TaxTMI 
TaxTMI 
2017 (10) TMI 938
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....ht in not appreciating that the penalty u/s. 271(1)(c) of the I.T. Act, 1961 is a civil liability meant to provide for ready for loss of revenue. 4. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. 3. The brief facts of the case are that the assessee filed its return of income of Rs. 68,35,97,164/- on 30.10.2007. The assessment order u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as the Act) was passed by completing the assessment at total income of Rs. 71,39,06,819/- on 21.11.2008 by making disallowance / addition on account of disallowance of license fee of Rs. 2,19,60,467/-, which was held as capital in nature and on account of disallowance of depreciation on computers which was allowed @15% instead of 60%, for which an addition in respet of Rs. 83,49,188/- was made. Being aggrieved with the order of the AO, the assessee had filed the appeal before the Ld. CIT(A), New Delhi. The Ld. CIT(A) has confirmed the addition made on account of disallowance of license fee and has deleted the addition on account of excess depreciation on computer. In view of above, a fresh show cause notice u/s. 271(1)(c) o....
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.... on account of license fee has been deleted by the Tribunal. We find that Section 271(1)(c) of the Act provides for imposition of penalty in case the Assessing Officer, in the course of any proceeding under Act, is satisfied that: (i) any person had concealed particulars of his income or (ii) had furnished inaccurate particulars of such income. 7.1 We further find that after the insertion of Explanation 1 to Section 271(1)(c) "the onus is on the assessee to show that there was no intention of concealment and not on the Revenue. Mens rea was considered to be a necessary ingredient for levy of penalty as laid down by the Supreme Court in CIT Vs Anwar Ali (1970) 76 ITR 696. But after the introduction of Explanation 1 to Section 271(1)(c), the Supreme Court held that the requirement of proof of Mens rea on the part of the Revenue, would no longer be necessary as held in Add!. CIT Vs Jeevan Lal Shah (1994) 205 ITR 244 (SC) and B.A. Balasubramaniam and Bros. Co. Vs CIT (1999) 236 ITR 977 (SC). 7.2 The role of the Explanation, it was pointed out, was only to place the burden of proof squarely on the taxpayer. It is however observed that the Explanation has been often overworked by t....
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.... in Dilip N. Shroff (Supra). T. Ashok Pai (Supra) in dispute under Central Excise Law the Apex Court in the case of UOI vs. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) held that "default merited penalty without having to consider any intend of the assessee to evade tax. The Mens rea is essential only for matters of prosecutor and not penalty." Thus after the decision in the case of Dharmendra Textile Processor (Supra), "Mesn rea is not necessary to be proved by revenue for civil penalties." 7.6 However with the recent decision of the recent decision of the Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. (2010) 322 ITR 158 (SC), it is clear that the Supreme Court by giving the ruling in Dharmendra Textile Processor's Case (Supra) has not overruled their decision in Dilip N. Shroff's case except for its mention of Mensrea therein. 7.7 It is also pertinent to mention here that after the ruling of Dharmendra Textile Processor, the Supreme Court has come out with the ruling in 2 different case of CIT Vs Atul Mohan Bindal (2009) (317 ITR1) and UOI Vs Rajasthan Spinning & Weaving Mills (2010) (1GSTR66) (SC) and have given a finding that "that for applica....
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....d is made/ evaluated/ account is created/ transactions are authorized/ raising disputes/ sending statements/ customer services and online payment processing. The software is mainly for credit card transaction processing by multinational banks and transaction processing companies. Various banks and financial institutions use this software application to store and process credit card/ debit card/ prepaid closed end loan accounts and process financial transactions which is available off the shelf. I also find that GECC itself has received the right to use the Software internally including its group entities for its business. It does not have any right to commercially exploit the Software. The Appellant makes the payment to GECC only to use the licensed programs. Further/ on careful consideration of the contents of EULA/ I observe that: (i) The appellant has been vested with only the limited right to use the license by the GECC during the period the agreement is in existence and the EULA does not provide any exclusive use to the Appellant. (ii) GECC is a global license holder of Vision plus software and the Appellant is one of the users of such software license which in itself....
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.... since there is no sun-set clause in the agreement, the agreement is perpetual in nature and hence the transfer of license is on permanent basis. Respectfully disagreeing with the same, I hold that the licensee appellant does not become the owner of the license by virtue of the EULA in view of the fact that the agreement provides for periodic payment for use of software, which itself is subject-matter of revision every year and that the agreement is subject to termination, in case of any breach in material terms and upon termination, the right to use the licensed program shall end and the Appellant will be required to deliver the licensed program with immediate effect to GECC and to remove from its systems the licensed software. 7.5 In view of the same, I hold that the impugned payment of Rs. 24,258,933 on account of License fee, Connectivity charges and Coordination charges for use of Vision plus' software was revenue in nature and allowable u/s 37 of the Act. Accordingly, this ground is allowed in favour the appellant---". 7.12 In view of the above, we are of the considered view that such an expense was an allowable expense and hence the addition made by the AO was in it....