2009 (7) TMI 1351 - HC - Income Tax

Summary

Issues involved: Determination of nature of expenses claimed in income tax return as capital or revenue expenses, imposition of penalty u/s 271(1)(c) of the Income-tax Act, 1961.

In the present case, the assessee claimed payment of technical fee, marketing research expenses, and advertisement and publicity expenses as revenue expenses in its income tax return. The Assessing Officer concluded that these expenses were capital in nature, leading to the initiation of penalty proceedings u/s 271(1)(c) of the Income-tax Act, 1961, resulting in a penalty of Rs. 24,14,690. The CIT(A) overturned the Assessing Officer's order, and upon further appeal by the revenue, the Income Tax Appellate Tribunal upheld the CIT(A)'s decision. The ITAT noted a divergence of opinion on the nature of the expenditure, indicating a debatable legal issue. It emphasized that the mere non-filing of an appeal against the addition does not establish concealment or furnishing of inaccurate particulars of income. The ITAT found the claim to be bona fide and a contentious legal issue, thereby ruling out the imposition of penalty for concealment. Consequently, the Court held that no substantial question of law arose for consideration, leading to the dismissal of the appeal.