2017 (5) TMI 1606 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - MAT - computation of income u/s 115JB - adjustments towards bad debts - Held that - In that view of the matter, penalty cannot not be imposed on the assessee since, the original appeal was decided in favour of the assessee.

Summary

Issues:
1. Interpretation of penalty provisions under section 271(1)(c) in relation to income computation under section 115JB.
2. Validity of canceling penalty levied under section 271(1)(c) partially upheld by CIT(A).
3. Treatment of unabsorbed losses and depreciation in the case of amalgamation.
4. Excess depreciation provided in books and its treatment under section 115JA.

Issue 1 - Interpretation of Penalty Provisions:
The High Court analyzed whether the Tribunal's decision to not levy a penalty under section 271(1)(c) when income is computed under section 115JB was legally justified. Referring to relevant case laws, the Court found in favor of the assessee, stating that penalty imposition was not warranted in this scenario.

Issue 2 - Validity of Canceling Partially Upheld Penalty:
The Court examined the cancellation of the penalty under section 271(1)(c) partially upheld by CIT(A). Relying on precedent, including the decision in Commissioner of Income Tax vs. Woodward Governor India, the Court ruled in favor of the assessee, directing the cancellation of the penalty.

Issue 3 - Treatment of Unabsorbed Losses and Depreciation:
Regarding the treatment of unabsorbed losses and depreciation due to amalgamation, the Court referred to decisions from Delhi High Court, Gujarat High Court, and the Tribunal. The Court upheld the Tribunal's decision, affirming that the assessee was not liable for any notional disallowance of depreciation under the block concept of assets.

Issue 4 - Excess Depreciation Provided in Books:
The Court addressed the issue of excess depreciation provided in books and its treatment under section 115JA. Citing the Supreme Court's decision in Apollo Tyres Ltd. vs. CIT, the Court ruled in favor of the assessee, stating that the excess depreciation, in compliance with accounting principles, should not be added in computing book profit under section 115JB.

In conclusion, the Court dismissed the appeal, emphasizing that penalty imposition on the assessee was unwarranted due to the favorable decision in the original appeal. The issues were resolved in favor of the assessee against the department, leading to the dismissal of the appeal.