2018 (10) TMI 1602 - HC - Income Tax

Penalty u/s 271(1)(C) - deduction u/s 80IA(4)(iv) rejected - Held that - In the quantum appeal the assessee has succeeded before this Court while allowing the appeals held that the Substantial Questions of Law, which have been framed for consideration, are covered by the decision of this Court in Velayudhaswamy Spinning Mills (P) Ltd., Vs. Assistant Commissioner of Income Tax 2010 (3) TMI 860 - MADRAS HIGH COURT 2010 (3) TMI 860 - MADRAS HIGH COURT . We may also add that the Tribunal has considered the matter in a proper perspective, took note of the factual position and held that at the relevant point of time there were two interpretations which were possible with regard to the deduction that can be claimed under Section 80IA(4)(iv). In such circumstances, the Tribunal has rightly held that the case of the assessee cannot be brought within the ambit of concealment and furnishing of inaccurate particulars with deliberate intention, to avoid payment of tax. - Decided in favour of assessee. Amounts paid to the employees under the Voluntary Retirement Scheme - whether such expense was an allowable expense or not? - Held that - In order to get over the legal embargo which permitted such expense to be allowable as a deduction, the Income Tax Act was amended and Section 35DDA was introduced by Finance Act, 2001 w.e.f 01.04.2001. Thus, in our considered view, the Tribunal was justified in setting aside the penalty levied on the assessee on account of the fact that the assessee had acted in terms of the law prevailing at the relevant point of time. Thus, for the above reasons the Revenue has not made out any grounds to interfere with the order passed by the Tribunal. - Appeal decided against revenue

Summary

Issues involved:
1. Appeal against the order passed by the Income Tax Appellate Tribunal regarding penalty under Section 271(1)(C) of the Income Tax Act for the assessment year 2001 to 2002.
2. Interpretation of deduction under Section 80IA(4)(iv) of the Income Tax Act.
3. Allowability of expenses related to amounts paid to employees under the Voluntary Retirement Scheme.

Analysis:

1. The appeal filed by the Revenue challenged the order of the Income Tax Appellate Tribunal regarding the penalty under Section 271(1)(C) of the Income Tax Act for the assessment year 2001 to 2002. The substantial question of law admitted for consideration was whether the Tribunal was right in deleting the penalty. The Tribunal had considered the matter and concluded that the case of the assessee could not be categorized as concealment or furnishing inaccurate particulars with the deliberate intention to avoid tax payment.

2. In the context of the interpretation of deduction under Section 80IA(4)(iv) of the Income Tax Act, it was noted that the assessee had succeeded in a previous appeal before the Court challenging the rejection of the claim for deduction under the same section. The Division Bench had allowed the appeals, stating that the substantial questions of law framed were covered by a previous decision of the Court. Therefore, the Court held that the Revenue could not pursue the present appeal against the penalty imposed under Section 271(1)(C) in favor of the assessee.

3. The issue regarding the allowability of expenses related to amounts paid to employees under the Voluntary Retirement Scheme was discussed in light of the legal position at the relevant time. The Court referred to past decisions and the subsequent amendment to the Income Tax Act introducing Section 35DDA. It was concluded that the Tribunal was justified in setting aside the penalty as the assessee had acted in accordance with the law prevailing at that time. The Court held that the Revenue had not established any grounds to interfere with the Tribunal's order, resulting in the dismissal of the Tax Case Appeal filed by the Revenue.

In conclusion, the Court dismissed the appeal filed by the Revenue, answered the substantial question of law against the Revenue, and held that no costs were to be awarded.