2015 (6) TMI 178 - AT - Income Tax

Deduction u/s 36(1)(viii) - income derived from providing long term finance - CIT(A) deleted addition - Held that - The CIT(A) had accepted and followed the order of his predecessor for previous assessment year i.e. 2003-04 which is the year under consideration in these appeals. The CIT(A) deleted the addition by following the order for preceding year and directed the AO to allow deduction to the assessee as per provisions of section 36(1)(viii) of the Act. We also note that the ITAT C Bench Delhi in the order passed for AY 2004-05 in assessee s own appeal has also restored this issue to the file of AO for fresh consideration with the directions as reproduced hereinabove. The impugned order of the CIT(A) in the present appeal has been passed on the same line i.e. for AY 2004- 05, therefore, in view of submissions of both the sides, this issue is also restored to the file of AO for a fresh adjudication - Decided in favour of assesse for statistical purposes. Addition of filing fees paid to Registrar of Companies (ROC) amounting - Held that - The facts and circumstances of the present case are similar to the facts and circumstances of the cases as relied by both the AO as well as the CIT(A) viz. judgment of Hon ble Supreme Court viz. Punjab State Industrial Corporation (1996 (12) TMI 6 - SUPREME Court) and Brooke Bond (India) Pvt. Ltd. vs CIT (1997 (2) TMI 11 - SUPREME Court) and the issue is squarely covered in favour of the revenue by these decisions. Under above noted facts and circumstances, we are unable to see any infirmity, ambiguity or any other valid reason to interfere with the conclusion of the CIT(A) confirming the addition made by the AO. - Decided against assessee. Penalty u/s 271(1)( c) - 100% tax sought to be evaded on ROC fees of ₹ 64,00,000/- paid for increasing the authorized share capital from ₹ 300 crore to ₹ 400 corre - Held that - AO imposed penalty on wrong premises merely because the claim of the assessee which was fully disclosed in the statement of income was not found to be acceptable by the department but it cannot be held that the assessee either furnished wrong particulars of its income or has concealed particulars of its income to attract penalty u/s 271(1)(c) of the Act. Hence, impugned penalty levied on the assessee is not sustainable - Decided in favour of assesse. Penalty u/s 271(1) (c) - disallowance of deduction u/s 36(1) (vii) (c) - Held that - since the quantum assessment and appeal order for A.Y 2003-04, on the basis of which penalty was levied do not survive and the order of second round of assessment is awaited, then the issue of sustainability or validity of the penalty order and impugned order becomes academic and infructuous and hence, the same does not survive for adjudication before this Tribunal and thus, we dismiss the sole ground of the Revenue without any detailed deliberations on merit - Decided in favour of assesse.

Summary

Issues Involved:

1. Deduction under Section 36(1)(viii) of the Income Tax Act.
2. Deduction under Section 36(1)(viia)(c) of the Income Tax Act.
3. Disallowance of filing fees paid to the Registrar of Companies (ROC).
4. Imposition of penalty under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Deduction under Section 36(1)(viii) of the Income Tax Act:

The Revenue challenged the CIT(A)'s decision to allow the assessee's claim for deduction under Section 36(1)(viii), arguing that the income derived from long-term finance did not qualify for this deduction. The Tribunal noted that a similar issue had been remitted to the Assessing Officer (AO) for fresh adjudication in the assessee's own case for AY 2004-05. Consequently, the Tribunal restored this issue to the AO for fresh consideration, directing that the AO take a new decision based on the provisions of the Act after providing the assessee a reasonable opportunity to be heard.

2. Deduction under Section 36(1)(viia)(c) of the Income Tax Act:

The assessee contested the reduction of the deduction under Section 36(1)(viia)(c) from Rs. 1,79,29,080 to Rs. 93,53,978. The Tribunal found that the issue was similar to the one remitted to the AO for AY 2004-05. Hence, the Tribunal restored this issue to the AO for fresh adjudication, similar to the directions given for AY 2004-05, ensuring proper opportunity for the assessee to present its case.

3. Disallowance of Filing Fees Paid to ROC:

The assessee argued that the Rs. 64,00,000 paid to the ROC for enhancing its capital base should be treated as revenue expenditure. However, both the AO and CIT(A) treated this expenditure as capital in nature, relying on Supreme Court judgments in the cases of Punjab State Industrial Development Corporation Ltd. vs CIT and Brooke Bond (India) Ltd. vs CIT. The Tribunal upheld this view, noting that the expenditure was directly related to the expansion of the capital base and thus constituted capital expenditure. Therefore, the Tribunal dismissed the assessee's ground on this issue.

4. Imposition of Penalty under Section 271(1)(c) of the Income Tax Act:

Assessee's Appeal:

The assessee contested the penalty imposed for furnishing inaccurate particulars of income concerning the ROC fees. The Tribunal noted that the assessee had disclosed all relevant details and that the disallowance of the claim did not automatically imply concealment of income or furnishing inaccurate particulars. Citing the Supreme Court's decision in CIT vs Reliance Petroproducts Pvt. Ltd., the Tribunal held that merely making a claim that was not accepted did not warrant a penalty under Section 271(1)(c). Consequently, the Tribunal directed the AO to delete the penalty.

Revenue's Appeal:

The Revenue challenged the deletion of the penalty related to the disallowance of the deduction under Section 36(1)(viia)(c). The Tribunal observed that since the quantum assessment order had been remitted back to the AO for fresh adjudication, the penalty issue became academic and infructuous. Therefore, the Tribunal dismissed the Revenue's appeal without detailed deliberations on the merits.

Conclusion:

The Tribunal allowed the assessee's appeal concerning the penalty on ROC fees and dismissed the Revenue's appeal on the penalty related to the deduction under Section 36(1)(viia)(c). The issues regarding deductions under Sections 36(1)(viii) and 36(1)(viia)(c) were restored to the AO for fresh adjudication. The disallowance of the ROC fees as capital expenditure was upheld.