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Income Tax Appellate Tribunal, “K” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI RAMIT KOCHAR
PER SAKTIJIT DEY, J.M.
Captioned appeals, three by the assessee and one by the Revenue are against separate orders of the learned Commissioner (Appeals) pertaining to assessment years 2002–03, 2003–04 and 2004–05.
ITA no.7033/Mum./2010 – A.Y. 2003–04
In this appeal, assessee has challenged the decision of the learned Commissioner (Appeals) in sustaining the imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") on the addition made on account of disallowance of depreciation claimed on energy saving device.
Brief facts are, assessee a company is engaged in manufacture and sale of lubricants. For the assessment year under consideration, assessee had filed its return of income on 31st October 2003, declaring total income of ` 206,65,31,871. In the course of assessment proceedings, the Assessing Officer noticing that assessee had entered into international transactions with its Associate Enterprise (A.E) made a reference to the Transfer Pricing Officer for determining the arm's length price of the international transactions. On the basis of order passed by the Transfer Pricing Officer, the Assessing Officer added an
4 M/s. Castrol India Limited amount of ` 3,46,12,406, on account of transfer pricing adjustment. Further, the Assessing Officer made few more additions / disallowances, one amongst them being disallowance of depreciation claimed on certain assets at the higher rate of 80% treating it as energy saving device. The depreciation claimed amounted to ` 10,18,636. During the assessment proceedings, the Assessing Officer called upon the assessee to justify its claim of higher depreciation by producing necessary documentary evidence to prove that the asset on which depreciation is claimed is energy saving device. As observed by the Assessing Officer, in response to the query raised the assessee furnished a certificate from the engineer of the vendor, however, it could not produce any other documentary evidence like catalogue or brochure to show that it is in the nature of energy saving device. He further noted that in order to qualify as energy saving device a certificate from the Ministry of Power, Government of India, is given to the manufacturer, however, the assessee could not produce any such certificate from Ministry of Power stating that the equipments used are energy saving device. He, therefore, held that assessee is not entitled to claim depreciation @ 80% as applicable to energy saving device and accordingly, restricted the depreciation to 25%. Being aggrieved of such disallowances, assessee preferred appeal before the learned Commissioner (Appeals) and being unsuccessful went in further appeal before the Tribunal.
5 M/s. Castrol India Limited
The Tribunal, accepting the reasoning of the Assessing Officer, however, sustained the disallowance. On the basis of disallowance made on account of claim of depreciation at higher rate, Assessing Officer initiated proceedings for imposition of penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income. Though, the assessee in response to the show cause notice objected to imposition of penalty, however, the Assessing Officer relying upon the observations of the Assessing Officer in the assessment order, held that as the assessee has failed to prove higher claim of depreciation by furnishing necessary certificate it amounted to furnishing of inaccurate particulars of income for which it is liable to be visited with penalty under section 271(1)(c). Accordingly, the Assessing Officer passed an order imposing penalty on the basis of various additions made in the assessment proceedings one of them being disallowance of depreciation at higher rate on energy saving device. Being aggrieved of the penalty order passed, assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) after considering the submissions of the assessee, deleted the penalty imposed under section 271(1)(c) in respect of the additions made by the Assessing Officer except disallowance of depreciation claimed at higher rate on energy saving device. As far as this issue is concerned, the learned
6 M/s. Castrol India Limited Commissioner (Appeals) sustained the penalty by concurring with the view of the Assessing Officer that the assessee has not fulfilled the basic requirement of furnishing a certificate from the Ministry of Power, Government of India, to indicate that the asset is an energy saving device. Thus, he sustained penalty imposed for an amount of ` 7.00.312.
