THE THE MAHALAKSHMI GLASS WORKS P.LTD, MUMBAI V. ACIT CIR 6(3), MUMBAI

ITA 6730/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3297 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 20-11-2013
• Court: TRIBUNAL
• Keywords: Wrong claim; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 6730 /MUM/ 201 3 (ASSESSMENT YEAR 2008 - 0 9 ) THE MAHALAKSHMI GLASS WORKS PVT. LTD. DR.E. MOSES ROAD MAHALAKSHMI JACOB CIRCLE MUMBAI - 400 011 . VS. ACIT 6(3) ROOM NO. 522 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACT0213D ASSESSEE BY NONE DEPARTMENT BY SHRI SANJEEV JAIN DATE OF HEARING 6.6 . 201 6 DATE OF PRONOUNCEMENT 6 . 6 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 08 - 10 - 2013 PASSED BY LD CIT(A) - 12, MUMBAI CONFIRMING THE PENALTY OF RS.2,13,220/ - LEVIED BY THE ASSESSING OFFICER U/S 271(1)(C) OF THE ACT. 2. NONE APPEA RED ON BEHALF OF THE ASSESSEE AND HENCE WE PROCEED TO DISPOSE OF THE APPEAL EX - PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. 3. WE HEARD LD D.R AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAS INCURRED A SUM OF RS.8,88,418/ - TOWARDS AMALGAMATIO N EXPENSES IN CONNECTION WITH AMALGAMATION OF A COMPANY WITH IT. THE ASSESSEE CLAIMED THE SAME AS DEDUCTION U/S 37(1) OF THE ACT. THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, POINTED OUT THAT THE SAME IS ALLOWABLE IN FIVE EQUAL ANNUAL INSTALLMENT S IN TERMS OF SEC. 35DD OF THE ACT. THE ASSESSEE AGREED TO THE SAME AND ACCORDINGLY THE AO ALLOWED A SUM OF RS.1,77,684/ - AND DISALLOWED THE THE MAHALAKSHMI GLASS WORKS LTD. 2 REMAINING AMOUNT. THE AO LEVIED THE PENALTY U/S 271(1)(C) OF THE ACT IN RESPECT OF THE AMOUNT SO DISALLOWED BY HI M AND THE LD CIT(A) ALSO CONFIRMED THE SAME. 4. WE HEARD LD D.R AND PERUSED THE RECORD. THE LD D.R SUBMITTED THAT THE LD CIT(A) HAS UPHELD THE LEVY OF PENALTY BY FOLLOWING THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ZOOM COMMUNICA TIONS PVT LTD (233 CTR 465) AND CIT VS. ESCORTS LTD (328 ITR 44). HE SUBMITTED THAT THE ASSESSEE SHOULD NOT HAVE CLAIMED DEDUCTION U/S 37(1) WHEN THE PROVISIONS OF SEC. 35DD PROVIDES FOR SPECIFIC DEDUCTION OF EXPENDITURE IN CONNECTION WITH AMALGAMATION OR DEMERGER OF UNDERTAKINGS. 5. WE HAVE NOTICED EARLIER THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 37(1) OF THE ACT. THE LD CIT(A) HAS REFERRED TO THE TAX AUDIT REPORT FILED BY THE ASSESSEE, PAGE 5 OF HIS ORDER. HE HAS POINTED OUT THAT THE TAX AUDITO R HAS REPORTED THAT THE AMOUNTS ADMISSIBLE AS DEDUCTION U/S 35DD AS NIL; CAPITAL EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT AS NIL AND PENALTY FOR VIOLATION OF LAW AS NIL. THUS, WE NOTICE THAT THE TAX AUDITOR HAS NOT ADVISED THE ASSESSEE TO CLAIM THE DEDUCTION U/S 35DD OF THE ACT. FURTHER, WE NOTICE THAT THE ASSESSEE HAS REPORTED A LOSS OF RS.3.35 CRORES AND THE EXCESS CLAIM OF RS.7.10 LAKHS WOULD NOT HAVE MADE ANY DIFFERENCE. WE FURTHER NOTICE THAT THE ASSESSEE IS A RUNNING COMPANY AND HENCE WHETHE R THE AMALGAMATION EXPENSES IS A CAPITAL EXPENDITURE OR REVENUE EXPENDITURE WAS A DEBATABLE ISSUE, BUT FOR SPECIFIC PROVISIONS OF SEC. 35DD OF THE ACT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE EXPLANATION OF THE ASSESSEE THAT THERE WAS A BON AFIDE MISTAKE ON ITS PART IN NOT CLAIMING THE ABOVE EXPENDITURE IN TERMS OF PROVISIONS OF SEC. 35DD OF THE ACT IS REQUIRED TO BE ACCEPTED. THE DECISION RENDERED BY HONBLE DELHI HIGH COURT IN THE CASE OF ESCORTS LTD WAS IN RESPECT OF DEDUCTION ALLOWABLE U /S 35D OF THE ACT AND THE DECISION RENDERED IN THE CASE OF ZOOM COMMUNICATIONS LTD WAS IN RESPECT OF ALTOGETHER WRONG CLAIM. THE FACTS THE MAHALAKSHMI GLASS WORKS LTD. 3 PREVAILING IN THE INSTANT CASE ARE DIFFERENT AND ACCORDINGLY, WE ARE OF THE VIEW THAT THE ABOVE SAID CASE LAW SHALL NOT APPLY TO THE INSTANT CASE. ACCORDINGLY, WE ARE OF THE VIEW THAT THE ASSESSEE CANNOT BE CHARGED WITH FURNISHING OF INACCURATE PARTICULARS OF INCOME. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) AND DIRECT THE AO TO DELETE THE IMPUGNED PENALTY. 6. I N THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COURT ON 6 .6 .2016 . SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 6 / 6/ 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) ITAT, MUMBAI PS