ALFA DISTILLIERIES P.LTD, MUMBAI V. ITO 2(1)(1), MUMBAI

ITA 5319/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8537 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 21-08-2014
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Business expenditure
• Section: 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAVISH SOOD , JM ITA NO. 5319 / MUM/20 1 4 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. ALFA DISTILLIERIES PVT. LTD., ALFA HOUSE, 5, VARMA CHAMBERS, 11, HOMJI STREET, FORT, M UMBAI 400 001 VS. ITO 2 (1)(1), MUMBAI PAN/GIR NO. AAACA5488K APPELLANT ) .. RESPONDENT ) ASSESSEE BY MS. NEELAM JADHAV REVENUE BY SHRI A. RAMACHANDRAN DATE OF HEARING 10 / 11 /2016 DATE OF PRONOUNCEME NT 09 / 02 /201 7 / 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) FOR THE ASSESSMENT YEAR 2009 - 10 IN THE MATTER OF PENALTY IMPOSED U/S.271(1)(C) OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECO RD PERUSED. 3. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN MANUFACTURING OF INDIAN MADE FOREIGN LIQUOR. DURING THE COURSE OF SCRUTINY ASSESSMENT, AO MADE DISALLOWANCE OF RS.22,74,300/ - ON ACCOUNT OF LICENSE FEE . F OR THE DISALLOWANCE SO MADE , AO ALSO LEV IED PENALTY U/S.271(1)( C) AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO. 5319/2014 ALFA DISTILLERIES PVT. LTD., 2 4. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF INDIAN MADE FOREIGN LIQUOR. THE ASSESSE E IS HOLDING PLL & RS2 LICENSES FOR MANUFACTURE OF IMFL, THESE LICENSES ARE ISSUED BY MAHARASHTRA STATE GOVERNMENT. THE SAID LICENSES WERE HOLDING SINCE YEAR, 1990. THE RENEWAL OF LICENSES FROM VARIOUS GOVERNMENT BODIES IS REQUIRED AS PER BOMBAY PROHIBITIO N ACT, SEC. 49 & 54 AND PART III (FOREIGN LIQUOR). THE ASSESSEE IS BEING RENEWING THE LICENSING, SINCE LAST 2 DECADES. THE LIQUOR LICENSE WAS LAST ISSUED IN YEAR 1984 AND THIS LICENSE IS NOT READILY AVAILABLE THEREFORE THE ASSESSEE NEEDS TO KEEP THE LICENC E ALI VE. 5. DURING THE YEAR THE ASSESSEE HAD FILED ITS RETURN OF INCOME ON 30.09.2009 DECLARING TOTAL LOSS AT RS.19,94,583/ - . ASSESSING OFFICER PASSED AN ORDER OBSERVING THAT THE EXPENDITURE INCURRED ON RENEWAL OF LICENSE WAS NOT ALLOWABLE IN VIEW OF SEC . 43B(A) AND ALSO NOT BE ALLOWABLE AS BUSINESS EXPENSES ULS.37(1) OF THE ACT. THEREAFTER HE INITIATE D PENALTY PROCEEDINGS FOR FURNISHING INACCURATE PARTICULA RS. 6. AFTER DISALLOWING THE CLAIM, THE AO ALSO LEVIED PENALTY U/S.271(1)( C) FOR THE DISALLOWANCE OF LICENSE FEE. DURING THE PENALTY PROCEEDING S, THE ASSESSEE HAD FILED FOLLOWING DETAILS: AUDITED ACCOUNTS NOTICE DTD. 5/8/2011 ASKING DETAILS OF LICENSE FEES ALONG WITH LEDGER DURING ASSESSMENT PROCEEDINGS. ITA NO. 5319/2014 ALFA DISTILLERIES PVT. LTD., 3 LETTER DATED 17/08/2011 SUBMITTED BEFORE A.O . DURING ASSESSMENT PROCEEDINGS ALONGWITH DETAILS OF LICENSE FEES IN ASSESSMENT PROCEEDINGS. LETTER DATED 21/10/2011 EXPLAINING THE PROVISIONS OF SECTION 43B(B) FOR DISALLOWANCE OF THE LICENSE FEE IN ASSESSMENT PROCEEDINGS. 7. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF AO AGAINST WHICH ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND FOUND FROM RECORD THAT T HE ASSESSEE HAS NEITHER CONCEALED NOR FILED ANY INACCURATE PARTICULARS OF INCOME, LEVY OF PENALTY WAS NOT JUSTIFIED. THE ASSESSEE HAD FILED ITS APPLICATION FOR RENEWAL OF ITS LICENCE. THIS LICENCE FEES IS PAYABLE ON YEARLY BASIS AND VALID FOR ONE YEAR. SIMILAR DISALLOWANCE WAS MADE BY DEPARTMENT A.Y. 2006 - 2007. HOWEVER, ON APPEAL THE HON'BLE ITAT ALLOWE D THE ASSESSEE'S CLAIM. THE ASSESSEE HAS NOT FILED APPEAL MAINLY BECAUSE THE ASSESSED INCOME WAS LESS AND TAX LIABILITY WAS LESS PAYABLE. THE PLL LICENSE FEES AND RSII DEBITED TO THE PROFIT AND LOSS ACCOUNT BUT IT WAS NOT PAID SINCE THE MATTER IS IN DISPU TES WITH THE BOMBAY HIGH COURT AND WITH STATE GOVERNMENT. THESE LICENCE FEES ARE NOT IN THE NATURE OF EXPENSES SPECIFIED U/S. 43B(A) SINCE THIS IS A LIABILITY ARISING DUE TO APPLICATION OF RENEWAL OF LICENCE. I IS NOT IN THE NATURE OF ANY DUTIES OR ROYALTY OR TAXES WHICH HAS BECOME DUE TO ITS USAGE DURING THE YEAR CONCERNED. THE NOMENCLATURE APPLIED THE AMOUNT FOR WHICH THE PROVISION WAS MADE 'FEE' AND NOT A TAX AND THEREFORE THE PROVISION OF SECTION 43B, ITA NO. 5319/2014 ALFA DISTILLERIES PVT. LTD., 4 IN THE YEAR IN QUESTION, WERE NOT ATTRACTED. MERELY BECAUSE THERE IS A LITIGATION PENDING IN HIGH COURT WHEREIN STAY WAS GRANTED, AND NECESSARY EXPENSES INCURRED TO KEEP ALIVE THE BUSINESS ASSETS CANNOT BE DISALLOWED AND CANNOT BE GROUND FOR LEVY OF PENALTY ON THE SAME. 9. FROM THE RECORD WE FOUND THAT TH E CLAIM MADE BY THE ASSESSEE WAS BASED ON SOUND LEGAL CONTENTION REMAINS A CLAIM AND CANNOT BE EQUATED WITH SUPPLYING INACCURATE PARTICULARS OF INCOME OR CONCEALING PARTICULARS OF INCOME, THEREFORE, THE PROVISION S OF S. 271(1)(C) IS NOT APPLIED. FROM THE R ECORD WE ALSO FOUND THAT IN A.Y.2011 - 12 ON THE SAME ADDITION THE A.O. HAS DELETED THE PENALTY. 10. WE ALSO FOUND THAT FROM A .Y. 2012 - 2013, THE ASSESSEE SUO MOTO STOPPED MAKING PROVISIONS FOR LICENSE FEES IN THE BOOKS OF ACCOUNTS. THEREFORE, THE DISALLO WANCE OF LICENSE FEES AND PENALTY ON THE SAME NOT AROSE. 11. HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) HELD THAT MAKING AN INCORRECT CLAIM IN LAW CANNOT TANTAMOUNT TO FURNISHING INACCURATE PARTIC U LARS. THERE IS NO' CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS WITHIN SEC. 271(1)(C) & ITS EXPLANATIONS. EXPLANATIONS GIVEN BY ASSESSEE ARE BONAFIDE BASED ON DOCUMENTARY EVIDENCES PRODUCED AT THE TIME OF ASSESSMENT PROCEEDINGS AND THE EXPLANATIONS OF THE ASSESSEE ARE NOT FOUND FALSE. 12. IN VIEW OF ABOVE DISCUSSION, WE DO NOT FIND ANY JUSTIFICATION FOR IMPOSING PENALTY U/S.271(1)(C). ITA NO. 5319/2014 ALFA DISTILLERIES PVT. LTD., 5 13. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 0 9 / 02 /2 01 7 S D/ - ( RAVISH SOOD ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 02 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE R ESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//