ACIT 1(1), MUMBAI V. BLUE STAR LTD, MUMBAI

ITA 4483/MUM/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62681 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-07-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 03-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: FIROZE ANDHYARUJINA; LAXMIKANT KOTHAR I
• Keywords: Depreciation; Earning of tax free income; Question of law; Revised return
• Section: 80HHC; 14A

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI .. , ! ' , # !, $ BEFORE SHRI R.S.SYAL, AM AND SHRI VIVEK VARMA, JM ./ ITA NOS.4481, 4482, 4483 & 4484/MUM/2011 ( #& ' #& ' #& ' #& ' / / / / ASSESSMENT YEARS : 2001-2002 TO 2004-2005) THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 1(1) MUMBAI. M/S.BLUE STAR LIMITED KASTURI BUILDING MOHAN T.ADVANI CHOWK JAMSHEDJI TATA ROAD MUMBAI 400 020. PAN : AAACB4487D. ( () / // / APPELLANT) & & & & / VS. ( *+()/ RESPONDENT) *+$ ./ CO NOS.41, 42, 43 & 44/MUM/2012 ( #& ' #& ' #& ' #& ' / / / / ASSESSMENT YEARS : 2001-2002 TO 2004-2005) M/S.BLUE STAR LIMITED KASTURI BUILDING MOHAN T.ADVANI CHOWK JAMSHEDJI TATA ROAD MUMBAI 400 020. THE ASSTT.COMMISSIONER OF INCOME-TAX CIRCLE 1(1) MUMBAI. (CROSS OBJECTOR) & & & & / VS. ( *+()/ RESPONDENT) , , , , - -- - . . . . / REVENUE BY : SHRI P.C.MAURYA #& /0 #& /0 #& /0 #& /0 - . - . - . - . / ASSESSEE BY : S/SHRI FIROZE ANDHYARUJINA & LAXMIKAN T KOTHARI & - 0 / / / / DATE OF HEARING : 18.07.2012 12' - 0 / DATE OF PRONOUNCEMENT : 20.07.2012 !3 !3 !3 !3 / / / / O R D E R PER BENCH : THESE FOUR APPEALS BY THE REVENUE AND EQUAL NUMBER OF CROSS OBJECTIONS BY THE ASSESSEE, FOR RELATION TO ASSESSMENT YEARS 2 001-2002 TO 2004-2005, ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 2 ARISE OUT OF THE PENALTY PROCEEDINGS U/S 271(1)(C). SINCE COMMON ISSUES ARE RAISED IN THESE APPEALS, WE ARE, THEREFORE, PROCEED ING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE . ASSESSMENT YEAR 2001-2002 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE FILED ITS RETURN DECLARING INCOME OF ` 5.08 CRORE. DURING THE COURSE OF ASSESSMENT PROCEED INGS A REVISED RETURN WAS FILED ON 07.03.2003 CLAIMING CRE DIT FOR ADDITIONAL TDS. THEREAFTER, A REVISED COMPUTATION WAS ALSO FILED DU RING THE COURSE OF ASSESSMENT PROCEEDINGS. THE ASSESSING OFFICER FRAME D ASSESSMENT MAKING ADDITIONS, INTER ALIA, ON ACCOUNT OF CURTAILMENT OF DEDUCTION U/S 80-IB A ND DISALLOWANCE U/S 14A. THE ASSESSEE, DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, OFFERED INCOME IN RESPECT OF DUTY DRAW BACK AND DIVIDEND FROM FOREIGN COMPANIES, WHICH WAS ALSO SUBJECTED TO PENA LTY. SIMILARLY, THE ASSESSEE HAD EARLIER CLAIMED DEPRECIATION ON THE AM OUNT OF OZONE GRANT, IN THE NATURE OF SUBSIDY ALLOWED BY THE STATE GOVERNMENT, WHICH WAS GIVEN UP BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. THE A.O. IMPOSED PENALTY U/S 271(1)(C) ON THE ABOVE AMOUNT AS WELL. THE LEARNED CIT(A) GOT CONVINCED WITH THE SUBMISSIONS ADVANCED ON BEHALF O F THE ASSESSEE AND DELETED THE PENALTY. AGGRIEVED, THE REVENUE IS IN APPEAL B EFORE US. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE FIRST ISSUE ON WHICH PENALTY HAS BEEN I MPOSED IS CURTAILMENT OF DEDUCTION U/S 80-IB. SHORN OF UNWARRANTED DETAILS, IT IS OBSERVED THAT THE QUESTION OF LAW ON THIS ISSUE HAS BEEN ADMITTED BY THE HONBLE HIGH COURT. SIMILAR DISALLOWANCE WAS MADE FOR ASSESSMENT YEAR 1 996-1997 AND THE TRIBUNAL, ON OBSERVING THAT THE QUESTION OF LAW HAS BEEN ADMITTED BY THE HONBLE HIGH COURT, DIRECTED TO DELETE THE PENALTY. A COPY OF SAID ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 1996-1997 IN ITA NO.11 90/MUM/2009 IS ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 3 AVAILABLE ON PAGE NOS. 42 ONWARDS OF THE PAPER BOOK . VIDE ITS ORDER DATED 16.07.2010, THE TRIBUNAL HAS OBSERVED IN PARA 8 THA T WHEN A QUESTION OF LAW IS ADMITTED BY THE HONBLE HIGH COURT, IT CANNOT BE SA ID THAT THE CLAIM OF THE ASSESSEE WAS FRIVOLOUS. THE TRIBUNAL HAS DELETED TH E PENALTY BY RELYING ON THE JUDGMENT OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT V. OFF SHORE INDIA LTD. [(1994) 209 ITR 473 (CAL.)] . SINCE THE FACTS AND CIRCUMSTANCES QUA THE DISALLOWANCE AND IMPOSITION OF PENALTY CONTINUE TO REMAIN THE SAME IN THE INSTANT YEAR AS WELL, RESPECTFULLY FOLLOWING THE PR ECEDENT, WE HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE PENALT Y ON THIS ISSUE. 4. THE NEXT ISSUE IS AGAINST THE DELETION OF PENALT Y ON DISALLOWANCE MADE U/S 14A. THE ASSESSING OFFICER MADE DISALLOWANCE U /S 14A BY CONSIDERING THAT THE ASSESSEE EMPLOYED INTEREST BEARING FUNDS UTILIZ ED FOR MAKING INVESTMENT IN SHARES, FROM WHICH EXEMPT INCOME WAS EARNED. THE AS SESSEE CONTENDED THAT NO INTEREST BEARING FUNDS WERE INVESTED IN SHARES. EVE NTUALLY DISALLOWANCE U/S 14A WAS MADE BY REJECTING THE ASSESSEES CONTENTION ON WHICH PENALTY HAS BEEN IMPOSED BY THE A.O. THE QUESTION OF DISALLOWANCE U/ S 14A IN THE PRESENT CASE REVOLVES AROUND THE DETERMINATION OF THE INTEREST-B EARING OR INTEREST-FREE FUNDS UTILIZED FOR THE PURPOSES OF MAKING INVESTMENT IN S HARES FROM WHICH EXEMPT INCOME WAS EARNED. THE MUMBAI BENCH OF THE TRIBUNAL IN SUNASH INVESTMENT CO. V. ACIT [(2007) 106 TTJ 855] HAS HELD THAT NO PENALTY U/S 271(1)(C) CAN BE LEVIED ON ACCOUNT OF DISALLOWANCE OF PRO-RATA INTER EST EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 14A. NO CONTRARY VIEW HAS BEEN BROUGHT ON RECORD BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. RESPECTFUL LY FOLLOWING THE PRECEDENT, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED C IT(A) WAS JUSTIFIED IN DELETING THE PENALTY TO THAT EXTENT. 