9911796707
TMI Blog2013 (6) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... the Supreme Court, the assessee would be at liberty to raise the said question at the time of hearing. 3. The assessee is a company engaged in hospitality services. For the assessment year 2001-02, the assessee filed its return declaring loss of Rs.43,15,328/-. The assessment was completed under Section 143(3) of the Act, vide order dated 27th February, 2004, at a positive income of Rs.9,26,510/-. The Assessing Officer made following additions/ disallowance in the quantum proceedings:- " S.No. Particulars Amount 1. Loss of closure of South Extension Unit Rs.25,37,521 2. Capital Expenditure for interior designing Rs.1,32,000 3. Depreciation on assets purchased from M/s Star Hospitality Rs. 3,03,433 4. Donations Rs. 10,494 5. Loss of subsidiary Company Rs.1,39,595 .." 4. In the first appeal, the assessee substantially succeeded and most of the additions/disallowances were deleted. After giving the first appeal effect, the loss was determined at Rs.34,30,680/- as against loss of Rs.43,15,328/-. Aggrieved, the Revenue preferred an appeal before the Tribunal, which was substantially allowed vide order dated 25th April, 2008. The 5 additions mentioned above were uph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of assessee‟s business. The said claim of Rs.3,03,433/- again is not substantial. 7. The real question pertains to the first two claims i.e. loss on closure of South Extension Unit of Rs.25,37,521/- and Capital Expenditure for interior designing of Rs.1,32,000/-. The two amounts are interconnected as the expenditure of interior designing was incurred on the South Extension Unit. 8. The respondent assessee had taken a premises on rent/lease in South Extension area in New Delhi in the very assessment year but the restaurant was closed and the operations stopped in the first year itself. The assessee had claimed that the expenditure incurred in the setting up the restaurant like flooring, civil and electrical works, alterations, repairing, wood work, fixtures and furniture etc. should be allowed as revenue loss. Disagreeing, the Tribunal in the quantum proceedings observed that the aforesaid loss was a capital loss and not a revenue loss for the following reasons:- "2.3 We have perused the records and considered the rival contentions carefully. The assessee during the year stated a new restaurant in which substantial capital investment had been made in the premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f law. We find that there is a specific provision u/s 32(1)(iii) inserted w.e.f. Assessment year 1998-99 as per which if any asset used for the purpose of business on which depreciation has been claimed, is sold, discarded, demolished or destroyed in the previous year other than the previous year in which it was first brought into use, the difference between the sale/salvage value and the WDV has to be allowed as a business loss. This provision is not applicable in the case of assessee because the assets in this case have to be discarded in the very first year as the restaurant was not found viable. Therefore, in our view it is capital put by the assessee in the new business, which was lost and has, therefore, to be treated as loss of capital not allowable. This is not a case of loss occurring during the actual carrying on of the business, which can be allowed as business expenditure but a case of capital put into the new business being lost as the business not found viable. The expenditure has therefore, to be disallowed as a loss of capital. We order accordingly. The order of CIT(A) is reserved and the disallowance made by the AO is upheld." 9. The aforesaid reasoning itself dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry? The assessee was able to bring back plant & machinery on the liquidation of subsidiary in Nepal as per their letter to RBI but on the closure of a unit in South Extension Delhi the assessee is not able to use the plant & machinery and has to abandon the same is too far fetched claim to substantiate any bona fide. Furniture and fixtures from Star Hospitalities Pvt. Ltd., Nepal is of a value of Rs.36,618/- while what is written of is Rs.19,978/-. Coming to the issue of building on lease, the Ld. CIT(A) in the appellate order in the quantum proceedings has termed the same to include the partition and fixing of wooden fixtures, wooden floor, false ceiling, frame work, sanitary and drainage. In the letter addressed to the RBI in respect of bringing back the movable assets more specifically the letter dated 14.06.2002 an amount of Rs.9 lacs has been shown as wood/planks removed from the building on rent. If such items can be removed from the building on rent in Nepal and be used in Rodeo South Extension as claimed by the assessee, it shows that it lease such items were dismentable. Then how can it be said that the total amount shown under the building on lease had to be abandoned. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assesse i.e. concealment or furnishing of inaccurate particulars which has resulted in additions in the quantum proceedings. Mens rea is not required or necessary to impose penalty for concealment but an assessee can escape penalty when he can show and establish that his case falls within four corners of the exclusion provided in Explanation 1 applicable to the said section. Section 271(1)(c) and the Explanation 1 read:- "271. Failure to furnish returns, comply with notices, concealment of income, etc.