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TMI Blog2016 (11) TMI 322X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view, the explanation given by the assessee is plausible explanation. Moreover, the expenses have not been found to be in-genuine or non-bonafide. Ld. CIT(A) has also examined the nature of the disallowance in detail and found that it was not a case of any concealment or furnishing of inaccurate particulars of income. After taking into account all facts and circumstances of this case, we find that the Ld. CIT(A) has rightly deleted the penalty. Excess carry forward of losses - Held that:- We find that disallowance made by the Assessing Officer has been deleted by the Tribunal. Therefore, there is no basis to continue with the penalty and, thus we find that the penalty on the same has rightly been deleted by Ld. CIT(A). Disallowance of claim being provision for diminution in value of investment written back for purpose of calculation of book profits u/s 115JB - Held that:- The assessee had conspicuously stated in the return itself while making this claim that this claim was dependent upon the outcome of the appeal of earlier year. Since relief was given in earlier year, this amount became disallowable in the year before us and, therefore, it was held to be rightly disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not have been found if there were no scrutiny proceedings. (ii) On the fact and in the circumstances of the case and in law. the Ld. CIT(A) erred in deleting the penalty u/s.271(1)(c) of the IT Act on the disallowance of professional fees of ₹ 19,)44,000/- paid to M/s. S.B. Billimoria Co., and treating the expenditure claimed as revenue expenditure when the assessee has paid the sum for valuation of shares, the income from which is determined under the head Capital Gains. whenever shares are sold. (iii ) On the fact and in the circumstances of the case and in the Ld. CIT(A) erred in deleting the penalty u/s.271(I)(c) of the IT Act on the disallowance of professional fees of ₹ 19,44,000/- paid to M/s. S.B. Billimoria Co., when the quantum appeal was confirmed on the said issue. 2 . (i) On the fact and in the circumstances of the case and in law. the Ld. CIT(A) erred in deleting the penalty u/s.27 I ( 1 )(c) of the IT Act on the disallowance of processing fees of ₹ 27,50,000/- paid to various banks for acquiring term loan, without appreciating the fact that the expenses on loan were claimed by the assessee as revenue expenditure when the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crore being provision for diminution in value of investments written back for the purpose of calculation of book Profit u/s I I 5JB, without appreciating that none of the clauses under Explanation to section 1 I5JB provide for reduction of the write back of provision of investments from the net profits to arrive at the book profit. (ii) On the fact and in the circumstances of the case and in law. the Ld. CIT(A) erred in deleting the penalty u/s.271(1)(c) of the IT Act on disallowance of claim of ₹ 38.84 crore being provision for diminution in value of investments written back for the purpose of calculation of book Profit u/s I I 5JB, when the quantum appeal was confirmed on the said issued. (iii) On the fact and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the penalty u/s.271(1)(c) of the IT Act on disallowance of claim of ₹ 38.84 crore being provision for diminution in value of investments written back P. for the purpose of calculation of book Profit u/s I I5JB, without appreciating the fact that the assessee had not contested against levy of penalty on the similar issue for A.Y. 2000-01. 6. (i) On the fact and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Tribunal passed in quantum appeal and decide the grounds raised by the revenue with respect to levy of penalty on various additions / disallowances as under:- 3. Ground 1: In this ground, the revenue has challenged the action of Ld. CIT(A) in deleting the penalty levied by the Assessing Officer on account of disallowance of professional fee of ₹ 19,44,000 paid to M/s S.B. Billimoria Co. It is noted that the aforesaid amount of professional fees was disallowed by the Assessing Officer on the ground that it was not allowable as business expenses u/s 37. But out of the said amount, a sum of ₹ 16,20,000 has been directed to be allowed by Ld.CIT(A) in the quantum appellate order in computing the capital gain on sale of shares of Tata Autocomp Systems Ltd In A.Y. 2003-04, vide para 14 of his order dt 19-01-2007. It is further shown to us that balance sum of Rs/-3,24,000 had been allowed by the Assessing Officer himself in the assessment order for A.Y. 2004-05 in computing the capital loss on sale of shares of Automotive Stamping Assemblies Ltd. Under these circumstances, we find that though the expenses were disallowed as business expenses, but the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such loans is also allowable as business expenditure. More over the issue is covered with the decision of the Hon ble Supreme Court in the case of India Cements Ltd. v. CIT [1966] 60 ITR 52, wherein the Supreme Court held that the expenditure in raising loans or issuing 52 ITA No.4894/Mum/2008 debentures would be revenue in nature, irrespective of whether the borrowing is a long term or short term one. This issue is accordingly decided in favour of the assessee. Thus, from the above, it is clear that the disallowance has been deleted. When the basis of levy of penalty no more exists, the penalty also cannot survive anymore and, therefore, penalty on this issue is directed to be deleted. Ground 2 of the revenue s appeal is dismissed. 4. Ground 3: In this ground, the Revenue has challenged the order of the Ld. CIT(A) in deleting the penalty on the disallowance of processing fee of ₹ 4,85,000/-. It has been stated by the Ld. Senior Counsel that though the nature of processing fee involved in this ground is similar and identical to the processing fee covered in ground 2 above which has been held to be allowable by the Tribunal, but inadvertently the Tribunal has not de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is called for in the order of the Ld. CIT(A). Thus, ground 3 is dismissed. 7. Ground 4 : In this Ground, Revenue has supported levy of the penalty on the disallowance made by the Assessing Officer on account of excess carry forward of losses. With the assistance of parties, it is noted by us that the Tribunal has deleted the disallowance made by the Assessing Officer vide paras 40 41 of its order, which reads as under:- 40. Grounds No. 11 12: The issues raised vide Grounds No.11 12 are as to at what stage the deduction under section 10A can be allowed. The assessee deducted the income from its eligible unit u/s section 10A at the first stage i.e. prior to the setting off of the unabsorbed brought forward losses. The AO, however, held that the deduction available u/s 10 A is to be set off against brought forward losses. He accordingly set off the deduction available u/s 10A against the available unabsorbed losses and disallowed the carry forward of business loss of ₹ 6.59 Crores. The ld. CIT (A) upheld the action of the AO in this respect. The assessee thus has come in appeal before us on this issue. 41. The Ld. A.R. of the assessee, at the outset, has stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore, penalty has rightly been deleted by the Ld. CIT(A). 9. Per contra, the Ld. DR relied upon the order of Ld. CIT(A) in the quantum appeal on this issue. 10. We have gone through the facts of this case and orders passed by the lower authorities. It is noted by us with the assistance of the parties that in the return of income, while making this claim on account of provision for investments written back amounting to ₹ 38.84 crores, following note has been appended in the computation sheet:- Provision for diminution in the value of investments written back has been deducted for the purpose of calculating taxable profits, as the Assessing Officer in his earlier assessments has added back the provision for investments whilst calculating taxable income u/s 115JB. This addition has been appealed against by the Company and in the event the Appeal is upheld, the current deduction of ₹ 38.84 crores will have to be ignored. In such an event, the taxable profit will increase to Rsa.26,83,64,896/- and the tax payable thereon will be ₹ 2,06,30,550/-. 11. Thus, it transpires from the perusal of the above note that the assessee had conspicuously stated in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the CIT(A) and no interference is called for in the order of Ld.CIT(A) and, therefore, ground 5 of revenue s appeal is dismissed. 12. Ground 6: In this ground, the Revenue has challenged the action of Ld. CIT(A) in deleting the penalty levied by the Assessing Officer on account of disallowance of ₹ 9 crores being the amount of provision for contingency. It is noted with the assistance of the parties that subsequent to the passing of the assessment order, the Assessing Officer passed an order u/s 154 dt 31-01-2007 wherein the aforesaid addition was deleted. Copy of the order passed u/s 154 has been placed before us and relevant portion of the same reads as under:- c(ii) The assessee has stated that during the year,Rs.90000000/- was written back on account of provision for contingency resulting in an increase in the Profit Before Taxes; that this amount was erroneously added back u/s 115JB. It is seen from the records that the out of the total provision of ₹ 12,70,00,000/-, the assessee has already reduced ₹ 90000000/- in the Profit Loss Account and debited the net amount thereby increasing the Net Profit and the quantifiable Book Profit. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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