2012 (4) TMI 322 - HC - Income Tax

Tribunal dismisses appeal on deduction claim under Income Tax Act citing precedents

The Tribunal dismissed the Department's appeal regarding the claim for deduction under section 80 IB of the Income Tax Act, citing precedents in Liberty ... Deduction claim under section 80 IB - penalty order was issued under section 271(1)(c) - claim allowed by Tribunal - department appeal - Held that:- The Apex Court in the case of CIT vs. Reliance Petroleum Products (P) Ltd (2010 (3) TMI 80 - SUPREME COURT) has laid down that a mere making of a claim which is not sustainable in law, but itself, will not amount to furnishing of inaccurate particulars regarding the income of the assessee - there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false - no question of inviting the penalty under section 271(1)(c) of the Act - no error in the order of the Tribunal dismissing the appeal of the Department. Issues:- Claim for deduction under section 80 IB of the Income Tax Act 1961 based on incentives by way of duty draw back for treating them as profits derived from industrial undertaking.- Imposition of penalty under section 271(1)(c) for incorrect claim of deduction.- Interpretation of the law regarding duty draw back/DEPB benefits as profits derived from industrial undertaking.- Application of judgments in Liberty India versus Commissioner of Income Tax and Commissioner of Income Tax versus Reliance Petro Products Pvt. Ltd. to the case.Claim for Deduction under Section 80 IB:The assessee claimed deduction under section 80 IB of the Act on the incentives received by way of duty draw back for treating them as profits derived from industrial undertaking. However, the Assessing Officer did not allow the deduction under section 80 IB in the assessment order. The Tribunal observed that the claim for deduction was not sustainable in law at the time of filing the return, as clarified by the Apex Court in Liberty India versus Commissioner of Income Tax. The Tribunal also referred to the judgment in Commissioner of Income Tax versus Reliance Petro Products Pvt. Ltd., stating that making a claim not sustainable in law does not amount to furnishing inaccurate particulars regarding the income of the assessee. Consequently, the Tribunal dismissed the appeal of the Department, finding no error in the order.Imposition of Penalty under Section 271(1)(c):A penalty order was issued under section 271(1)(c) based on the incorrect claim for deduction under section 80 IB. The Department contended that the penalty was rightly imposed, citing the clarification of law by the Supreme Court in Liberty India versus Commissioner of Income Tax. However, the Tribunal, relying on the judgment in Commissioner of Income Tax versus Reliance Petro Products Pvt. Ltd., held that the mere making of a claim not sustainable in law does not constitute furnishing inaccurate particulars regarding the income of the assessee. The Tribunal found the cancellation of penalty by the CIT(A) justified and rejected the grounds raised in the appeal, ultimately dismissing the Department's appeal.Interpretation of Law on Duty Draw Back/DEPB Benefits:The Tribunal analyzed the law regarding duty draw back/DEPB benefits as profits derived from industrial undertaking. Referring to the judgment in Liberty India versus Commissioner of Income Tax, the Tribunal concluded that such incentives are not profits derived from the eligible business but an independent source of income. The Tribunal also cited the judgment in Commissioner of Income Tax versus Reliance Petro Products Pvt. Ltd., emphasizing that a claim not sustainable in law does not amount to furnishing inaccurate particulars regarding the income of the assessee. Consequently, the Tribunal dismissed the Department's appeal, finding no substantial question of law involved in the case.Application of Judgments:The Tribunal extensively applied the judgments in Liberty India versus Commissioner of Income Tax and Commissioner of Income Tax versus Reliance Petro Products Pvt. Ltd. to the case at hand. These judgments clarified the law regarding the treatment of duty draw back/DEPB benefits as profits derived from industrial undertaking and the imposition of penalties for incorrect claims under section 80 IB. The Tribunal found that the assessee's claim for deduction and the subsequent penalty imposition were not sustainable in law, as per the interpretations provided by the Apex Court. Consequently, the Tribunal dismissed the Department's appeal, upholding the decisions based on the legal precedents established in the aforementioned judgments.