5. THE NEXT ISSUE IS AGAINST THE PENALTY IN RESPECT OF DUTY DRAW BACK AND DIVIDEND INCOME FROM FOREIGN COMPANIES OFFERED TO T AX. DURING THE COURSE OF ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 4 ASSESSMENT PROCEEDINGS, THE ASSESSEE VOLUNTARILY OF FERED THE AMOUNT OF DUTY DRAW BACK AND DIVIDEND INCOME FROM FOREIGN COMPANIE S TO TAX WHICH WAS INCLUDED BY THE A.O. IN THE TOTAL INCOME AND THEREA FTER PENALTY WAS IMPOSED. FROM THE FACTS ON RECORD, IT IS OBSERVED THAT IT WA S A VOLUNTARY ACTION OF THE ASSESSEE IN OFFERING THESE TWO AMOUNTS FOR TAXATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS, BEFORE THERE BEING ANY DET ECTION MADE BY THE A.O. THE LD. DR COULD NOT PLACE ANY MATERIAL ON RECORD T O SHOW THAT THE ASSESSEE CAME FORWARD TO OFFER THE SAID INCOME FOR TAXATION ONLY WHEN IT WAS CORNERED BY THE AO IN THIS REGARD. IT IS FURTHER RELEVANT TO NOTE THAT SIMILAR INCOME WAS OFFERED FOR TAXATION IN ASSESSMENT YEAR 2002-2003 O N WHICH THE ASSESSING OFFICER CHOSE NOT TO IMPOSE PENALTY U/S 271(1)(C). THE DECISIONS RELIED ON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE ARE NOT REL EVANT ON THE GROUND THAT IN THOSE CASES THE ASSESSEE CAME OUT WITH THE OFFER OF THE INCOME WHEN IT WAS FINALLY DETECTED BY THE REVENUE. IT WAS UNDER THOSE CIRCUMSTANCES THAT THE HONBLE COURTS JUSTIFIED THE IMPOSITION OF PENALTY. ADVERTING TO THE FACTS OF THE INSTANT CASE WE FIND THAT THERE IS NOTHING IN ASSES SMENT ORDER TO DIVULGE THAT THE ASSESSEE OFFERED INCOME PURSUANT TO ANY DETECTION B Y THE REVENUE. RATHER IT IS SUO MOTO OFFERING BY THE ASSESSEE. IN VIEW OF THE FOREGOING DISCUSSION WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY WAS RIGH TLY DELETED BY THE LEARNED CIT(A) ON THIS ISSUE. WE, THEREFORE, UPHOLD THE IMP UGNED ORDER. 6. THE LAST ISSUE ON WHICH PENALTY HAS BEEN IMPOSED IS TOWARDS DISALLOWANCE OF DEPRECIATION ON THE OZONE GRANT. TH E ASSESSEE CLAIMED DEPRECIATION AMOUNTING TO ` 76,433 IN RESPECT OF THE AMOUNT CAPITALIZED ON OZONE GRANT. ON BEING CALLED UPON TO JUSTIFY THE CL AIM OF DEPRECIATION ON SUCH AMOUNT, THE ASSESSEE AGREED THAT THE DEPRECIATION T O THIS EXTENT MAY BE DISALLOWED IN DETERMINING THE TOTAL INCOME. THAT IS HOW THE DEPRECIATION WAS DISALLOWED AND THE PENALTY WAS IMPOSED WHICH CAME T O BE DELETED IN THE FIRST APPEAL. ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 5 7. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD IT IS OBSERVED THAT THE ASSESSEE WAS ALLOWED GRANT BY THE STATE GOVERNMENT. BEARING THE MIND THE RATIO OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. P.J.CHEMICALS [(1994) 210 ITR 830 (SC)] THE ASSESSEE ENTERTAINED A BONA FIDE BELIEF THAT THE AMOUNT OF SUBSIDY WAS NOT REQUIRED TO BE REDUCED FROM THE COST OF ASSET FOR T HE PURPOSE OF DEPRECIATION. HOWEVER DURING THE COURSE OF PROCEEDINGS THE ASSESS EE SURRENDERED ITS CLAIM. MERE FACT THAT THE ASSESSEE AGREED NOT TO CLAIM DEP RECIATION ON THE AMOUNT OF OZONE SUBSIDY DURING THE COURSE OF ASSESSMENT PROCE EDINGS CANNOT BE A GOOD GROUND FOR IMPOSITION OF PENALTY. THE INITIAL VIEW OF THE ASSESSEE THAT IT WAS ENTITLED TO DEPRECIATION, BASED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN P.J.CHEMICALS (SUPRA), CAN BE FOUND FAULT WITH. THUS, IT CANNOT BE SAID T HAT THE ASSESSEE MADE A MALA FIDE CLAIM IN THE SHAPE OF DEPRECIATION ON THE OZONE GRANT RECEIVED FROM THE STATE GOVERNMENT. IT IS AXI OMATIC THAT WHEN A POSSIBLE LEGALLY SUSTAINABLE VIEW IS TAKEN BY THE ASSESSEE O N THE DEDUCTIBILITY OF A PARTICULAR AMOUNT, THERE CAN BE NO QUESTION OF IMPO SITION OF PENALTY, IF SUCH VIEW IS FINALLY TUNED DOWN BY THE A.O. IN THE LIGH T OF THE ABOVE DISCUSSION, WE ARE OF THE CONSIDERED OPINION THAT THE LEARNED CIT( A) WAS JUSTIFIED IN DELETING THE PENALTY ON THIS ISSUE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ASSESSMENT YEAR 2002-2003 9. IT HAS BEEN CANDIDLY ADMITTED BY BOTH THE SIDES THAT THE FACTS AND CIRCUMSTANCES OF THIS APPEAL IN RESPECT OF PENALTY ON CURTAILMENT OF DEDUCTION U/S 80-IB, DISALLOWANCE U/S 14A AND DISALLOWANCE OF DEPRECIATION ON OZONE GRANT ARE MUTATIS MUTANDIS SIMILAR TO THOSE FOR ASSESSMENT YEAR 2001-2002. IN ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 6 FACT, NO SEPARATE ARGUMENT WAS ADVANCED BY THE EITH ER SIDE. FOLLOWING THE VIEW TAKEN HEREINABOVE, WE HOLD THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DELETING THE PENALTY ON THESE THREE ISSUES. 10. THE ONLY OTHER POINT ON WHICH THE PENALTY HAS B EEN DELETED BY THE LEARNED CIT(A) IS ON THE CURTAILMENT OF DEDUCTION U /S 80HHC. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR ISS UE WAS DECIDED BY THE TRIBUNAL IN QUANTUM PROCEEDINGS IN FAVOUR OF THE AS SESSEE FOR ASSESSMENT YEAR 2001-2002. THE REVENUE APPROACHED THE HONBLE HIGH COURT. FOLLOWING THE JUDGMENT IN THE CASE OF ASSOCIATE CAPSULES PVT. LTD. V. DCIT [(332 ITR 42 (BOM)], THE HONBLE HIGH COURT WAS PLEASED TO UPHOLD THE V IEW TAKEN BY THE TRIBUNAL. FOR THE CURRENT YEAR, THE ASSESSING OFFI CER IMPOSED PENALTY ON THE CURTAILMENT OF AMOUNT OF DEDUCTION U/S 80HHC, WHIC H CAME TO BE DELETED BY THE LEARNED CIT(A). AS THE VERY BASIS FOR THE IMPOS ITION OF PENALTY CEASES TO EXIST, IN OUR CONSIDERED OPINION, NO FAULT CAN BE F OUND IN THE IMPUGNED ORDER IN DELETING THE PENALTY. WE, THEREFORE, DECIDE THIS IS SUE AGAINST THE REVENUE. 11. IN THE RESULT, THE APPEAL IS DISMISSED. ASSESSMENT YEAR 2003-2004 12. PENALTY WAS IMPOSED BY THE A.O. U/S 271(1)(C) I N RESPECT OF CURTAILMENT OF DEDUCTION U/S 80-IB AND 80HHC APART FROM CURTAIL MENT OF DEDUCTION U/S 80M. BOTH THE SIDES ARE AGREEABLE THAT THE FACTS AN D CIRCUMSTANCES OF PENALTY ON CURTAILMENT OF DEDUCTION U/S 80-IB AND 80HHC ARE SIMILAR TO THOSE FOR THE EARLIER YEARS. FOLLOWING THE VIEW TAKEN HEREINABOVE WE HOLD THAT NO PENALTY CAN BE IMPOSED. THE VIEW TAKEN BY THE LEARNED CIT(A) IS UPHELD. ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 7 13. THE ONLY OTHER ISSUE WHICH SURVIVES FOR OUR CON SIDERATION IN THIS APPEAL IS AGAINST THE DELETION OF PENALTY ON CURTAILMENT O F DEDUCTION U/S 80M. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE TRIBUNAL, IN THE QUANTUM PROCEEDINGS, DECIDED THIS ISSUE IN ASSESSEES FAVOU R AND THE DEPARTMENT DID NOT FILE ANY FURTHER APPEAL AGAINST THIS ORDER BEFORE T HE HONBLE HIGH COURT. IN VIEW OF THE FACT THAT THE DEDUCTION U/S 80M HAS BEE N ALLOWED BY THE TRIBUNAL, OBVIOUSLY, THERE CAN BE NO FOUNDATION FOR CREATING THE STRUCTURE OF PENALTY ON THIS ISSUE. WE, THEREFORE, UPHOLD THE IMPUGNED ORDE R. 14. IN THE RESULT, THE APPEAL IS DISMISSED. ASSESSMENT YEAR 2004-2005 15. IN THIS YEAR THE REVENUE IS AGGRIEVED AGAINST T HE DELETION OF PENALTY ON THE CURTAILMENT OF DEDUCTION U/S 80-IB AND CURTAILM ENT OF DEDUCTION U/S 80HHC. HERE AGAIN BOTH THE SIDES ARE AGREEABLE THAT THE FACTS AND CIRCUMSTANCES ON THESE ISSUES ARE SIMILAR TO THE OT HER YEARS IN THE PRESENT SET OF APPEAL. IN VIEW OF THE FACT THAT WE HAVE SUSTAINED THE DELETION OF PENALTY ON THESE TWO ISSUES IN THE EARLIER PARTS OF THIS ORDER , WE THEREFORE, UPHOLD THE IMPUGNED ORDER. 16. IN THE RESULT, THE APPEAL IS DISMISSED. 17. THE LEARNED AR DID NOT PRESS THE CROSS OBJECTIO NS FILED BY IT IN RESPECT OF ALL THE YEARS IN QUESTION. THESE ARE, THEREFORE, DI SMISSED AS NOT PRESSED. 18. / 04 , - 5 #& /0 - *+$ /, - ,0 67 . IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS T HE CROSS OBJECTIONS OF THE ASSESSEE ARE DISMISSED. ITA NO.4481/MUM/2011 & ORS. CO NO.41/MUM/2012 & ORS. M/S.BLUE STAR LIMITED. 8 ORDERS PRONOUNCED ON THIS 20 TH JULY, 2012. . !3 - 12' 8!&4 2 - 9 SD/- SD/- (VIVEK VARMA) (R.S.SYAL) # ! # ! # ! # ! / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER MUMBAI ; 8!& DATED : 20 TH JULY, 2012. DEVDAS* !3 - *#0:' ;''0 !3 - *#0:' ;''0 !3 - *#0:' ;''0 !3 - *#0:' ;''0/ COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. < () / THE CIT(A)-I, MUMBAI. 4. < / CIT 5. '?9 *#0#& , , / DR, ITAT, MUMBAI 6. 9@ A / GUARD FILE. !3& !3& !3& !3& / BY ORDER, +'0 *#0 //TRUE COPY// B B B B/ // /6 , 6 , 6 , 6 , ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI