2014 (7) TMI 800 - AT - Income Tax

Penalty u/s 271(1)(c) Nature of fees paid to ROC - Held that - The ROC fees were duly disclosed - there is no case of concealment - the assessee s plea that there was an inadvertent error deserves to be accepted - There was no concealment of income on the part of the assessee - The expenditure made was duly disclosed - Only the treatment thereof as capital or revenue - penalty u/s 271(1)(c) of the Act is not exigible Relying uponCOMMISSIONER OF INCOME-TAX Versus RELIANCE PETROPRODUCTS PVT. LTD. 2010 (3) TMI 80 - SUPREME COURT -non acceptance of a claim made by the assessee cannot result in automatic levy of penalty u/s 271(1)(c) Decided against Revenue. Stamp duty and registration charges paid on leasehold property CIT(A) deleted the addition by holding that since the ownership of the asset was not with the assessee company hence the expenditure involved was revenue in nature. - Held that - where the matter pertains to treatment of brokerage of stamp duty paid for acquisition of lease hold properties - it must also be noted that the expenditure was in respect of stamp duty, registration charges and professional fee - There was no element of the premium in the amount claimed as expenditure - this expenditure would have been the same even if the lease had been of a shorter duration provided the period of lease was more than one year - The decision in CIT vs Bombay Cycle & Motor Agency 1979 (1) TMI 64 - BOMBAY High Court followed Decided against Revenue. FBT on internet charges Held that - CBDT Circular are binding upon the revenue the appeal has been filed in contravention of the Circular issued by the CBDT regarding the monetary limit for filing the appeal before ITAT Decided against Revenue.

Summary

Issues:
1. Deletion of penalty levied under section 271(1)(c) of the IT Act for ROC fees.
2. Treatment of stamp duty and registration charges on leasehold property as capital or revenue expenditure.
3. Deletion of addition for FBT on Internet charges.
4. Addition of provision for leave encashment under section 43B(f) of the Act.

Issue 1: Penalty for ROC Fees:
The appeal concerned the deletion of a penalty levied under section 271(1)(c) of the IT Act for ROC fees debited under rates and taxes. The AO disallowed the expenses and imposed the penalty, alleging it was a capital expenditure. The CIT(A) deleted the penalty, citing inadvertent error and lack of deliberate concealment. The ITAT upheld the CIT(A)'s decision, emphasizing that there was no concealment of income, and the penalty was not justified as the expenditure was duly disclosed. Citing relevant case laws, the ITAT concluded that the penalty was not exigible due to the inadvertent nature of the error.

Issue 2: Stamp Duty and Registration Charges:
The appeal involved the treatment of stamp duty and registration charges on leasehold property as capital or revenue expenditure. The AO treated the expenditure as capital, while the CIT(A) considered it revenue in nature since the ownership of the asset was not with the assessee. The ITAT upheld the CIT(A)'s decision, relying on precedents that supported the revenue nature of such expenses. Citing relevant court decisions, the ITAT found no infirmity in the CIT(A)'s order and dismissed the Revenue's appeal.

Issue 3: Deletion of FBT on Internet Charges:
The issue revolved around the deletion of an addition for FBT on Internet charges. The ITAT dismissed the Revenue's appeal as the tax effect was below the CBDT's appeal filing limit. Citing CBDT Circulars, the ITAT held that the appeal was not maintainable due to contravention of the monetary limit set by the CBDT. Consequently, the ITAT dismissed the Revenue's appeal on tax effect grounds.

Issue 4: Provision for Leave Encashment:
The appeal contested the addition of provision for leave encashment under section 43B(f) of the Act. The AO disallowed the expenditure based on a stay order by the Supreme Court on a High Court decision. The CIT(A) upheld the addition, prompting the assessee to appeal. The ITAT remitted the issue back to the AO for fresh consideration post the Supreme Court's decision, as per the assessee's request. The appeal filed by the assessee was allowed for statistical purposes.

In conclusion, the ITAT addressed various issues related to penalties, expenditure treatment, tax effect limits, and legal interpretations, providing detailed analyses and referencing relevant legal precedents to support its decisions in each case.