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2019 (8) TMI 1203 - AT - Income TaxPenalty u/s.271(1)(c) r.w.s. 274 - addition made on receipts as repairs and maintenance grant from the Government of Maharashtra and rental income by the assessee - HELD THAT - We hold that once the quantum is deleted 2019 (6) TMI 1370 - ITAT MUMBAI , the penalty will have no legs to stand. Accordingly, we direct the ld. AO to delete the penalty levied in the case of the assessee in respect of these two additions. - Decided in favour of assessee.
Issues Involved:
1. Legitimacy of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Treatment of ?1 crore grant from the Government of Maharashtra. 3. Treatment of ?1.05 lakhs rental income. Issue-Wise Detailed Analysis: 1. Legitimacy of Penalty under Section 271(1)(c): The primary issue in this appeal is the challenge against the confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961, which pertains to the concealment of income or furnishing inaccurate particulars of income. The penalty was levied in respect of additions made for a ?1 crore grant received for repairs and maintenance from the Government of Maharashtra and ?1.05 lakhs received as rental income. The Tribunal referenced its earlier decision in the quantum proceedings (ITA No.3072/Mum/2014 for A.Y.2010-11) where these additions were deleted. The Tribunal concluded that since the quantum of additions was deleted, the penalty under Section 271(1)(c) could not stand and directed the Assessing Officer (AO) to delete the penalty. 2. Treatment of ?1 Crore Grant from the Government of Maharashtra: The Tribunal examined whether the ?1 crore grant received from the Government of Maharashtra for repairs and maintenance of airports should be treated as income. The CIT(A) had treated this grant as income from business. The Tribunal noted that the assessee, being a 100% subsidiary of the Government of Maharashtra, argued that the grant should not be treated as income based on precedents like City and Industrial Development Corporation of Maharashtra Ltd. Vs. ACIT and CIT Vs. Karnataka Urban Infrastructure Development & Finance Corporation. The Tribunal observed that the grant was capital in nature, intended for repairs and maintenance, and should not be treated as revenue income. It was concluded that the grant was not liable to be treated as income of the assessee, aligning with the view that such grants are capital receipts. 3. Treatment of ?1.05 Lakhs Rental Income: The Tribunal also addressed the treatment of ?1.05 lakhs received as rental income. The CIT(A) had classified this as business income, which the Tribunal upheld. The Tribunal cited the assessee's primary objective of leasing land and noted that similar treatment was given in previous assessment years (2011-12 and 2012-13). The Tribunal referenced decisions like Shreeji Exhibitors Vs. ACIT and Chennai Properties & Investment Vs. CIT, which held that rental income from commercial exploitation of properties should be treated as business income. Consequently, the Tribunal decided that the rental income of ?1.05 lakhs was correctly treated as business income. Conclusion: The Tribunal concluded that the penalty under Section 271(1)(c) could not be sustained as the quantum additions were deleted. The ?1 crore grant was deemed a capital receipt and not income, while the ?1.05 lakhs rental income was rightly classified as business income. The appeal was allowed in favor of the assessee, directing the deletion of the penalty.
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