DCIT, CHENNAI vs. REDINGTON INDIA LTD., CHENNAI

This appeal of the Revenue is directed against the order of the Commissioner of Income Tax (Appeals) – 3, Chennai, dated 09.09.2015 and pertains to assessment year 2006-07, deleting the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').

Shri Shiva Srinivas, the Ld. Departmental Representative, submitted that the assessee claimed depreciation at the rate of 100% on the so-called temporary structures. The Assessing Officer, however, disallowed the claim of the assessee. The assessee has also paid royalty to M/s Microsoft Corporation Inc. without deducting tax. Besides, the assessee has paid consultancy charges. The Assessing Officer levied penalty in respect of the claim of depreciation and non-deduction of tax on the ground that the assessee has filed inaccurate particulars of income. However, the CIT(Appeals) deleted the penalty on the ground that this Tribunal allowed the claim of the assessee as revenue expenditure in respect of temporary structures. With regard to payment made to M/s Microsoft Corporation Inc., according to the Ld. D.R., the matter was remitted back to the file of the Assessing Officer. According to the Ld. D.R., when the temporary structure is not eligible for 100% depreciation, the claim of the assessee is not bonafide, therefore, the assessee has furnished inaccurate particulars. Hence, according to the Ld. D.R., the CIT(Appeals) ought not to have deleted the penalty levied by the Assessing Officer under Section 271(1)(c) of the Act.

We have heard Sh. R. Vijayaraghavan, the Ld.counsel for the assessee also. The assessee’s claim of 100% depreciation on the temporary structure was examined by this Tribunal in the subsequent assessment year, namely, assessment year 2007-08 and this Tribunal found on identical set of facts that the expenditure has to be allowed as revenue expenditure. The assessee apparently treated the expenditure on temporary structures as capital and claimed 100% depreciation. Whether a particular expenditure is revenue in nature or capital in nature would depend upon the facts of each case and there can be difference of opinion depending upon the individual is concerned. When the assessee felt that the expenditure on the temporary structures is capital in nature and claimed 100% depreciation for the year under consideration, this Tribunal is of the considered opinion that it cannot be construed as furnishing inaccurate particulars of income or concealment of part of its income. Furthermore, with regard to non-deduction of tax on the payment made to M/s Miscrosoft Corporation Inc., as rightly submitted by the Ld. D.R., the matter was remitted back to the file of the Assessing Officer for reconsideration. In view of these factual aspects, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly deleted the penalty levied by the Assessing Officer Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

In the result, the appeal filed by the Revenue is dismissed.