DCIT 7(3), MUMBAI V. TIMES GLOBAL BROADCASTING CO. LTD, MUMBAI

ITA 6695/MUM/2012

• Counselvise Citation: 669519914 RSA 2012
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2007-2008
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAL
• Assessee Lawyers: S VENKATRAMA N
• Keywords: Depreciation; Difference of opinion
• Section: 32; 143(3)

Judgement Text

` IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI . . , !' #'' ' , $ % BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : 6695 / / 2012 A.Y. 2007-08 ITA NO. : 6695/MUM/2012 (ASSESSMENT YEAR: 2007-08) DY. COMMISSIONER OF INCOME TAX -7(3), ROOM NO. 615, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI -400 020 VS M/S TIMES GLOBAL BROADCASTING CO LTD, 1 ST FLOOR, TRADE HOUSE, KAMALA MILLS COMPOUND, SENAPATI BAPAT MARG, LOWER PAREL, MUMBAI -400 013 PAN: AACCT 2259 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M L PERUMAL RESPONDENT BY : SHRI S VENKATRAMAN /DATE OF HEARING : 07-01-2014 / DATE OF PRONOUNCEMENT : 15-01-2014 ( O R D E R #'' ' , : PER VIVEK VARMA, JM: THE APPEAL FILED BY THE DEPARTMENT ARISES FROM THE ORDER OF CIT(A) 13, MUMBAI, DATED 24.08.2012, WHEREIN THE CIT(A) DELETED THE PENALTY U/S 271(1)(C), LEVIED BY THE AO. 2. THE FACTS AS NOTED BY THE CIT(A) IN THE IMPUGNED ORDER ARE, THE APPELLANT FILED ITS RETURN OF INCOME FOR ASSESSMENT YEAR 2007-08 ON 30.10.2007 DECLARING TOTAL LOSS OF RS. 88,47,43,143/-. THE ASSESSIN G OFFICER (A.O.) PASSED AN ORDER U/S 143(3) OF I.T. ACT, 1961 ON 11/12/2009 DETERMINING TOTAL LOSS OF RS. 84,86,56,012/- . IN THE RETURN OF INCOME, THE APPELLANT HAD CLAIMED D EPRECIATION ON SOFTWARE LICENCE FEE AT THE RATE OF 60% IN RESPECT OF ADDITIONS PRIOR T O 1 ST OCTOBER, 2006 AND AT THE RATE OF 30% ON ADDITIONS SUBSEQUENT TO THE SAID DATE. THIS CLAI M OF THE APPELLANT WAS BASED ON ITEM 5 APPEARING IN APPENDIX I PRESCRIBED UNDER RULE 5 OF THE INCOME TAX RULES, 1962, WHICH READS AS FOLLOWS: COMPUTERS INCLUDING COMPUTER SOFTWARE 60% M/S TIMES GLOBA L BROADCASTING CO LTD ITA NO. 6695/MUM/2012 2 THE ASSESSING OFFICER, HOWEVER, WAS OF THE OPINION TH AT THE SOFTWARE LICENCE FEE WAS IN THE NATURE OF AN INTANGIBLE ASSET AND CONSEQUENTLY ALLOW ED DEPRECIATION AT THE RATE OF 25%. BY SO DOING, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEPRECIATION TO THE EXTENT OF RS. 2,51,31,317/-. 3. THE AO, THEREAFTER, INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) ON THE DISALLOWANCE OF RS. 2,51,31,317/-. 4. THE ASSESSEE DID NOT CONTEST THE DISALLOWANCE OF DEP RECIATION AND CONSEQUENTIAL ADDITION THEREOF, IN THE APPEAL PROCEEDING S, AS IT WOULD IN ANY CASE BE ALLOWED IN FUTURE YEARS ON THE WRITTEN DOWN VALUE AND PRIMARILY, AS THERE WAS NO REVENUE IMPACT ON THE ASSESSEE. 