DCIT 3(3), MUMBAI V. SOFOTEL SOFTWARE SERVICES P. LTD, MUMBAI

ITA 6701/MUM/2010

• Counselvise Citation: 670119914 RSA 2010
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 08-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 20-09-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K G KUTTY
• Assessee Lawyers: S V JOSHI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI VIVEK VARMA (JM) I.T.A. NO. 6701/MUM/2010 (A.Y. 2004-05) DY. COMMR. OF INCOME-TAX-3(3), R.NO.609, 6 TH FLOOR, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. SOFOTEL SOFTWARE SERVICES P.LTD., 10-B, BAKHTAWAR, NARIMAN POINT, MUMBAI-400 021. PAN: AAACS8038B. APPELLANT RESPONDENT APPELLANT BY SHRI K.G. KUTTY. RESPONDENT BY SHRI S .V. JOSHI. DATE OF HEARING 08-05-2012 DATE OF PRONOUNCEMENT 11-05-2012 O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-7, MUMBAI, ON 13-04-2010 DELETING PENALTY O F RS.6,99,112/- IMPOSED BY THE AO U/S. 271(1)(C) OF INCOME-TAX ACT, 1961, IN RELATION TO ASSESSMENT YEAR 2004-05. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE WROTE OFF A SUM OF RS.19,48,743/- IN ITS BOOKS OF ACCOUNT TOWARDS CAFETERIA EXPENSES. ON BEING CALLED UPON TO EXPLAIN AS TO HOW SUCH DEDUCTION WAS CLAIMED, THE ASSESSEE ITA NO.6701/MUM/2010 SOFOTEL SOFTWARE SERVICES P.LTD. 2 SUBMITTED THAT THE PROJECT WAS INITIATED IN EARLY 1 999 FOR CATERING TO THE NEEDS OF WORKING STAFF EMPLOYED WITH VARIOUS MNCS. SINCE THE PROJECT WAS NOT FOUND TO BE FEASIBLE, IT WAS ABANDONED AND THE SAID AMOUN T WAS WRITTEN OFF IN THE PROFIT & LOSS ACCOUNT FOR THE CURRENT YEAR. THE AO DID NOT ACCEPT THE ASSESSEES CONTENTION ON THE GROUND THAT THE ASSESSEE ITSELF H AD CAPITALIZED THIS AMOUNT IN EARLIER YEARS AND HENCE SUCH DEDUCTION WAS NOT ADMI SSIBLE. HE, THEREFORE, REFUSED DEDUCTION ON THIS ACCOUNT AND CONSEQUENTLY IMPOSED PENALTY U/S.271(1)(C) OF THE ACT IN THIS REGARD. THE LD. C IT(A) GOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND ORDERED TO DELETE THE PE NALTY. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSEE CAPITALIZE D THE EXPENSES IN RELATION TO CAFETERIA PROJECT AS CAPITAL WORK IN PROGRESS IN EA RLIER YEAR. SUCH PROJECT DID NOT TAKE OFF AND EVENTUALLY THE ASSESSEE CLAIMED IT AS A BUSINESS LOSS IN THE CURRENT YEAR. IT IS CLEARLY BORNE OUT FROM RECORDS THAT TH E ASSESSEE CLAIMED DEDUCTION BY DISCLOSING COMPLETE PARTICULARS IN THIS REGARD. SIM PLY BECAUSE THE ASSESSEE DID NOT SUCCEED IN THE FIRST APPEAL ON THIS ISSUE, IT D OES NOT MEAN THAT PENALTY WILL BE AUTOMATIC. THE LD. CIT(A), WHILE DECIDING THE ISSUE IN ASSESSEES FAVOUR HAS TAKEN NOTE OF CERTAIN DECISIONS INCLUDING THAT OF T HE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BRALCO METAL INDUSTRIES PVT. L TD. VS. CIT (1994) 206 ITR 477 (BOM). WE ARE AGREEABLE WITH THE VIEWPOINT OF T HE AO THAT THE AMOUNT IN QUESTION MAY NOT BE CONCLUSIVELY ALLOWABLE AS DEDUC TION. AT THE SAME TIME, IT ITA NO.6701/MUM/2010 SOFOTEL SOFTWARE SERVICES P.LTD. 3 CANNOT BE SAID THAT THERE IS NO POSSIBILITY TO CLAI M SUCH AMOUNT AS A BUSINESS LOSS. IN OTHER WORDS, IT IS A CASE OF DEBATABLE ISS UE ON WHICH TWO VIEWS ARE POSSIBLE. IT IS SETTLED LEGAL POSITION THAT PENALTY U/S. 271(1)(C) CANNOT BE IMPOSED ON A DEBATABLE ISSUE. MOREOVER, SINCE THE ASSESSEE MADE COMPLETE DISCLOSURE OF THE DETAILS IN THIS REGARD IN ITS RETURN OF INCOME, IN OUR CONSIDERED OPINION THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETROPRODUCTS (P) LTD. (2010) 322 ITR 158 (SC) WILL COME TO THE ASSESSEES RESCUE, IN WHICH IT HAS BEEN HELD THAT MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT ATTRACT PEN ALTY UNDER THIS SECTION. CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES PREVAILING IN THE INSTANT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT(A ) WAS JUSTIFIED IN ORDERING THE DELETION OF PENALTY. WE, THEREFORE, UPHOLD THE IMP UGNED ORDER. 4. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 11TH DAY OF MAY, 20 12. SD/- SD/- (VIVEK VARMA) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11 TH MAY , 2012. NG: ITA NO.6701/MUM/2010 SOFOTEL SOFTWARE SERVICES P.LTD. 4 COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-7, MUMBAI. 4 CIT-3,MUMBAI. 5.DR,E BENCH, MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST. REGISTRAR, ITAT, MUMBAI. ITA NO.6701/MUM/2010 SOFOTEL SOFTWARE SERVICES P.LTD. 5 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 8-05-2012 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 8-05-2012 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/A M 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/A M 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *