CHT INDIA P. LTD, MUMBAI V. ADDL CIT 8(1), MUMBAI

ITA 4666/MUM/2009

• Counselvise Citation: 466619914 RSA 2009
• Duration Of Justice: 4 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 01-04-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 07-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: N M PORWAL
• Keywords: Revenue expenditure
• Section: 37(1)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & DR.STM PAV A LAN , J M ITA NO. 46 66 / MUM/20 09 ( ASSESSMENT YEAR : 200 1 - 02 ) M/S CHT INDIA PVT. LTD., 352, SOLITAIRE PARK, 151, MATHURADAS VASSANJI ROAD, CHAKALA, ANDHERI (EAST), MUMBAI - 400 093 VS. DCIT - 8(1), MUMBAI PAN/GIR NO. : A A ACC 3596 Q ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : MR.N.M.PORWAL /REVENUE BY : MR. M.L.PERUMAL DATE OF HEARING : 1 ST APRIL , 201 4 DATE OF PRONOUNCEMENT : 16 TH APRIL , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 27 - 5 - 2009 FOR THE ASSESSMENT YEAR 200 1 - 02 , IN THE MATTER OF PENALTY IMPOSED UNDER SECTION 271(1)(C) OF THE I.T. AC T. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF SPECIALITY CHEMICALS. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED PAYMENT TO RETIRING DIRECTORS AS WELL AS PAYME NT MADE TO M/S CHK GERMANY FOR PROVIDING TECHNOLOGY AND TECHNICAL KNOWHOW. THE CIT(A) ALSO CONFIRMED THE ACTION OF THE AO WITH REGARD TO TECHNOLOGY KNOWHOW ON THE PLEA THAT SAME WAS CAPITAL IN NATURE. THE ITA NO. 4666 / 09 2 DISALLOWANCE MADE FOR TECHNICAL KNOW - HOW PAYMENT WA S ALSO CONFIRMED BY THE CIT(A). ON BOTH THESE DISALLOWANCES, PENALTY WAS IMPOSED UNDER SECTION 271(1)(C) WHICH WAS CONFIRMED BY THE CIT(A) AND ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. IT WAS ARGUED BY THE LEARNED AR THAT DISALLOWANCE MADE ON ACCOUNT O F PAYMENT TO THE DIRECTOR WAS DELETED BY THE TRIBUNAL IN ITS QUANTUM APPEAL VIDE ORDER DATED 11 - 7 - 2012 IN ITA NO. 4278/MUM/2006. WITH REGARD TO THE DISALLOWANCE OF TECHNICAL KNOWHOW FEE, THE LEARNED AR DRAWN OUR ATTENTION TO THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN, WHEREIN AS PER NOTE NO.1, IT WAS STATED THAT ENTIRE TECHNICAL KNOWHOW FEES WAS SHOWN AS DEFERRED REVENUE EXPENDITURE IN THE BALANCESHEET AMOUNTING TO RS. 33,52,500 / - AND SINCE THE ENTIRE EXPENDITURE HAS BEEN PAID DURING THE YEAR, SAME WAS CLAIMED AS REVENUE EXPENDITURE UNDER SECTION 37(1) OF THE ACT AND FOR THESE PURPOSE RELIANCE WAS PLACED ON THE FOLLOWING JUDGMENTS: - (1) GOOD YEAR (INDIA) LTD. V /TO (200J] 731TD 189/68 TTJ (DELHI) (TM)300. (2) GOOD YEAR (INDIA) LTD. V /TO [2000] 1 10 TAXMAN 59/2431TR 239 (DELHI). (3) CIT V. SOUTH INDIA EXPORT CO. LTD.[2000]242ITR150(MAD) (4) CIT V. SOUTH INDIA EXPORT CO. LTD .[2000]242ITR 67(MAD) (5) CIT V. WAVIN (INDIA) LTD. [19W] 236 /TR314(SC) (6) HINDUSTAN CIBA GEIGY LIMITED' CIT[1999] 15 2 CTR (BOM.)15 (7) VELJAN HYDRAIR (P.) LTD.V. CIT (1988] 38 TAXMAN 111 (AP) (8) KIRLOSKAR PNEUMATIC CO. LTD. V. C I T [1983] 15 TAXMAN 455(BOM) AS PER LEARNED AR, THERE WAS FULL DISCLOSURE OF ENTIRE FACTS. ALL THE PARTICULARS OF INCOME WAS DULLY DISCLO SED IN THE RETURN OF INCOME ALONG WITH NOTE FOR CLAIMING THE SAME AS REVENUE EXPENSES IN THE COMPUTATION OF INCOME. RELIANCE WAS PLACED ON THE DECISION OF THE ITA NO. 4666 / 09 3 HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD., [2010] 322 ITR 158(SC) , WH EREIN THE HON BLE SUPREME COURT HAS HELD AS UNDER : - 9. WE ARE NOT CONCERNED IN THE PRESENT CASE WITH THE MENS REA. HOWEVER, WE HAVE TO ONLY SEE AS TO WHETHER IN THIS CASE, AS A MATTER OF FACT, THE ASSESSEE HAS GIVEN INACCURATE PARTICULARS. IN WEBSTER'S D ICTIONARY, THE WORD & INACCURATE HAS BEEN DEFINED AS: - NOT ACCURATE, NOT EXACT OR CORRECT; NOT ACCORDING TO TRUTH; ERRONEOUS; AS AN INACCURATE STATEMENT, COPY OR TRANSCRIPT ;. WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICULARS IN THE EARLIER PA RT OF THIS JUDGMENT. READING THE WORDS IN CONJUNCTION, THEY MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS. WE MUST HASTEN TO ADD HERE THAT IN THIS CASE, THERE IS NO FINDING T HAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE. SUCH NOT BEING THE CASE, THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. A MERE MAKING OF THE CLAIM, WHICH IS NO T SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO THE INACCURATE PARTICULARS. IN VIEW OF THE ABOVE, IT WAS CONTENDED THAT FOR IMPOSIT ION OF PENALTY UNDER SECTION 271(1)(C) , IN TERMS OF DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA), THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF INCOME. 4 . ON THE OTHER HAND, LEARNED DR PLACED R ELIANCE ON THE OBSERVATION MADE BY THE LOWER AUTHORITIES FOR LEVYING THE PENALTY. 5. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WITH REGARD TO THE DISALLOWANCE OF PAYMENTS OF DIRECTORS REMUNERATIO N, WE FOUND THAT IN THE QUANTUM APPEAL THE TRIBUNAL VIDE ORDER DATED 11 - 7 - 2012 HAD DELETED THE ITA NO. 4666 / 09 4 DISALLOWANCE SO MADE. ACCORDINGLY, THERE IS NO JUSTIFICATION FOR LEVY OF PENALTY FOR DISALLOWANCE OF PAYMENT OF REMUNERATION TO THE DIRECTIONS. 5.1 WITH REGARD TO THE PENALTY LEVIED FOR DISALLOWANCE OF TECHNICAL KNOWHOW FEES PAID, WE FOUND THAT ASSESSEE HAS MADE FULL DISCLOSURE OF EXPENDITURE SO INCURRED. IT WAS CLEARLY SHOWN IN THE BALANCE SHEET AS DEFERRED REVENUE EXPENDITURE. SINCE THE ENTIRE EXPENDITURE WAS P AID DURING THE YEAR IN THE COMPUTATION OF INCOME, SAME WAS CLAIMED AS REVENUE EXPENDITURE UNDER SECTION 37(1) , BY RELYING ON VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE DECISION OF THE HON BLE SUPREME COURT IN THE CASE OF CIT VS. WAVIN (INDIA) LTD. (1999 ) 236 ITR 314 (SC), HINDUSTAN CIBA GEIGY LTD. VS. CIT, 152 CTR (BOM) 15 AND KIRLOSKAR PNEUMATIC CO. LTD. VS. CIT, 15 TAXMAN 455 (BOM) . THUS, THERE WAS NO CONCEALMENT OF FACTS BY THE ASSESSEE IN THE RETURN OF INCOME. WE DO NOT FIND ANY JUSTIFICATION FOR THE IMPOSITION OF PENALTY FOR DISALLOWING THE PAYMENT CLAIMED UNDER SECTION 37(1) , SINCE THERE WAS FULL DISCLOSURE OF EXPENSES SO INCURRED FOR TECHNICAL KNOWHOW, GENUINENESS OF EXPENSES WERE NOT DOUBTED , MERE DISALLOWANCE ON THE PLEA OF EXPENSES BEING CAPITA L IN NATURE , DO NOT WARRANT ANY IMPOSITION OF PENALTY U/S.271(1)(C) . 6. HONBLE SUPREME COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) HAS HELD THAT FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) , THERE HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF THE ASSESSEE AND REVENUE IS REQUIRED TO SHOW THAT ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS IN HIS INCOME. WHEN THERE IS NO FINDING ITA NO. 4666 / 09 5 THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE, THERE IS NO QUESTION OF INVITING PENALTY UNDER SECTION 271(1)(C) . A MERE MAKING OF CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS. 7. IN VIEW OF THE DISCUSSION HEREINABOVE, WE REVERSE THE ORDERS OF THE LOWER AUTHORITIES AND DELETE THE PENALTY IMPOSED UNDER SECTION 271(1)(C). 8 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 16 TH APRIL . 201 4 . 16 TH APRIL ,2014 SD/ - SD/ - ( ) ( DR. S.T.M.PAV A LAN ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 16 /04 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TR UE COPY//