AMOL DICALITE LTD., Ahmedabad V. THE Dy.CIT.,Range-1, Ahmedabad

ITA 3360/AHD/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73014 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 04-02-2014
• Assessment Year: 1998-1999
• Appeal Filed On: 20-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Revenue expenditure
• Section: 143(3); 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 3360 /AHD/2010 (ASSESSMENT YEAR:1998-99) AMOL DICALITE LTD. 301, AKSHAY, SHRIMALI SOCIETY, NAVRANGPURA, AHMEDABAD V/S THE DCIT, CIRCLE-1, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AABCA 2807 K APPELLANT BY : MS. URVASHI SHODHAN RESPONDENT BY : SHRI J.P. JHANGID, SR. D.R. ( )/ ORDER DATE OF HEARING : 04-02-2014 DATE OF PRONOUNCEMENT : 21 -02-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), VI, AHMEDABAD DATED 02.11.2010 FOR A.Y. 1998-99. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERI AL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PEARLITE AND FILTER PRODUCTS AND GLAZY CLOTH. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 98-99 ON 30.11.1998 DECLARING TOTAL INCOME OF RS. 24,08,800/ -. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 28.02.2001 AND THE TOTAL INCOME WAS DETERMINE D AT RS. 63,88,440/- AFTER MAKING DISALLOWANCE OF TECHNICAL KNOW-HOW EXPENDITU RE U/S. 35AB OF RS. 40,62,344/-. AGGRIEVED BY THE ORDER OF A.O., ASSES SEE CARRIED THE MATTER BEFORE ITA NO 3 360/AHD/2010 . A.Y. 1998- 99 2 CIT(A). CIT(A) VIDE ORDER DATED 28.11.2002 DISMISSE D THE APPEAL OF THE ASSESSEE. ON THE DISALLOWANCE OF KNOW-HOW EXPENDITURE U/S. 35 AB OF RS. 40,62,344/-. A.O. VIDE ORDER DATED 28.04.2009 LEVIED PENALTY U/S. 271 (1)(C) OF RS. 14,21,820/-. AGGRIEVED BY THE AFORESAID ORDER, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 21.01.2010 DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE IS NOW IN APPEAL BEFO RE US. THOUGH THE ASSESSEE HAS RAISED VARIOUS GROUNDS BUT THE ONLY EFFECTIVE GROUN D IS WITH RESPECT TO CONFIRMATION OF PENALTY LEVIED BY A.O. U/S. 271(1)(C) OF RS. 14,21, 820/-. 4. BEFORE US, THE LD. A.R. SUBMITTED THAT TECHNICAL KNOW-HOW EXPENDITURE FOR EXPANSION OF EXISTING BUSINESS AMOUNTING TO RS. 40,62,344/- W AS TREATED AS DEFERRED REVENUE EXPENSES IN THE ACCOUNTS OF THE COMPANY BUT HOWEVER IN THE COMPUTATION OF INCOME, THE SAME WAS CONSIDERED AS REVENUE EXPENDITURE AS I T WAS PAID AS LICENCE FEE FOR THE USE OF TECHNICAL KNOW-HOW. THE SUBMISSION OF TH E ASSESSEE FOR ALLOWING IT AS REVENUE EXPENDITURE WAS NOT FOUND ACCEPTABLE TO THE A.O. AS HE WAS OF THE VIEW THAT AS PER SECTION 35AB, ONLY 1/6 TH CONSIDERATION PAID BY THE ASSESSEE FOR ACQUIRING ANY KNOW-HOW FOR USE FOR THE PURPOSE OF HIS BUSINES S SHALL BE DEDUCTED IN COMPUTING THE PROFITS AND GAINS OF THE BUSINESS FOR THAT PREVIOUS YEAR AND THE BALANCE AMOUNT SHALL BE DEDUCTED IN EQUAL INSTALLME NTS IN SUCCEEDING 5 YEARS. A.O. THEREFORE DID NOT ALLOW THE DEDUCTION OF THE ENTIRE TECHNICAL KNOW-HOW FEES U/S. 37 OF THE ACT BUT HOWEVER ALLOWED ONLY 1/6 TH OF THE AMOUNT SPENT I.E. RS. 8,12,468/- U/S. 35AB OF THE ACT AND THE BALANCE AMOUNT OF RS. 40,82 ,344/- WAS ADDED TO THE TOTAL INCOME. THE AFORESAID ADDITION WAS ALSO CONFIRMED B Y CIT(A) AND ON THE AFORESAID DISALLOWANCE PENALTY U/S 271(1)(C) WAS LEVIED BY A. O. 5. BEFORE US, THE LD. A.R. SUBMITTED THAT ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME WITH RESPECT TO ITS CLAIM OF TECHNICAL KNOW-HOW LICENCE FEES PAID. IT WAS FURTHER SUBMITTED THAT UNDER FOOT NO TE NO. 5 OF THE NOTES ATTACHED WITH THE STATEMENT OF TOTAL INCOME FILED WITH THE RETURN OF INCOME, THE DISCLOSURE ABOUT THE TREATMENT OF TECHNICAL KNOW-HOW FEES WAS MADE BY TH E ASSESSEE. HE POINTED TO THE COMPUTATION FILED BY PAGE 2 TO 4 OF THE PAPER BOOK. THE LD. A.R. FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A SSESSEE HAS FURNISHED ALL THE REQUIRED DETAILS BEFORE A.O. HE POINTED TO PAGE 5 & 6 OF THE PAPER BOOK BEING THE COPY OF THE LETTER WRITTEN TO A.O. DURING THE COURS E OF ASSESSMENT PROCEEDINGS. IN ITA NO 3 360/AHD/2010 . A.Y. 1998- 99 3 SUPPORT OF ITS CONTENTION OF ALLOWABILITY OF EXPENS ES AS REVENUE EXPENDITURE, THE ASSESSEE ALSO RELIED ON THE VARIOUS DECISIONS OF SU PREME COURT AND HIGH COURT AND ALSO CIRCULAR NO. 21 DATED JULY 9, 1969 ISSUED BY C BDT. THE LD. A.R. FURTHER SUBMITTED THAT THE ISSUE BEING DEBATABLE IN VIEW OF THE FACT THAT THERE WERE CONTRARY DECISIONS ON THE ISSUE, THE ASSESSEE COULD NOT BE D EEMED TO HAVE FURNISHED INACCURATE PARTICULARS AND THEREFORE THE PENALTY LE VIED BY A.O. AND CONFIRMED BY CIT(A) BE DELETED. 6. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT TH E PROVISIONS OF SECTION 35AB WERE INSERTED BY FINANCE ACT, 1985 WITH EFFECT FROM 01.0 4.1986 AND SINCE THE ASSESSEE IS LIMITED COMPANY WHICH IS GUIDED AND ADVISED BY QUAL IFIED PERSONS, THE ASSESSEE SHOULD HAVE BEEN AWARE ABOUT THE PROVISIONS OF THE ACT AND THEREFORE SHOULD NOT HAVE CLAIMED AN EXPENDITURE WHICH WAS NOT ALLOWABLE AS PER THE PROVISIONS OF THE ACT. HE FURTHER SUBMITTED THAT ASSESSEE HAD CLAIMED EXCESS DEDUCTION IN RESPECT OF TECHNICAL KNOW-HOW FEES DESPITE THE FACT THAT THE P ROVISIONS OF SECTION 35AB APPLIED AND ONLY 1/6 DEDUCTION WAS ALLOWABLE. BY CLAIMING DEDUCTION OF ENTIRE EXPENSES, ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF IN COME WHICH COULD BE DETECTED ONLY ON SCRUTINY ASSESSMENT. HE FURTHER SUBMITTED T HAT HAD THERE BEEN NO SCRUTINY ASSESSMENT, THE ASSESSEE WOULD HAVE BEEN ALLOWED EX CESS DEDUCTION RESULTING IN ESCAPEMENT OF INCOME. HE FURTHER SUBMITTED THAT CLA IM OF DEDUCTION U/S. 37(1) MADE BY THE ASSESSEE WAS WITHOUT ANY BASIS. HE THUS SUP PORTED THE ORDER OF A.O. AND CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IN ITS BOOKS OF ACCOU NTS HAD CONSIDERED THE TECHNICAL KNOW-HOW EXPENDITURE AS DEFERRED REVENUE EXPENSES B UT ITS RETURN OF INCOME HAD CLAIMED THE DEDUCTION OF TECHNICAL KNOW-HOW FEES AS REVENUE EXPENSES. IT IS ALSO A FACT THAT IN THE COMPUTATION OF INCOME FURNISHED BY THE ASSESSEE, IT HAD DISCLOSED THE ACCOUNTING TREATMENT GIVEN TO IT BY WAY OF NOTE . THE CLAIM OF ASSESSEE U/S. 37(1) WAS NOT ALLOWED BY THE A.O. BUT INSTEAD