, THE A.O. ALSO I NITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. 8. THE ASSESSEE WAS THEN ASKED TO EXPLAIN AS TO WHY THE PENALTY U/S 271(1)(C) SHOULD NOT BE IMPOSED IN RESPECT OF THE AFORESAID T HREE ADDITIONS MADE BY THE A.O. IN REPLY, THE ASSESSEE SUBMITTED THAT NEITHER THE ASSESSEE COMPANY HAD CONCEALED THE PARTICULARS OF INCOME NOR HAD FURNISH ED ANY INACCURATE PARTICULARS OF THE SAME. IN SUPPORT OF THIS CONTENTION, THE AS SESSEE PLACED RELIANCE ON CERTAIN DECISIONS. HOWEVER, ACCORDING TO THE A.O., THE EXP LANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTABLE AND THE DECISIONS RELIE D UPON WERE FOUND TO BE DISTINGUISHABLE ON FACTS. THE A.O. HAD OBSERVED TH AT THE ASSESSEE HAS TRIED TO TWIST THE FACTS TO CLAIM CERTAIN DEDUCTIONS, WHICH WERE NOT AVAILABLE TO THE ASSESSEE ON THE FACTS OF THE CASE. THE A.O., THERE FORE, HAD TAKEN A VIEW THAT THE ASSESSEE HAS DELIBERATELY CONCEALED THE FACTS OF IT S INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WITH A VIEW TO EVADE PAYMENT OF TAX. THE A.O., THEREFORE, LEVIED MINIMUM PENALTY U/S 271(1)(C) OF THE ACT, WH ICH WAS WORKED OUT AT RS. 2,09,72,468/- BEING 100% OF THE TAX SOUGHT TO BE EV ADED ON THE AFORESAID THREE ADDITIONS MADE BY THE A.O. 4 9. BEING AGGRIEVED, THE ASSESSEE PREFERRED AN APPEA L BEFORE THE LD. CIT(A). 10. WITH REGARD TO THE ASSESSEES CLAIM OF DEDUCTIO N OF AN AMOUNT OF RS. 1,31,58,290/- ON ACCOUNT OF PAYMENT MADE TO AT&T, S INGAPORE, THE ASSESSEE SUBMITTED THAT IT HAD CREDITED AN AMOUNT OF RS. 1,3 1,58,290/- ON 31.03.2001 TO THE ACCOUNT AT AT&T, SINGAPORE TOWARDS REMOTE END S ERVICES PROVIDED BY AT&T, SINGAPORE DURING THE YEAR UNDER CONSIDERATION AND THE TAX WAS DEDUCTED AT 10% AS PER DTAA AND THE SAID TAX DEDUCTION AT SO URCE WAS REMITTED TO THE GOVERNMENT OF INDIA IN NOVEMBER, 2001. IT WAS FURT HER POINTED OUT BY THE ASSESSEE THAT AMOUNT IN QUESTION WAS DISALLOWED FOR THE REASON THAT THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE WITHIN THE TIME ALLO WED U/S 139(1) BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) BY THE A.O. WHEREAS , ON THE OTHER HAND, THE LD. CIT(A) CONFIRMED THE ADDITION BY GIVING THE REASON THAT THE AMOUNT IN QUESTION DID NOT ACCRUE DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE FURTHER CONTENDED BEFORE THE LD. CIT(A) THAT AS PER SECTION 40(A)(I) (AS IT STOOD AT THE RELEVANT TIME) WHERE THE PAYMENT IS MADE OUTSIDE IN INDIA WHICH IS CHARGEABLE TO TAX IN INDIA, AND NEITHER THE TAX IS PAID NOR DEDUC TED THEREON, NO DEDUCTION CAN BE CLAIMED IN RESPECT OF SUCH PAYMENT. THUS, ACCORDIN G TO THE ASSESSEE WHEN IN CASE, THE TAX HAS BEEN DEDUCTED OR THOUGH THE SAME HAS BEEN PAID IN SUBSEQUENT YEAR, NO DISALLOWANCE COULD BE MADE. IT WAS FURTHE R STATED BY THE ASSESSEE THAT IN THE ASSESSEES CASE, TAX WAS DEDUCTED IN THE YEAR U NDER CONSIDERATION AND, THE SAME WAS PAID IN THE SUBSEQUENT YEAR, NO DISALLOWAN CE COULD BE MADE. IN THIS 5 RESPECT, THE RELIANCE WAS PLACED UPON THE DECISION OF TRIBUNAL IN THE CASE OF MINDA (HUF) VS. ACIT 82 TTJ 305 (DELHI). THE ASSES SEE ALSO SUBMITTED BEFORE THE LD. CIT(A) THAT AN AMENDMENT IN SECTION 40(A)(I ) WAS MADE EFFECTIVE FROM 01.04.2003 WHEREIN IT HAS BEEN PROVIDED THAT WHERE THE TAX HAS BEEN DEDUCTED AND NOT PAID BEFORE THE TIME ALLOWED U/S 200(1), NO DEDUCTION SHOULD BE ALLOWED. IT WAS, THUS, SUBMITTED THAT SINCE THE ASSESSEE HAD DEDUCTED THE TAX ON SUCH PAYMENT THOUGH DEBITED IN SUBSEQUENT YEAR, NO DISAL LOWANCE WAS CALLED FOR AS PER THE PROVISIONS CONTAINED IN SECTION 40(A)(I) AS IT STOOD PRIOR TO 01.04.2003. 11. WITH REGARD TO THE ADDITION OF RS. 3,95,06,026/ - MADE UNDER THE HEAD LIABILITY ON ACCOUNT OF BRAND BUILDING FUND, IN RE SPECT OF WHICH THE A.O. HAS ALSO LEVIED PENALTY U/S 271(1)(C), THE ASSESSEE SUB MITTED BEFORE THE LD. CIT(A) THAT THE AT&T CORPORATION, U.S. AND OVERSEAS ENTITY , ENTERED INTO AND SERVICES MARKED LICENCE AGREEMENT WITH BIRLA AT&T COMMUNICAT ION LTD FOR USE OF ITS SERVICE MARK FOR MARKETING BIRLAS CIRCULAR SERVICE S IN INDIA, AND AS PER THE AGREEMENT BIRLA AT&T WAS REQUIRED TO REIMBURSE AT&T CORPORATION OR ITS DESIGNING FOR BRAND BUILDING EXPENSES INCURRED BY I T. AT&T CORPORATION, ASSIGNED THE BRAND BUILDING ACTIVITIES TO THE ASSES SEE COMPANY AND ITS ROLE IN THIS REGARD WAS ONLY TO RECEIVE MONEY FROM BIRLA AT&T AN D TO SPEND THE SAME ON BRAND BUILDING ACTIVITIES AND NO FURTHER RIGHTS AND RESPONSIBILITIES WERE ASSIGNED TO THE ASSESSEE COMPANY. THEREFORE, THE AMOUNT REC EIVED BY THE ASSESSEE COMPANY FROM BIRLA AT&T WAS NOT SHOWN AS INCOME OF THE PRESENT ASSESSEE. 6 ASSESSEE FURTHER CONTENDED THAT THE ASSESSEE WAS UN DER BONAFIED BELIEF THAT THE AMOUNT IN QUESTION WAS NOT AN INCOME OF THE ASSESSE E SO AS TO BE OFFERED FOR TAX AS THE ASSESSEES ROLE IN THIS REGARD WAS TO RECEIV E AN AMOUNT AND SPENT FOR BRAND BUILDING AND, THEREFORE, THE AMOUNT IN QUESTION DID NOT PARTAKE THE CHARACTER OF INCOME. HE FURTHER SUBMITTED THAT THIS AMOUNT WAS DULLY DISCLOSED IN THE BALANCE SHEET VIDE SCHEDULE-F, AND VIDE NOTE NO. 6. IT WAS CLEARLY DESCRIBED THE BRAND FUND ARRANGEMENT ENTERED INTO BY THE ASSESSEE, AND THEREFORE, THE ASSESSEE DID NOT CONCEAL ANY PARTICULARS THEREOF SO AS TO SAY THAT T HE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO THE ISSUE. 12. WITH REGARD TO THE DISALLOWANCE OF RS. 33,333/- OUT OF EXPENSES INCURRED ON ACCOUNT OF FEES PAID TO REGISTRAR OF COMPANIES, THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT CONCEAL ANY PARTICULARS OF THI S TRANSACTION AND WAS DULY DISCLOSED IN THE RETURN OF INCOME AND THIS CLAIM WA S MADE UNDER THE BONAFIDE BELIEF THAT THE AMOUNT SPEND IS AN ALLOWABLE DEDUCT ION. 13. THE LD. CIT(A) CONSIDERED THE ASSESSEES SUBMIS SION AS WELL AS THE A.O.S ORDER. 14. WITH REGARD TO THE DISALLOWANCE OF ASSESSEES C LAIM ON ACCOUNT OF PAYMENT PAYABLE TO AT&T, SINGAPORE, THE LD. CIT(A) HAS OBSE RVED THAT IN RESPECT OF THIS AMOUNT, THE ASSESSEE HAS FAILED TO DEDUCT THE TAX A T SOURCE AND TO PAY THE SAME IN THE GOVERNMENT ACCOUNT DURING THE CURRENT FINANCIAL YEAR RENDERING THE SAME NOT ADMISSIBLE AS PER PROVISIONS CONTAINED IN SECTION 4 0(A)(I) OF THE ACT. THE LD. 7 CIT(A) FURTHER OBSERVED THAT THE ASSESSEE HAD MADE THE PAYMENT AS AS IN NOVEMBER, 2001 AND THAT TOO AFTER RECEIVING THE INV OICE DATED 23.11.2001 FROM THE AT&T, SINGAPORE, WHICH GOES TO SHOW THAT THE AS SESSEE HAD NEITHER DEDUCTED NOR PAID THE TAX IN THE RELEVANT FINANCIAL YEAR, AN D MERE PASSING ENTRY IN THE BOOKS WOULD NOT JUSTIFY THE ASSESSEES CLAIM THAT T AX WAS ACTUALLY DEDUCTED ON THE SAME DATE I.E. ON 31.03.2001. THE LD. CIT(A) CONSID ERED THE PROVISIONS OF SECTION 40(A)(I) AND THEN HOLD THAT THIS AMOUNT WAS PRIMA F ACIE NOT ADMISSIBLE. THE LD. CIT(A), THEREFORE, TAKEN A VIEW THAT ASSESSEE HAS F ILED INACCURATE PARTICULARS OF ITS INCOME LEADING TO A PENALTY LEVIABLE U/S 271(1) (C) OF THE ACT. THE LD. CIT(A) ALSO HAD TAKEN INTO ACCOUNT THE OBSERVATION OF LD. CIT(A) IN QUANTUM APPEAL THAT THE LIABILITY TO PAY SUCH AMOUNT DID NOT CRYSTALLIZ ED IN THE CURRENT FINANCIAL YEAR BUT HAD CRYSTALLIZED IN THE FINANCIAL YEAR 2001-02, WHEN THE LD. AT&T HAD RAISED AN INVOICE AND, THEREFORE, ON THIS ACCOUNT ALSO, TH E ASSESSEES CLAIM WAS NOT ADMISSIBLE. 15. WITH REGARD TO THE DISALLOWANCE OF RS.33,333/-, THE LD. CIT(A) HAS TAKEN A VIEW THAT IN THE LIGHT OF THE FACTS OF THE PRESENT CASE, IT WAS CLEAR THAT THE ASSESSEE HAD MADE A CONSCIOUS EFFORT TO GET DEDUCTION BY TWI STING THE ISSUE ON ONE PRETEXT OR THE OTHER. 16. AS REGARDS THE ADDITION OF RS. 3,98,06,026/-, T HE LD. CIT(A) OBSERVED THAT IT WAS NOT IN DISPUTE THAT THE ASSESSEE HAD RECEIVE D THE AMOUNT IN QUESTION AS PART OF THE SERVICES RENDERED/ TO BE RENDERED AND, HENCE , THE AMOUNT IN QUESTION WAS 8 ON REVENUE ACCOUNT. THE LD. CIT(A), THEREFORE, OBS ERVED THAT THE ASSESSEES CONDUCT IN NOT OFFERING THE SAID AMOUNT TO TAX WAS NOT BONAFIDE AND ASSESSEE HAS NOT BEEN ABLE TO PROVE ITS CASE WITHIN THE MEANING OF EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT. 17. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US. 18. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ASSESSEE HAD CREDITED AN AMOUNT OF RS. 1,31,58,290/- IN THE ACCOUNT OF M/S. AT&T WORLDWIDE COMMUNICATION SERVICES SINGAPORE PVT. LTD. ON ACCOU NT OF PAYMENT PAYABLE TO THEM AND AT THE SAME TIME THE ASSESSEE ALSO DEDUCTE D THE TAX AT SOURCE BY MAKING NECESSARY ENTRY IN THE BOOKS OF ACCOUNT. HE FURTHE R SUBMITTED THAT THE TAX SO DEDUCTED WAS DEPOSITED ON 23.11.2001. SINCE THE TAX DEDUCTED AT SOURCE WAS NOT DEPOSITED IN THE RELEVANT FINANCIAL YEAR, THE SAME WAS DISALLOWED BY THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT. HE FURTHER CONTENDED THAT PRIOR TO THE AMENDMENT MADE TO SECTION 40(A)(I) EFF ECTIVE FROM THE ASSESSMENT YEAR 2003-04, THE TAX DEDUCTED AT SOURCE AND EVEN N OT PAID DURING THAT YEAR COULD STILL BE CLAIMED AS DEDUCTION IN THE YEAR IN WHICH THE TAX WAS DEDUCTED AS SO HELD BY THE ITAT, DELHI E BENCH, IN THE CASE OF MINDA HUF LTD. VS. ADDL. CIT (2004) 82 TTJ 305 (DEL). HE FURTHER POINTED OUT TH AT DEDUCTION CLAIMED AS SUCH WAS NEITHER BOGUS NOR INADMISSIBLE ON MERIT. IT WA S DISALLOWED MERELY BECAUSE OF TECHNICAL PROVISIONS CONTAINED IN SECTION 40(A)( I) FOR NON-PAYMENT OF TAX DEDUCTED AT SOURCE DURING THAT RELEVANT FINANCIAL Y EAR. 9 19. THE LD. COUNSEL FOR THE ASSESSEE FURTHER POINTE D OUT THAT IT IS NOT IN DISPUTE THAT THE TAX SO DEDUCTED WAS ULTIMATELY PAID TO THE GOVERNMENT ACCOUNT ON 23.11.1991 AND WAS ALLOWED AS DEDUCTION IN SUBSEQUE NT ASSESSMENT YEAR IN THE LIGHT OF THE PROVISO TO SECTION 40(A)(I) OF THE ACT . HE, THEREFORE, SUBMITTED THAT THE ASSESSEES CLAIM WAS NOT FALSE AND BOGUS BUT WA S MADE ON A BONAFIDE BELIEF AND IMPRESSION AFTER DISCLOSING ALL THE RELEVANT PA RTICULARS RELATING TO THAT CLAIM. HE, THEREFORE, CONTENDED THAT THE BURDEN THAT LAY U PON THE ASSESSEE VIDE EXPLANATION-1 TO SECTION 271(1)(C) HAS BEEN DISCHAR GED AND, THEREFORE, NO PENALTY U/S 271(1)(C) IS ATTRACTED. 20. THE LD. D.R., ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND REITERATED FROM OBSERVATIONS AND REASONS IN LEVYING THE PENALTY U/S 271(1)(C) ON THE AFORESAID AMOUNT OF RS. 3,98,06,02 6/- DISALLOWED BY INVOKING PROVISIONS OF SECTION 40(A)(I) OF THE ACT. 21. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 22. IN THIS PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 3,98,06,026/- IN THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF THE AMOUNT PAYABLE TO THE AT&T SINGAPORE. THE ASSESSEE ALSO PASSED A NECESSARY ENTRY IN THE BOOKS OF ACCOUNT ABOUT THE AMOUNT OF T AX DEDUCTED FROM THE SAID AMOUNT PAYABLE TO AT&T SINGAPORE. HOWEVER, THE TAX SO DEDUCTED AT SOURCE HAS NOT BEEN PAID DURING THE FINANCIAL YEAR BUT WAS PAI D IN SUBSEQUENT YEAR ON 10 23.11.1991. SINCE THE TAX WAS NOT PAID DURING THE RELEVANT FINANCIAL YEAR, THE ASSESSEES CLAIM WAS NOT ALLOWED BY THE A.O. THE A SSESSMENT YEAR INVOLVED IS THE ASSESSMENT YEAR 2001-02. THE RELEVANT SECTION 4 0(A)(I) AS IT WAS SUBSTITUTED BY THE FINANCE ACT, 1988 WITH EFFECT FROM 01.04.198 9 AND IT STOOD IN THE RELEVANT ASSESSMENT YEAR 2001-02 AS UNDER:- (I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISSU ED FOR PUBLIC SUBSCRIPTION BEFORE THE 1 ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE DEDUCTED UNDER CHAPTER XVII-B : PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN PAID OR DEDUCTED UNDER CHAPTER XVII-B IN ANY SUBSEQUENT YEA R, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME O F THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID OR DEUCTED. 23. SUB-CLAUSE (I) OF CLAUSE (A) OF SECTION 40 WAS SUBSTITUTED BY THE FINANCE ACT, 2003, WITH EFFECT FROM 01.04.2004. THEREAFTER , THE SUB-CLAUSE (I) WAS AGAIN SUBSTITUTED BY THE FINANCE (NO. 2) ACT, 2004, WITH EFFECT FROM 01.04.2005. THE SUB-CLAUSE (I) OF CLAUSE (A) OF SECTION 40 AS IT ST OOD FROM 01.04.2004, AND PRIOR TO 01.04.2005 WAS AS UNDER:- 40 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN SEC TIONS 30 TO 38, THE FOLLOWING AMOUNTS SHALL NOT BE DEDUCTED IN COMPUTIN G THE INCOME CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUS INESS OR PROFESSION,- (A) IN THE CASE OF ANY ASSESSEE- [(I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISS UED FOR PUBLIC SUBSCRIPTION BEFORE THE 1 ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER TH IS ACT, WHICH IS PAYABLE- (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, 11 ON WHICH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCT ION, HAS NOT BEEN PAID BEFORE THE EXPIRY OF THE TIME PRE SCRIBED UNDER SUB-SECTION (1) OF SECTION 200 AND IN ACCORDA NCE WITH OTHER PROVISIONS OF CHAPTER XVII-B: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED UNDER CHAPTER XVII-B OR PAID IN ANY SUBSEQUENT YEAR, SUCH SUM SHALL BE ALLOWED AS A DED UCTION IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHI CH SUCH TAX HAS BEEN PAID. 24. SUB CLAUSE (I) OF CLAUSE (A) OF SECTION 40 AGAI N SUBSTITUTED WITH EFFECT FROM 01.04.2005 AS UNDER:- (A) IN THE CASE OF ANY ASSESSEE- [(I) ANY INTEREST (NOT BEING INTEREST ON A LOAN ISS UED FOR PUBLIC SUBSCRIPTION BEFORE THE 1 ST DAY OF APRIL, 1938), ROYALTY, FEES FOR TECHNICAL SERVICES OR OTHER SUM CHARGEABLE UNDER TH IS ACT, WHICH IS PAYABLE,- (A) OUTSIDE INDIA; OR (B) IN INDIA TO A NON-RESIDENT, NOT BEING A COMPANY OR TO A FOREIGN COMPANY, ON WHICH TAX IS DEDUCTIBLE AT SOURCE UNDER CHAPTER XVII-B AND SUCH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID DURING THE PREVIOUS YEAR, OR IN THE SUBSEQUENT YEAR BEFORE THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SEC TION 200: PROVIDED THAT WHERE IN RESPECT OF ANY SUCH SUM, TAX HAS BEEN DEDUCTED IN ANY SUBSEQUENT YEAR OR, HAS BEEN DEDUCT ED IN THE PREVIOUS YEAR BUT PAID IN ANY SUBSEQUENT YEAR AFTER THE EXPIRY OF THE TIME PRESCRIBED UNDER SUB-SECTION (1) OF SECTION 20 0, SUCH SUM SHALL BE ALLOWED AS A DEDUCTION IN COMPUTING THE INCOME O F THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 25. THE LANGUAGE USED IN SUB-CLAUSE (I) PRIOR TO IT S SUBSTITUTION BY THE FINANCE ACT, 2003 WITH EFFECT FROM 01.04.2004 WAS ON WHICH TAX HAS NOT BEEN PAID OR DEDUCTION UNDER CHAPTER XVII B OR THE PREVIOUS YE AR IN WHICH SUCH TAX HAS BEEN PAID OR DEDUCTED. 12 26. THE AFORESAID LANGUAGE THEN MODIFIED BY THE FIN ANCE ACT, 2003 WITH EFFECT FROM 01.04.2004 AND SUBSTITUTED BY THE EXPRESSION ON WHICH TAX HAS NOT BEEN DEDUCTED OR, AFTER DEDUCTION, HAS NOT BEEN PAID AN D IN THE PROVISO THE LANGUAGE USED SUCH SUM SHALL BE ALLOWED AS DEDUCTION IN COM PUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID. 27. IN THE LIGHT OF THE LANGUAGE USED IN SUB-CLAUSE (I) OF CLAUSE (A) OF SECTION 40 AS IT STOOD PRIOR TO ITS SUBSTITUTION BY THE FINANC E ACT, 2003 W.E.F. 01.04.2004, IT HAS BEEN HELD BY THE INCOME TAX APPELLATE TRIBUNAL, DELHI E BENCH IN THE CASE OF MINDA HUF LTD. VS. ACIT (SUPRA) BY OBSERVING AS UNDER:- 17. FROM A BARE READING OF SUB-CL. (I), WE ARE OF THE VIEW THAT ANY PAYMENT OF ROYALTY FOR TECHNICAL SERVICES WHICH IS PAYABLE OUTSIDE INDIA, SHALL NOT BE DEDUCTIBLE IN COMPUTING THE INCOME CHA RGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS AND PROFESSION UNLE SS TAX ON SUCH SUM HAS BEEN PAID OR DEDUCTED UNDER CHAPTER XVII-B IN RELEV ANT PREVIOUS YEAR. IT HAS ALSO BEEN CLARIFIED IN THE PROVISO THAT DEDUCTI ON OF SUCH ROYALTY AMOUNT SHALL BE ALLOWED IN COMPUTING THE INCOME OF THE PREVIOUS YEAR IN WHICH SUCH TAX HAS BEEN PAID OR DEDUCTED. THE LEGI SLATURE HAS USED THE CONJUNCTION AS OR WHICH MEANS IF ANY ONE OF THE CON DITIONS IS FULFILLED, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF THE PAYM ENT OF ROYALTY. HAD THE LEGISLATURE EVER INTENDED TO MAKE BOTH THE CONDITIO NS IMPERATIVE THEY WOULD HAVE USED THE CONJUNCTION ANY. IN THIS BAC KDROP, WE FIND FORCE IN THE CONTENTION OF THE ASSESSEE THAT IF THE TAX IS D EDUCTED AT SOURCE, DURING THE YEAR AND IS DEPOSITED BEFORE THE DUE DATE WHICH LIES IN THE SUCCEEDING YEAR, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION O F THE PAYMENT OF ROYALTY IN THAT PREVIOUS YEAR IN WHICH THE TAX AT SOURCE WA S DEDUCTED. WE ALSO FIND FORCE IN THE CONTENTION OF THE ASSESSEE THAT I F THE PAYMENT WAS MADE LATE, THE REVENUE MAY TAKE RECOURSE OF CHARGING INT EREST UNDER SECTION 201(A) OF THE ACT BUT THE DEDUCTION OF ROYALTY UNDE R SECTION 40(A)(I) COULD NOT BE DISALLOWED. WE HAVE ALSO CAREFULLY EXAMINED THE JUDGEMENT OF THE RAJASTHAN HIGH COURT AND THE TRIBUNALS ORDER WHICH SUPPORTS THE AFORESAID VIEW. WE, THEREFORE, DO NOT FIND OURSELVE S IN AGREEMENT WITH THE FINDINGS OF THE CIT(A). WE, ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE CLAIM OF THE ASSESSE E. 13 28. IN SUB-CLAUSE (I) OF CLAUSE (A) OF SECTION 40, THE EXPRESSION HAS BEEN USED ON WHICH TAX HAS NOT BEEN PAID OR DEDUCTED UNDER C HAPTER XVII-B AND IN THE PROVISO THERETO THE EXPRESSION HAS BEEN USED PREVI OUS YEAR IN WHICH SUCH TAX HAS BEEN PAID OR DEDUCTED WHICH HAS LED THE TRIBUN AL TO TAKE A VIEW THAT IF THE TAX IS DEDUCTED AT SOURCE DURING THE YEAR AND IS DE POSITED IN THE SUCCEEDING YEAR, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF THE PAYMENT OF ROYALTY IN THAT PREVIOUS YEAR IN WHICH THE TAX AT SOURCE WAS DEDUCT ED. THE TRIBUNAL HAS TAKEN THIS VIEW AFTER RELYING UPON THE DECISION OF HONBL E RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. FARASOL LTD. (1987) 163 ITR 364 (RA J) AND ALSO THE DECISION OF TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. IN ITA NO . 3862/D/1996 WHERE THE TRIBUNAL HAS ALLOWED DEDUCTION TO THE ASSESSEE U/S 40(A)(I) OF THE ACT IN CASE WHERE TAX WAS DEDUCTED IN THE PREVIOUS YEAR BUT WAS PAID TO THE CREDIT OF THE CENTRAL GOVERNMENT IN THE NEXT ASSESSMENT YEAR. 29. NOW, REVERTING BACK TO THE FACTS OF THE PRESENT CASE, WE FIND THAT IT IS NOT THE CASE OF THE DEPARTMENT THAT THE AMOUNT PAYABLE TO AT&T SINGAPORE WAS NOT ALLOWABLE AS SUCH ON MERIT AS BUSINESS DEDUCTION. T HE A.O. HAS DISALLOWED THE CLAIM FOR NON-COMPLIANCE OF PROVISIONS OF SECTION 4 0(A)(I) OF THE ACT. THE LD. CIT(A) UPHELD THE ADDITION FOR THE REASON GIVEN BY THE A.O. HOWEVER, ONE MORE REASON WAS GIVEN BY THE LD. CIT(A) WHILE SUSTAINING THE ADDITION BY SAYING THAT THE AMOUNT WAS NOT CRYSTALLIZED DURING THE RELEVANT FINANCIAL YEAR AS THE INVOICE RAISED BY AT&T SINGAPORE WAS OF DATED 23.11.1991 FA LLING WITHIN SUBSEQUENT 14 YEAR. AT THIS STAGE, WE FIND THAT THE LD. CIT(A) H AS MERELY RELIED UPON THE INVOICE ISSUED BY THE AT&T SINGAPORE BUT HAS NOT GO NE INTO QUESTION AS TO WHETHER HAVING REGARD TO THE SERVICES RENDERED BY T HE ASSESSEE, THIS AMOUNT COULD BE SAID TO HAVE BEEN CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. THE ASSESSEES RIGHT TO CLAIM DEDUCTION DEPEND UPON THE ACCRUAL OF ASSESSEES LIABILITY TO PAY THE AMOUNT AND NOT UPON WHETHER THE BILL OR INVOICE HAS BEEN ISSUED BY THE OTHER PARTY. IT IS NOT THE CASE OF THE DEPARTMENT THAT T HIS AMOUNT IS NOT RELATED TO THE YEAR UNDER CONSIDERATION. ON THIS ASPECT OF THE MA TTER ABOUT LIABILITY BEING INCURRED DURING CURRENT YEAR, THE TRIBUNAL IN QUANT UM APPEAL HAS OBSERVED AND HELD AS UNDER::- 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT TH E DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF THE AMOUNT PAYABLE BY THE AS SESSEE COMPANY TO AT&T, SINGAPORE BY INVOKING THE PROVISIONS OF SECTI ON 40(A)(I) WAS CONFIRMED BY THE LD. CITA() ALSO ON THE GROUND THAT THE SAID LIABILITY HAD NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATIO N SINCE THE RELEVANT BILL WAS ADMITTEDLY RAISED BY AT&T, SINGAPORE ONLY IN TH E MONTH OF NOVEMBER, 2001. WE FIND IT DIFFICULT TO AGREE WITH THIS STAND TAKEN BY THE LD. CIT(A) WHILE SUPPORTING THE DISALLOWANCE MADE B Y THE A.O. BY INVOKING THE PROVISIONS OF SECTION 40(A)(I). IT IS NO DOUBT TRUE THAT THE RELEVANT BILL WAS RAISED BY AT&T, SINGAPORE ON THE ASSESSEE COMPA NY ONLY IN THE MONTH OF NOVEMBER, 2001. HOWEVER, IT IS ALSO TRUE THAT THE SAID BILL WAS RAISED FOR THE SERVICES WHICH HAD BEEN RENDERED BY AT&T, SINGAPORE TO THE ASSESSEE COMPANY IN TERMS OF AN AGREEMENT ALREA DY ENTERED INTO WHICH WAS IN FORCE THROUGHOUT TH YEAR UNDER CONSIDERATION . A PERUSAL OF THE COPY OF THE BILL RAISED BY AT&T, SINGAPORE ON THE A SSESSEE COMPANY PLACED AT PAGE NO. 93 OF THE ASSESSEES PAPER BOOK ALSO SHOWS THAT THE NARRATION/ DESCRIPTION GIVEN THEREIN WAS CHARGES T OWARDS REMOTE AND SUPPORT AND NETWORK CHARGES FOR PERIOD APRIL, 2000 TO 31 ST MARCH, 2001 AS PER CLAUSE (1) OF AGREEMENT EFFECTIVE 1 ST APRIL, 2000. THIS DESCRIPTION GIVEN IN THE RELEVANT BILL CLEARLY SHOWS THAT NOT O NLY THE SERVICES CHARGED FOR IN THE SAID BILL WERE RENDERED BY AT&T, SINGAPO RE TO THE ASSESSEE 15 COMPANY IS TERMS OF AN AGREEMENT WHICH WAS EFFECTIV E FROM 01.04.2000 BUT EVEN THE CHARGES FOR THE SAID SERVICES WERE QUA NTIFIED AS PER THE TERMS AND CONDITIONS OF THE SAID AGREEMENT. THE LIABILITY FOR THE SAID SERVICES THUS HAD NOT ONLY ARISEN DURING THE YEAR UNDER CONS IDERATION IN TERMS OF THE AGREEMENT WHICH WAS VERY MUCH IN FORCE BUT EVEN THE QUANTIFICATION THEREOF WAS POSSIBLE WITH REASONABLE CERTAINTY IN T HAT YEAR. IN OUR OPINION, THE SAID LIABILITY THUS HAD CRYSTALLIZED D URING THE YEAR UNDER CONSIDERATION ITSELF IRRESPECTIVE OF THE FACT THAT THE RELEVANT BILL WAS RAISED BY AT&T SERVICES IN THE MONTH OF NOVEMBER, 2001. 30. ON READING THE AFORESAID ORDER OF THE TRIBUNAL, WE FIND THAT THE TRIBUNAL DID NOT AGREE WITH THE STAND TAKEN BY THE LD. CIT(A ) THAT LIABILITY HAD NOT CRYSTALLIZED DURING THE RELEVANT YEAR UNDER CONSIDE RATION. THE TRIBUNAL OBSERVED THAT IT IS NO DOUBT TRUE THAT THE RELEVANT BILL WAS RAISED BY AT&T, SINGAPORE ON THE ASSESSEE COMPANY ONLY IN THE MONTH OF NOVEMBER, 2001. HOWEVER, IT IS ALSO TRUE THAT SAID BILL WAS RAISED FOR THE SERVICES, WH ICH HAD BEEN RENDERED BY AT&T, SINGAPORE TO THE ASSESSEE COMPANY IN TERMS OF AGREE MENT ALREADY ENTERED INTO WHICH WAS IN FORCE THROUGHOUT THE YEAR UNDER CONSID ERATION. THE TRIBUNAL FURTHER OBSERVED THAT A PERUSAL OF THE COPY OF BILL RAISED BY AT&T, SINGAPORE ON THE ASSESSEE COMPANY PLACED AT PAGE NO. 93 OF THE A SSESSEES PAPER BOOK ALSO SHOWS THAT THE NARRATION/ DESCRIPTION GIVEN THEREIN WAS CHARGES TOWARDS REMOTE AND THE SUPPORT AND NETWORK CHARGES FOR PERIOD APRI L, 2000 TO 31 ST MARCH, 2001 AS PER CLAUSE (I) OF AGREEMENT EFFECTIVE FROM 1 ST APRIL, 2000. THE TRIBUNAL THEN OBSERVED THAT ITS DESCRIPTION GIVEN IN THE RELEVANT BILL CLEARLY SHOWS THAT NOT ONLY THE SERVICES CHARGED FOR IN THE SAID BILL WERE REND ERED BY AT&T, SINGAPORE TO THE ASSESSEE COMPANY IN THE TERMS OF THE AGREEMENT WHIC H WAS EFFECTIVE FROM 01.04.2000 BUT EVEN THE CHARGES FOR THE SAID SERVIC ES WERE QUANTIFIED AS PER THE 16 TERMS AND CONDITIONS OF THE SAID AGREEMENT. THE LIA BILITY FOR THE SAID SERVICES, THUS, HAD NOT ONLY ARISEN DURING THE YEAR UNDER CON SIDERATION IN TERMS OF THE AGREEMENT WHICH WAS VERY MUCH IN FORCE BUT EVEN THE QUANTIFICATION THEREOF WAS POSSIBLE WITH REASONABLE CERTAINTY IN THAT YEAR. TH E TRIBUNAL, THEREFORE, TAKEN A VIEW THAT THE SAID LIABILITY, THUS, HAD CRYSTALLIZE D DURING THE YEAR UNDER CONSIDERATION ITSELF IRRESPECTIVE OF THE FACT THAT THE RELEVANT BILL WAS RAISED BY THE AT&T, SINGAPORE SERVICES IN THE MONTH OF NOVEMBER, 2001. FROM THE SAID DECISION OF THE TRIBUNAL, IT IS, THUS, CLEAR THAT T HE LD. CIT(A)S STAND THAT LIABILITY DID NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDER ATION HAS NOT BEEN ACCEPTED BY THE TRIBUNAL BUT RATHER THE TRIBUNAL HAS GIVEN A CA TEGORICAL FINDING THAT LIABILITY HAD CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION IR RESPECTIVE OF THE FACT THAT THE RELEVANT BILL MIGHT HAVE BEEN RAISED BY THE AT&T SE RVICES IN THE YEAR 2001. THEREFORE, THIS BASIS FOR DISALLOWANCE ADOPTED BY T HE CIT(A) DOES NOT SURVIVE, AND ON THIS COUNT, THE CLAIM OF THE ASSESSEE CANNOT BE SAID TO BE FALSE AND MALAFIDE. 31. NOW, THE FACT REMAINS THAT DISALLOWANCE HAS BEE N MADE BY INVOKING THE PROVISIONS OF SECTION 40(A)(I). HOWEVER, THE PROPO SITION WHETHER THE ENTRY PASSED IN THE ACCOUNT BOOKS ABOUT THE DEDUCTION TAX AT SOU RCE IS SUFFICIENT TO COMPLY THE PROVISIONS OF SECTION 40(A)(I) OF THE ACT AS IT STO OD PRIOR TO 01.04.2003 IS A MATTER OF INTERPRETATION OF THE PROVISIONS OF THE ACT, AND THAT MERE BECAUSE THE CERTAIN CLAIM HAS BEEN DISALLOWED BY INVOKING THE DEEMING P ROVISIONS CONTAINED IN 17 SECTION 40(A)(I), IT CANNOT BE SAID THAT THE ASSESS EES CLAIM OF DEDUCTION WAS FALSE WHEN A CATEGORICAL FINDING HAS BEEN GIVEN BY THE TR IBUNAL THAT THE LIABILITY HAD CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION IT SELF. IT IS ALSO NOT IN DISPUTE THAT THIS DEDUCTION HAS BEEN ALLOWED TO THE ASSESSE E IN THE SUBSEQUENT ASSESSMENT YEAR, I.E. ASSESSMENT YEAR 2002-03, WHEN TAX WAS PA ID TO THE GOVERNMENT ACCOUNT. THEREFORE, THE ASSESSEES CLAIM AS SUCH I S NOT FALSE OR MALAFIDE. THE DISPUTE IS ONLY WITH REGARD TO THE YEAR IN WHICH IT SHOULD BE ALLOWED WHETHER IT SHOULD BE ALLOWED IN 2001-02 OR 2002-03. IT HAS BE EN ADMITTED AT THE TIME OF HEARING OF THIS APPEAL THAT THIS DEDUCTION HAS BEEN ALLOWED TO THE ASSESSEE IN THE ASSESSMENT YEAR 2002-03. IT IS NOT THE CASE THAT A NY MORE TAX LIABILITY HAS ARISEN TO THE ASSESSEE IN AS MUCH AS IN BOTH THE ASSESSMEN T YEAR 2001-02, 2002-03, THE ASSESSEE HAS A POSITIVE INCOME ON WHICH TAX WAS TO BE PAID AT THE SAME RATE, AND, THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD ANY MALAFIDE INTENTION TO AVOID ANY PAYMENT OF TAX. THE DETAILS AS TO THE AMOUNT P AYABLE TO THE AT&T SINGAPORE AND THE NATURE OF THE LIABILITY HAS BEEN DULY FURNISHED BY THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. THEREFORE, IT IS NO T THE CASE WHERE IT CAN BE SAID THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE DEDUCTION CLAIMED BY THE ASSESSEE. THE ASSESSEE S CLAIM IS, THEREFORE, FOUND TO BE BONAFIDE IN THE LIGHT OF THE ABOVE REFERRED D ECISIONS OF TRIBUNAL AS WELL AS OF RAJASTHAN HIGH COURT. WE, THEREFORE, HOLD THAT THE DISALLOWANCE OF RS. 1,31,58,290/- BY INVOKING PROVISIONS OF SECTION 40( A)(I) AS TAX DEDUCTED AT SOURCE WAS NOT PAID DURING THE RELEVANT FINANCIAL YEAR CAN NOT BE A GROUND TO LEVY THE 18 PENALTY U/S 271(1)(C) OF THE ACT. WE, THEREFORE, DE LETE THE PENALTY IN SO FAR AS IT IS RELATED TO THE DISALLOWANCE OF RS. 1,31,58,290/- MA DE BY THE A.O. U/S 40(A)(I) OF THE ACT. 32. NOW, WE SHALL COME TO THE ADDITION OF RS. 3,98, 36,108 MADE BY THE A.O. ON ACCOUNT OF AMOUNT RECEIVED OR RECEIVABLE BY THE ASSESSEE COMPANY FROM BIRLA AT&T COMMUNICATION LTD. 33. IN THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE A.O. THAT THE ASSESSEE COMPANY HAD SHOWN A SUM OF RS. 3,95,06 ,026/- ON ACCOUNT OF BRAND BUILDING FUND UNDER THE HEAD LIABILITIES IN THE B ALANCE SHEET, WITH A NOTE GIVEN VIDE POINT NO. 6 IN NOTES OF ACCOUNT, WHICH READS A S UNDER:- THIS YEAR THE COMPANY HAS TREATED THE AMOUNTS RECE IVED/RECEIVABLE FROM BIRLA AT&T COMMUNICATIONS LIMITED (HEREINAFTER ALSO REFERRED AS BIRLA AT&T) BEING ROLATY FRO USAGE OF THE AT&T B RAND AS A RECEIPT FROM WHICH ADVERTISEMENT, PROMOTIONAL EXPENDITURE T OWARDS THE BRAND IS TO BE INCURRED. THE FUTURE EXPENSES TO BE INCUR RED BY THE COMPANY FOR THE ABOVE MENTIONED ACTIVITIES WOULD BE DONE UT ILIZING THE FUNDS RECEIVED. 34. IT WAS FURTHER NOTED BY THE A.O. THAT THE AFORE SAID SUM RECEIVED OR RECEIVABLE FROM BIRLA AT&T COMMUNICATIONS LTD. WAS NOT INCLUDED IN THE INCOME SHOWN IN THE PROFIT AND LOSS ACCOUNT. AN EX PLANATION WAS CALLED FOR FROM THE ASSESSEE ON THIS ASPECT OF THE MATTER AND ASSES SEE HAS ACCORDINGLY SUBMITTED THE DETAILS ON THIS POINT. THE A.O. THEN EXAMINED THE SERVICE MARKED LICENCE AGREEMENT DATED 30.07.1996 BETWEEN AT&T CORPORATION , USA CORPORATION AND BIRLA AT&T COMMUNICATIONS LTD. FROM WHICH THE A.O. NOTED THAT M/S BIRLA 19 AT&T COMMUNICATION WAS ENTITLED TO USE THE SERVICE MARKED AT&T AND IN CONSIDERATION MENTIONED IN THE AGREEMENT, THE SAID SUM WAS RECEIVABLE BY THE ASSESSEE COMPANY AS AN INDEPENDENT CONTRACTOR. FRO M THE DETAILS OF ACCOUNT, IT WAS REVEALED THAT THE ASSESSEE HAD CREDITED ADVANCE AMOUNT TOWARDS BRAND EXPANSES FROM BIRLA AT&T FOR THE YEAR 2000-01 AT RS . 3,98,36,108/- OUT OF WHICH EXPENSES ON ACCOUNT OF BRAND FEE TO THE EXTEN T OF RS. 3,30,082/- WAS DEDUCTED AND A NET AMOUNT OF RS. 3,95,06,025/- WAS TAKEN TO THE BALANCE SHEET. 35. AFTER CONSIDERING THE VARIOUS FACTS AS WELL AS THE SUBMISSIONS OF THE ASSESSEE, THE A.O. WAS OF THE VIEW THAT THE AFORESA ID AMOUNT OF RS. 3,98,36,108/- WAS INCLUDABLE IN THE ASSESSEES INCOME OF THE RELE VANT YEAR AND HE, ACCORDINGLY, ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 36. ON AN APPEAL, THE LD. CIT(A) CONFIRMED THE ADDI TION BY OBSERVING THAT ASSESSEE HAS INCURRED EXPENSES ONLY OF RS. 3,30,082 /- ON ADVERTISEMENT FOR BRAND BUILDING OF AT&T, OUT OF THE TOTAL AMOUNT OF RS. 3, 98,36,108/- RECEIVED BY THE ASSESSEE AS ROYALTY FROM BIRLA AT&T COMMUNICATIONS LTD. THE AFORESAID EXPENDITURE AT RS. 3,36,082/- HAS BEEN CONSIDERED T O BE IN THE NATURE OF ACQUIRING CAPITAL ASSET. THE LD. CIT(A), THEREFORE, UPHOLD T HE ADDITION OF RS. 3,98,36,108/- BEING THE AMOUNT RECEIVABLE FROM BIRLA AT&T COMMUNI CATIONS LTD. ON ACCOUNT OF USE OF AT&T BRAND. 37. ON FURTHER APPEAL BEFORE THE TRIBUNAL, THE TRIB UNAL VIDE ITS ORDER DATED 03.10.2008 RESTORED THE MATTER BACK TO THE FILE OF THE A.O. TO DECIDE THE ISSUE 20 RELATING TO THE EXACT NATURE OF AMOUNT IN QUESTION RECEIVED BY THE ASSESSEE COMPANY AND TAXABILITY OF THE SAME IN ITS HANDS AFR ESH AFTER EXAMINING THE EXACT ARRANGEMENT BETWEEN THE ASSESSEE COMPANY AND AT&T C ORPORATION, USA IN THIS REGARD. 38. HOWEVER, IN THE MEANTIME, THE A.O. HAS LEVIED P ENALTY IN RESPECT OF THIS AMOUNT BY SAYING THAT A.O. IN HIS ASSESSMENT ORDER HAS HIGHLIGHTED VARIOUS CONTRADICTIONS AND SHIFTS IN THE STAND TAKEN BY THE ASSESSEE TO CLAIM THAT THE INCOME WAS NOT TAXABLE. THE PENALTY SO CONFIRMED BY THE A.O. WITH REGARD TO THIS AMOUNT HAS ALSO BEEN UPHELD BY THE LD. CIT(A) BY OB SERVING THAT IN THE LIGHT OF THE A.O.S ORDER, IT WAS CLEAR THAT THE ASSESSEE HA D RECEIVED THE AMOUNT IN QUESTION AS PART OF THE SERVICES RENDERED OR TO BE RENDERED AND HENCE, THE AMOUNT IN QUESTION WAS ON REVENUE ACCOUNT AND ASSESSEE HAS NOT BEEN ABLE TO DISCHARGE ITS BURDEN VIDE EXPLANATION-1 TO SECTION 271(1)(C) OF THE ACT. 39. HENCE, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US RAISING A POINT THAT THE LD. CIT(A) IS UNJUSTIFIED IN CONFIRMING THE PENALTY U/S 271(1)(C) LEVIED BY THE A.O. IN RESPECT OF THE ADDITION OF RS. 3,98,36,108/- BEI NG THE AMOUNT RECEIVED OR RECEIVABLE FROM BIRLA AT&T COMMUNICATIONS LTD. 40. WE HAVE HEARD BOTH THE PARTIES AND HAVE GONE TH ROUGH THE ORDERS OF THE AUTHORITIES BELOW. 41. THE A.O. HAS LEVIED PENALTY U/S 271(1)(C) VIDE HIS ORDER DATED 29.03.2006, WHICH HAS BEEN UPHELD BY THE LD. CIT(A) VIDE HIS OR DER DATED 31.07.2006, AND THE 21 ASSESSEE HAS FILED THIS APPEAL BEFORE US ON 06.08.2 006. AT THE TIME, WHEN THE ORDER OF PENALTY WAS PASSED BY THE A.O. AND FURTHER UPHELD BY THE LD. CIT(A) VIDE HIS ORDER DATED 31.07.2006, THE ORDER OF THE T RIBUNAL DATED 03.10.2008 AGAINST THE ASSESSMENT WAS NOT AVAILABLE. HOWEVER, IN THE LIGHT OF THE TRIBUNALS ORDER DATED 03.10.2008 RESTORING THE MATTER BACK TO THE FILE OF THE A.O. TO DECIDE THE ISSUE AFRESH, IT IS CLEAR THAT THE BASIS ON WHI CH THE PENALTY HAS BEEN LEVIED BY THE A.O. IN RESPECT OF THE AFORESAID AMOUNT OF ADDI TION DOES NOT SURVIVE ANY MORE. THEREFORE, THE PENALTY LEVIED U/S 271(1)(C) IN SO FAR AS THE ADDITION OF RS. 3,98,36,108/- OF BEING THE AMOUNT RECEIVED OR RECEI VABLE FROM BIRLA AT&T COMMUNICATIONS LTD. IS SET ASIDE. IT WILL NOW BE T HE SUBJECT MATTER TO BE DECIDED IN THE COURSE OF THE FRESH ASSESSMENT PROCEEDINGS T O BE MADE BY THE A.O. IN RELATION TO THIS ADDITION AS TO WHETHER ANY ADDITIO N IS CALLED FOR OR NOT AND IF CALLED FOR WHETHER ANY PENALTY U/S 271(1)(C) WOULD BE LEVIABLE OR NOT. IN SO FAR AS THIS APPEAL IS CONCERNED, THE PENALTY SO LEVIED BY THE A.O. U/S 271(1)(C) DOES NOT SURVIVE AND IT IS, THUS, SET ASIDE. 42. NOW, WE COME TO THE LAST ADDITION OF RS. 33,333 /- MADE BY THE A.O. BY OBSERVING THAT THE AMORTISED PAYMENT OF FEES PAID T O ROC FOR THE INCREASE IN AUTHORIZED SHARE CAPITAL IS NOT ALLOWABLE. IN THE RETURN OF INCOME, THE ASSESSEE CLAIMED THE SUM OF RS. 33,333/- BEING 1/3 RD OF AN AMOUNT OF RS. 1,00,000/- PAID TO ROC TOWARDS FEES TO INCREASE AUTHORIZED CAPITAL. THE ASSESSEE CLAIMED THE SAME AS REVENUE EXPENDITURE. HOWEVER, THE A.O. HAS DISALLOWED THE SAME BY 22 TREATING THE SAME TO BE OF CAPITAL IN NATURE. THE LD. CIT(A) UPHELD THE ADDITION MADE BY THE A.O. NO FURTHER APPEAL WAS FILED BY TH E ASSESSEE ON THIS ISSUE. 43. WE HAVE HEARD BOTH THE PARTIES AND HAVE CAREFUL LY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. 44. IT IS NOW WELL SETTLED THAT THE PAYMENT OF FEES TO ROC TOWARDS INCREASE OF AUTHORIZED CAPITAL IS EXPENDITURE OF CAPITAL IN NAT URE AS SO LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF BROOK BOND IND IA LTD. VS. CIT 225 ITR 798. THE PRESENT ASSESSMENT YEAR IS ASSESSMENT YEA R 2001-02. THE ASSESSEE HAD PAID RS. 1 LAKH TOWARDS FEE FOR INCREASE OF AUTHORI ZED CAPITAL, TO ROC, AND 1/3 RD THEREOF WAS CLAIMED AS EXPENDITURE IN THE ASSESSMEN T YEAR 2000-01 AND FURTHER 1/3 RD HAS BEEN CLAIMED IN THE PRESENT ASSESSMENT YEAR UN DER CONSIDERATION. IN THE BALANCE SHEET AS AT END OF 31.03.2000, THE ASSESSEE HAS SHOWN DEFERRED REVENUE EXPENDITURE OF RS. 66,667/- AFTER CLAIMING THE SUM OF RS. 33,333/- AS REVENUE EXPENDITURE IN THE ASSESSMENT YEAR 2000-01. SIMILA RLY, THE ASSESSEE CLAIMED 1/3 RD AMOUNT IN THE PRESENT ASSESSMENT YEAR UNDER CONSIDE RATION. AT THE TIME OF HEARING OF THIS APPEAL, IT HAS BEEN STATED AT THE B AR BY THE LD. SENIOR COUNSEL FOR THE ASSESSEE THAT IDENTICAL CLAIM TO THE EXTENT OF 1/3 RD OF THE TOTAL PAYMENT MADE IN THE ASSESSMENT YEAR 2000-01 HAS NOT BEEN DISALLO WED BY THE A.O. AND, THEREFORE, THE ASSESSEE WAS BONAFIDE IN MAKING CLAI M OF 1/3 RD OF THE TOTAL AMOUNT IN THIS PRESENT ASSESSMENT YEAR ALSO AS DEFERRED RE VENUE EXPENDITURE. HE, 23 THEREFORE, SUBMITTED THAT ASSESSEES CONDUCT WAS BO NAFIDE IN THE LIGHT OF THE FACT THAT IDENTICAL CLAIM WAS NOT DISALLOWED IN THE ASSE SSMENT YEAR 2000-01. 45. AFTER CONSIDERING THE PECULIAR FACT OF THE PRES ENT CASE AND HAVING REGARD TO THE FACT THAT AN IDENTICAL CLAIM, THOUGH NOT ADMISS IBLE IN THE EYES OF LAW, HAS ACTUALLY BEEN NOT ALLOWED BY THE A.O. WHETHER DUE T O OVER SIGHT OR FOR ANY OTHER REASON, WE ARE OF THE CONSIDERED VIEW THAT THE CLAI M SO MADE BY THE ASSESSEE CANNOT BE A BASIS TO HOLD THAT THE ASSESSEE HAS MAD E A FALSE CLAIM BY CONCEALING THE PARTICULARS OF THE MATTER. WE, THEREFORE, DELE TE THE PENALTY IN RESPECT OF THE AFORESAID ADDITION OF RS. 33,333/- DISALLOWED BY TH E A.O. 46. BEFORE PARTING WITH THIS APPEAL, IT IS IMPERATI VE ON OUR PART TO DEAL WITH THE CONTENTION ADVANCED BY THE L.D D.R. TO SUPPORT THE ORDER OF LD. CIT(A) IN CONFIRMING THE PENALTY LEVIED BY THE A.O. IN SO FAR AS THE ADDITION OF RS. 1,31,58,290/- AND AN ADDITION OF RS. 33,333/- IS CO NCERNED THAT THE PENALTY LEVIED BY THE AO IS JUSTIFIED IN THE LIGHT OF THE DECISION OF HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. ESCORTS FINANCE LTD. DATED 2 4.08.2009 IN ITA NO. 1005/2008. HE SUBMITTED THAT IN THE AFORESAID CASE OF ESCORTS FINANCE LTD. (SUPRA) THE PENALTY LEVIED U/S 271(1)(C) WITH REGAR D TO THE ASSESSEES CLAIM OF DEDUCTION U/S 35D OF THE ACT TO THE EXTENT OF 1/10 TH OF THE TOTAL EXPENSES INCURRED TOWARDS PUBLIC ISSUE OF SHARES HAS BEEN UPHELD BY T HE HIGH COURT AND, THEREFORE, THE PENALTY LEVIED BY THE A.O. IN THE PRESENT CASE WITH REGARD TO THE AFORESAID TWO AMOUNTS IS JUSTIFIED. 24 47. WE HAVE CAREFULLY GONE THROUGH THE AFORESAID DE CISION AND FIND THAT WHILE CONFIRMING THE PENALTY, THE HONBLE DELHI HIGH COUR T HAS OBSERVED AND HELD AS UNDER:- 12. A SUM OF RS. 21,02,228/- UNDER SECTION 35D OF THE ACT WAS DISALLOWED BY THE ASSESSING OFFICER. THIS, ACCORDIN G TO THE ASSESSEE, WAS MADE ON THE BASIS OF THE OPINION GIVEN BY THE CHART ERED ACCOUNTANTS, WHICH IS CLEAR FROM THE PROSPECTUS FOR PUBLIC ISSUE OF SHARES IN WHICH IT WAS CLEARLY MENTIONED THAT THE ASSESSEE COMPANY WOU LD BE ENTITLED TO RELIEF UNDER SECTION 35D OF THE ACT. EXPENSES WERE INCURRED IN CONNECTION WITH THE PUBLIC ISSUE OF SHARES SUCH AS UNDERWRITING COMMISSION, BROKERAGE AND OTHER CHARGES ETC. WHICH, AS PER THE OPINION OF THE CHARTERED ACCOUNTANTS, QUALIFY FOR AMORTIZAT ION OVER A PERIOD OF 10 YEARS UNDER SECTION 35D OF THE ACT. SUBMISSION OF THE LD. COUNSEL FOR THE REVENUE WAS THAT MERELY BECAUSE INFORMATION IN THIS BEHALF WAS MADE AVAILABLE IN THE TAX AUDIT REPORT, WOULD NOT ABSOLV E THE ASSESSEE OF THE PENALTY PROCEEDINGS WHEN SUCH A CLAIM WAS EX FACIE BOGUS. SHE SUBMITTED THAT HARDLY 5% RETURNS ARE TAKEN UP FOR S CRUTINY UNDER SECTION 143(2) OF THE ACT AND ASSESSMENT IS MADE UNDER SUB- SECTION (3) OF SECTION 143 OF THE ACT. THEREFORE, WITH THE HOPE THAT HIS/ HER RETURN MAY NOT COME UNDER SCRUTINY AND MAY BE ASSESSED ON THE BASIS OF SELF-ASSESSMENT, AN ASSESSEE CAN VENTURE TO GIVE WRONG INFORMATION. TH EREFORE, MERELY BECAUSE INFORMATION WAS AVAILABLE IN THE TAX AUDIT REPORT WOULD NOT ABSOLVE THE ASSESSEE. WHAT WAS TO BE SEEN WAS THAT WHETHER THE CLAIM MADE WAS BOGUS. 13. WE ARE INCLINED TO AGREE WITH THE AFORESAID SUB MISSION OF LD. COUNSEL FOR THE REVENUE. EVEN IF THERE IS NO CONCEA LMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS, BUT ON THE BA SIS THEREOF THE CLAIM WHICH IS MADE IS EX FACIE BOGUS, IT MAY STILL ATTRA CT PENALTY PROVISION. CASES OF BOGUS HUNDI LOANS OR BOGUS SALES OR PURCHA SES HAVE BEEN TREATED AS THAT OF CONCEALMENT OR INACCURACY IN PAR TICULARS OF INCOME BY THE JUDICIAL PRONOUNCEMENTS (SEE KRISHNA V. CIT 217 ITR 645, RAJARAM V. CIT 193 ITR 614 AND BEENA METALS, 240 ITR 222). 14. IN THE PRESENT CASE, WE HAVE TO EXAMINE AS TO W HETHER THE CLAIM MADE UNDER SECTION 35D OF THE ACT WAS BOGUS OR IT W AS A BONAFIDE CLAIM. THE ASSESSEE PLEADED BONAFIDE, AS ACCORDING TO IT, IT WAS BASED ON THE OPINION OF THE CHARTERED ACCOUNTANT. LEARNED COUNS EL FOR THE REVENUE, HOWEVER, SUBMITTED THAT A BARE READING OF SECTION 3 5D WOULD REVEAL EVEN TO A LAYMAN THAT THERE WAS NO SCOPE OF GETTING BENE FIT OF THOSE PROVISIONS IN RESPECT OF EXPENSES INCURRED IN CONNECTION WITH THE PUBLIC ISSUE OF 25 SHARES SUCH AS UNDERWRITING COMMISSION, BROKERAGE A ND OTHER CHARGES ETC. INASMUCH AS CERTAIN EXPENSES ARE ALLOWABLE WHE N THEY ARE INCURRED WITH THE EXPANSION OF ASSESSEES INDUSTRIAL UNDERTA KINGS OR IN CONNECTION WITH HIS SETTING UP OF A NEW INDUSTRIAL UNDERTAKING OR INDUSTRIAL UNIT WHEREAS THE ASSESSEE IS A FINANCE COMPANY. 15. WE ARE IN AGREEMENT WITH THE AFORESAID SUBMISSI ON OF LD. COUNSEL FOR THE REVENUE. WE FAIL TO UNDERSTAND AS TO HOW T HE CHARTERED ACCOUNTANTS WHO ARE SUPPOSED TO BE EXPERT IN TAX LA WS, COULD GIVE SUCH AN OPINION HAVING REGARD TOHTE PLAIN LANGUAGE OF SE CTION 35D OF THE ACT ON THE BASIS OF THE SAID OPINION. WHAT WAS STATED WAS THAT IN THE PROSPECTUS IS WAS MENTIONED THAT AS PER THE OPINION GIVEN BY THE CHARTERED ACCOUNTANTS, THE COMPANY WOULD BE ENTITLE D FOR RELIEF UNDER SECTION 35D OF THE ACT. THEREFORE, IT IS NOT THE C ASE OF THE ASSESSEE THAT WHILE FILING THE RETURN IT GOT ASSISTANCE FROM THE CHARTERED ACCOUNTANTS WHO OPINED THAT THE AFORESAID EXPENSES QUALIFY FOR AMORTIZATION OVER A PERIOD OF 10 YEARS UNDER SECTION 35D OF THE ACT. T HAT APART, WHEN WE FIND THAT IT IS NOT A CASE WHERE TWO OPINIONS ABOUT THE APPLICABILITY OF SECTION 35D WERE POSSIBLE. THEREFORE, IT CANNOT BE A CASE OF A BONA FIDE ERROR ON THE PART OF THE ASSESSEE. AS HAS BEEN POI NTED OUT ABOVE, THE RELIEF AVAILABLE UNDER SECTION 35D OF THE ACT TO FI NANCE COMPANY IS EX FACIE INADMISSIBLE AS THAT IS CONFINED ONLY TO THE EXISTING INDUSTRIAL UNDERTAKING FOR THEIR EXTENSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. IT WAS, THUS, NOT A WRONG CLAIM PREFERRED BY THE ASS ESSEE, BUT IS A CLEAR CASE OF FALSE CLAIM. IN COMMISSIONER OF INCOME T AX V. VIDYAGAURI NATVERLAL AND OTHERS, (1999) 238 ITR 91, GUJARAT HI GH COURT MADE A DISTINCTION BETWEEN WRONG CLAIM AS OPPOSED TO FALSE CLAIM AND HELD THAT IF THE CLAIM IS FOUND TO BE FALSE, THE SAME WOULD A TTRACT PENALTY. WE MAY ALSO TAKE NOTE OF THE FOLLOWING OBSERVATIONS OF THE SUPREME COURT IN THE CASE OF UNION OF INDIA AND OTHERS VS. DHARMENDRA TE XTILE PROCESSORS AND OTHERS, (2008) 13 SCC 369 = 306 ITR 277 (SC). IN SUCH A CASE IT IS DIFFICULT TO ACCEPT THE PLEA THAT ERROR WAS BONA FI DE. 48. FROM THE AFORESAID OBSERVATION OF THE HONBLE H IGH COURT, IT IS SEEN THAT THE ASSESSEES CLAIM MADE U/S 35D OF THE ACT WAS PR IMA FACIE NOT ADMISSIBLE AND IT WAS NOT A CASE WHERE TWO OPINIONS ABOUT THE APPL ICABILITY OF SECTION 35D WERE POSSIBLE. HONBLE HIGH COURT HAS ALSO HELD THAT IT COULD NOT BE A CASE OF BONAFIDE ERROR ON THE PART OF THE ASSESSEE IN AS MUCH AS THE RELIEF AVAILABLE U/S 35D OF THE ACT TO A FINANCE COMPANY IS EX-FACIE INADMISSIBLE A S THAT IS CONFINED ONLY TO THE 26 EXISTING INDUSTRIAL UNDERTAKING FOR THEIR EXTENSION OR FOR SETTING UP A NEW INDUSTRIAL UNIT. THE HONBLE HIGH COURT, THUS, FOU ND THAT IT WAS NOT A WRONG CLAIM PREFERRED BY THE ASSESSEE, BUT IT IS A CLEAR CASE OF FALSE CLAIM. THE HONBLE HIGH COURT HAS TAKEN NOTE OF A DISTINCTION BETWEEN A WRONG CLAIM OPPOSED TO FALSE CLAIM AND IF THE CLAIM IS FOUND TO BE FALSE, THE SAME WOULD ATTRACT PENALTY. HOWEVER, IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASSESSEE HAD INCURRED LIABILITY PAYABLE TO AT&T, SINGAPORE AND THE LIABIL ITY WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND IN THE QUANTUM APPEAL, THE TRIBUNAL HAS ALSO ACCEPTED THIS POSITION. THE DISALLOWANCE HAS BEEN M ADE U/S 40(A)(I) FOR THE REASON THAT ASSESSEE HAS FAILED TO DEDUCT TAX AT SO URCE. WE HAVE ALSO DELIBERATED UPON THE PROVISIONS OF SECTION 40(A)(I) PRIOR TO IT S AMENDMENT MADE BY THE FINANCE ACT, 2002 WITH EFFECT FROM 01.04.2003 TO BR ING OUT THE DISTINCTION BETWEEN THE POSITION EXISTING BEFORE OR AFTER THE A MENDMENT. THEREFORE, IT IS NOT THE CASE OF FALSE CLAIM MADE BY THE ASSESSEE BUT IS THE CASE WHERE PROVISION OF SECTION 40(A)(I) HAS BEEN APPLIED BY REJECTING THE INTERPRETATION GIVEN BY THE ASSESSEE. IN THE LIGHT OF THE DISCUSSIONS MADE ABO VE BY US, IT IS CLEAR THAT THE INTERPRETATION GIVEN BY ASSESSEE TO SECTION 40(A)(I ) AS IT STOOD IN THE RELEVANT ASSESSMENT YEAR 2001-02 WAS A POSSIBLE VIEW SUPPORT ED BY THE DECISION OF RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. FARASOL LTD. (SUPRA) AND THE DECISION OF TRIBUNAL IN THE CASE OF NESTLE INDIA LTD. (SUPRA ) AS WELL AS THE DECISION OF TRIBUNAL IN THE CASE OF MINDA (HUF) VS. CIT (SUPRA) . THEREFORE, THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ESC ORTS FINANCE LTD. IS OF NO 27 ASSISTANCE TO THE REVENUES CASE IN SO FAR AS THE A DDITION OF RS. 1,31,58,290/- IS CONCERNED. WITH REGARD TO THE CLAIM OF RS. 33,333/ -, IT IS NO DOUBT TRUE THAT CLAIM IS NOT ADMISSIBLE IN THE LIGHT OF THE DECISION OF H ONBLE SUPREME COURT IN THE CASE OF BROOK BOND INDIA LTD. VS. CIT 225 ITR 798 B UT THE FACT REMAINS THAT IDENTICAL CLAIM MADE IN THE ASSESSMENT YEAR 2000-01 HAS NOT BEEN DISALLOWED BY THE A.O. WOULD UNDOUBTEDLY GIVEN A BONAFIDE IMPRESS ION TO THE ASSESSEE THAT THE CLAIM IS AN ADMISSIBLE ONE. THEREFORE, ON PECULIAR FACTS OF THE PRESENT CASE, THE AFORESAID CLAIM OF RS. 33,333/- ON ACCOUNT OF PAYME NT OF FEES TO ROC FOR INCREASE IN AUTHORIZED CAPITAL WOULD NOT ATTRACT PE NALTY LEVIABLE U/S 271(1)(C) OF THE ACT. 49. IN THE RESULT, THE PRESENT APPEAL FILED BY THE ASSESSEE IS ALLOWED. 50. THIS DECISION IS PRONOUNCED IN THE OPEN COURT O N 19 TH MARCH, 2010. (SHAMIM YAHYA) ACCOUNTANT MEMBER (C.L. SETHI) JUDICIAL MEMBER DATED: 19 TH FEBRUARY, 2010. MAMTA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. BY ORDER DEPUTY REGISTRAR