DCIT, New Delhi V. M/s. Discovery Communication India, New Delhi

ITA 4434/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4261 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 22-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 23-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMAN KUMAR; JATIN BUDHIRAJ
• Keywords: Retrospective amendment; Bad and doubtful debts; Capital expenditure
• Section: 115JB; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.4434/DEL/2013 ASSESSMENT YEAR : 2003-04 DCIT, CIRCLE-10(1), NEW DELHI. VS. DISCOVERY COMMUNICATION INDIA, 9/1B, QUTUB INSTITUTIONAL AREA, ARUNA ASAF ALI MARG, NEW DELHI. PAN: AAACD4746K (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMAN KUMAR, CA & SHRI JATIN BUDHIRAJ, CA DEPARTMENT BY : SHRI ANSHU PRAKASH, SR. DR DATE OF HEARING : 13.09.2017 DATE OF PRONOUNCEMENT : 15.09.2017 ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 01.05.2013 DELETING THE PENALTY IMPOSED B Y THE ASSESSING ITA NO.4434/DEL/2013 2 OFFICER U/S 271(1)(C) OF THE ACT IN RELATION TO T HE ASSESSMENT YEAR 2003-04. 2. SUCCINCTLY, THE FACTS OF THE FIRST COMPONENT OF PENALTY ARE THAT THE ASSESSEE REDUCED PROVISION FOR DOUBTFUL DEBTS AMOUN TING TO RS.53,63,688/- AND PROVISION FOR GRATUITY AMOUNTING TO RS.3,17,087/- IN THE COMPUTATION OF `BOOK PROFITS U/S 115JB OF THE ACT. THE ASSESSING OFFICER DID NOT ACCEPT THE ASSESSEES CLAIM AND ACC ORDINGLY ENHANCED THE AMOUNT OF BOOK PROFITS. THEREAFTER, PENALTY WAS IM POSED, WHICH CAME TO BE DELETED IN THE FIRST APPEAL. THE REVENUE IS A GGRIEVED AGAINST THE DELETION OF PENALTY. 3. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS OBSERVED THAT IN SO FAR AS THE `PROVI SION FOR GRATUITY IS CONCERNED, THE LD. CIT(A) ALLOWED THE ASSESSEES CL AIM IN QUANTUM PROCEEDINGS WHICH CAME TO BE UPHELD BY THE TRIBUNAL . UNDER THESE CIRCUMSTANCES, THERE CAN BE NO QUESTION OF PENALTY ON AN ADDITION WHICH HAS BEEN DELETED IN THE QUANTUM PROCEEDINGS. ITA NO.4434/DEL/2013 3 4. AS REGARDS THE `PROVISION FOR DOUBTFUL DEBTS , IT IS SEEN THAT THE HON'BLE SUPREME COURT IN CIT VS. HCL COMNET SYSTEMS AND SERVICES LTD. (2008) 305 ITR 409 (SC), HAS HELD THAT THE PROVISION FOR DOUBTFUL DEBTS CANNOT BE ADDED BACK UNDER CLAUSE (C) OF THE EXPLANATION TO SECTION 115JA. THE FINANCE (NO.2) ACT, 2009, WITH RETROSPECTIVE EFFECT FROM 01.04.2001, INSERTED CLAUSE (I) TO THE EXPLAN ATION TO SECTION 115JB THEREBY SETTING TO NAUGHT THE RATIO LAID DOWN IN HCL COMNET SYSTEMS AND SERVICES LTD. (SUPRA). THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2003-04 AND THE RETRUN OF INCOME WAS FILED ON 2.12 .2003. THOUGH THE INSERTION OF CLAUSE (I) TO THE EXPLANATION TO SECTI ON 115JB HAS BEEN MADE RETROSPECTIVELY APPLICABLE, BUT, THE AMENDMENT CAME TO BE INTRODUCED BY THE FINANCE (NO.2) ACT, 2009 I.E., MUCH AFTER THE F ILING OF THE RETURN BY THE ASSESSEE IN 2003. THE ASSESSEE COULD NOT HAVE ANTICIPATED THE AMENDMENT AND GIVEN EFFECT TO THE SAME AT THE TIME OF FILING ITS RETURN OF INCOME. UNDER THESE CIRCUMSTANCES, THERE CAN BE NO QUESTION OF PENALTY U/S 271(1)(C) ON THE AMOUNT OF `PROVISION F OR DOUBTFUL DEBTS ADDED BACK BY THE ASSESSING OFFICER, WHICH CLAIM OF THE ASSESSEE WAS BACKED BY SOME JUDICIAL PRECEDENTS IN ITS FAVOUR AT THE RELEVANT TIME. ITA NO.4434/DEL/2013 4 WE, THEREFORE, APPROVE THE VIEW TAKEN BY THE LD. CI T(A) IN DELETING THE PENALTY ON THE AMOUNT OF `PROVISION FOR DOUBTFUL DE BTS AS WELL. 5. THE NEXT COMPONENT OF PENALTY IS DISALLOWANCE OF JOINT VENTURE EXPENSES. THE ASSESSEE DEBITED A SUM OF RS.51,64,3 40/- AS JOINT VENTURE EXPENSES UNDER THE HEAD `ADMINISTRATIVE AND SELLING EXPENSES BY GIVING A NOTE TO THE EFFECT THAT IT ENTERED INTO JOINT VEN TURE BY THE NAME OF SET DISCOVERY (P) LTD. THE ASSESSING OFFICER DISALLOWE D 25% OF EXPENSES ON AD HOC BASIS BY TREATING THE SAME AS A CAPITAL EXPENDITUR E AND IMPOSED PENALTY ON THIS DISALLOWANCE, WHICH WAS DEL ETED IN THE FIRST APPEAL. 6. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD, IT IS SEEN THAT THE ASSESSING OFFICER MADE DISALLOWANCE BY TREATING 25% OF THE TOTAL EXPENSES AS CAPITAL EXPEN DITURE ON AD HOC BASIS. THERE IS NO JUSTIFICATION FOR TREATING 25% OF THE A MOUNT AS CAPITAL EXPENDITURE. IT COULD HAVE BEEN ACTUALLY MORE OR L ESS ALSO. THUS, IT IS EVIDENT THAT IT IS ONLY A MATTER OF ESTIMATION BY T HE ASSESSING OFFICER TREATING A PARTICULAR PERCENTAGE OUT OF TOTAL EXPEN SES AS CAPITAL, WHICH ITA NO.4434/DEL/2013 5 THE ASSESSEE CLAIMED AS REVENUE. IN THE GIVEN CIRC UMSTANCES, WE ARE SATISFIED THAT THE LD. CIT(A) RIGHTLY APPRECIATED T HE FACTS AND DELETED THE PENALTY ON SUCH ADDITION. 7. IN THE RESULT, THE APPEAL IS DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.201 7. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 15 TH SEPTEMBER, 2017. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.