Vardhman Textile Ltd., Ludhiana V. ACIT, Ludhiana

ITA 66/CHANDI/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7515 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 year(s) 5 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 20-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAGDEEP GOYAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Capital receipt
• Section: 80IB; 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS.ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NOS.65 & 66/CHD/2011 (ASSESSMENT YEARS: 2004-05 & 2005-06) VARDHMAN TEXTILES LTD. VS. THE ASST. CIT CHANDIGARH ROAD, CIRCLE-1, LUDHIANA LUDHIANA PAN: AABCM4692E ITA NO. 285/CHD/2011 (ASSESSMENT YEAR: 2005-06) THE ACIT VS. VARDHMAN TEXTILES LTD. CIRCLE-1 CHANDIGARH ROAD LUDHIANA LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI. SUBHASH AGGARWAL DEPARTMENT BY : SHRI. JAGDEEP GOYAL DATE OF HEARING : 20/06/2018 DATE OF PRONOUNCEMENT : 11/07/2018 ORDER PER SANJAY GARG, JUDICIAL MEMBER : THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE A GITATING AGAINST THE LEVY OF PENALTY BY LOWER AUTHORITIES UNDER SECTION 271 (1)(C) OF THE ACT. 2. LD. COUNSEL FOR THE ASSESSEE WHILE INVITING OUR ATTENTION TO THE RELEVANT ISSUES IN RELATION TO WHICH THE IMPUGNED PENALTY WA S LEVIED IN RELATION TO A.Y. 2004-05, HAS SUBMITTED THAT THE ASSESSING OFFICER H AD MADE DISALLOWANCE AND CONSEQUENTIAL ADDITIONS TO THE INCOME OF ASSESSEE O N THE FOLLOWING ISSUES: 1. DISALLOWANCE OF FOREIGN TRAVELING EXPENSES 2. DISALLOWANCE OF EXEMPTION UNDER SECTION 10B ON INTE REST FROM BANKS, RENTAL INCOME AND COMMISSION INCOME 3. THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE ORDER OF THE TRIBUNAL DT. 04/05/2018 PASSED IN ITA NO. 681/C HD/2007 AND HAS SUBMITTED THAT FOR THE YEAR UNDER CONSIDERATION FOR A.Y. 2004 -05 QUANTUM APPEAL OF THE 2 ASSESSEE IN ITA NO. 981/CHD/2008 HAS BEEN DECIDED W HEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE RELATING TO THE DEDUCTION CLAIM ED ON ACCOUNT OF INTEREST FROM BANKS, DISALLOWANCE OF RENT AND DISALLOWANCE OF COM MISSION INCOME OUT OF EXEMPTION CLAIMED UNDER SECTION 10B, TO THE FILE OF THE AO. HOWEVER THE DISALLOWANCE OF 50% OF EXPENDITURE IN RELATION TO F OREIGN TRAVELLING EXPENSES OF THE MANAGING DIRECTOR AND ENTIRE EXPENDITURE ON TRE ATMENT OF HIS WIFE HAS BEEN UPHELD BY THE TRIBUNAL. LD. COUNSEL FOR THE ASSESSE E IN THIS RESPECT HAS INVITED OUR ATTENTION TO PAGE 36 OF THE ORDER. 4. SO FAR AS THE ISSUES IN RELATION TO WHICH THE MA TTER HAS BEEN SET ASIDE TO THE FILE OF THE AO IS CONCERNED, THERE ARE NO ADDIT ION SUBSISTING ON THIS ISSUE AS ON THIS DAY. SINCE THE DISALLOWANCE / ADDITION AT T HIS STAGE AS HAVE CEASED SO TO EXIST HENCE CONSEQUENTIAL PENALTY HAS NO LEG TO STA ND AND ACCORDINGLY THE PENALTY LEVIED IN RESPECT OF DISALLOWANCE MADE ON A CCOUNT OF INTEREST FROM BANKS, RENT AND COMMISSION INCOME IS ORDERED TO BE DELETED. HOWEVER IT IS MADE CLEAR THAT IF IN THE SET ASIDE PROCEEDING, ANY DISALLOWANCE OR ADDITION IS MADE IN THIS RESPECT AND THE AO IS OF THE VIEW THAT PENALTY PROCEEDING ARE ATTRACTED HE WILL BE AT LIBERTY TO INITIATE THE SAM E. 5. SO FAR AS THE DISALLOWANCE IN RESPECT OF FOREIGN TRAVELLING EXPENSES IS CONCERNED, WE FIND THAT THE 50% OF THE EXPENDITURE OF FOREIGN TRAVELLING EXPENSES OF THE DIRECTOR AND EMPLOYEES OF THE COMPA NY HAS BEEN MADE ON ADHOC BASIS. IN OUR VIEW THE AFORESAID DISALLOWANCE DOES NOT ATTRACT RIGOROUS PENALTY PROVISIONS UNDER SECTION 271(1)(C) OF THE A CT. 6. SO FAR AS THE DISALLOWANCE OF FOREIGN TRAVELLING EXPENSES OF WIFE OF THE MANAGING DIRECTOR IS CONCERNED, THOUGH IT WAS THE C ASE OF THE ASSESSEE BEFORE THE LOWER AUTHORITY THAT THE WIFE OF THE MANAGING D IRECTOR OF THE COMPANY ACCOMPANIED HIM FOR HELPING AND ASSISTING THE MD FO R PROCURING THE BUSINESS FOR THE COMPANY AND EVEN THAT THE COMPANY HAD ALREADY P ASSED A RESOLUTION ALLOWING THE WIFE OF THE MANAGING DIRECTOR TO ACCOM PANYING HIM. HOWEVER THE ASSESSEE COULD NOT FURNISH NECESSARY EVIDENCE IN TH IS RESPECT DURING THE QUANTUM PROCEEDINGS. HOWEVER AT THIS STAGE, MR. AGG ARWAL THE LD. COUNSEL FOR THE ASSESSEE, HAS STATED THAT THE BOARD RESOLUTION WAS PASSED BY THE COMPANY. HE HAS RELIED UPON THE COPY OF THE BOARD RESOLUTION IN THIS RESPECT. AFTER CONSIDERING THE SUBMISSION AND OVER ALL FACTS AND C IRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THOUGH THE DISALLOWANCE HAS BE EN CONFIRMED BY THE 3 TRIBUNAL IN RESPECT OF TRAVELLING EXPENSES OF THE W IFE OF THE MD, YET, SO FAR AS THE PENALTY PROCEEDING UNDER SECTION 271(1)(C) ARE CONC ERNED, IT IS NOT A CASE OF FURNISHING OF INACCURATE PARTICULARS OF INCOME OR C ONCEALMENT OF INCOME. IT IS A CASE OF CLAIM OF EXPENDITURE ON THE GROUND THAT WIF E OF MD HAD ACCOMPANIED HIM FOR BUSINESS PURPOSES OF THE COMPANY AND THE CO MPANY HAD ALSO AUTHORIZED THE MD TO TAKE HIS WIFE ON FOREIGN TOUR. THOUGH THE LD. AO MADE THE DISALLOWANCE HOLDING THAT THE SAID EXPENDITURE COUL D NOT BE SAID TO BE INCURRED SOLELY FOR THE BUSINESS OF THE ASSESSEE, HOWEVER, A S DISCUSSED ABOVE, IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INAC CURATE PARTICULARS OF INCOME. IN VIEW OF THE ABOVE, THE PENALTY LEVIED UN DER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DISALLOWANCE OF FOREIGN TRAVELLIN G EXPENSES OF THE MD, EMPLOYEES AS WELL AS WIFE OF THE MD IS ORDER TO BE DELETED. 7. COMING TO THE APPEAL IN ITA NO. 66/CHD/2011 FOR A.Y. 2005-06, LD. COUNSEL FOR THE ASESSEE HAS STATED THAT THE ISSUES RELATING TO PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ARE IDENTICAL TO THAT FOR A.Y. 2004-05. HE HAS FURTHER SUBMITTED THAT THE ISSUES OF SUCH DISALLOWA NCE HAVE ALREADY BEEN SET ASIDE BY THE TRIBUNAL TO THE FILE OF THE AO. FURTHE R THAT THE ISSUE OF DISALLOWANCE OF FOREIGN TRAVEL EXPENSES IS IDENTICAL AS DISCUSSE D ABOVE WHILE ADJUDICATING THE ISSUE OF LEVY OF PENALTY FOR A.Y. 2004-05. 8. IN VIEW OF OUR FINDINGS GIVEN WHILE DECIDING THE APPEAL OF THE ASSESSEE IN ITA NO. 65/CHD/2011 IMPUGNED PENALTY LEVIED IN THIS CASE IS ALSO ORDERED TO BE DELETED ON SIMILAR DIRECTIONS. 9. THIS APPEAL OF THE ASSESSEE IS ALLOWED. 10. THE NEXT APPEAL IS ITA NO. 285/CHD/2011. THE DE PARTMENT HAS CAME UP IN THIS APPEAL AGITATING THE ACTION OF THE LD. CIT(A) IN DELETING THE PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT ON ACCOUNT OF DI SALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE IN RESPECT OF SALES TAX SUB SIDY. AT THE OUTSET THE LD. COUNSEL OF THE ASSESSEE HAS SUBMITTED THAT DISALLOW ANCE MADE BY THE LOWER AUTHORITIES IN RESPECT OF SALES TAX SUBSIDY HAS BEE N DELETED TREATING THE SAME AS CAPITAL RECEIPT. IN VIEW OF THIS THE VERY BASIS ON WHICH IMPUGNED PENALTY WAS LEVIED HAS CEASED TO EXIST, HENCE THE IMPUGNED PENA LTY LEVIED BY THE AO IS NOT SUSTAINABLE. 4 11. THE SECOND ISSUE UPON WHICH THE PENALTY HAS BEE N LEVIED IS REGARDING THE DISALLOWANCE OF CLAIM DEDUCTION UNDER SECTION 10B A ND 80IB ON MISCELLANEOUS INCOME. 12. THE LD. COUNSEL FOR THE ASSESSEE INVITING OUR A TTENTION TO THE PAGE 11 TO 13 OF THE DECISION OF THE TRIBUNAL IN RESPECT OF QUANT UM PROCEEDINGS, HAS SUBMITTED THAT THE ISSUES RELATING TO WHICH THE QUA NTUM ADDITION WERE MADE, HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE A SSESSEE. IN VIEW OF THIS THE IMPUGNED PENALTY LEVIED ON THIS ISSUE IS NOT SUSTAI NABLE. 13. IN THE RESULT THERE IS NO MERIT IN THE APPEAL O F THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 11/07/2018 AG COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR