Appeal granted for MAT credit and expenses disallowance penalties. ITAT rules in favor of assessee.

The ITAT allowed the appeal, deleting penalties imposed on the assessee for excess claim of brought forward MAT credit and disallowance of expenses incurred on earning exempt income. The ITAT held that MAT credit is not income for penalty purposes and that there was no concealment of income in the disallowance of expenses case.

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Issues:
1. Levy of penalty on excess claim of brought forward MAT credit.
2. Levy of penalty on disallowance of expenses incurred on earning exempt income.

Analysis:

Issue 1: Levy of penalty on excess claim of brought forward MAT credit
The assessee filed its return of income claiming brought forward MAT credit of &8377; 90,25,449. Subsequently, assessments for AY 2008-09 and 2009-10 were framed, reducing the brought forward MAT credit. The AO initiated penalty proceedings, alleging that the assessee deliberately carried forward excess MAT credit. The AO imposed a penalty under section 271(1)(c) based on the judgment of Hon'ble ITAT Mumbai. However, the ITAT held that MAT credit is not income for the purpose of section 271(1)(c) as it is taxes paid in advance. The ITAT further stated that no inaccurate particulars were furnished at the time of filing the return, and the reduction in MAT credit did not impact the tax payable by the assessee. Therefore, the penalty imposed on excess MAT credit claim was deleted.

Issue 2: Levy of penalty on disallowance of expenses incurred on earning exempt income
The AO imposed a penalty on the disallowance of expenses incurred on earning exempt income under section 14A. The assessee argued that there was no concealment or furnishing of inaccurate particulars as both expenses and income were disclosed in the P&L account. The AO had already dropped penalty proceedings on the deduction under section 80IC based on the same facts. The ITAT held that there was no concealment of income, and the case was covered by the decision of the Apex Court. Consequently, the penalty imposed on disallowance of expenses was deleted.

In conclusion, the ITAT allowed the appeal filed by the assessee, deleting the penalties imposed on both counts.

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