EMMBI POLYARNS LTD, MUMBAI V. A.C. CIR 8(1), MUMBAI

ITA 2885/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7419 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Bench Allotted: E
• Assessment Year: 2001-2002
• Appeal Filed On: 06-05-2009
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Keywords: Depreciation
• Section: 271(1)(c); 80IB; 195; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E BEFORE SHRI N.V. VASUDEVAN (JM) & T.R. SOOD (AM) I.T.A.NO. 2885/MUM/09 (ASSESSMENT YEAR : 2001-02) EMMBI PLOYARNS LIMITED 309/310, KUBER COMPLEX OPP. LAXMI ESTATE NEW LINE ROAD ANDHERI WEST MUMBAI-400 053. VS. ACIT 8(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT PAN/GIR NO. : AAACE3423G ASSESSEE BY : SHRI SATISH MODY DEPARTMENT BY : SHRI NAVEEN GUPTA ORDER PER N.V. VASUDEVAN, JM :- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 2.3.2009 OF LEARNED CIT(A)-VIII, MUMBAI RELATING TO A.Y. 200 1-02. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE ORDER OF LEARNED CIT(A), WHEREBY LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER IMPOSING PENALTY ON THE ASSESSEE U/S. 271(1 )(C) OF THE ACT. 3. PENALTY WAS IMPOSED IN RESPECT OF THE FOLLOWING CLAIMS MADE BY THE ASSESSEE WHICH WAS NOT ACCEPTED BY THE ASSESSIN G OFFICER :- A) THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F MANUFACTURING OF HTPE/PP CIRCULAR OVEN SETS. IT WAS ENTITLED TO CLAIM DEDUCTION U/S. 80IB OF THE ACT ON MANUFACT URE OF THE AFORESAID PRODUCT. WHILE COMPUTING PROFITS ON WHICH THE DEDUCTION U/S. 80IB OF THE ACT WAS TO BE ALLOWED. THE ASSESSEE DID NOT CLAIM THE DEPRECIATION ON FIXED AS SET U/S. 32 OF THE ACT. ACCORDING TO THE ASSESSING OFFICER, WHI LE ALLOWING DEDUCTION U/S. 80IB OF THE ACT, DEPRECIATION HAS TO BE EMMBI PLOYARNS LIMITED 2 MANDATORILY CLAIMED. DEPRECIATION WAS ACCORDINGLY T HRUST ON THE ASSESSEE AND DEDUCTION U/S. 80IB WAS ALLOWED ON SUCH PROFIT. B) WHILE COMPUTING PROFITS ELIGIBLE FOR DEDUCTION U/S. 80IB OF THE ACT, THE ASSESSEE HAD INCLUDED A SUM OF RS. 6,270/- BEING INTEREST ON FIXED DEPOSITS AND RS. 77.50 BEING PROF IT ON RESALE OF RAW MATERIAL. ACCORDING TO THE ASSESSING OFFICER , THESE WERE NOT PROFIT DERIVED BY THE ASSESSEE FROM THE INDUSTR IAL UNDERTAKING; AND HE THEREFORE EXCLUDED THE AFORESAI D SUM FROM PROFIT OF THE BUSINESS WHILE ALLOWING DEDUCTION U/S . 80IB OF THE ACT. C) THE ASSESSEE HAD BROUGHT FORWARD LOSS OF RS. 62,931 /- FOR A.Y. 1996-97, RS. 1,17,960/- FOR A.Y. 1997-98. THIS, BRO UGHT FORWARD LOSS HAD NOT BEEN SET OFF BY THE ASSESSEE A GAINST THE PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING. ACCORD ING TO THE ASSESSING OFFICER, THE ASSESSEE OUGHT TO HAVE SET O FF ABOVE BROUGHT FORWARD LOSS AND CLAIMED DEDUCTION U/S. 80I B ON SUCH REDUCED PROFITS. IT IS IN RESPECT OF THE AFORESAID ADDITIONS MADE IN COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSING OFFICER IMPOSED PENA LTY