The ACIT, Circle-2(1)(1), Baroda V. M/s. Sabic Research & Technology Pvt. Ltd., Baroda

ITA 604/AHD/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6331 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 17-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K SINGH
• Keywords: Capital asset; Transfer pricing; Bonafide belief; Wrong claim
• Section: 92C; 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER) ITA. NO: 604/AHD/2015 & C.O. NO. 53/AHD/15 (ASSESSMENT YEAR: 2004-05) ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BARODA M/S SABIC RESEARCH & TECHNOLOGY LTD. PLOT NO. 5 & 6 SAVLI, GIDC ESTATE, MANJUSAR-391175 V/S V/S M/S SABIC RESEARCH & TECHNOLOGY LTD. PLOT NO. 5 & 6 SAVLI, GIDC ESTATE, MANJUSAR-391175 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-2(1)(1), BARODA (APPELLANT) (RESPONDENT) PAN: AABCS7650L APPELLANT BY : SHRI V.K. SINGH, SR. D.R. RESPONDENT BY : SHRI ROHIT PANSARI, A.R. ( )/ ORDER DATE OF HEARING : 01 -01-201 8 DATE OF PRONOUNCEMENT : 03 -01-2018 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: ITA NO. 604/ AHD/2015 & C.O. NO. 53 /AHD/2015 . A.Y. 2004-0 5 2 1. ITA NO. 604/AHD/2015 & C.O. NO. 53/AHD/2015 ARE APP EAL BY THE REVENUE AND CROSS OBJECTION OF THE ASSESSEE DIRECTED AGAINS T THE VERY SAME ORDER OF LD. CIT(A)-2, VADODARA DATED 30.12.2014 PERTAINING TO A .Y. 2004-05. 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN DIRECTING TO DELETE THE PENALTY LEVIED U/S. 271(1)(C) OF THE ACT . 3. THE ROOTS FOR THE LEVY OF PENALTY LIE IN THE ASSESS MENT ORDER DATED 21.01.2010 FRAMED U/S. 143(3) R.W.S. 147 R.W.S. 92C & 144C OF THE ACT. THE SAID ASSESSMENT WAS COMPLETED BY DETERMINING TOTAL INCOME AT RS. 40 ,52,943/- UNDER NORMAL PROVISIONS OF THE ACT AFTER MAKING FOLLOWING ADDITI ONS UNDER NORMAL PROVISIONS ON WHICH PENALTY PROCEEDINGS WERE ALSO INITIATED: (I) UPWARD ADJUSTMENTS OF TRANSFER PRICING - RS. 2 ,08,61,862/- (II) EXCHANGE FLUCTUATION GAIN - RS. 54,03,649/- 4. WHILE COMPUTING THE BOOK PROFIT ADDITION ON ACCOUNT OF EXCHANGE FLUCTUATION GAIN OF RS. 54,03,649/- WAS ALSO MADE AND PENALTY P ROCEEDINGS U/S. 271(1)(C) OF THE ACT WERE ALSO INITIATED. 5. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE UNDER NORMAL PROVISIONS ON ACCOUNT OF FLUCTUATION GAIN OF RS. 54,03,649/- A ND CONFIRMED THE ADDITION MADE ON ACCOUNT OF UPWARD ADJUSTMENTS OF TRANSFER P RICING TO THE EXTENT OF RS. 1,46,67,225/-. ADDITION MADE IN BOOK PROFIT U/S . 115JB OF THE ACT IN RESPECT OF FLUCTUATION GAIN OF RS. 54,03,649/- WAS ALSO CONFIRMED. ITA NO. 604/ AHD/2015 & C.O. NO. 53 /AHD/2015 . A.Y. 2004-0 5 3 6. DURING THE COURSE OF THE PENALTY PROCEEDINGS, THE A SSESSEE WAS SHOW CAUSED TO EXPLAIN WHY PENALTY U/S. 271(1)(C) OF THE ACT SHOUL D NOT BE LEVIED ON THE IMPUGNED ADJUSTMENTS/DISALLOWANCES. 7. NOT CONVINCED WITH THE CONTENTION OF THE ASSESSEE, THE A.O. LEVIED PENALTY OF RS. 56,77,300/-. 8. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND GOT NECESSARY RELIEF. 9. BEFORE US, THE LD. D.R. STRONGLY SUPPORTED THE FIND INGS OF THE A.O. PER CONTRA, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2004-05 IN ITA NO. 1065/AHD/2012. IT IS THE SAY OF THE LD. COUNSEL THAT ON IDENTICAL SET OF FACTS, THE TRIBUNAL HAS DELETED THE PENALTY. 10. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORI TIES BELOW. IT IS TRUE THAT IN THE CASE IN HAND FOR THE YEAR UNDER CONSIDERATION I NCOME HAS BEEN DETERMINED U/S. 115JB OF AND WHICH IS A LOSS AND THEREFORE NO MAT HAS BEEN PAID BY THE ASSESSEE. THEREFORE, ULTIMATELY THE INCOME OF THE A SSESSEE HAS BEEN FINALLY DETERMINED UNDER THE NORMAL PROVISIONS OF THE ACT. 11. IT IS ALSO TRUE THAT THE ADDITION MADE ON NOTIONAL FOREIGN EXCHANGE BENEFIT WHILE COMPUTING THE INCOME AS PER NORMAL PROVISIONS OF TH E ACT HAS BEEN DELETED. THOUGH THE SAME HAS BEEN UPHELD WHILE DETERMINING T HE BOOK PROFIT BUT WHICH HAS NOT RESULTED INTO ANY MAT PAYABLE BY THE ASSESS EE. THEREFORE, TO THIS EXTENT, NO PENALTY IS LEVIABLE AND THERE IS NO ERRO R IN THE FINDINGS OF THE LD. CIT(A). THE RELEVANT PART OF THE ORDER OF THE CO-OR DINATE BENCH RELIED UPON BY THE LD. COUNSEL READ AS UNDER:- ITA NO. 604/ AHD/2015 & C.O. NO. 53 /AHD/2015 . A.Y. 2004-0 5 4 16.5 WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE T HROUGH THE DECISIONS RELIED ON BY THE ASSESSEE. THE SHORT QUESTION IS WHETHER T HE ASSESSEE IS LIABLE TO PAY PENALTY UNDER SECTION 271(L)(C) OF THE ACT FOR NOT INCLUDING THE NOTIONAL EXCHANGE GAINS IN THE BOOKS PROFIT WHILE COMPUTING MAT UNDER SECTION 115JB OF THE ACT. IN THE YEAR UNDER APPEAL, THE ASSESSEE WHILE CALCULATI NG BOOK PROFIT FOR THE PURPOSE OF MAT, REDUCED THE NOTIONAL FOREIGN EXCHANGE GAIN IN RESPECT OF ECB LOANS AVAILED FOR THE PURPOSE OF ACQUIRING CAPITAL ASSETS . THE AMOUNT OF NOTIONAL FOREIGN EXCHANGE GAIN IS NOT UNDER DISPUTE BY THE R EVENUE AND THEREFORE, THE CALCULATION OF NOTIONAL FOREIGN EXCHANGE GAIN SUBMI TTED BY ASSESSEE IN ITS FINANCIAL STATEMENT AND INCOME TAX RETURNS IS FREE FROM ANY ERROR. THIS IS ALSO A FACT THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND IS A PART OF SAUDI BASIC INDUSTRIES CORPORATION AND IS ENGAGED IN THE BUSINE SS OF PROVIDING CONTRACT RESEARCH AND DEVELOPMENT. AS ON 31.03.2005, THE ASS ESSEE WAS HAVING A ASSET BASE OF RS.34.85 CRORES AND IS REGULARLY FURNISHING INCOME TAX RETURN; BOOKS OF ACCOUNTS ARE AUDITED AND NO MAJOR DEFECT HAS BEEN P OINTED OUT BY THE REVENUE AUTHORITIES. WE FURTHER OBSERVE THAT ASSESSEE HAS G IVEN PLAUSIBLE REASONS FOR REDUCING THE BOOK PROFIT BY THE AMOUNT OF NOTIONAL FOREIGN EXCHANGE GAIN AND HAS ALSO REFERRED TO VARIOUS JUDGMENTS. FOR IMPOSIN G A PENALTY UNDER SECTION 271(L)(C) OF THE ACT, THE ASSESSEE SHOULD HAVE EITH ER CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOM E. IN THE GIVEN FACTS, WE OBSERVE THAT THE ASSESSEE HAS FURNISHED ACCURATE PA RTICULARS OF INCOME AND IN A BONAFIDE BELIEF HAS MADE A CLAIM WHICH WAS ACTUALLY NOT SUSTAINABLE IN LAW. IN THESE PECULIAR FACTS, WE OBSERVE THAT JUDGMENT OF H ON'BLE APEX COURT IN THE CASE OF RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) IS SQUA RELY APPLICABLE, WHEREIN IT HAS BEEN HELD THAT A MERE MAKING OF A CLAIM, WHICH IS N OT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PA RTICULARS REGARDING THE INCOME OF THE ASSESSEE AND SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. WE FURTHER OBSERVE THAT THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS WOOD PAPERS LTD, HAS AL SO RELIED ON THE ABOVE REFERRED JUDGMENT OF HON'BLE APEX COURT AND HELD THAT MERE M AKING OF FALSE CLAIM DOES NOT CONFIRM LEVY OF PENALTY. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, AND RESPECTFULLY FOL LOWING THE JUDGMENTS OF HON'BLE APEX COURT AND HON'BLE JURISDICTIONAL HIGH COURT, WE FIND THAT THE ASSESSEE SHOULD NOT HAVE BEEN VISITED WITH PENALTY UNDER SECTION 271(L)(C) OF THE ACT. WE, THEREFORE, DELETE THE PENALTY OF RS.4,56,5 13/- AND ALLOW THE GROUND RAISED BY THE ASSESSEE. ITA NO. 604/ AHD/2015 & C.O. NO. 53 /AHD/2015 . A.Y. 2004-0 5 5 12. RESPECTFULLY FOLLOWING THE FINDINGS OF THE CO-ORDI NATE BENCH IN THE LIGHT OF THE DISCUSSION HEREINABOVE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS DISM ISSED. 13. THE CROSS OBJECTION OF THE ASSESSEE IS IN SUPPORT O F THE ORDER OF THE LD. CIT(A) AND THEREFORE NEEDS NO SEPARATE ADJUDICATION . ORDER PRONOUNCED IN OPEN COURT ON 03 - 01- 20 18 SD/- SD/- (RAJPAL YADAV) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 03/01/2018 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,AHME DABAD