2006 (8) TMI 114 - HC - Income Tax

Assessee had bonafide belief that by selling dubbing rights to foreign company, it was selling goods within the meaning of section 80HHC claim for deduction u/s 80HHC can be disallowed but penalty cannot be imposed for the same on account of concealment of income.

Summary

Issues:
1. Deduction under Section 80 HHC of the Income-Tax Act for dubbing rights of Hindi films.
2. Disallowance of deduction by the Assessing Officer.
3. Initiation of penalty proceedings under Section 271(1)(C) of the Act.
4. Rejection of Assessee's contention by the Assessing Officer.
5. Imposition of penalty under Section 271(1)(C) of the Act.
6. Appeal before the Commissioner of Income-tax (Appeals) and subsequent dismissal.
7. Acceptance of the second appeal by the Tribunal.
8. Assessment of the Assessee's belief and intention.
9. Determination of concealment of income or inaccurate particulars.
10. Liability of the Assessee for penalty under Section 271(1)(C) of the Act.

The judgment pertains to the issue of the Assessee claiming a deduction under Section 80 HHC of the Income-Tax Act for the sale of dubbing rights of Hindi films to a foreign company. The Assessing Officer disagreed with this characterization, viewing the transaction as a receipt of royalty rather than a sale of goods or merchandise, leading to the disallowance of the deduction. Additionally, penalty proceedings were initiated under Section 271(1)(C) of the Act based on the perceived discrepancy. The Assessee contended that there was no concealment of income or furnishing of inaccurate particulars, requesting the dropping of penalty proceedings, but the Assessing Officer imposed the penalty. Subsequent appeals were made, with the Tribunal ultimately accepting the Assessee's appeal, prompting the Revenue's challenge.

Upon review, the High Court observed that the Assessee's actions did not indicate an intent to mislead the Assessing Officer. It was noted that the Assessee genuinely believed that the sale of dubbing rights constituted a sale of goods or merchandise under Section 80 HHC of the Act. While the Assessing Officer disagreed with this interpretation, it was acknowledged that there was no evidence of deliberate concealment or misleading particulars regarding the Assessee's income. Consequently, as there was no concealment of primary facts, the High Court determined that the Assessee could not be penalized under Section 271(1)(C) of the Act.

The Court endorsed the Tribunal's decision, emphasizing that the Assessee should not be penalized for advocating a position that the Assessing Officer found unacceptable. It was concluded that since there was no concealment of facts, the imposition of a penalty was unwarranted. The judgment highlighted the absence of any substantial legal question necessitating further consideration, leading to the dismissal of the appeal.