-(1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person- (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty." Xxxxxxxx "Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act:- (A) Such person falls to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the Commissioner to be false, or (B) Such person offers an explanation which he i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and few minor items of other assets amounting to Rs.25,37,521 has been shown as loss due to closure of unit." 16. This was in reference to the entry in the profit and loss account where under the head „Expenditure‟ loss of wholly owned subsidiary and closure of unit was specifically marked or indicated. The explanation as claimed also referred to note No. 4. Thus, the assessee in its return of income or the profit and loss account had not concealed and tried to camouflage the nature of loss that it was loss on account of wholly owned subsidiary and on closure of the unit. We say so with clarity and duly note that the assessee had come clean and had narrated and stated the facts and material. There is nothing in the penalty order or the appellate orders to negate the said admitted position. The second condition is thus satisfied. 17. The second aspect is whether the explanation or justification for the claim made by the assessee was bona fide. This requires examination of the merits of the claim and whether or not the claim made was bona fide i.e. had legal basis or foundation on which it could be made and was justified or was a mere pretense or make belief. 18. Whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that the expenditure under the head „current repairs‟ should be allowed as revenue deduction as by very nature tenancy right is for a limited period and does not create any asset. The question was answered in favour of the assessee and against the Revenue. In CIT vs. Escorts Finance Ltd. (2006) 205 CTR 574 (Del.), yet again expenditure incurred on carrying out repairs to make the premises workable, to replace glasses etc. was treated as a revenue expense. The expenditure included polishing of floor, wooden paneling etc. Reference in this regard may also be made to decisions of the Madras High Court and the Punjab and Haryana High Court in CIT vs. Ayesh Hospitals Pvt. Ltd. 2007 292 ITR 266 (Mad.) and CIT vs. Porrits & Spencer (A) Ltd. (2002) 257 ITR 49 (P&H). 19. We have extensively referred to these judgments, only to show that the issue raised by the assessee was debatable and capable of two views. The assessee had an arguable case or had taken a bonafide plea. The assessee had given his explanation and categorically and clearly stated the true and full facts in the return itself. He did not try to camouflage or cover up the expenses claimed. It is not uncom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 1st November, 2010. The claim made by the appellant may have been rejected, but it cannot be said that the same was not plausible or legally tenable. This aspect has been discussed above and it has been held that the claim made was bona fide. Regarding the legal opinion in writing, it is not mandatory for a person to obtain legal opinion in writing. Assessees do take legal opinion and in the present case the return of income was duly audited. Claim for depreciation is a technical claim based on interpretation of legal provision. Legal opinion, in such cases, is frequently given by Chartered Accountants to help the company to prepare its return of taxable income. In the present case, there is no allegation that the quantum of depreciation claim was incorrectly computed. The note itself indicates that it is written by a professional." 21. Similarly Delhi High Court in CIT vs. Zoom Communication Pvt. Ltd. (2010) 327 ITR 510 (Del.) has observed:- "The proposition of law which emerges from this case, when considered in the backdrop of the facts of the case before the court, is that so long as the assessee has not concealed any material fact or the factual information given by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount claimed as deduction on account of certain equipment being written off could not be added back in the computation of income." 22. In Devsons Logistics Pvt. Ltd. vs. CIT (2010)329 ITR 483 (Del.), it has been held that when a question arises, which is debatable but the claim of the assessee is not finally accepted, penalty under Section 271(1)(c) should not be imposed. Divergent views on legal interpretation of tax provisions have been subject matter of plethora of decisions. It is not necessary that there should be uniformity or consistency of opinion on aspects of law and the assessee must accept interpretation against him, even when a favourable view is credible and tenable. Penalty cannot be imposed because assessee had taken a particular legal stand unless the assessee had not disclosed facts before the department/authorities and is unable to establish his bonafides on the legal interpretation put forward. 23. Reference can also be made to CIT vs. Brahmputra Consortium Ltd. 2012 348 ITR 339 and Pramod Mittal vs. CIT ITA No. 67/2012 decided on 11th October, 2012 by the Delhi High Court. 24. Recently again, the Supreme Court in the case Price Water House Coopers Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
