RIDDHI STEELS & TUBES LIMITED,AHMEDABAD vs. DCIT,CIRCLE-3(1)(2), AHMEDABAD

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-9, Ahmedabad (‘CIT(A)’ in short), dated 07.11.2017 arising in the penalty order dated 15.03.2017 passed by the Assessing Officer (AO) under s. 271(1)(c) of the Income Tax Act, 1961 (the Act); concerning A.Y. 2012-13.

As per the captioned appeal, the assessee has challenged the imposition of penalty of Rs.35,690/- on account of ROC expenses of Rs.1,10,000/-.

When the matter was called for hearing, the learned AR for the assessee pointed out that the disallowance of Rs.1,10,000/- was made towards expenses incurred to increase the share capital on the ground that such expenditure of raising additional share capital is a capital expenditure having regard to the decision of Hon’ble Supreme Court in Brooke Bond India Ltd. v. CIT [1997] 91 Taxman 26 (SC). The learned AR submitted that the debate being expenditure to be revenue in character or of capital expenditure, no penalty is imposable.

The learned DR, on the other hand relied upon the orders of the lower authorities.

We have carefully considered the rival submissions on imposition of penalty under s.271(1)(c) of the Act towards ROC fees paid for increasing authorized capital in controversy. The assessee has debited fee paid to Registrar of companies for increasing the authorized capital and claimed the same as revenue expenditure. The revenue authorities, on the other hand, have disallowed the expenditure on the ground that such increase in authorized capital will result in advantage of enduring nature and is capital expenditure. The provisions of Section 271(1)(c) of the Act was invoked for such disallowance. We straightway notice that no falsity has been found in the particulars of expenditure claimed per se. It is trite that merely because assessee has claimed expenditure which claim was not accepted or was not acceptable to the Revenue, that by itself, would not attract penalty under s. 271(1)(c) of the Act. Disallowance of expenses per se cannot mean that assessee has furnished inaccurate [Riddhi Steel & Tube Ltd. Vs. DCIT] A.Y. 2012-13 - 3 - particulars of his income. Reference can be made to the decision of Hon’ble Supreme Court in CIT vs Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC) for this purpose. We thus see merit in the plea of the assessee for deletion of penalty imposed. The order of the CIT(A) is accordingly set aside and the AO is directed to delete the penalty on this score.

In the result, appeal of the assessee is allowed.