Punjab Tractors Limited, Mohali V. ACIT, Patiala

ITA 617/CHANDI/2014

• Counselvise Citation: 61721514 RSA 2014
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 10-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RATTAN KAUR
• Keywords: Depreciation; Bonafide belief; Difference of opinion; Bonafide mistake; Capital expenditure
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI H.L.KARWA, VICE PRESIDENT AND MS. RANO JAIN, ACCOUNTANT MEMBER ITA NO.617/CHD/2014 (ASSESSMENT YEAR : 2007-08) PUNJAB TRACTORS LIMITED VS. THE A.C.I.T., (SINCE MERGED WITH MAHINDRA & PATIALA CIRCLE, MAHINDRA LTD.), MOHALI. PATIALA. PAN: AAACP8578K AND ITA NO.595/CHD/2014 (ASSESSMENT YEAR : 2007-08) THE A.C.I.T., VS. PUNJAB TRACTORS LIMITED PATIALA CIRCLE, (SINCE MERGED WITH MAHINDRA & PATIALA. MAHINDRA LTD.), MOHALI. PAN: AAACP8578K (APPELLANT) (RESPONDENT) ASSESSEE BY : MS.RATTAN KAUR DEPARTMENT BY : SHRI MANOJ MISHRA, DR DATE OF HEARING : 03.11.2015 DATE OF PRONOUNCEMENT : 26.11.2015 O R D E R PER RANO JAIN, A.M . : BOTH THE CROSS APPEALS ARE DIRECTED AGAINST THE ORD ER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS), CHAND IGARH DATED 31.3.2014 FOR ASSESSMENT YEAR 2007-08 PARTIAL LY 2 DELETING THE PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) LEVIED BY THE ASSESS ING OFFICER. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASS ESSING OFFICER HAS IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT AGAINST THE ADDITION OF RS.16,85,461/- TREATED BY T HE ASSESSING OFFICER AS CAPITAL EXPENDITURE AND ANOTHE R PENALTY UNDER SECTION 271(1)(C) OF THE ACT LEVIED ON A DISA LLOWANCE OF RS.1,55,69,559/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF HIGHER DEDUCTION ON ACCELERATED DEPRECIATION CLAIME D BY THE ASSESSEE. THE LEARNED CIT (APPEALS) DELETED THE P ENALTY IMPOSED BY THE ASSESSING OFFICER ON ACCOUNT OF DISA LLOWANCE OF RS.16,85,461/- TREATING THE EXPENDITURE AS CAPIT AL, WHILE THE PENALTY LEVIED ON DISALLOWANCE OF CLAIM OF HIGH ER DEDUCTION ON ACCELERATED DEPRECIATION AMOUNTING TO RS.15,55,69,559/- WAS CONFIRMED BY THE LEARNED CIT (APPEALS). IN THIS WAY, BOTH THE ASSESSEE AS WELL AS THE DEPARTMENT IS IN APPEAL BEFORE US. 3. IN ASSESSEES APPEAL, THE FACTS OF THE CASE ARE THAT IN ORDER TO CLAIM ENHANCED DEPRECIATION UNDER RULE 5(2) OF THE INCOME TAX RULES, THE ASSESSEE CLAIMED IN ITS RETUR N OF INCOME HIGHER RATE OF DEPRECIATION I.E. @ 40% ON PL ANT & MACHINERY. HOWEVER, SINCE THE APPROVAL FROM DSIR W AS NOT RECEIVED BY THE ASSESSEE. THE ASSESSEE PAID A SUM OF RS.75 LACS AND FORWARDED THE CHALLAN UNDER LETTER DATED 3 1.3.2009 BEFORE THE ASSESSING OFFICER WITH A REQUEST TO TREA T THE SAME AS ADVANCE TAX PAYMENT FOR ASSESSMENT YEAR 2007-08 ALONGWITH A REVISED COMPUTATION OF INCOME AFTER D ELETING ITS 3 CLAIM OF ACCELERATED DEPRECIATION UNDER RULE 5(2) OF THE RULES. THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271(1)(C) OF THE ACT ON SUCH ACCELERATED DEPRECIATI ON CLAIMED BY THE ASSESSEE. 4. BEFORE THE LEARNED CIT (APPEALS), IT WAS SUBMIT TED THAT THE ASSESSEE BEING IN THE BUSINESS OF MANUFACT URE OF TRACTORS, ETC. HAS BEEN INCURRING EXPENDITURE TOWAR DS TECHNOLOGY AND KNOW-HOW AND IN ORDER TO CLAIM ENHAN CED DEPRECIATION UNDER RULE 5(2) OF THE RULES, THE ASSE SSEE USED TO APPLY FOR AND OBTAIN SANCTION FROM THE DSIR. T HE APPROVAL FROM DSIR WAS USUALLY RECEIVED BY THE ASSESSEE AFTE R THE DUE DATE FOR FILING OF THE INCOME TAX RETURN AND, THERE FORE, IN ANTICIPATION OF THE SANCTION FROM DSIR, THE ENHANCE D DEPRECIATION CLAIM OF THE ASSESSEE IN EARLIER YEARS WAS ALLOWED DURING THE ASSESSMENT STAGE EITHER ON FILING REVISE D RETURN OR FILING OF CLAIM DURING THE ASSESSMENT PROCEEDINGS. THE DATES OF APPLICATION AND APPROVAL OF DSIR FOR VARIOUS YEA RS WERE AS FOLLOWS: A.Y. DATE OF APPLICATION TO D.S.I.R. DATE OF RECEIPT OF APPROVAL FROM D.S.I.R. 2004-05 10.09.2004 30.12.2004 2005-06 25.08.2005 04.01.2006 2006-07 21.08.2006 15.06.2007 5. IT WAS SUBMITTED IN THIS BACKGROUND THAT AS USU AL THE ASSESSEE APPLIED FOR THE SANCTION FROM DSIR IN THE CURRENT YEAR ALSO AND SPECIFICALLY CLAIMED DEDUCTION ON ENH ANCED RATE 4 OF DEPRECIATION UNDER RULE 5(2) OF THE RULES IN THE RETURN OF INCOME. IN THIS WAY, IT WAS SUBMITTED THAT THERE W AS NO CONCEALMENT OF INCOME BY THE ASSESSEE OR FURNISHING OF INACCURATE PARTICULARS. SINCE THE SANCTION FROM D SIR HAD NOT COME AND WHEN THE RETURN OF THE ASSESSEE WAS TA KEN FOR SCRUTINY, IT PAID THE DUE TAXES TOGETHER WITH THE R EVISED COMPUTATION OF INCOME BEFORE THE ASSESSING OFFICER. NO PENALTY UNDER SECTION 271(1)(C) OF THE ACT CAN BE LEVIED. THE LEARNED CIT (APPEALS) AFTER CONSIDERING THE SUBMISS IONS MADE BY THE ASSESSEE OBSERVED THAT THE DISALLOWANCE OF E NHANCED DEPRECIATION CLAIMED BY THE ASSESSEE, MADE IN ASSES SMENT YEARS 2004-05 AND 2006-07 HAS ALREADY BEEN DELETED BY THE HON'BLE I.T.A.T. THE COUNTER COMMENTS WERE ASKED BY THE LEARNED CIT (APPEALS) FROM THE ASSESSING OFFICER, W HO IN HIS LETTER DATED 31.3.2013 CONFIRMED THE SAID STATUS. HOWEVER, THE LEARNED CIT (APPEALS) OBSERVED THAT IN THIS YEA R THE ASSESSEE MADE THE CLAIM BUT WHEN THE CASE WAS SELEC TED FOR SCRUTINY THE CLAIM WAS WITHDRAWN AS THE RELEVANT CE RTIFICATE FOR CLAIMING THE ENHANCED DEPRECIATION COULD NOT BE OBTAINED. SINCE THE CLAIM WAS WITHDRAWN ONLY AFTER INITIATION OF ASSESSMENT PROCEEDINGS AND THERE BEING NO EVIDENCE THAT THE FACTS WERE DISCLOSED IN THE RETURN OF INCOME, THE C ASE WAS DISTINGUISHED BY HIM AND THE PENALTY SO LEVIED BY T HE ASSESSING OFFICER WAS CONFIRMED. 6. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT 5 (APPEALS) AND STRESSED ON THE FACT THAT THE ENHANCE D DEPRECIATION WAS BEING CLAIMED BY THE ASSESSEE FROM ASSESSMENT YEAR 2002-03 ONWARDS. THE SAME WAS ALLO WED TO IT CONSISTENTLY BY THE ASSESSING OFFICER HIMSELF TI LL ASSESSMENT YEAR 2005-06. IN ASSESSMENT YEAR 2006-07, THE CLA IM WAS NOT ALLOWED TO IT AND EARLIER CASES WERE REOPENED. HOWEVER, THE I.T.A.T. ALLOWED THE CLAIM OF THE ASSESSEE FOR ALL THE YEARS FROM ASSESSMENT YEAR 2002-03 TO 2006-07. THESE FA CTS WERE BROUGHT TO OUR NOTICE TO EMPHASIZE THE FACTS THAT T HE CLAIM MADE BY THE ASSESSEE IN THE CURRENT YEAR WAS BONAFI DE CLAIM AND SINCE THE APPROVAL FROM DSIR WAS NOT RECEIVED, THE ASSESSEE REVISED ITS COMPUTATION AND PAID THE DUE T AXES TO BRING OUT THE CASE IN THE AMBIT OF BONAFIDE MISTAKE NOT LEADING THE LEVY OF PENALTY, RELIANCE WAS PLACED ON THE JUDGMENT OF THE CIT VS RAJ OVERSEAS 336 ITR 261 (P& H). OTHER DECISIONS RELIED UPON BY THE ASSESSEE WERE IN BANYAN TOURS & TRAVELS (P) LTD. VS. ITO, 120 ITD 404 (MUM) AND S.S. FOODS INDUSTRIES VS. ACIT (2015) 38 ITR (TRIB.) 90 (CHD.). 7. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AS WELL AS THAT OF THE LEARNED CI T (APPEALS). 8. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS CLAIME D BENEFIT OF ENHANCED DEPRECIATION @ 40% ON PLANT & MACHINERY WI TH ITS RETURN OF INCOME AND REVISED THE SAME DURING THE SC RUTINY ASSESSMENT AS THE APPROVAL FROM DSIR WAS NOT RECEIV ED, WHICH 6 IS THE BASIC CONDITION FOR BEING ELIGIBLE TO GET SU CH ENHANCED DEPRECIATION. HOWEVER, IT IS ALSO A FACT THAT THE CLAIM OF HIGHER DEPRECIATION WAS BEING ALLOWED TO THE ASSESS EE IN VARIOUS YEARS BEFORE THE CURRENT YEAR I.E. FROM ASS ESSMENT YEARS 2002-03 TO 2006-07 BY THE HON'BLE I.T.A.T. T HEREFORE, IT CANNOT BE DENIED THAT THE ASSESSEE WAS UNDER THE BO NAFIDE BELIEF THAT IT IS ELIGIBLE FOR SAID ENHANCED DEPREC IATION IN THE CURRENT YEAR ALSO. THEREFORE, THE RETURN WAS REVI SED AND DUE TAXES WERE PAID IN THE EVENT OF NOT GETTING SANCTIO N FROM DSIR. THE CHRONOLOGY OF EVENTS VERY CLEARLY PROVE THE BONAFIDE INTENTION OF THE ASSESSEE. THERE ARE NUMB ER OF JUDGMENTS OF VARIOUS HIGH COURTS, WHEREBY IT HAS BE EN HELD THAT IF A CLAIM HAS BEEN MADE BY THE ASSESSEE UNDER BONAFIDE BELIEF, THE ADDITION OR DISALLOWANCE CAN BE MADE, H OWEVER, NO PENALTY CAN BE LEVIED. THE RELIANCE PLACED BY THE LEARNED COUNSEL FOR THE ASSESSEE ON THE JUDGMENT OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS RAJ OVERSE AS (SUPRA) IS NOT OUT OF PLACE IN THIS CONTEXT. IN THAT CASE ALSO, THE ISSUE WAS CLAIM OF DEPRECIATION. THIS WAS ALSO BRO UGHT TO OUR NOTICE THAT THE SLP AGAINST THIS DECISION HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT VIDE CCNO.1943 OF 2011 . 9. GETTING SUPPORT FROM THE ABOVE SAID JUDGMENTS A ND FURTHER IN THE CASE OF CIT VS. RELIANCE PETRO PROD UCTS (P) LTD., 322 ITR 158, WHEREBY THE HON'BLE SUPREME COUR T HAS HELD THAT THE CLAIM MADE BY THE ASSESSEE ON A BONAF IDE BELIEF CANNOT LEAD TO IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF 7 THE ACT. WE DIRECT THE ASSESSING OFFICER TO DELET E THE PENALTY. 10. THE APPEAL OF THE ASSESSEE IN ITA NO.617/CHD/2 014 IS ALLOWED 11. IN THE APPEAL OF THE REVENUE, BRIEFLY THE FACT S OF THE CASE ARE THAT THE ASSESSING OFFICER MADE DISALLOWAN CE OF AN AMOUNT OF RS.36,05,814/- ON ACCOUNT OF REPAIR AND MAINTENANCE EXPENSES CLAIMED BY THE ASSESSEE. THIS DISALLOWANCE WAS COMPUTED @ 20% OF THE TOTAL EXPENS ES AND GIVING BENEFITS OF DEPRECIATION, AS THE ASSESSING O FFICER TREATED THE EXPENDITURE BEING CAPITAL IN NATURE. THE ASSESSING OFFICER IMPOSED PENALTY UNDER SECTION 271 (1)(C) OF THE ACT ON THE SAME DISALLOWANCE. 12. BEFORE THE LEARNED CIT (APPEALS), IT WAS CONTE NDED THAT THE ASSESSEE HAS NOT CONCEALED ANY INCOME NOR HAS IT FURNISHED ANY INACCURATE PARTICULARS. THE EXPENDIT URE WAS INCURRED ON REPAIR AND MAINTENANCE ACTIVITY FOR REN OVATION OF FLOORS,, CEILINGS, FABRICATION WORK AND VARIOUS PLA NTS, ETC. IT WAS ALSO SUBMITTED THAT THE LEARNED CIT (APPEALS) H AD GIVEN PARTIAL RELIEF AND TREATED EXPENDITURE OF RS.16,85, 461/- AS CAPITAL IN NATURE. RELIANCE WAS ALSO PLACED ON TH E JUDGMENT OF THE JURISDICTIONAL PUNJAB & HARYANA HIGH COURT I N THE CASE OF CIT VS. AMTEK AUTO LTD., 352 ITR 394 (P&H) TO T HE EFFECT THAT MERELY BECAUSE THE ASSESSEE CLAIMED EXPENDITUR E AS REVENUE, WHICH WAS TREATED BY THE ASSESSING OFFICER AS CAPITAL 8 IN NATURE, THE PENALTY CANNOT BE LEVIED. AGREEING WITH THESE SUBMISSIONS, THE LEARNED CIT (APPEALS) DELETED THE PENALTY. 13. AGGRIEVED BY THE ACTION OF THE LEARNED CIT (AP PEALS), NOW THE DEPARTMENT HAS COME UP IN APPEAL BEFORE US. THE LEARNED D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND PRAYED TO CONFIRM THE PENALTY LEVIED BY THE ASS ESSING OFFICER. FURTHER, HE PLACED RELIANCE ON THE JUDGM ENT OF DELHI HIGH COURT IN THE CASE OF CIT VS. ESCORTS FINANCE LTD., 188 TAXMAN 87 (DEL). 14. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE US THAT THE DISALLOWANCE WAS MADE ONLY ON A DIFFERENCE OF OPINION. THE ASSESSEE WAS OF THE OPINION THAT THE EXPENSES ARE REVENUE IN NATURE WHILE THE ASSESSING OFFICER CONSIDERED THE SAME TO BE CAPITAL IN NATURE. FURT HER, THE ASSESSING OFFICER HAS DISALLOWED 20% OF THE TOTAL E XPENDITURE JUST ON THE BASIS OF ESTIMATION, WHICH WAS REDUCED BY THE HON'BLE I.T.A.T. TO 10% ONLY. IN THIS BACKGROUND, IT WAS ALSO ARGUED THAT ON A DISALLOWANCE MADE ON ESTIMATE BASI S, PENALTY CANNOT BE LEVIED. RELIANCE WAS PLACED ON THE JUDGMENT OF JURISDICTIONAL PUNJAB & HARYANA HIGH CO URT IN THE CASE OF CIT VS. AMTEK AUTO LTD. (2013) 352 ITR 394 AND CIT VS. AJAIB SINGH & CO. (2002) 253 ITR 630. 15. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF B OTH THE PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIE S BELOW AND CONSIDERED THE MATERIAL AVAILABLE ON RECORD. THE U NDISPUTED 9 FACTS OF THE CASE ARE THAT THE ASSESSEE CLAIMED REP AIR AND MAINTENANCE EXPENSES TO BE REVENUE IN NATURE. WHILE CONSIDERING THE EXPENSES TO BE CAPITAL IN NATURE, T HE ASSESSING OFFICER DISALLOWED 20% OF THE EXPENSES, W HICH WAS GOT REDUCED TO 10% BY THE HON'BLE I.T.A.T. IN SUCH CIRCUMSTANCES, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED ITS INCOME OR FURNISHED INACCURATE PARTIC ULARS. IT WAS JUST A VIEW OF THE ASSESSEE WHICH WAS NOT APPRE CIATED BY THE ASSESSING OFFICER. HE HAS NOWHERE BEEN ABLE T O BRING ON RECORD ANY MATERIAL TO PROVE ANY CONCEALMENT OR FUR NISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. EVEN ALL T HE FACTS AND FIGURES HAVE BEEN PICKED UP BY HIM FROM THE MATERIA L SUPPLIED BY THE ASSESSEE ITSELF. FURTHER, EVEN THE DISALLO WANCE MADE BY THE ASSESSING OFFICER IS NOT OF THE FULL AMOUNT AND ONLY A PORTION OF THE EXPENDITURE CLAIMED HAS BEEN DISALLO WED. THAT TOO ON AN ESTIMATION BASIS. EVEN THE I.T.A.T. HAS CONFIRMED THE DISALLOWANCE TO THE EXTENT OF 10% IN ORDER TO M EET THE ENDS OF JUSTICE. IN THIS VIEW, THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT CANNOT BE LEVIED. THE JUDGME NTS PLACED ON RECORD BY THE LEARNED COUNSEL FOR THE ASSESSEE A RE SQUARELY APPLICABLE TO THE FACTS OF THE CASE. THE JUDGMENT OF DELHI HIGH COURT RELIED UPON IN THE CASE ESCORTS FINANCE (SUPRA) IS DISTINGUISHABLE, AS THERE WAS THE QUESTION OF WRONG APPLICATION OF LAW, WHICH IS NOT HERE IN THIS CASE. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF THE LEARNED CIT ( APPEALS) ON THIS GROUND. 10 16. THE APPEAL OF THE REVENUE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN I TA NO.617/CHD/2014 IS ALLOWED AND THE APPEAL OF THE RE VENUE IN ITA NO.595/CHD/2014 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF NOVEMBER, 2015. SD/- SD/- (H.L.KARWA) (RANO JAIN) VICE PRESIDENT ACOUNTANT MEMBER DATED : 26 TH NOVEMBER, 2015 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH