Continental Engines Ltd., New Delhi V. ITO, New Delhi

ITA 6174/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4526 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 11-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO.6174/DEL/2014 ASSESSMENT YEAR : 2007-08 CONTINENTAL ENGINES LTD., 22, COMMERCIAL COMPLEX, MALCHA MARG, NEW DELHI. PAN: AABCC9896N VS. ITO, WARD-3(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KVSR KRISHNA, CA DEPARTMENT BY : SHRI ANSHU PRAKASH, SR. DR DATE OF HEARING : 13.09.2017 DATE OF PRONOUNCEMENT : 14.09.2017 ORDER PER R.S. SYAL, VP: THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDE R PASSED BY THE CIT(A) ON 12.09.2014 CONFIRMING PENALTY OF RS.19,57 ,130/- IMPOSED BY ITA NO.6174/DEL/2014 2 THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT IN RELATION TO THE ASSESSMENT YEAR 2007-08. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING AU TOMOBILES AND AUTO PARTS. IT CLAIMED EXEMPTION U/S 10B. THERE I S NO DISPUTE ON THE OTHERWISE ELIGIBILITY OF THE ASSESSEE TO SUCH EXEMP TION. THE ASSESSING OFFICER HELD THAT INTEREST INCOME OF RS.49,71,923/- AND MISCELLANEOUS INCOME OF RS.2,25,000/- ARE NOT ELIGIBLE FOR EXEMPT ION. HE, THEREFORE, REDUCED THESE TWO AMOUNTS FROM THE QUALIFYING INCOM E AND ASSESSED THEM UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION. BECAUSE OF THE EXCLUSION OF THESE TWO ITEMS OF INCO ME FROM THE AMBIT OF THE AMOUNT ELIGIBLE FOR EXEMPTION U/S 10B, THE DECL ARED INCOME GOT ENHANCED. THE ASSESSING OFFICER IMPOSED PENALTY U/ S 271(1)(C) OF THE ACT IN RELATION TO INCREASE IN THE INCOME DUE TO NO N-GRANTING OF THE BENEFIT U/S 10B ON INTEREST INCOME AND MISCELLANEOU S INCOME. THE LD. CIT(A) ECHOED THE PENALTY ORDER, AGAINST WHICH TH E ASSESSEE HAS COME UP IN APPEAL BEFORE THE TRIBUNAL. ITA NO.6174/DEL/2014 3 3. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE REL EVANT MATERIAL ON RECORD. THE ASSESSEE SUBMITTED DURING THE COURSE O F PENALTY PROCEEDINGS VIDE ITS LETTER DATED 20.03.2012 THAT INTEREST INCO ME WAS EARNED ON FDRS, WHICH WERE CREATED FOR OBTAINING BANK GUARANT EES AND LETTERS OF CREDIT. AS REGARDS MISCELLANEOUS INCOME OF RS.2.25 LAC, IT WAS STATED THAT THE SAME REPRESENTED THE RECOVERY FROM CUSTOME RS OF EXCESS COST INCURRED BY THE ASSESSEE FOR SCANNING AND REMODELIN G CHARGES. THIS DIVULGES THE NATURE OF BOTH THE ITEMS OF INCOME AS `BUSINESS INCOME, WHICH FACT HAS ALSO BEEN ADMITTED BY THE ASSESSING OFFICER, WHO, CHOSE TO TAX THE SAME UNDER THE HEAD PROFITS AND GAINS O F BUSINESS OR PROFESSION AND NOT AS INCOME FROM OTHER SOURCES. IN SO FAR AS EXEMPTION U/S 10B IS CONCERNED, IT IS CLEAR FROM TH E LANGUAGE OF THE PROVISION THAT THE SAME IS AVAILABLE IN RESPECT OF PROFITS AND GAINS OF THE UNDERTAKING AND CANNOT BE RESTRICTED TO THE PROFIT DERIVED FROM THE UNDERTAKING, AS HAS BEEN HELD BY THE HON'BLE DELHI HIGH COURT IN RIVIERA HOME FURNISHING VS. ADDL.CIT VIDE ITS ORDER DATED 19.11.2015, WHOSE COPY HAS BEEN PLACED AT PAGE 40 OF THE PAPER BOOK. IN THIS CASE, QUESTION NO.3 BEFORE THE HON'BLE HIGH COURT WAS ON THE GRANT OF ITA NO.6174/DEL/2014 4 EXEMPTION U/S 10B ON INTEREST ON FDR WHICH CAME TO BE DECIDED IN ASSESSEES FAVOUR. SIMILAR VIEW HAS BEEN TAKEN BY THE HON'BLE KARNATAKA HIGH COURT IN CIT VS. MOTOROLA INDIA ELECTRONICS PVT. LTD. (2014) 46 TAXMANN.COM 167 (KAR). IN VIEW OF THESE DECISIONS, IT BECOMES APPARENT THAT THE VIEW POINT OF THE ASSESSE E AS REGARDS THE ELIGIBILITY OF CLAIM FOR EXEMPTION U/S 10B ON INTER EST INCOME AND MISCELLANEOUS INCOME, WHICH HAVE BEEN OBVIOUSLY CHA RGED TO TAX UNDER THE HEAD PROFITS AND GAINS OF PROFESSION, CANNOT BE HELD TO BE WITHOUT ANY FOUNDATION. THE MERE FACT THAT THE ASSESSEE DI D NOT CHALLENGE THE REJECTION OF SUCH CLAIM IN APPELLATE PROCEEDINGS, C ANNOT AUTOMATICALLY MEAN THAT PENALTY SHOULD ALSO BE IMPOSED. WHEN THE FACTS AND CIRCUMSTANCES OF THE CASE ARE SEEN IN ENTIRETY, IT BECOMES APPARENT THAT THE ASSESSEE MADE A LEGALLY SUSTAINABLE CLAIM FOR E XEMPTION U/S 10B ON THESE TWO ITEMS OF INCOME AND THERE CAN BE NO QUEST ION OF IMPOSING PENALTY U/S 271(1)(C) ON THIS SCORE, NOTWITHSTANDIN G THE FACT THAT THE ORDER PASSED IN QUANTUM PROCEEDINGS WAS NOT ASSAILE D IN FURTHER APPEAL. OUR VIEW IS FORTIFIED BY THE JUDGMENT DATED 21.8.20 13 OF THE HONBLE PUNJAB & HARYNA HIGH COURT IN CIT VS. OLYMPIA ELECTRONICS PVT. LTD. ITA NO.6174/DEL/2014 5 IN WHICH PENALTY HAS BEEN HELD TO BE UNSUSTAINABLE UNDER SIMILAR CIRCUMSTANCES. A COPY OF THE JUDGMENT HAS BEEN PLAC ED AT PAGE 52 OF THE PAPER BOOK. SETTING ASIDE THE IMPUGNED ORDER, WE DI RECT THE DELETION OF PENALTY. 4. IN THE RESULT, THE APPEAL IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 14.09.201 7. SD/- SD/- [SUCHITRA KAMBLE] [R.S. SYAL] JUDICIAL MEMBER VICE PRESIDENT DATED, 14 TH SEPTEMBER, 2017. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.