5. SINCE THE PENAL PROCEEDINGS HAD BEEN INITIATED AGAINST THE ASSESSEE ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION, THE A SSESSEE SUBMITTED BEFORE THE AO THAT THE CLAIM OF DEPRECIATION IN THE RETURN OF INC OME WAS BASED ON A LEGITIMATE AND BONA FIDE VIEW THAT THE RATE OF DEPRECIATION PRESCRIBED IN APPENDIX I WAS APPLICABLE. AS AGAINST THE SAME, THE ASSESSING OFFICER WAS OF THE VI EW THAT DEPRECIATION AT THE RATE OF 25% WAS ONLY ALLOWABLE. IT WAS, THEREFORE, SUBMITTED TH AT THE ENTIRE ISSUE WAS DEBATABLE AND TWO VIEWS WERE LEGITIMATELY POSSIBLE IN THE M ATTER AND, CONSEQUENTLY, NO PENALTY LIES AS THERE WAS NO FURNISHING OF INACCURATE PARTICULARS OF THE INCOME. 6. THE AO, DISREGARDED THE REPLY OF THE ASSESSEE AND LE VIED THE PENALTY AT RS. 84,59,200/- U/S 271(1)(C) ON THE ALLEGED CLAIM O F DEPRECIATION. 7. THE ASSESSEE, PREFERRED AN APPEAL BEFORE THE CIT(A) AN D REITERATED ITS SUBMISSION MADE BEFORE THE AO, IN THE PENA LTY PROCEEDINGS AND FURTHER SUBMITTED THAT THE FACTS OF THE CASE ARE COVERED BY THE RATIO LAID DOWN BY THE HONBLE SUPREME C OURT OF INDIA IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT LTD, R EPORTED IN 322 ITR 158, WHEREIN THE HONBLE SUPREME COURT OF INDIA VIRTU ALLY REVERSED THE DECISION OF UOI VS DHAREMENDRA TEXTILE PRO CESSORS, REPORTED IN 306 ITR 277, WHEREIN, THE ISSUE OF MENS REA HAD BEEN TAKEN INTO CONSIDERATION FOR LEVY OF PENALTY. 8. THE CIT(A), TAKING INTO ACCOUNT, THE SUBMISSIONS MADE B Y THE ASSESSEE, HELD, M/S TIMES GLOBA L BROADCASTING CO LTD ITA NO. 6695/MUM/2012 3 I HAVE CONSIDERED THE ARGUMENTS AND SUBMISSIONS MADE BY THE AUTHORIZED REPRESENTATIVE AND AM INCLINED TO AGREE WITH THE SAME. THE CLAIM OF DEPRECIATION MADE BY THE APPELLANT IN ITS RETURN OF INCOME AT THE RATE O F 60% OF THE SOFTWARE LICENCE FEE ACCORDING TO THE APPELLANT WAS A BONA FIDE AND LEGITIMATE CLAIM AS IN EVIDENT FROM ITEM 5 APPEARING IN APPENDIX I PRESCRIBED UNDER RULE 5 OF TH E INCOME TAX RULES, 1962. HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT D EPRECIATION WAS ALLOWABLE AT THE RATE OF 25% BY TREATING THE SOFTWARE LICENCE FEE AS AN INTANGIBLE ASSET UNDER SECTION 32 OF THE ACT. CONSEQUENTLY, THE CLAIM MODE BY THE APPELL ANT IN ITS RETURN OF INCOME CANNOT BE SAID TO BE AN INCORRECT OR INACCURATE CLAIM TO VISIT THE APPELLANT WITH PENALTY UNDER SECTION 2I 1(1 )(C) OF THE INCOME TAX ACT, 1961 4.6 IN CIT V/S SIVARIANDA STEELS LTD ( 256 ITR PG 683) PENALTY UNDER SECTION 271(1)(C) WAS LEVIED FOR FURNISHING INACCURATE PARTICULARS OF IN COME ON A CLAIM OF DEPRECIATION THAT WAS WITHDRAWN. THE HONBLE MADRAS HIGH COURT WHILE DELET ING THE PENALTY SLATED AS FOLLOWS AT PAGE 684:- IT IS ALSO THE FURTHER FINDING OF THE TRIBUNAL THAT TH E PARTICULARS GIVEN BY THE ASSESSEE WERE ACCURATE. THE DIFFERENCE OF OPINION BE TWEEN THE ASSESSING OFFICER AND THE ASSESSEE AS TO WHETHER THE EXPERIMENT AL RUNNING OF THE MACHINE WAS SUFFICIENT TO REGARD IT AS USE IN THE BUSINESS OF THE ASSESSEE ENTITLING THE ASSESSEE TO CLAIM DEPRECIATION FOR THE YEAR, THEREFOR E CANNOT BE REGARDED AS SUFFICIENT TO SUBJECT THE ASSESSEE TO PENALTY ON. T HE GROUND THAT THE PARTICULARS GIVEN BY THE ASSESSEE WERE INCORRECT. THE TRIBUNAL WAS, IN THE CIRCUMSTANCES, RIGHT IN HOLDING THAT THE PENALTY WAS NOT LEVIABLE AND S ETTING ASIDE THE PENALTY THAT HAD BEEN. LEVIED THE DELHI ITAT IN LOLA HARBHAGWAN DASS MEMORIAL & DR PRE M HOSPITAL (P) LTD V/S ITO, WARD 39(3), NEW DELHI ( 23 TAXMAN 32 ) THE ASSESSEE HAD CLAIMED DEPRECIATION ON A NEW CT SCANNER AT THE RATE OF 40% UNDER THE CATEGOR Y OF LIFE SAVING EQUIPMENT, JUST LIKE AN MRI EQUIPMENT ON WHICH IT WAS CLAIMING AT THE SAME RATE. THE CLAIM OF DEPRECIATION WAS DISALLOWED BY THE A.O. AS HE NOTED THAT THE NAME O F CT SCANNER DID NOT APPEAR AMONG THE LIST OF LIFE SAVING EQUIPMENT AND PENALTY UND ER SECTION 271(1) WAS LEVIED IN RESPECT OF THE SAID DISALLOWANCE. THE HONBLE DELHI ITAT D ELETED THE PENALTY ON THE GROUND THAT THERE WAS NEITHER CONCEALMENT NOR FURNI SHING OF INACCURATE PARTICULARS BUT AN ERRONEOUS CLAIM. WHILE DOING SO THE DELHI ITAT RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V/S RELIANCE PETROPRO DUCTS (P) LTD ( 322 ITR PAGE 158) REFERRED TO BY THE ASSESSEE IN THE PRESENT APPEAL. THE RELIANCE BY THE AUTHORIZED REPRESENTATIVE ON THE DE CISION OF THE HONBLE SUPREME COURT. IN RELIANCE PETROPRODUCTS (P) LTD. (322 ITR 158) AND THE OBSERVATIONS OF THE APEX COURT AT PAGES 165 AND 166 OF ITS JUDGMENT CLEARLY GO TO SHOW THAT A MERE CLAIM BASED ON AN INTERPRETATION OF LAW, WHICH IS NOT ACCEPTED OR NO T. ACCEPTABLE BY / TO THE ASSESSING OFFICER, WOULD NOT AMOUNT TO FURNISHING INACCUR ATE PARTICULARS OF INCOME. FURTHER, WHERE TWO VIEWS ARE LEGITIMATELY POSSIBLE AND B ASED ON ONE VIEW A CLAIM OF DEPRECIATION MADE THAT, IN ANY EVENT, WOULD NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS OF INCOME.. IN THE CIRCUMSTANCES, THE PENALTY OF RS. 84,59,200/- LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961, IS DELETED. 9. AGAINST THIS ORDER OF THE CIT(A), THE DEPARTMENT IS IN A PPEAL BEFORE THE ITAT. 10. BEFORE US, THE DR PLACED RELIANCE ON THE DETAILED ORDER OF THE AO, WHEREAS, THE AR PLACED RELIANCE ON THE DETAILED ORDER OF THE CIT(A) AND FURTHER SUBMITTED ON THE FACTS, AS NOTED IN THE IMPU GNED ORDER OF THE CIT(A), PENALTY SHOULD NOT BE SUSTAINED. 11. WE HEARD THE ARGUMENTS OF THE CONTESTING PARTIES AN D HAVE SCRUTINIZED THE ORDERS OF THE REVENUE AUTHORITIES. THE ISS UE IS WHETHER THE CLAIM OF DEPRECIATION AT 60% ON SOFTWARE LICENCE A GE NUINE CLAIM. M/S TIMES GLOBA L BROADCASTING CO LTD ITA NO. 6695/MUM/2012 4 EVEN IF NOT, WHETHER THE ISSUE IS DEBATABLE AND WHETHER T HE CLAIM WAS BONA FIDE . 12. FROM THE FACTS GERMANE FROM THE ARGUMENTS OF THE AR, THE RATE AT WHICH THE CLAIM IS MADE , FIGURES AS ITEM NO. 5 IN APPENDIX I UNDER RULE 5 OF INCOME TAX RULES, 1962. ON THIS NOTE ITSELF, THAT T HE CLAIM WAS CORRECT, AND NO PENALTY IS EXIGIBLE, BECAUSE, IT IS NOT O NLY CORRECT BUT BONA FIDE . ON THE OTHER HAND, THE CLAIM OF DEPRECIATION ALLOWED BY THE AO AT 25% IS DEBATABLE, ON WHICH PENALTY CANNOT BE IM POSED, BECAUSE THE PENALTY U/S 271(1)(C) MUST ARISE FROM THE RETU RN OF INCOME, WHERE THE AO MUST DETECT SOMETHING WHICH AMOUNT S TO CONCEALMENT OF PARTICULARS OF INCOME. THE HONBLE SUPREME C OURT DEALT WITH THE PHRASES USED IN THE PENALTY PROVISION AND DISCUSSING THEM HELD, THE WORD PARTICULAR THEIR LORDSHIPS OBSERVED THA T IT REFERRED TO HE DETAILS OF A CLAIM, OR THE SEPARATE ITEMS OF AN ACCOUNT. FURTHER , AT PAGE 165 WHILE DEALING WITH THE DEFINITION OF THE EXPRESSION INACCURATE, THEIR LORDSHIP S STATE AS FOLLOWS: WE HAVE ALREADY SEEN THE MEANING OF THE WORD PARTICU LARS IN THE EARLIER PART OF THE JUDGMENT. READING THE WORDS IN CONJUNCTION, THE Y MUST MEAN THE DETAILS SUPPLIED IN THE RETURN, WHICH ARE NOT ACCURATE, NOT EX ACT OR CORRECT, NOT ACCORDING TO TRUTH OR ERRONEOUS A MERE MAKING OF THE CLAIM, WHICH IS NOT SUSTAINABLE IN LA W, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING TH E INCOME OF THE ASSESSEE. SUCH CLAIM MADE IN THE RETURN CANNOT AMOUNT TO INACCURATE PARTICULARS MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM WAS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE R EVENUE THAT, BY ITSELF, WOULD NOT, IN OUR OPINION, ATTRACT THE PENALTY UNDER S EC 271(1)(C). IF WE ACCEPT THE CONTENTION OF THE REVENUE, THEN IN CASE OF EVERY RETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY THE ASSESSING OFFICER, FOR A NY REASON, THE ASSESSEE WILL INVITE PENALTY UNDER SEC. 271(1)(C). THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 13. WE MAY ALSO REFER TO THE DECISION OF COORDINATE BENCH AT DELHI IN THE CASE OF LALA HARBHAGWAN DAS MEMORIAL & DIA PREM HOSP ITAL (P) LTD VS ITO, REPORTED IN 23 TAXMAN 32. THIS WAS A CASE WHERE THE ASSESSEE CLAIMED DEPRECIATION ON A NEW C T SCAN MACHINE AT 40%, TAKING THE SAME IN THE CATEGORY OF EQUIPMENT, LIKE MRI, WHIC H HAD BEEN ALLOWED AT 40%. THE AO DISALLOWED THE DEPRECIATION ON CT SCAN MACHINE, AS IT DID NOT FIGURE IN THAT LIST. THE COORDINATE BEN CH AT DELHI DELETED THE DISALLOWANCE ON THE GROUND THAT THERE WAS N EITHER M/S TIMES GLOBA L BROADCASTING CO LTD ITA NO. 6695/MUM/2012 5 CONCEALMENT NOR FURNISHING OF INACCURATE PARTICULARS BUT A N ERRONEOUS CLAIM. 14. IN THE INSTANT CASE, AS OBSERVED BY US, THAT THE CLA IM OF DEPRECIATION AT 60% WAS MADE AS PER ITEM NO. 5, APPENDI X I UNDER RULE 5. THIS ACCORDING TO OUR OPINION WAS A BONA FIDE CLAIM. 15. IN THESE CIRCUMSTANCES, THE PENALTY AS IMPOSED BY TH E AO CANNOT BE SUSTAINED BECAUSE NEITHER THE CLAIM WAS MALA FIDE , NOR THE CLAIM WAS WRONG, NOR THE CLAIM WAS NOT ALLOWABLE, NOR IS THE ARGUMENT OF THE AO THAT THERE WERE INACCURATE PARTICULARS WHICH W ERE FURNISHED, NOR THERE WAS AN ATTEMPT TO CONCEAL INCOME. 16. WE, THEREFORE, SUSTAIN THE ORDER OF THE CIT(A), DELETING T HE PENALTY AND REJECT THE GROUNDS OF APPEAL AS FILED BY THE DEPARTMENT. 17. IN THE RESULT, THE APPEAL, AS FILED BY THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2014. SD/- SD/- ( . . ) ( #'' ' ) (R. C. SHARMA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 15 TH JANUARY, 2014 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT (A)-13, MUMBAI. 4) THE CIT-7, , MUMBAI, 5) !'# $ , % $ , &'( / THE D.R. E BENCH, MUMBAI. 6) #) * COPY TO GUARD FILE. %+,- / BY ORDER M/S TIMES GLOBA L BROADCASTING CO LTD ITA NO. 6695/MUM/2012 6 / / TRUE COPY / / . / / '0 % $ , &'( DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *23/ . . * CHAVAN, SR. PS