2016 (12) TMI 1006 - HC - Income Tax

Penalty u/s 271(1)(c) - excess claim made under Section 80IA - non-allocation of Head Office (personnel expenses) to the eligible unit - Held that - It is an admitted position before us that the issue of 10% of allocation to personnel expenses to the eligible unit for the Assessment Year 2000-01 was decided by the Tribunal much after filing of return of income for the subject assessment years. Thus, it cannot be said that non-allocation of eligible unit was deliberate to increase the profits of the eligible units. Before us, the respondent assessee in support of its submissions that non-allocation of Head Office (personnel expenses) to the eligible unit was on the basis of its understanding that only direct expenses i.e. having a direct nexus to the eligible unit is debitable. This view of the assessee in fact has found acceptance by the decision of this Court in Zandu Pharmaceutical Work Ltd. Vs. Commissioner of Income Tax, 2012 (9) TMI 620 - BOMBAY HIGH COURT . Therefore, the view / opinion of the respondent assessee in not allocating any personnel expenses of the Head Office to the eligible units is a possible view. Therefore, it cannot be said on these facts that there was any filing inaccurate particulars and / or concealment of income on the part of the respondent assessee warranting imposition of penalty.- Decided against revenue

Summary

Issues involved:
Challenge to order under Section 260A of the Income Tax Act, 1961 regarding penalty deletion under Section 271(1)(c) for Assessment Years 2002-03 and 2003-04.

Analysis:
1. The appeals challenged the Tribunal's order related to penalty deletion under Section 271(1)(c) of the Income Tax Act for Assessment Years 2002-03 and 2003-04. The main issue was whether the Tribunal was justified in deleting the penalty despite the assessee furnishing inaccurate particulars of income by making an excess claim under Section 80IA, leading to income concealment.

2. The respondent assessee, engaged in manufacturing, had a unit eligible for deduction under Section 80IA. The Assessing Officer allocated 40% of personnel expenses to this unit, which the Tribunal reduced to 10% in quantum proceedings. The assessee accepted this allocation.

3. The Assessing Officer imposed penalties for excessive deduction claims under Section 80IA, totaling ?1.14 crores for A.Y. 2002-03 and ?1.39 crores for A.Y. 2003-04. However, the CIT(A) allowed the appeal, deleting the penalties, stating that the expense allocation was a matter of opinion and did not indicate concealment.

4. The Revenue appealed to the Tribunal, which upheld the CIT(A)'s decision. The Tribunal noted that the assessee maintained separate accounts for each unit, and the allocation was adhoc. It found no defects in the accounts or allocation method, concluding that no penalty was warranted.

5. The Revenue argued that the penalty was justified as the assessee furnished inaccurate particulars. However, the Court found that the Tribunal's decision on the allocation was made after the return filing, and the assessee's understanding was supported by legal precedent, thus not warranting a penalty.

6. The Court held that the issue did not raise any substantial question of law, leading to the dismissal of both appeals without costs.

In conclusion, the Court upheld the Tribunal's decision to delete the penalties, emphasizing that the allocation of expenses was a matter of opinion and did not indicate deliberate concealment or inaccurate particulars of income.