Learned Authorised Representative though accepted that in the quantum proceedings, assessee’s claim of higher depreciation by treating the assets as energy saving device, has been rejected even by the Tribunal but that would automatically not lead to imposition of penalty under section 271(1)(c). Learned Authorised Representative submitted, imposition of penalty under section 271(1)(c) is for furnishing inaccurate particulars of income. Learned Authorised Representative referring to Annexure–F of its audited balance sheet, a copy of which is at Page–20 of the paper book submitted, assessee has made full disclosure relating to energy saving device. Learned Authorised Representative submitted the primary reason for which depreciation claimed @ 80% was disallowed is because assessee failed to furnish a certificate from Ministry of Power certifying the asset as an energy saving device. Learned Authorised Representative referring to old Appendix–1, applicable for assessment years 2003–04 and 2005– 06, which prescribes the rate at which depreciation is admissible and
7 M/s. Castrol India Limited specifically drawing our attention to list of tangible assets under Part– A(III)(8)(ix) submitted that neither in the said appendix nor anywhere else in the statute there is any stipulation / condition imposed to obtain a certificate from Ministry of Power to justify its claim of depreciation at higher rate in case of energy saving device. Learned Authorised Representative submitted, a micro processor based control system for monitoring energy flow is also part of energy saving device, hence, is eligible for depreciation @ 80%. Thus, it was submitted by the learned Authorised Representative, though in the quantum proceedings assessee’s claim has been rejected and the assessee has also accepted it but for that reason alone, penalty under section 271(1)(c) cannot be imposed as it is an independent and separate proceedings. He submitted, not only the assessee claimed depreciation on the basis of such certificate but it also disclosed full particulars of its claim in the audited financial accounts. That, being the case the allegation of the Assessing Officer that assessee has furnished inaccurate particulars of income is unfounded. He submitted, the Assessing Officer has not pointed out what is the inaccurate particular furnished by the assessee. Learned Authorised Representative submitted, though Explanation–1 to section 271(1)(c) only applies to concealment of income and does not apply to furnishing of inaccurate particulars of income even then the assessee has furnished explanation which has not been found to be false by the Assessing
8 M/s. Castrol India Limited Officer. Therefore, imposition of penalty was unjustified. Learned Authorised Representative submitted, while claiming depreciation at a particular rate one has to identify the assets with reference to the clauses of appendix. If as per Appendix depreciation is allowable at a particular rate without any further condition, then the claim of the assessee cannot be termed as “bonafide”. In this context, he referred to the decision of Hon’ble Orissa High Court in Industrial Development Corporation Of Orissa Ltd. v/s CIT & Ors. [2004] 268 ITR 130 (Orissa). Learned Authorised Representative submitted, in any case of the matter, assessee having furnished full particulars of depreciation claimed in its audited accounts and claim being made under a bonafide on the basis of certificate of the Chartered Engineer, penalty under section 271(1)(c) is not imposable merely because such claim of the assessee was found to be inadmissible by the Departmental Authorities. For such proposition, he relied upon the following decision:–
i) CIT v/s. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR 158 (SC); ii) DCIT v/s Castrol India Ltd., ITA no.5753/Mum./2006, dated 31st May 2010 (Mum.); CIT v/s Castrol India Ltd., ITA no.6061/2010, dated 12th iii) October 2011 (Bom.); iv) DCIT v/s Exensys Software Solution Ltd., ITA no.322/Hyd./ 2014 dated 27th October 2015; v) DCIT v/s Do Publicity Media Pvt. Ltd., ITA no.939/Mum./2013, dated 25th March 2015; and
9 M/s. Castrol India Limited
vi) ITO v/s Lord Shiva Construction Co. Pvt. Ltd., ITA no.1302/ Del./2010 dated 28th January 2011.
Learned Departmental Representative, more or less, relying upon the observations of the Assessing Officer in the assessment order as well as penalty order submitted that the assessee having failed to furnish a certificate from the Ministry of Power indicating that the asset on which depreciation is claimed at higher rate of 80% is an energy saving device, the claim of depreciation at such higher rate amounts to furnishing of inaccurate particulars of income. learned Departmental Representative submitted, neither before the Assessing Officer nor at any other stage assessee has produced any other documents, except a certificate from an engineer, to indicate the nature and use of the asset claimed to be an energy saving device. He submitted, even as far as certificate of engineer is concerned, though, in the said certificate, the engineer has stated that depreciation @ 100% is allowable, however, the assessee had claimed depreciation @ 80% which itself shows that assessee’s contention is not on the basis of certificate. Therefore, the claim of the assessee that it had claimed depreciation at the higher rate under bonafide belief is not acceptable.
Learned Departmental Representative submitted, simply on the basis of certificate of a Chartered Engineer, the assessee could not
10 M/s. Castrol India Limited have harboured a bonafide belief that depreciation at a higher rate is available on the asset. He submitted, in any case, department does not require to prove mens rea. For such proposition, he relied upon the decision of Hon'ble Supreme Court in Union of India v/s Dharmendra Textile Processors & Ors., [2007] 295 ITR 244 (SC).
We have considered the rival submissions and the facts and material on record in the light of decisions relied upon by the learned Authorised Representative. Undisputedly, assessee’s claim of depreciation at the higher rate of 80% on a micro processor based control system by treating it as energy saving device has been rejected by the Departmental Authorities in the quantum proceedings which has also been confirmed by the Tribunal while deciding the assessee’s appeal. As it appears, the assessee has also accepted such decision. However, on a perusal of assessment order for the impugned assessment year as well as the appeal orders on this issue we have noted that the primary reason for which assessee’s claim of depreciation at higher rate applicable to energy saving device was rejected is it has not furnished a certificate from the Ministry of Power certifying that the asset is an energy saving device. It is the contention of the learned Authorised Representative that there is no requirement under the statutory provisions to obtain such certificate from the Ministry of Power as per the law existing at the relevant
11 M/s. Castrol India Limited time. On a perusal of old Appendix–1, which prescribes rate at which depreciation is admissible for different assets applicable for assessment years 2003–04 to 2005–06, we have observed, Part–A under the heading tangible assets and sub head machinery and plant at serial no.8 clause (ix) provides for depreciation for energy saving device which is again divided into 7 parts and under Part–B(c) depreciation @ 80% is allowed on micro processor based control systems for monitoring energy flows. It is further noted, neither in the depreciation schedule nor in the notes appended thereto, there is any condition imposed for obtaining a certificate from the Ministry of Power certifying the asset to be an energy saving device. Learned Departmental Representative could not bring to our notice such conditions prescribed anywhere else in this statute. Therefore, in the absence of an express condition in the statute providing for obtaining a certificate from the Ministry of Power certifying the particular asset as energy saving device, in our view, such condition cannot be imposed on the assessee. Though, it may be a fact that this argument was not taken by the assessee during the quantum proceedings or even earlier in course of penalty proceedings but in our view, that cannot be a ground to reject assessee’s contention if otherwise it is an acceptable proposition. More so, considering the fact that penalty proceedings under section 271(1)(c) is distinct and independent from the assessment proceeding and in the course of penalty proceedings, it is
12 M/s. Castrol India Limited open for the assessee to lead evidence and argue to show that penalty is not imposable and assessee’s explanation in the light of evidence submitted has to be examined afresh. Thus, considered in the aforesaid perspective, in our view, claim of depreciation at higher rate by treating the asset as energy saving device could be under a bonafide belief by the assessee on the basis of certificate issued by the Chartered Engineer and in absence of any other manner or mode prescribed under the old Appendix–1 to justify the claim of higher depreciation by treating the asset as energy saving device. It is also a fact on record the assessee in its audited account has made complete disclosure of its claim of higher depreciation by treating the asset as energy saving device. Therefore, the allegation of furnishing inaccurate particulars of income by the Assessing Officer appears to be unfounded. As far as the allegation of the Department that the assessee could not produce any other documentary evidence like catalogue or invoices, we may observe, the argument of the Department is unacceptable for the reason that the Assessing Officer has not disputed or doubted the purchase of assets by the assessee as he has allowed depreciation on the asset @ 25% by treating it as plant and machinery. As far as the allegation of the Department that the assessee’s claim cannot be considered to be bonafide as the Chartered Engineer mentioned the rate of depreciation @ 100% whereas the assessee claimed depreciation @ 80%, in our view, such argument is
13 M/s. Castrol India Limited thoroughly misconceived as the assessee has to claim depreciation as per the rate prescribed under the statutory provisions. Moreover, it is a fact that assessee has obtained a certificate from a Chartered Engineer to justify its claim that the asset on which depreciation claimed is at higher rate is energy saving device and such evidence was produced before Assessing Officer during assessment proceedings. Therefore, assessee’s claim was on the basis of some evidence. It is another matter the evidence submitted was found to be insufficient, hence, claim was disallowed. However, insufficiency of evidence ipso facto would not prove either concealment of income or furnishing inaccurate particulars of income. Therefore, in our view, it cannot be said that the assessee has furnished inaccurate particulars of income so as to impose penalty under section 271(1)(c). It is worth observing, the Hon'ble Supreme Court in Reliance Petroproducts Pvt. Ltd. (supra), after taking note of the ratio laid down by the Hon'ble Supreme Court in Dharmendra Textile Processers (supra), have observed that every inadmissible claim of the assessee would not automatically lead to imposition of penalty under section 271(1)(c) unless the claim made by the assessee is totally against law. The same view has been expressed in the other decisions cited before us by the learned Authorised Representative. Applying the principle laid down in these decisions, we hold that case for imposition of penalty under section
14 M/s. Castrol India Limited 271(1)(c) has not been made out by the Department. Accordingly, we delete the penalty imposed under section 271(1)(c) of the Act.
