EXEDY INDIA LTD,MUMBAI vs. DCIT OSD(1), MUMBAI

The assessee has filed the present appeal against the order dated 31.12.2015 passed by the Commissioner of Income Tax (Appeals)-2 Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the AY. 2007- 08.

The Commissioner of Income Tax (Appeals) erred in not referring to written submissions and the authorities cited before him and filed in compilation submitted before him at the time of hearing of the appeal.

The Commissioner of Income Tax (Appeals) at the time of hearing of appeal gave a wrong impression that he will be allowing the appeal f the Appellant. 4. The Commissioner of Income Tax (Appeals) erred in holding that the technical collaboration fees instalment paid of Rs.28,70,000/- was claimed as revenue expenditure, and the Assessing Officer held it to capital expenditure, it amounts to deliberate concealment of income the penalty under Section 271(1)© is leviable. 5. The Commissioner of Income Tax (Appeals) erred in not adjudicating livability of penalty under section 271(1}© of the Act, on the club expenses save and except just mentioning the facts relating to that issue. 6. The Appellant craves leave to add to amend or raise new grounds of appeal

We have heard the arguments advanced by the Ld. Representative of the parties and perused the record. Under these issues the assessee has challenged the confirmation of the order of the AO by the CIT(A) to levy the penalty u/s 271(1)(c) of the Act. The penalty has been levied on account on account of disallowance of deferred revenue expenditure to the tune of Rs.28,70,000/-. So far as the disallowance of club expenses to the tune of Rs.4,25,556/- is concerned, we noticed that the assessee company initially an amount of Rs.4,25,556/- under the head club expenses. The contention of the assessee is that the expenditure was actually incurred by the employees through credit card payment towards hotel, lodging and travel outside the place of work however, finding no proof about these expenses for the business purpose, the Assessing Officer disallowed the same and added to the income of the assessee. The assessee filed an appeal before the CIT(A) who allowed the claim to the extent of 50% of the total expenses and deleted the addition to the extent of Rs.2,12,778/- disallowance of claim nowhere attract the penalty in view of the provision u/s 271(1)(c) of the Act. In this regard, we are also find support in law settled in CIT Vs. Reliance Petroproduct Vs. CIT (P) Ltd. 322 ITR 158 SC & Meherjee Cassinath Holdings P. Ltd. Vs. ACIT, Circle-4(2). Moreover, the CIT(A) allowed the claim of the assessee on estimation basis which nowhere attract the penalty also. So far as the other ground to levy the penalty is concerned, the penalty was levied on account of disallowance of deferred revenue expenses of Rs.28,70,000/-. It is to be seen in which the ITA. No.1443M/16 A.Y.2007-08 circumstances, the claim of the assessee has been declined. The company had paid payment technical know- how fees of Rs.78.20 lacs upto the F.Y. 2005-06 to the collaborator M/s. Exedy Corp. Japan. While remitting the said technical know-how, the company deducted the tax which was deposited in view of the provision u/s 40A(ia) of the Act. According to the procedure consistently followed by the company, technical know-how fees paid to M/s. Exedy Corp. Japan, was amortised value a period of 4 years in the books of accounts and accordingly the value of Rs.28,70,000/- was debited to the P & L account under the head deferred revenue expenses written off for the purpose of income tax and the same was added to the block of assets under the head technical know-how upto A.Y.2005-06 and claim depreciation @ 25% of provision u/s 32 of the I.T. Act. However, for the relevant assessment year, the said amount to the tune of Rs.28,70,000/- was not added to the income. Upon the notice, the assessee agreed to add the said amount into the income of assessee by virtue of letter dated 17.11.2009. Since the depreciation had already been allowed on the payment of technical know-how through further depreciation upon the said amount was not allowable. It is purely mistake which was accepted by assessee immediately, in view the letter dated 17.11.2009. The facts are on record which are not disputed. The Hon’ble Supreme Court in the case of Price Waterhouse Coopers (P. Ltd. Vs. CIT (2012) 25 taxmann.com 400 (SC) has held that in the case of bona fide and inadvertent mistake no penalty is leviable in accordance with law. Moreover, it is not a case of furnishing inaccurate particulars and attempt to conceal the income. In view of the said circumstances and in view of the law relied by the Ld. representative of the assessee in the case of Price Waterhouse Coopers (P.