2016 (11) TMI 322 - AT - Income Tax

Tribunal Upholds Commissioner Decision to Delete Penalties

ACIT 2 (3), Mumbai Versus M/s Tata Industries Ltd

The Tribunal upheld the Commissioner of Income-tax (Appeals) decisions to delete penalties on various disallowances challenged by the revenue. The ... Penalty u/s 271(1)(c) - disallowance of professional fee - Held that:- Though the expenses were disallowed as business expenses, but the same have been allowed as expenses while computing taxable amount of capital gains / loss. It is further noted by us that entire claim was made by the assessee making full disclosure and no facts were concealed or hidden. Though, the disallowance was made by the Assessing Officer as in his opinion, these expenses were not allowable u/s 37, but ultimately these have been found to be allowable under the head “capital gains”. Under these circumstances, we find that the Ld. CIT(A) has rightly deleted the penalty. Disallowance of processing fee paid to various banks for acquiring term loans, etc. - Held that:- Disallowance has been deleted. When the basis of levy of penalty no more exists, the penalty also cannot survive anymore and, therefore, penalty on this issue is directed to be deleted. Disallowance of processing fee - Held that:- Disallowance was made by the Assessing Officer due to difference in opinion of the assessee and the Assessing Officer. In our view, the explanation given by the assessee is plausible explanation. Moreover, the expenses have not been found to be in-genuine or non-bonafide. Ld. CIT(A) has also examined the nature of the disallowance in detail and found that it was not a case of any concealment or furnishing of inaccurate particulars of income. After taking into account all facts and circumstances of this case, we find that the Ld. CIT(A) has rightly deleted the penalty. Excess carry forward of losses - Held that:- We find that disallowance made by the Assessing Officer has been deleted by the Tribunal. Therefore, there is no basis to continue with the penalty and, thus we find that the penalty on the same has rightly been deleted by Ld. CIT(A). Disallowance of claim being provision for diminution in value of investment written back for purpose of calculation of book profits u/s 115JB - Held that:- The assessee had conspicuously stated in the return itself while making this claim that this claim was dependent upon the outcome of the appeal of earlier year. Since relief was given in earlier year, this amount became disallowable in the year before us and, therefore, it was held to be rightly disallowed by the AO. But, in our view, it is not a case of concealment of income or furnishing of inaccurate particulars of income. The circumstances was such that if assessee would not have made this claim in the impugned year (though made on conditional basis) and if no relief would have been given in the appeal in earlier years, then, assessee would have lost the benefit in all the years. Thus we find that the assessee had made the claim in most transparent and befitting manner. Under these circumstances, it will be harsh and unjustified to fasten the assessee with the liability of penalty. Disallowance being the amount of provision for contingency - Held that:- As addition itself has been deleted and, therefore, there are no basis to continue with the penalty. Under these circumstances, we find that no interference is called for in the order of the Ld. CIT(A) wherein penalty has been deleted. Disallowance of expenditure incurred for issue of debentures / bonds - Held that:- As addition itself has been deleted and, therefore, there are no basis to continue with the penalty. Under these circumstances, we find that no interference is called for in the order of the Ld. CIT(A) wherein penalty has been deleted. Appeal decided against revenue Issues Involved:1. Deletion of penalty on disallowance of professional fees.2. Deletion of penalty on disallowance of processing fees for acquiring term loans.3. Deletion of penalty on disallowance of processing fees for a new business venture.4. Deletion of penalty on disallowance of excess carried forward of loss.5. Deletion of penalty on disallowance of provision for diminution in value of investments.6. Deletion of penalty on disallowance of provision for contingency.7. Deletion of penalty on disallowance of expenditure incurred for issuing debentures/bonds.Detailed Analysis:1. Deletion of Penalty on Disallowance of Professional Fees:The revenue challenged the deletion of penalty on professional fees paid to M/s. S.B. Billimoria & Co. The Assessing Officer (AO) disallowed this as business expenses under Section 37. However, the Commissioner of Income-tax (Appeals) [CIT(A)] allowed Rs. 16,20,000 as capital gains expenses and Rs. 3,24,000 as capital loss expenses. The Tribunal found that the expenses were disclosed fully and no facts were concealed. Thus, the CIT(A) rightly deleted the penalty, and the Tribunal upheld this decision.2. Deletion of Penalty on Disallowance of Processing Fees for Acquiring Term Loans:The revenue contested the deletion of penalty on processing fees paid to banks for term loans. The Tribunal had previously deleted this disallowance, noting that the fees were business expenditures. The Tribunal referenced the Supreme Court's decision in India Cements Ltd. v. CIT, which held that expenses for raising loans are revenue in nature. Since the disallowance was deleted, the penalty could not be sustained. The Tribunal upheld the CIT(A)'s decision to delete the penalty.3. Deletion of Penalty on Disallowance of Processing Fees for New Business Venture:The revenue argued against the deletion of penalty on processing fees of Rs. 4,85,000, which the AO disallowed as capital expenditure and prior period expenses. The Tribunal noted that similar expenses were allowed as revenue by the Tribunal in another case. The assessee had made full disclosures, and the disallowance was due to a difference in opinion. The Tribunal found the assessee's explanation plausible and upheld the CIT(A)'s deletion of the penalty.4. Deletion of Penalty on Disallowance of Excess Carried Forward of Loss:The revenue contested the deletion of penalty on excess carry forward of losses. The Tribunal had previously deleted the disallowance, following the Bombay High Court's decision in CIT vs. Black & Veatch Consulting Pvt. Ltd., which held that Section 10A deductions should be made before setting off unabsorbed losses. Since the disallowance was deleted, the penalty could not stand. The Tribunal upheld the CIT(A)'s deletion of the penalty.5. Deletion of Penalty on Disallowance of Provision for Diminution in Value of Investments:The revenue challenged the deletion of penalty on a claim of Rs. 38.84 crores for diminution in value of investments. The claim was made conditionally, depending on the outcome of an appeal for earlier years. The Tribunal found that the assessee made full disclosures and the claim was genuine and bonafide. The CIT(A) rightly deleted the penalty, and the Tribunal upheld this decision.6. Deletion of Penalty on Disallowance of Provision for Contingency:The revenue contested the deletion of penalty on a Rs. 9 crore provision for contingency. The AO had deleted this addition in a subsequent order under Section 154. Since the addition was deleted, the penalty had no basis. The Tribunal upheld the CIT(A)'s deletion of the penalty.7. Deletion of Penalty on Disallowance of Expenditure for Issuing Debentures/Bonds:The revenue argued against the deletion of penalty on expenses of Rs. 22,14,030 for issuing debentures/bonds. The Tribunal had previously deleted this disallowance, referencing the Supreme Court's decision in India Cements Ltd. v. CIT, which held that such expenses are revenue in nature. Since the disallowance was deleted, the penalty could not stand. The Tribunal upheld the CIT(A)'s deletion of the penalty.Conclusion:The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s deletion of penalties on all contested grounds. The Tribunal found no concealment or submission of inaccurate particulars by the assessee, and the disallowances were primarily due to differences in opinion or were subsequently deleted. The penalties were thus rightly deleted by the CIT(A).