TaxTMI 
TaxTMI 
2010 (1) TMI 787
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....he Ld. CIT(A) erred in law and on the facts of the case in deleing the penalty of Rs. 1,38,56,774/- levied u/s 271(1)(C) of the Income Tax Act, 1961. 3. The facts are that during the course of assessment proceedings, the AO made the disallowances on account of Foreign Usance Bill Interest paid (Rs. 3,86,03,654/-) and Prior Period expenses (Rs. 21,499/-). Aggrieved with the order of the AO, the assessee preferred appeal before the CIT(A) XVII, New Delhi, who vide order in Appeal No. 166/CIT(A)XVII/Del/2007-08 dated 28.3.2007 dismissed the appeal of the assessee. However, Ld. CIT (A), in his order, directed the AO to verify the claims relating to the amount of interest paid and applicability of DTAAs. The AO while giving effect to t....
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.... discounted through his bankers. (iv) The assessee's bank is paid the principal and interest which it has paid to the supplier's bank. (v) The assessee obtained a legal opinion from M/s. Vaish Associates, Advocates on the issue of deduction of tax at source. They opined that the interest paid by the assessee would be eligible for exclusion from deduction of tax at source as provided in clause (iii) of sub-section (3) of section 194A of the Act since the interest is being paid to a bank. (vi) M/s. Vaish Associates, had also opined that the decision of the Gujarat High Court in the case of CIT vs. Vijay Ship Breaking Corporation and Others (181-CTR-134) does not lay down the correct law. (vii) The tax a....
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.... view taken by the Ld. AO and CIT(A), while disallowing the above referred sum, was based on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Vijay Ship Baking Corporation (261 ITR 113) which has recently been reversed by the Hon'ble Apex Court (314 ITR 309). A copy of the said order has also been filed by the Ld. AR before me. After going through the said decision of Hon'ble Apex Court I am convinced with the plea of the appellant that the addition on account of disallowance of foreign usance bill interest itself cannot be hold good in the light of the decision of the Apex Court. There is ample force in the argument of the appellant that the issue was quite debatable, therefore, considering the totality of the facts and ci....
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....uctible expenditure has been claimed. In view of such position the penalty u/s 271 (1)(c) can also not be upheld on disallowance of prior period expenses." The revenue is in further appeal before us. 6. We have heard the counsels and perused the orders of authorities below. From the same facts the opinion of the AO is that interest paid on Usance Bill through the bankers is not allowable whereas the assessee is under bonafide belief that the expenses are allowable. The reasoning adopted by AO was based on Hon'ble Gujarat High Court decision in the case of CIT vs. Vijay Ship Breaking Corporation. However the said decision has been reversed by Hon'ble Supreme Court finding that the law in this regard has been retrospective....