2014 (1) TMI 173 - AT - Income Tax

Computation of book profit u/s 115 JB Reduction of book profits under Clause (iv) of Explanation I to S.115 JB for Deduction u/s 80HHC of the Act Whether deduction u/s 80HHC was to be computed with reference to profits computed as per Companies Act or profits computed as per Income Tax Act Held that - Relying upon Ajanta Pharma Ltd. Vs. CIT 2010 (9) TMI 8 - SUPREME COURT the judicial opinion got settled in favour of the assessee - Thereafter vide Finance Act 2011 the statute was amended with retrospective affect from 01/04/2005 - Thus the assessee has lost in the Quantum proceedings - Following CIT vs. Reliance Petro Products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT - the First Appellate Authority was right in deleting penalty levied u/s. 271 (1)(c) for the reason that there is neither furnishing of inaccurate particulars of income nor concealment of income - The assessee has made an honest claim and all the facts relating to the claim were on record. Levy of penalty us. 271 (1)(c) - Disallowance on depreciation Held that - Following M/s. Bhushan Steel Ltd. (Formerly Bhushan Steel & Strips Ltd.) Versus Dy. Commissioner of Income tax 2010 (3) TMI 996 - ITAT DELHI - the assessee could possibly claim the whole of the expenditure as revenue expenditure in assessment year 1999-2000 and the result would have been that the deductions now claimed over a number of years might have been allowed in that year - the conduct of the assessee was not such which could establish the charge of concealment of income or furnishing inaccurate particulars of income - CIT(Appeals) was not justified in sustaining the levy of penalty Decided against Revenue.

Summary

Issues:
- Disallowance of depreciation
- Computation of deduction u/s 80 HHC for book profits u/s 115 JB

Analysis:
1. The appeals were filed by the Revenue against orders canceling penalties u/s 271(1)(c) for AY 2005-06 and 2006-07. The company, engaged in manufacturing, faced additions in assessment, leading to penalty imposition. The First Appellate Authority deleted penalties for both years, prompting the Revenue's appeal.

2. For AY 2005-06, the issues included disallowance of depreciation and deduction u/s 115 JB. The Revenue contended errors in the CIT(A)'s order, seeking to add or amend grounds during the appeal. Similarly, for AY 2006-07, the Revenue challenged the deletion of penalties related to disallowed depreciation and deduction u/s 80HHC for computing MAT u/s 115 JB.

3. The core issue revolved around computing book profits u/s 115 JB, specifically the deduction u/s 80 HHC. The AO disagreed with the assessee's method, leading to penalty imposition. This matter was debated across Tribunal Benches until the Supreme Court settled it in favor of the assessee. The retrospective amendment by Finance Act 2011 impacted the quantum proceedings.

4. The Tribunal found the assessee's claim on deduction u/s 80 HHC as debatable, following the principles laid down by the Supreme Court in CIT vs. Reliance Petro Products Pvt. Ltd. The absence of inaccurate particulars or concealment of income led to the First Appellate Authority rightly deleting the penalties.

5. Regarding the depreciation disallowance issue, the Tribunal referred to a previous case where the nature of expenditure was debated. The Tribunal held that the conduct of the assessee did not indicate concealment or furnishing inaccurate particulars, leading to the dismissal of the Revenue's appeals for both AYs.

6. Ultimately, the Tribunal upheld the First Appellate Authority's decision to delete the penalties, emphasizing the absence of concealment or inaccurate particulars. The appeals by the Revenue for both AYs were dismissed, affirming the orders in favor of the assessee.