OF TH E CLAIM OF ONLY 1/6 TH OF THE EXPENSES WAS ALLOWED U/S. 35AB OF THE ACT. BEFORE U S, THE LD. A.R. HAS SUBMITTED THAT THE AHMEDABAD TRIBUNAL IN THE CASE OF SAYAJI I NDUSTRIES LTD. 68 TTJ 851 HAS HELD FEES PAID AS ALLOWABLE REVENUE EXPENSES BUT HO WEVER IN THE LATER DECISION RENDERED BY HON. M.P. HIGH COURT IN THE CASE OF CIT VS. BRIGHT AUTOMOTIVES AND ITA NO 3 360/AHD/2010 . A.Y. 1998- 99 4 PLASTICS LTD. 273 ITR 59 IT WAS HELD THAT SUCH EXPE NSES WERE ALLOWABLE U/S. 35AB OF THE ACT. THUS IT IS SEEN THAT THERE WERE CONTRARY D ECISION ON THE SAME ISSUE AND THEREFORE THE ISSUE CAN BE SAID TO BE DEBATABLE. 8. IT IS ALSO AN UNDISPUTED FACT THAT DURING THE CO URSE OF ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS THE SUBMISSIONS IN SUPPORT OF ITS CLAIM AS REVENUE EXPENSES WERE SUBMITTED BY ASSESSEE AND THE SAME HAVE NOT BE EN PROVED TO BE FALSE OR NOT BONAFIDE BY THE REVENUE. A CASE FOR LEVY OF PENALTY FOR CONCEALMENT OF INCOME HAS TO BE EVALUATED IN TERMS OF PROVISIONS OF EXPLANATI ON. 1 TO SECTION. 271(1)(C), AS PER WHICH IF IN RELATION TO ANY ADDITION IN THE ASSESSM ENT, THE ASSESSEE OFFERS NO EXPLANATION OR OFFERS EXPLANATION WHICH IS FOUND TO BE FALSE OR IS NOT ABLE TO SUBSTITUTE THE EXPLANATION AND IS ALSO NOT ABLE TO PROVE THAT THE EXPLANATION IS BONAFIDE, THE ADDITION MADE WOULD AMOUNT TO CONCEALMENT OF PARTIC ULARS OF INCOME. IT IS A SETTLED LEGAL POSITION THAT PENALTY PROCEEDINGS ARE DIFFERE NT FROM ASSESSMENT PROCEEDINGS AND THE FINDINGS GIVEN IN THE ASSESSMENT THOUGH IT MAY CONSTITUTE GOOD EVIDENCE BUT SAME IS NOT CONCLUSIVE IN THE PENALTY PROCEEDINGS F URTHER, MERELY BECAUSE ADDITIONS HAVE BEEN CONFIRMED IN APPEAL IT CANNOT BE THE SOLE GROUND FOR COMING TO THE CONCLUSION THAT THE ASSESSEE HAD CONCEALED ANY INCO ME. WE ARE OF THE VIEW THAT IN THE ABSENCE OF COMPLETE AND CONVINCING CORROBORATIV E EVIDENCE, THE REVENUE MAY JUSTIFY ADDITION, BUT IN THE MATTER OF PENALTY PROC EEDINGS, THE ONUS LIES HEAVILY ON THE REVENUE TO PROVE THAT THE ASSESSEE HAD CONCEALED IT S INCOME OR HAS FILED INACCURATE PARTICULARS OF ITS INCOME. WE ALSO FIND THAT THE HO NBLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS 322 ITR 158 HAS HELD AS UNDE R:- THE ARGUMENT OF THE REVENUE THAT 'SUBMITTING AN INC ORRECT CLAIM FOR EXPENDITURE WOULD AMOUNT TO GIVING INACCURATE PARTICULARS OF SUCH INC OME' IS NOT CORRECT. BY NO STRETCH OF IMAGINATION CAN THE MAKING OF AN INCORRECT CLAIM IN LAW TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE. IF THE CONTENTION OF THE REVENUE IS ACCEPTED THEN I N CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE AO FOR ANY RE ASON, THE ASSESSEE WILL INVITE PENALTY U/S 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT O F THE LEGISLATURE. ITA NO 3 360/AHD/2010 . A.Y. 1998- 99 5 9. IN VIEW OF THE AFORESAID FACTS WE ARE OF THE VI EW THAT IN THE PRESENT CASE NO PENALTY IS LEVIABLE U/S 271(1)(C) AND THEREFORE DIRECT ITS DELETION. THUS THIS GROUND OF ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 21 - 02 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD