2010 (2) TMI 976 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of penalty u/s 271(1)(c) of the Income-tax Act.
2. Proportionate interest reduction from profits for deduction u/s 80-IB.
3. Disallowance of expenses from one unit and reduction from profits of the second unit.
4. Non-inclusion of income from sale of scraps for computing deduction u/s 80-IB.
5. Interest on fixed deposit receipts and interest from debtors as income from other sources.
6. Depreciation on fixed assets not considered for deduction u/s 80-IB.

Summary:

1. Deletion of Penalty u/s 271(1)(c):
The appeal by the Revenue challenged the deletion of penalty u/s 271(1)(c) by the Commissioner of Income-tax (Appeals). The Tribunal upheld the Commissioner's decision, noting that the major issues on which the penalty was imposed had been decided in favor of the assessee by the Tribunal. The reallocation of expenditure for deduction u/s 80-IB was deemed debatable, and the assessee's claim was based on prevailing law and Tribunal decisions, indicating a bona fide claim rather than concealment of income or furnishing inaccurate particulars.

2. Proportionate Interest Reduction from Profits for Deduction u/s 80-IB:
The Commissioner of Income-tax (Appeals) reduced the assessed income by considering proportionate interest reduction from profits for deduction u/s 80-IB. This was upheld as a debatable issue, not warranting penalty u/s 271(1)(c).

3. Disallowance of Expenses from One Unit and Reduction from Profits of the Second Unit:
Expenses of Rs. 2,37,396 were disallowed from one unit and reduced from the profits of the second unit. The Commissioner of Income-tax (Appeals) upheld this reallocation but deemed it a debatable issue, thus not justifying penalty u/s 271(1)(c).

4. Non-inclusion of Income from Sale of Scraps for Computing Deduction u/s 80-IB:
The Commissioner of Income-tax (Appeals) upheld the non-inclusion of income from scrap sales for deduction u/s 80-IB. However, the Tribunal had previously decided in favor of the assessee on this issue, negating the basis for penalty.

5. Interest on Fixed Deposit Receipts and Interest from Debtors as Income from Other Sources:
Interest from fixed deposit receipts and debtors was considered income from other sources. The Commissioner of Income-tax (Appeals) found that the assessee could not have anticipated the inclusion of such interest for deduction u/s 80-IB, thus considering the explanation bona fide and not attracting penalty u/s 271(1)(c).

6. Depreciation on Fixed Assets Not Considered for Deduction u/s 80-IB:
Depreciation on fixed assets was not considered for deduction u/s 80-IB. The Tribunal found that the assessee's claim was based on prevailing decisions and thus bona fide, not warranting penalty.

Conclusion:
The Tribunal confirmed the findings of the Commissioner of Income-tax (Appeals) and dismissed the Revenue's appeal, holding that the issues were either decided in favor of the assessee or were debatable, and the assessee's claims were bona fide based on prevailing law and Tribunal decisions. Thus, no penalty u/s 271(1)(c) was imposable.