ON THE ASSESSEE U/S. 271(1)(C) OF THE ACT. LEARNED CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER GIVING RISE TO THE PRESENT APPEAL BY THE ASSESSEE BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. LEARNED DR RELIED ON THE ORDER OF LEARNED CIT(A). LEARNED COUNSEL FOR THE AS SESSEE BROUGHT TO OUR NOTICE THAT ALL THE ADDITIONS IN RESPECT OF WHICH, PENALTY HAS BEEN IMPOSED ARE ISSUES ON WHICH TWO VIEWS ARE POSSIBLE. IN OTHER WORDS, IT WAS SUBMITTED BY HIM THAT THE ISSUES WERE DEBATABLE . ON THE ISSUE OF CLAIMING DEPRECATION WHILE MAKING A CLAIM FOR DEDUC TION UNDER CHAPTER- VIA OF THE ACT, LEARNED COUNSEL FOR THE ASSESSEE PO INTED OUT THAT THERE ARE SEVERAL DECISIONS OF THE TRIBUNAL TAKING A VIEW THAT EVEN WHILE CLAIMING DEDUCTION UNDER CHAPTER-VIA OF THE ACT, IT WAS NOT MANDATORY FOR AN ASSESSEE TO CLAIM DEPRECIATION. THE DISPUTE WAS ULTIMATELY SETTLED BY THE SPECIAL BENCH ALLAHABAD IN THE CASE OF VAHID PAPERS CONVERTERS VS. ITO, 98 ITD 165. IN FACT IN ASSESSEES OWN CA SE IN PAST, THE TRIBUNAL EMMBI PLOYARNS LIMITED 3 HAD ALLOWED SIMILAR CLAIM OF THE ASSESSEE. ON THE I SSUE OF INTEREST INCOME AND INCOME FROM RESALE OF RAW MATERIAL, IT W AS SUBMITTED THAT THE FIXED DEPOSITS WAS KEPT IN THE BANK TO ENABLE OPERA TING CURRENT ACCOUNT AND SALE OF RAW MATERIAL WAS INCIDENTAL TO THE BUSI NESS. THEREFORE THE ASSESSEE TREATED THEM AS INCOME FROM BUSINESS AND A S ONE DERIVED FROM THE INDUSTRIAL UNDERTAKING. ON THE ISSUE OF NOT SET TING OFF BROUGHT FORWARD LOSS RELATING TO A.Y. 1996-97 AND 1997-98, LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE COMPUTATION OF INCOME OF THE ASSESSEE FOR A.Y. 1998-99 AND SUBMITTED THAT THERE WAS A PROFIT FROM BUSINESS OF RS. 34,29,958/- AND IN THAT YEAR ALSO, THE ASSESSEE DID NOT CLAIM SET OFF CARRY FORWARD LOSS. ACCORDING TO THE ASSESSEE, IN THE PRESENT ASSESSMENT YEAR, IT COULD HAVE TAKEN A STAND THAT C ARRY FORWARD BUSINESS LOSS FOR A.Y. 1996-97 AND 1997-98 OUGHT TO BE SET O FF ONLY AGAINST BUSINESS PROFIT OF A.Y. 1998-99. HE ALSO BROUGHT TO OUR NOTICE THAT IN THE PRESENT ASSESSMENT YEAR I.E., A.Y. 2001-02, THE ASS ESSEE HAD CLAIMED CARRY FORWARD OF AFORESAID LOSS FOR A.Y. 1996-97 AN D 1997-98 AND DULY REFLECTED THE SAME IN THE COMPUTATION OF TOTAL INCO ME. IT WAS THEREFORE ARGUED THAT THERE WAS NO ATTEMPT ON THE PART OF THE ASSESSEE TO CONCEAL PARTICULARS OF INCOME OR FURNISH INACCURATE PARTICU LARS OF INCOME. FURTHER RELIANCE WAS PLACED BY HIM ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S P. LTD. IN SLP (C) NO. 27161 OF 2008 DATED 17.3.2010; WHEREIN HON'BLE SUPR EME COURT HAS LAID DOWN THAT PENALTY IS NOT AUTOMATIC WHEN AN ADDITION IS MADE AND THAT ONE HAS TO SEE WHETHER THERE IS ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE COURT FURT HER LAID DOWN THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT OF FURNISHING INACCURATE PARTICULARS REGARDI NG INCOME