TaxTMI 
TaxTMI 
2017 (6) TMI 543
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....d is not tenable on facts and in law. 4. That the grounds of the ld CIT(A) is erroneous and is not tenable on facts and in law." 3. The brief facts of the case is that the appellant is a public limited company filed its return of income on 01.10.2008 at Nil income and subsequently revised for Rs. 54622868/-. Assessment u/s 143(3) of the Act was made on 24.12.2010 u/s 143(3) of the Act at Nil income, however, one of the addition which is subject to the penalty was with respect to the expenditure claimed by the assessee on voluntary retirement scheme expenditure claimed by the assessee of Rs. 60874376/-. 4. During the year assessee has claimed the whole of the expenditure amounting to Rs. 76092970/- claimed on account of VRS expenditure whereas, the ld Assessing Officer disallowed 80% of such expenditure and held that u/s 35DDA, 20% of such expenses are allowable in the year in which the expenses are incurred and balance shall be allowed in for equal installments in the immediately succeeding previous years. The assessee aggrieved with the order of AO preferred appeal before the ld CIT(A) who denied the deduction of Rs. 60874376/-. Therefore, assessee approached the co....
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.... CIT (A) who also confirmed the order of AO on same reasoning and therefore assessee is in appeal before us on this ground. 8. Before us Ld. AR of the assessee said that the claim is allowable u/s 37(1) of the Income Tax Act and he relied up on following decision of various courts. a. CIT V KJS India Private Limited 340 ITR 380 ( Delhi) b. CIT V Bhor Industries Limited 264 ITR 180 ( Bom) c. CIT V orient papers and Industries Limited 372 ITR 680 ( cal) d. CIT V Simpson & co Limited 230 ITR 703 e. CIT V Swan Mills Limited 39 Taxmann.com 112 ( Bom) 9. Ld DR relied on the order of AO as well as CIT (A) and submitted that claim is not allowable u/s 37(1) of the Act as it is specifically allowable u/s 35DDA of the Income Tax Act. 10. We have carefully considered the rival submission of the parties and also perused the orders of lower authorities. We have also perused the decisions relied up on by the Ld AR of the assessee. In fact it is not disputed by the assessee that the claim of the assessee is not governed by the provision of section 35DDA. However the stand of the assessee is that though the claim of the assess....
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....ase of the amalgamating company referred to in sub- section (2), in the case of demerged company referred to in sub-section (3) and in the case of a firm or proprietary concern referred to in sub-section (4) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place. (6) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act. According to this section the dispute has come to end that whether the VRS expenditure is capital or revenue in nature. With effect from AY 2001-02 , any expenditure incurred by assessee on Voluntary retirement scheme shall be allowed in five years i.e @ 20 % for each of the year. Further any expenditure which is in nature of expenditure of Voluntary retirement scheme shall not be allowed as deduction under any other section of the Income Tax Act. Analyzing the claim of the assessee it is apparent that claim of the assessee is allowable u/s 35DDA of the act in 5 years @ 20 % in each of the years. However assessee claims that same is fully allowable u/s 37(1) in this year .i.e. in the year in which it is incurred. 12. Provi....
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....d gains of business or profession" of the assessee, if the expenditure is of revenue nature and not personal expenses of the assessee and if the said expenditure is laid out or expended wholly and exclusively for the purpose of business or profession. Hence, if the expenses are not covered by the specific provisions of sections 30 to 36 and yet the said expenses are laid out or expended wholly and exclusively for the purposes of the business or profession and they are not in the nature of capital expenditure or personal expenses of the assessee, then deduction is required to be given for the said expenses. It is quite possible that with regard to some expenses there may be overlapping between sections 30 to 36 and section 37. In that set of circumstances, if the expenses are deductible under sections 30 to 36, then section 37 is not to be resorted to. But if the said expenses are not deductible under sections 30 to 36 and the conditions prescribed under section 37 are satisfied, then the said expenses are required to be deducted while computing the income unless there is a specific prohibition." 13. Therefore in our view the claim of the assessee is allowable u/s 35DDA of ....
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....ew of above facts we confirm the order of CIT (A) disallowing the claim of the assessee of Rs. 6,08,74,376/- u/s 37(1) of the act on account of payment made under voluntary retirement scheme. Therefore ground no 3 of the appeal is dismissed. " 8. On perusal of the order of the coordinate bench it is apparent that the claim of the assessee was based on several decisions including the decision of Hon'ble Delhi High Court in CIT Vs. KJS India Pvt. Ltd 340 ITR 380 (Del) and coordinate bench has also discussed the claim of the assessee thoroughly. Merely because the claim of the assessee was not accepted by the concurrent authority despite there being plausible judicial precedents in favour of the assessee, the claim of the assessee cannot be said to be false. It is also an established principle that penalty u/s 271(1)(c) of the Act cannot be levied on debatable issues. Hon'ble Supreme Court in case of CIT Vs. Reliance Petro Products Pvt. Ltd 322 ITR 158 has held that merely on the ground that the claim of the assessee is incorrect cannot tantamount to furnishing of incorrect claims. Further, Hon'ble Delhi High Court on identical facts and circumstances in the case of CIT....
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....t in the case of CIT v. Ram Commercial Enterprises Ltd. [2000] 246 ITR 5681 (Delhi), no more remains valid in view of legislative amendment in section 271 by the Finance Act, 2008. By this amendment, sub-section (1B) is inserted to section 271 of the Income-tax Act retrospectively with effect from 1-4-1989 as per which it is not necessary for the Assessing Officer to record such a satisfaction. It is for this reason that on 18-7-2008, this Court taking note of the aforesaid amendment observed that the matter is to be now examined on merits. 7. For this reason, we heard the counsel for the parties on merits. Section 35DDA inter alia states that where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee in connection with his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal instalments for each of the remaining succeeding previous years. Thus, this provision is applicable when Voluntary Retirement Scheme is introduced by the ....