DCIT, CHENNAI V. M/s. Marine Container Services (South) Pvt. Ltd., CHENNAI

ITA 814/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58123 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-03-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 02-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR STAND ING
• Assessee Lawyers: A RAJASEKARAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.814 & 815(MDS)/2011 ASSESSMENT YEARS : 2004-05 & 2007-08 THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE IV(1), CHENNAI. VS. M/S.MARINE CONTAINER SERVICES(SOUTH) PVT. LTD., 21, SWAMI SIVANANDA SALAI, CHEPAUK, CHENNAI-600005. PAN AAACM6255A. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KEB RENGARAJAN, JR.STAN DING COUNSEL RESPONDENT BY : SHRI A.RAJASEKARAN, C.A. DATE OF HEARING : 15 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THESE TWO APPEALS ARE FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEARS ARE 2004-05 AND 2007-08. THE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER PASSE D BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-V AT CHENNAI, D ATED - - ITA 814 & 815 OF 2011 2 4-2-2011 AND ARISE OUT OF THE ORDERS OF PENALTY PAS SED UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961. 2. FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSEE HA D CLAIMED AN EXPENDITURE OF ` 24,86,977/- TOWARDS HUMAN RESOURCE DEVELOPMENT EXPENDITURE. THIS CLAIM WAS D ISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE EXP ENSES WERE IN FACT INCURRED FOR MEETING THE EXPENSES ON EDUCAT ION ABROAD IN THE CASE OF THE DAUGHTER OF THE ASSESSEE COMPANYS DIRECTOR. THE ASSESSING OFFICER HELD THAT THIS IS NOT AN EXPE NDITURE INCURRED BY THE COMPANY FOR ITS BUSINESS. THE ASSE SSING AUTHORITY ALSO DISALLOWED THE EXPENDITURE CLAIMED B Y THE ASSESSEE TOWARDS SHORT-TERM CAPITAL LOSS AND DIVIDE ND STRIPPING. IT IS ON THE BASIS OF THESE DISALLOWANCES THAT THE ASSESSING OFFICER HAS LEVIED PENALTY ON THE GROUND THAT THE A SSESSEE HAS FILED INACCURATE PARTICULARS LEADING TO CONCEALMENT OF INCOME. 3. IN FIRST APPEALS, THE COMMISSIONER OF INCOME- TAX(APPEALS) DELETED THE PENALTY ON THE GROUND THAT MERE ACCEPTING OF DISALLOWANCES DOES NOT WARRANT LEVY OF PENALTY. IT SEEMS THAT HE HAS RELIED ON THE DECISION OF THE HON BLE SUPREME - - ITA 814 & 815 OF 2011 3 COURT RENDERED IN THE CASE OF CIT VS. RELIANCE PETR OPRODUCTS PVT. LTD., 322 ITR 158. 4. THE REVENUE IS AGGRIEVED AND, THEREFORE, THESE APPEALS BEFORE THE TRIBUNAL. 5. WE HEARD BOTH SIDES IN DETAIL AND CONSIDERED TH E ISSUE. THE EXPENDITURE CLAIMED BY THE ASSESSEE UND ER THE HEAD HUMAN RESOURCE DEVELOPMENT EXPENDITURE WAS IN FACT INCURRED FOR THE FOREIGN STUDY MADE BY THE DAUGHTER OF THE A SSESSEE- COMPANYS DIRECTOR. THE DAUGHTER WAS NOT AN EMPLOY EE OF THE COMPANY AT THE RELEVANT POINT OF TIME. THE DAUGHTE R OF THE DIRECTOR MIGHT HAVE JOINED THE SERVICE OF THE COMPA NY THEREAFTER. THE DIRECTOR, HAVING THE CONTROLLING INTEREST IN TH E ASSESSEE- COMPANY, HIS DAUGHTER MIGHT HAVE JOINED THE MANAGEM ENT OF THE ASSESSEES BUSINESS FOR PROPRIETARY INTEREST ALSO. THOSE MATTERS ARE TO BE EXAMINED AT THAT POINT OF TIME. AS FAR A S THE RELEVANT PERIOD IS CONCERNED, THESE AMOUNTS SHOULD HAVE BEEN DEBITED IN THE PERSONAL ACCOUNT OF THE DIRECTOR, AS THE EXPENS ES WERE INCURRED FOR THE EDUCATION OF HIS DAUGHTER. THIS I S A PURE PERSONAL EXPENDITURE INCURRED BY THE DIRECTOR OF TH E ASSESSEE COMPANY. THIS IS NOT AN EXPENDITURE INCURRED FOR T HE PURPOSE OF - - ITA 814 & 815 OF 2011 4 CARRYING ON OF THE BUSINESS. WE DO NOT AGREE WITH THE COMMISSIONER OF INCOME-TAX(APPEALS) THAT THE DISALL OWANCE OF THE ABOVE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE BY ITSELF DOES NOT MAKE OUT A CASE FOR LEVY OF PENALTY. BY CL AIMING A PERSONAL EXPENDITURE OF THE DIRECTOR IN COMPUTING T HE TAXABLE INCOME OF THE ASSESSEE COMPANY, THE COMPANY HAS FUR NISHED INACCURATE PARTICULARS OF ITS INCOME. THERE IS NO FACTUAL OR LEGAL SUPPORT TO THE ARGUMENT OF THE ASSESSEE-COMPANY THA T THE EXPENDITURE INCURRED ON THE EDUCATION OF THE DIRECT ORS DAUGHTER IS A DEDUCTIBLE EXPENDITURE. THERE IS NO FORCE IN THE ARGUMENT THAT THE CLAIM IS ATLEAST DEBATABLE. 6. LIKEWISE, CLAIMING OF DEDUCTION BY WAY OF SHORT -TERM CAPITAL LOSS AND DIVIDEND STRIPPING ARE ALL NOT CAP ABLE OF DERIVING ANY SUPPORT FROM THE STATUTE. THE ASSESSEE COMPANY CLAIMED THESE ITEMS TO REDUCE ITS TAXABLE INCOME. AS AND W HEN THESE DISALLOWABLE ITEMS WERE POINTED OUT BY THE ASSESSIN G OFFICER, THE ASSESSEE TOOK A STAND THAT THOSE DISALLOWANCES COUL D BE MADE BUT NO PENALTY CAN BE LEVIED. 7. IN ALL THESE THREE CASES WE FIND THAT IT IS A C ASE WHERE THE ASSESSEE HAS FURNISHED INACCURATE PARTICU LARS OF ITS - - ITA 814 & 815 OF 2011 5 INCOME. THEREFORE, WE FIND THAT THIS IS A FIT CASE WHERE PENALTY UNDER SECTION 271(1)(C) IS IMPOSABLE. ACCORDINGLY WE SET ASIDE THE ORDERS PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND RESTORE THE PENALTY ORDERS PASSED BY THE ASSESS ING AUTHORITY. 8. IN RESULT, THESE APPEALS FILED BY THE REVENUE A RE ALLOWED. ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MARCH, 2012. V.A.P. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT (4) CIT(A) (5) D.R. (6) G.F.