TaxTMI 
TaxTMI 
2014 (7) TMI 167
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....on services. During the year it had claimed an expenditure of Rs. 4,15,14,394/- on account of cost of WEB site maintenance. Out of this expenditure the assessee had debited an amount of Rs. 1,50,21,941/- in the profit and loss account. The balance of Rs. 2,64,92,553/- was capitalized and transferred to balance sheet under the head " miscellaneous expenditure" in schedule 7, on which the assessee had claimed depreciation @ 25%. In response to specific query as to why the amount of Rs. 1,50,21,841/- should not be capitalized, the assessee could not furnish any satisfactory explanation therefore the amount of Rs. 1,31,44,111/- was added to the income of the assessee after allowing depreciation of Rs. 18,77,730/- allowable under the Act. 4. The assessee had claimed an expenditure of Rs. 13502409/- towards payment made to FCB ULKA Advertising Ltd. Summons u/s 131 were issued to the party to confirm the transaction. In reply, the party i.e. FCB ULKA Advertising Ltd. confirmed that they have booked an income of Rs. 13281184/-. Therefore, the difference of Rs. 2,21,225/- was added to the income of the assessee on account of unexplained expenditure. The AO initiated penalty proceedings u....
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....to the file of the Tribunal in view of their answer given to the following similar issues in the case of CIT vs. Aditya Chemical Ltd. and Others (ITA No. 205/2001). In the present case of the assessee two substantial question of law were raised before the Hon'ble High Court , namely 1. Whether the ITAT was right in deleting penalty u/s 271(1)(c) of the Income Tax Act 1961 on the ground that the total income of the assesee has been assessed at a minus figure / loss ? 2. Whether the ITAT was justified in holding that the judgments in Prithipal Singh &Co. (183 ITR 69) and 249 ITR 670) will apply even after insertion of Explanation 4 to section 271 (1)(C) w.e.f. 1.4.1976 ? 8. The Hon'ble High Court noted that similar questions were examined by a division bench of that court in the case of CIT vs. Aditya Chemicals Ltd. and others (supra) and connected matters and answered in the following words :- 18. Hence answering question 1 in favour of the revenue we hold that the ITAT was not right in deleting the penalty imposed u/s 271(1)(c) of the Income Tax Act 1961 merely on the ground that the total income of the assesee has been assessed on a minus figure / loss. Question No. 2 ....
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....g Officer by the assesee. The expenditure in question was related to cost of website maintenance. The total cost was Rs. 4,15,14,394/- and the asset was expected to last for three years. Therefore the assesee wrote off 1/3rd equal to Rs. 1,50,21,841/- this year and the balance was capitalized. The AO reproduced 'Notes' to the accounts (schedule 14) as "content development cost incurred on online educational material is deferred and amortized over its estimated useful life of 3 years commencing from the date on which the company starts generating revenues from the sale of the respective educational material or over the remaining useful life of the content material. Schedule 10 gave details of expenditure and extent of capitalization. It was explained by the assesee that website maintenance is not an asset which figures in appendix I of the Income Tax Act. Apparently, that was the reason as to why depreciation thereon was calculated at the general rate. The assessee stated that the useful life of the asset was three years and therefore 1/3rd was written off this year. This appears to be case of deferred revenue expenditure and not one where the capital asset was acquired for the endu....
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.... justified. The Tribunal answered it in affirmative in favour of the revenue. Likewise in the case of CIT vs Gold Coin Health Food (P) Ltd. (supra) the issue was as to whether amendment made in Explanation 4 to section 271(1)(c) (iii) with effect from 1.4.2003 is clarificatory and therefore will have retrospective effect. It was answered in affirmative by the Supreme Court of India. In the case of CIT vs. Unipol Chemicals Intermediates Ltd. (supra) the assessed income resulted in loss. The issue was as to whether penalty u/s 271(1)(c) can be levied even when assessed income is a loss. In was answered in affirmative in favour of the revenue. In the case of JCIT vs. Saheli Leasing & Industries Ltd. it has been held that in view of Explanation 4(a) to section 271(1)(c), penalty would be levied not only in a case where after addition of concealed income a loss returned becomes positive income, but also in a case where addition of concealed income reduces returned loss and finally assessed income is also a loss or minus figure. The issue is finally settled by the Hon'ble Supreme Court that even in a case where income is assessed in minus or on reduced loss, penalty is leviable. Thus in ....