OF AN ASSESSEE. IT WAS HELD THAT SUCH CLAIM MADE IN A RET URN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS RIG HTLY CONTENDED ON BEHALF OF THE ASSESSEE THE ISSUE AS TO WHETHER CLAI MING DEPRECIATION IS OPERATIONAL OR MANDATORY WHILE CLAIMING DEDUCTION U NDER CHAPTER-VIA OF EMMBI PLOYARNS LIMITED 4 THE ACT FOR ARRIVING AT THE PROFITS ON WHICH DEDUCT ION IS TO BE ALLOWED WAS A HIGHLY DEBATABLE ISSUE. THE ASSESSEE HAD FILED IT S RETURN OF INCOME ON 31.10.2001. AS ON THAT DATE, THIS ISSUE WAS HIGHLY DEBATABLE. IN FACT, SPECIAL BENCH OF ITAT AHMEDABAD IN THE CASE OF VAHI D PAPERS CONVERTERS (SUPRA) DECIDED THE ISSUE ON 9.1.2005 AN D THEY HELD THAT WHILE DETERMINING PROFITS FOR ALLOWING DEDUCTION UN DER CHAPTER-VIA OF THE ACT, DEPRECIATION HAS TO BE MANDATORILY CLAIMED . THE HON'BLE BOMBAY HIGH COURT ALSO TOOK A SAME VIEW IN THE CASE OF SCO OP INDUSTRIES P. LTD., 289 ITR 195 (BOM) AND THIS JUDGEMENT DATED 10.6.200 6. HOWEVER ANOTHER BENCH OF HON'BLE BOMBAY HIGH COURT DOUBTED THE CORRECTNESS OF THE AFORESAID DECISION AND BY ORDER DATED 19.12.200 8 MADE A REFERENCE TO A LARGER BENCH IN THE CASE OF PLASTIC BENDS INDI A PVT. LTD. VS. ACIT, 223 CTR 29. IN THE ABOVE CIRCUMSTANCES, WE ARE OF T HE VIEW THAT THE ASSESSEE CANNOT BE SAID TO HAVE FURNISHED INACCURAT E PARTICULARS OF INCOME. IN RESPECT OF OTHER TWO ADDITIONS, THE ASSE SSEE HAD DULY DISCLOSED ALL MATERIAL FACTS. WE HAVE ALREADY EXPLA INED THE MANNER OF DISCLOSURE DONE BY THE ASSESSEE WHILE FILING RETURN OF INCOME. FACT THAT THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED WILL NOT AUTOMATICALLY GIVE RISE TO IMPOSITION OF PENALTY. THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF RELIANCE PETRO PRODUCT P. LTD. (SUPRA) SUPPORTS THE PLEA OF THE ASSESSEE IN THIS REGARD. APART FROM THE ABOVE, WE A RE ALSO OF THE VIEW THAT THE CLAIM OF THE ASSESSEE WITH REGARD TO INTEREST I NCOME AND PROFIT ON RESALE OF RAW MATERIAL WAS A BONAFIDE CLAIM IN THE LIGHT OF THE EXPLANATION GIVEN BY THE ASSESSEE. THE COMPLAINT WITH REGARD TO BROUGHT FORWARD LOSS OF EARLIER YEARS BEFORE CLAIMING DEDUCTION UNDER CH APTER VI-A OF THE ACT, IN OUR VIEW CANNOT BE SUSTAINED. THE COMPUTATION OF TOTAL INCOME FILED BEFORE US AT PAGE NO. 1 OF THE ASSESSEES PAPER BOO K CLEARLY REVEALS THAT THE ASSESSEE HAD DULY DISCLOSED EXISTENCE OF CARRY FORWARD BUSINESS LOSS OF EARLIER YEARS. THUS, THERE CANNOT BE ANY CHARGE OF CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME. FOR THE REASONS GIVEN ABOVE, WE HOLD THAT THIS IS N OT A FIT CASE FOR IMPOSITION OF PENALTY. WE DIRECT THAT THE PENALTY I MPOSED BE CANCELLED. EMMBI PLOYARNS LIMITED 5 6. APPEAL OF THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOUNCED ON 31 ST DAY OF MARCH, 2010. SD/- (T.R. SOOD) ACCOUNTANT MEMBER SD/- (N.V. VASUDEVAN) JUDICIAL MEMBER DATED : 31 ST MARCH, 2010 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI PS