M/s Venus Remedies Limited, Chandigarh V. ACIT, Chandigarh

ITA 899/CHANDI/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7068 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-09-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 10-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Bonafide belief; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE SHRI T.R. SOOD, ACCOUNTANT MEMBER AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO.899/CHD/2013 ASSESSMENT YEAR: 2009-10 M/S VENUS REMEDIES LIMITED, VS. THE ACIT, CIRCLE 5 (1), MANIMAJRA, CHANDIGARH CHANDIGARH PAN NO. AAACV6524H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI JASPAL SHARMA RESPONDENT BY : SHRI MAHAVIR SINGH DATE OF HEARING : 09.09.2014 DATE OF PRONOUNCEMENT : 15.09.2014 ORDER PER T.R.SOOD, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 27.06.2013 OF CIT (APPEALS), CHANDIGARH. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLO WING EFFECTIVE GROUND:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN HAVING CONFIRMED THE PENALTY AMOUNTING TO RS. 38,71,543/- IMPOSED BY THE ASSESSI NG OFFICER U/S 271(1)(C) OF THE INCOME TAX ACT. 3. AFTER HEARING BOTH THE PARTIES WE FIND THAT DURI NG ASSESSMENT PROCEEDINGS VARIOUS ADDITIONS CONSISTING OF DISALLOWANCE U/S 1 4A OF RS. 1,94,506/-, DISALLOWANCE OF CERTAIN EXPENSES AMOUNTING TO RS. 15,00,000/- AND DISALLOWANCE OF WRITING OFF OF PATENTS AMOUNTING TO RS. 1,13,90,243/- WERE MADE AND PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATE D. IN RESPONSE TO THE SHOW CAUSE NOTICE FOR LEVY OF PENALTY, VARIOUS EXPLANATI ONS WERE GIVEN AND THE SAME 2 WERE ACCEPTED PARTLY IN RESPECT OF DISALLOWANCE U/S 14A AND DISALLOWANCE OF EXPENSES. HOWEVER, EXPLANATION IN RESPECT OF WRITI NG OFF OF PATENTS WAS NOT ACCEPTED BECAUSE ACCORDING TO ASSESSING OFFICER THE ASSESSEE WAS ENTITLED ONLY TO THE DEPRECIATION ON PATENTS BEING INTANGIBLE ASS ETS WHEREAS THE ASSESSEE HAS CLAIMED THE WHOLE OF THE EXPENSES. 4. ON APPEAL BEFORE CIT(A) IT WAS MAINLY SUBMITTED THAT PATENTS WERE WRITTEN OFF BY FOLLOWING THE CONSISTENT ACCOUNTING POLICY. SINCE THIS FACT WAS DISCUSSED, THEREFORE, IT CANNOT BE SAID THAT ASSESS EE HAS CONCEALED PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS. HOWEVE R, LD. CIT(A) DID NOT FIND FORCE IN THESE SUBMISSIONS AND DECIDED THE ISSUE AG AINST THE ASSESSEE VIDE PARA 5 & 5.1, WHICH ARE AS UNDER:- 5. I HAVE CONSIDERED THE SUBMISSION OF LD. COUNSE L. AS PER THE AMENDED PROVISIONS OF SECTION 32(1)(III), WITH EFFE CT FORM 1.4.1999, KNOWHOW, PATENTS, LICENSES ETC. ARE TO BE TREATED AS INTANGIBLE ASSETS ON WHICH DEPRECIATION @ 25% IS AD MISSIBLE AND SO THE APPELLANT HAS WRONGLY CLAIMED THE ENTIRE AMOUNT OF RS. 1,53,30,959/- AS DEDUCTION ON ACCOUNT OF PA TENTS WRITTEN OFF. THE ASSESSING OFFICER HAS GIVEN A FI NDING, WHICH HAS NOT BEEN CHALLENGED BY THE APPELLANT IN THE APP ELLATE PROCEEDINGS. I DO NOT THINK THAT APPELLANT HAD AT A NY STAGE A BONAFIDE BELIEF THAT THE AMOUNT OF PATENTS WRITTEN OFF COULD BE CLAIMED AS DEDUCTION. THE APPELLANT MADE THAT C LAIM WITHOUT ANY REASONABLE BASIS AND HOPED THAT THE CLA IM MIGHT BE ALLOWED. NOW THAT ITS GAMBLE HAS FAILED, IT MUST BEAR THE CONSEQUENCES. TWO VIEWS ARE NOT POSSIBLE ON THIS IS SUE AND SO THE CONTENTION OF THE APPELLANT THAT AT MOST IT COU LD BE TERMED AS DIFFERENT OF OPINION, BUT COULD NOT BE TREATED A S CONCEALMENT OF INCOME, IS NOT CORRECT. THE APPELLA NT HAS TRIED TO MAKE AN INCORRECT CLAIM IN THIS REGARD AND CAUGHT ON THE WRONG FOOT. 5.1 THE APPELLANT HAS RELIED UPON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF M/S RELIANCE PETROPROD UCTS 3 PRIVATE LTD (SUPRA) AND HAS SUBMITTED THAT IT HAS H ELD BY HON'BLE SUPREME COURT IN THAT CASE THAT MERE MAKIN G OF AS CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, W ILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF I NCOME. THE RATIO OF THIS DECISION DOES NOT APPLY TO THE CA SE OF APPELLANT, SINCE THE APPELLANT HAD KNOWINGLY MADE A FALSE CLAIM. THE APPELLANT HAS ALSO RELIED UPON THE DECIS ION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/ S SSP LTD (SUPRA) AND HAS SUBMITTED THAT HON'BLE HIGH COURT H AS HELD IN THAT CASE THAT MERE ERRONEOUS CLAIM IN THE ABSEN CE OF ANY CONCEALMENT WAS NO GROUND FOR LEVYING PENALTY. THE RATIO OF THIS DECISION ALSO DOES NOT APPLY TO THE FACTS OF T HE APPELLANT, SINCE THE APPELLANT HAD DELIBERATELY MADE A WRONG C LAIM. 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT FIRST OF ALL PENALTY IS NOT LEVIABLE BECAUSE INCOME HAS BEEN ASSESSED ON TH E BASIS OF MAT PROVISIONS AND IN THIS REGARD HE RELIED ON THE DECISION OF HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT V NALWA SONS INVESTMENT LTD 327 ITR 543 . IN ANY CASE EXPENSES HAVE BEEN CLAIMED AS REVENUE EXPENSES AND REVENUE H ELD THAT PATENTS ARE CAPITAL AND ASSESSEE IS ONLY ENTITLED TO DEPRECIATI ON, THEREFORE, PENALTY PROVISIONS CANNOT BE ATTRACTED. IN THIS RESPECT HE RELIED ON THE DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V AMTEK AUTO LTD VS. CIT 352 ITR 394 (P&H). 6. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL FOR THE ASSESSEE BECAUSE ASSESSEE HAD CLAIMED THE TOTAL AMOUNT OF PATENTS IN VIEW OF THE ACCOUNTING STANDARD AS-26 ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA. FURTHER, THIS METHO D IS FOLLOWED BY THE ASSESSEE. MERELY BECAUSE EXPENSE HAS BEEN TREATED AS CAPITAL EXPENSE AND ONLY DEPRECIATION HAS BEEN ALLOWED WOULD NOT CALL FOR PE NAL ACTION. THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. AMTEK AUTO LIMITED HAS HELD AS UNDER:- 4 HELD, DISMISSING THE APPEAL, THAT THE ASSESSEE HAD DISCLOSED THE NATURE OF TRANSACTIONS IN ITS RETURN. IT WAS ON THE BASIS OF THE INTERPRETATION OF THE PROVISIONS OF THE STATUTE , THAT THE ASSESSING OFFICER HAD FOUND THAT THE EXPENDITURE CL AIMED BY THE ASSESSEE WAS NOT REVENUE EXPENDITURE BUT CAPITA L EXPENSES. THERE IS A FINE DISTINCTION AS TO WHEN AN EXPENDITU RE CAN BE TREATED AS REVENUE OR CAPITAL EXPENDITURE. THEREFOR E, MERELY FOR THE REASON THAT THE ASSESSEE HAD CLAIMED THE EX PENDITURE TO BE REVENUE THAT WOULD NOT RENDER THE ASSESSEE LIABL E TO PENALTY PROCEEDINGS. THE ORDER PASSED BY THE TRIBUNAL DID N OT GIVE RISE TO THE QUESTIONS OF LAW SOUGHT BY THE REVENUE. 8. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT THIS IS NOT A FIT CASE FOR LEVY OF PENALTY AND WE ACCORDINGLY SET ASIDE THE OR DER OF CIT(A) AND DELETE THE PENALTY. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.09.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMER DATED : 15 TH SEPTEMBER, 2014 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR