COMMISSIONER OF INCOME TAX vs. EASTERN MEDIKIT LTD.

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ITA - 921 / 2009HC Delhi23 September 20091 pages
For Petitioner: PREM LATA BANSAL
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the ITAT's order. The Tribunal's approach was deemed correct. The reasoning was that the Supreme Court judgment in IPCA Laboratories Limited Vs. Deputy Commissioner of Income Tax (266 ITR 521) was delivered after the assessee had filed their Income Tax Return for Assessment Year 2002-2003. Moreover, the Tribunal had considered various High Court judgments and observed that the law concerning the inclusion of expenses of loss-making units for Section 80HHC deduction was not categorically settled before the Supreme Court's decision. In a situation where two views were possible, the assessee's claim could not be characterized as wrong, false, or malafide. Consequently, the penalty was rightly deleted. The operative direction was the dismissal of the appeal.

What were the facts?

The Assessing Officer initiated penalty proceedings against the assessee for Assessment Year 2002-2003. The assessee claimed deduction under Section 80HHC, excluding expenses of the head office and losses from Unit No. 292. The Assessing Officer contended this was concealment of fact, citing the Supreme Court judgment in IPCA Laboratories Limited Vs. Deputy Commissioner of Income Tax (266 ITR 521), which mandated inclusion of loss-making units' expenses. The assessee appealed the penalty order, which was decided in their favour by the CIT(A) and subsequently confirmed by the ITAT. The ITAT noted that the Supreme Court judgment in IPCA was delivered after the assessee filed the return and that the law on this aspect was not settled prior to it, allowing for two possible interpretations.

What were the issues?

1. Whether a question of law arises from the order of the Income Tax Appellate Tribunal (ITAT) upholding the deletion of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, for Assessment Year 2002-2003. Assessee's Contentions: The assessee argued that the penalty was wrongly imposed because the Supreme Court judgment in IPCA Laboratories Limited Vs. Deputy Commissioner of Income Tax (266 ITR 521), which formed the basis for the penalty, was rendered after the filing of the return. Furthermore, the law on the issue of including expenses of loss-making units for Section 80HHC deduction was not settled at the time of filing the return, with different High Courts holding varying views. Therefore, the assessee's claim, based on a possible interpretation of the law, could not be considered incorrect, false, or malafide. Revenue's Contentions: The revenue contended that the assessee had concealed facts by not taking into consideration the expenses of the head office and the losses of Unit No. 292 while claiming deduction under Section 80HHC. They relied on the Supreme Court's decision in IPCA Laboratories Limited Vs. Deputy Commissioner of Income Tax (266 ITR 521) to argue that the assessee was obligated to show the expenses of the loss-making unit.

Which sections of the Income-tax Act were involved?

Section 80HHC,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 23.09.2009 . Present: Ms. P.L.Bansal, Advocate for the appellant. Mr. Anoop Sharma and Mr. Manu K.Giri, Advocate for the respondent. . +ITA No. 921/2009 . . The Assessing Officer initiated penalty proceedings against the respondent/assessee on the ground that in the Income Tax Return filed by the assessee for the Assessment Year 2002-2003, the assessee had claimed deduction under Section 80HHC in respect of manufacturing unit Nos. 196 and 205 and had not taken into consideration expenses of head office unit, losses of Unit No. 292. According to the Assessing Officer, it was concealment of fact in his opinion because of the judgment of Supreme Court in IPCA Laboratories Limited Vs. Deputy Commissioner of Income Tax (266 ITR 521), the assessee was bound to show the expenses of the loss making unit as well. He, thus, passed the penalty order against which the assessee filed appeal which was decided in his favour by the CIT(A). This order was confirmed by the ITAT as well holding that the judgment of the Supreme Court in IPCA was rendered much after the filing of the return. The Tribunal has also taken note of various judgments of different High Courts on this issue on the basis of which it observed that the law on this aspect had not been categorically settled before the judgment of the Supreme Court in IPCA Laboratories and, therefore, when two views were possible, it cannot be said that the claim of the assessee was wrong, false or malafide. We are of the opinion that approach of the Tribunal is correct and no question of law arises. Dismissed. A.K.SIKRI, J . . . . VALMIKI J.MEHTA, J . September 23, 2009 ib . #41 .

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