In the result, assessee’s appeal is allowed.
ITA no.7922/Mum./2010 – A.Y. 2003–04
In this appeal, the Department has raised the following grounds:–
“1. The Ld.CIT(A) has erred in deleting the penalty levied in relation to the transfer pricing adjustments made of Rs.3,46,12,406/- u/s.92CA(3) of the Act, by holding that the conduct of the assessee satisfies both the conditions given in Explanation 7 to sec.271(1)(c) of the Act, i.e. good faith and due diligence, without appreciating the fact that the TPO had made the adjustment after detailed discussions." "2. The Ld.CIT(A) has erred in deleting the penalty levied on excess claim of depreciation of Rs.737,06,647/- in respect of Silvassa Unit, without appreciating the fact that by not claiming depreciation, the assessee had claimed higher exemption u/s.1OA, which the assessee was not entitled to in view of the insertion of Explanation 5 of Sec.32(l) by Finance Act, 2001 w.e.f. 1.4.2002."
As could be seen from the grounds raised, the Department is aggrieved with the decision of the learned Commissioner (Appeals) in deleting the penalty imposed on the basis of addition made on account of transfer pricing adjustment of ` 3,46,12,406 and excess claim of depreciation amounting to ` 7,37,06,647 in respect of Silvassa unit.
As far as ground no.1 is concerned, brief facts are, in the course of assessment proceedings, the Assessing Officer noticing that the
15 M/s. Castrol India Limited assessee has entered into international transactions with its A.E. made reference to the Transfer Pricing Officer to analyse the transactions entered into by the assessee with its A.E. and determine the arm's length price. The Transfer Pricing Officer after analysing the international transactions entered into by the assessee made an adjustment to the price charged by an amount of ` 3,46,12,406 under the following heads:–
On account of royalty paid / payable ` 40,51,486 On account of export of goods ` 3,75,021 On account of reimbursement / ` 2,06,73,899 allocation of cost (COE3 related expenses) On account of ` 95,12,000 David Beckham advertising campaign
On the basis of the transfer pricing adjustment made the Assessing Officer made addition while completing the assessment. Being aggrieved, the assessee challenged the addition before the learned Commissioner (Appeals).
Learned Commissioner (Appeals), however, confirmed the addition made on account of transfer pricing adjustment. Being aggrieved, the assessee preferred appeal before the Tribunal.
On the basis of additions made by the Assessing Officer and confirmed by the learned Commissioner (Appeals), the Assessing imposed penalty under section 271(1)(c) rejecting the explanation of
16 M/s. Castrol India Limited the assessee. Being aggrieved of the penalty order passed, assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals), after considering the submissions of the assessee in the context of facts and material on record, ultimately concluded that as the assessee in terms of Explanation–7 has computed the price charged in respect of international transaction in the manner prescribed under section 92C, in good faith and with due diligence, there is no case for levy of penalty under section 271(1)(c). Accordingly, he deleted the penalty imposed. In the mean time, against the order passed by the learned Commissioner (Appeals), the assessee preferred appeal before the Tribunal which was disposed off by the Tribunal As far as the transfer pricing adjustment is concerned, the Tribunal while disposing off the appeal deleted the addition made on account of payment of royalty. As far as COE3 related expenses, the arm's length price of which was determined as nil as against ` 2,06,73,899 claimed by the assessee, the Tribunal relying upon its own decision in the case of assessee for assessment year 2002–03 wherein the Tribunal disapproved of the determination of arm's length price at nil by Transfer Pricing Officer and restored the matter back to his file for fresh determination of arm's length price followed the same and restored the matter back to the file of the Assessing Officer / Transfer Pricing Officer for deciding
17 M/s. Castrol India Limited afresh in terms of direction of the Tribunal in assessment year 2002– 03. As far as the issue of share of cost amounting to ` 95,12,000 on account of David Beckham advertising campaign Tribunal held that the arm's length price of the transaction cannot be taken at nil as done by the Transfer Pricing Officer. The Tribunal restored the matter back to the file of the Assessing Officer / Transfer Pricing Officer to determine the arm's length price keeping in view the relevant provisions of the Act. Thus, only addition on account transfer pricing adjustment which became final is the amount of ` 3,75,000 towards arm's length price of export of lubricants.
Learned Departmental Representative submitted, the order passed by the learned Commissioner (Appeals) is laconic as he has not considered the issue in proper perspective as far as the imposition of penalty under section 271(1)(c) in relation to addition of ` 3,75,000. Learned Departmental Representative referring to the order of the Transfer Pricing Officer submitted, as per the transfer pricing report of the assessee, though, internal CUP was available assessee did not apply it. He found that the price at which assessee had sold lubricant to Indian companies is more than the price at which it sold lubricants to A.E. Therefore, there being better internal CUP available, the Transfer Pricing Officer had applied the same for determining the arm's length price of the lubricants sold to A.Es. The learned Departmental
18 M/s. Castrol India Limited Representative submitted, in spite of the fact that a better internal CUP was available with the assessee still he did not apply the same while determining the price of lubricants sold to A.Es. Therefore, computation of arm's length price by the assessee is not in good faith or due diligence as provided under Explanation–7 to section 271(1)(c). He, therefore, submitted penalty under section 271(1)(c) on the addition of ` 3,75,000 is justified. In support, learned Departmental Representative relied upon the decision of ITAT, Mumbai Bench, in case of Genom Biotech P. Ltd. v/s ITO, ITA no.7214/Mum./2010.
Learned Authorised Representative on the other hand strongly defending the order of the learned Commissioner (Appeals) submitted, the Transfer Pricing Officer while determining the arm's length price of the lubricant sold to A.Es has not applied a correct method. He submitted the price charged to Indian companies cannot be applied in case of an international transaction with A.E. without the qualitative factors like different kind of risks and export incentive / duty draw back benefit. Learned Authorised Representative contesting the claim of the Department that learned Commissioner (Appeals) has not considered the issue in proper perspective, referred to Para–3 of his order to contend that the order of the learned Commissioner (Appeals) is on the basis of detail documentary evidence submitted before him, therefore, it cannot be said to be laconic. Thus, the learned Authorised
19 M/s. Castrol India Limited Representative submitted imposition of penalty under the facts and circumstances is not justified.
We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee in transfer pricing study and other documents furnished in the course of proceedings before the Departmental Authorities has disclosed all material facts relating to international transactions entered with the A.E. It is also a fact assessee has applied CUP method for bench marking the price. In fact, on a perusal of the order passed by the Transfer Pricing Officer reveals that he has relied upon the material submitted by the assessee itself in its transfer pricing study while making the transfer pricing adjustment in respect of sale of lubricants to A.E. Perusal of the transfer pricing order further reveals that this particular transfer pricing adjustment made by the Transfer Pricing Officer was by applying the price charged towards sale of lubricant effected by the assessee to Indian companies. We fail to understand how the price charged in case of a domestic sale can be compared with price charged to international transactions without accounting for various qualitative factors as brought to our notice by assessee. Therefore, the very premise on which the Transfer Pricing Officer made adjustment is inappropriate. It is another matter, the assessee did not press the ground before the Tribunal due to smallness of the amount.
20 M/s. Castrol India Limited However, that does not establish the fact that assessee has not acted in good faith and due diligence while bench marking the price charged in respect of one of its international transactions. The decision relied upon by the learned Departmental Representative being factually distinguishable is not applicable to the facts of this case. That being the case, we do not find any valid reason to interfere with the order of the learned Commissioner (Appeals) as far as deletion of penalty on the addition of ` 3,75,021.
As far as the payment of royalty is concerned, it has been brought to our notice by the learned Authorised Representative, the addition made on account of transfer pricing adjustment has been deleted by the Tribunal, therefore, penalty imposed under section 271(1)(c) will not survive.
As far as other two additions relating to COE3 related expenses and David Beckham advertising campaign expenses are concerned, the Tribunal in the quantum proceedings has restored the matters back to the file of the Assessing Officer / Transfer Pricing Officer negating the approach of the Transfer Pricing Officer in determining the arm's length price of both the transactions at nil. Therefore, since the issues relating to aforesaid additions have been restored back to the file of the Assessing Officer / Transfer Pricing Officer, imposition of penalty on such additions cannot survive. Further, on a perusal of the order of
21 M/s. Castrol India Limited the learned Commissioner (Appeals), we find, after due consideration of various documentary evidences submitted and submissions made by the assessee, learned Commissioner (Appeals) has concluded that imposition of pnalty under section 271(1)(c) was not proper. Inasmuch as the learned Departmental Representative also confined his argument only in respect of penalty imposed on the addition made of ` 3,75,021 towards sale of lubricant. In view of the aforesaid, we uphold deletion of penalty.
The next ground relates to deletion of penalty levied on excess claim of depreciation on Silvassa unit.
In the course of assessment proceedings, the Assessing Officer while verifying the computation of income filed with the return of income noticed that in note no.5, the assessee had stated that though the assessee from the inception of the plant has not claimed depreciation but the Department has thrust upon depreciation on the assessee. However, as per the amended provisions of section 32(1)(ii) to Explanation–5 it became mandatory to claim depreciation from the impugned assessment year. Therefore, the assessee in terms with the statutory provisions claimed depreciation. While doing so, the assessee took the WDV of the plant without reducing the depreciation allowed by the department in the earlier assessment years. However, the assessee in the note stated that the claim made by the assessee is
22 M/s. Castrol India Limited subject to revision upon finalization of the dispute pending for earlier assessment year. The Assessing Officer observed that the claim of the assessee that depreciation for Silvassa unit should not be thrust upon it was rejected by the Assessing Officer in assessment year 1997–98, and CIT(A) has confirmed the view of the Assessing Officer. Therefore, the Assessing Officer was of the view that the assessee had claimed higher depreciation by taking the WDV at higher value without reducing the depreciation allowed to it earlier. Accordingly, the Assessing Officer worked out the depreciation allowable to the assessee at ` 5,32,25,360 thereby disallowing the excess depreciation claimed of ` 7,37,06,647. Being aggrieved of such disallowance, the assessee preferred appeal before the appellate forum and thereafter in the High Court, however, the issue was decided against the assessee and it is stated before us that dispute is now subjudice before the Hon'ble Supreme Court. Be that as it may, on the basis of addition made proceedings for imposition of penalty was initiated. Though, the assessee objected to the initiation of penalty proceedings but the Assessing Officer rejected the explanation of the assessee and imposed penalty on the aforesaid addition. Being aggrieved, the assessee preferred appeal before the learned Commissioner (Appeals).
The learned Commissioner (Appeals) having considered the fact that penalty imposed on the basis of similar addition made for the
23 M/s. Castrol India Limited assessment year 2001–02 was deleted by the Tribunal, followed the same and deleted the penalty imposed in the impugned assessment year.
While learned Departmental Representative relied upon the observations of the Assessing Officer, learned Counsel for the assessee supporting the order of the learned Commissioner (Appeals) submitted, the ground raised by the Department is wrong as neither the assessee has claimed excess depreciation nor it has claimed any exemption under section 10AA. Learned Authorised Representative submitted in earlier years, the assessee did not claim any depreciation on Silvassa unit as it was not mandatory to claim depreciation under the existing statutory provisions. However, the Department thrust upon depreciation on the assessee. When the claim of depreciation become mandatory from the impugned assessment year the assessee started claiming depreciation on Silvassa unit without reducing the depreciation computed by the Department from the WDV. He submitted, the assessee in the computation of total income gave an explanatory note stating reasons for claiming depreciation of higher amount.
Learned Authorised Representative accepting the fact that the issues has been decided against the assessee even by the Hon'ble Jurisdictional High Court submitted, the assessee has preferred appeal
24 M/s. Castrol India Limited to the Hon'ble Supreme Court and the assessee’s claim of depreciation is consequential to the decision of the Hon'ble Supreme Court. Learned Authorised Representative submitted, in assessment year 2001–02, penalty was imposed under section 271(1)(c) on similar addition made on account of disallowance of depreciation of assets of Silvassa unit, however, the Tribunal while deciding assessee’s appeal in ITA no.5753/Mum./2006 dated 31st May 2010, deleted the penalty imposed and the aforesaid order of the Tribunal was upheld by the High Court while dismissing the Department’s appeal.
We have considered the submissions of the parties and perused the material available on record. Undisputedly, assessee from the very inception did not claim depreciation on the assets of Silvassa unit. However, the Department in the assessment completed for assessment year 1997–98 onwards computed depreciation on the assets of Silvassa unit. It is also a fact on record that, though, the assessee contested the computation of depreciation before the Tribunal and thereafter before the Hon’ble High Court, but, assessee’s claim was rejected. However, as stated by learned Authorised Representative assessee has preferred appeal before the Hon'ble Supreme Court which is still pending. Be that as it may, on a perusal of the computation of income filed for the impugned assessment year it is noticed that the assessee in respect of depreciation claimed has
25 M/s. Castrol India Limited given an explanatory note stating that claim of depreciation is subject to revision of WDV on re–computation of past assessment years. It is also a fact on record that in assessment year 2001–02, the Assessing Officer levied penalty under section 271(1)(c) on the addition made on account of higher deduction claimed by the assessee as a result of non–claim of depreciation. However, the Tribunal while deciding the assessee’s appeal challenging levy of penalty under section 271(1)(c) deleted the penalty imposed holding as under:–
“5. We find that it is an undisputed position that the assessee has made the claim, inadmissible as they may be, in a transparent manner and without concealing the details. In our considered view, mere making of a claim of deduction, incorrect as it may turn out to be, cannot be construed as concealment of particulars. What is a correct claim and what is an incorrect claim is a matter of perception. In our considered view, raising a legal claim, even if it is ultimately found to be legally unacceptable, cannot amount of furnishing of inaccurate particulars of income. „Inaccurate‟, as we have noted above, is something factually incorrect and interpretation of law can never be a factual aspect. In any event, the connotations of expression „particulars of income‟ do not extend to the issues of interpretation of law and as such making a claim, which is found to be unacceptable in law, cannot be treated as furnishing of inaccurate particulars of income. Mere making of an incorrect claim, as is the settled legal position in view of Hon‟ble Supreme Court‟s judgment in the case of CIT Vs Reliance Petroproducts Limited (322 ITR 158), can not be visited with penal consequences under section 271(1)(c) of the Act. In this case, Hon‟ble Supreme Court were dealing with a situation in which a claim for deduction was made which was found to be inadmissible in law. Thir Lordships were concerned with the question whether “in this case, as a matter of fact, the assessee has given inaccurate particulars”. Their Lordships noted that “in this case, there is no finding that any details supplied by the assessee in its return were found to be incorrect or erroneous or false” and add that “such being the case, there would be no question of inviting the penalty under section 271(1)(c) of the Act” and that “a mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding income of the
26 M/s. Castrol India Limited assessee”. In our considered view, it is the same situation in the present case. It is nobody‟s allegation that there has been any concealment of particulars or that the claims are made in less than transparent manner.” 29. The aforesaid decision of the Tribunal was also confirmed by the Hon'ble Jurisdictional High Court while dismissing the department’s appeal in ITA no.6061/2010. In view of the aforesaid, we are of the opinion that the learned Commissioner (Appeals) was justified in deleting the penalty imposed under section 271(1)(c).
In the result, Department’s appeal is dismissed.
ITA no.2414/Mum./2014 – A.Y. 2002–03
In this appeal, assessee has challenged imposition of penalty under section 271(1)(c) on account of addition made of ` 5,40,294 due to transfer pricing adjustment on export of lubricants.
Before us, the learned Counsels appearing for both the parties admitted that the facts and circumstances of the issue arising out of the ground raised in the present appeal is identical to the facts and circumstances relating to the issue arising out of the ground raised by the Revenue in its appeal being ITA no.7922/Mum./2010 for the assessment year 2003–04, wherein the said issue is decided against the Revenue and in favour of the assessee vide Para–20 of this order. Consistent with the view taken therein, we set aside the impugned
27 M/s. Castrol India Limited order passed by the learned Commissioner (Appeals) and delete the penalty imposed by the Assessing Officer.
In the result, assessee’s appeal is allowed.
ITA no.5261/Mum./2014 – A.Y. 2004–05
Assessee has raised the following grounds:–
“The learned CIT(A) has erred in law and on facts in giving liberty to the TPO/AO to initiate penalty proceedings if any adjustment is made during the course of fresh assessment proceedings on account of COE3 expenses despite the fact that the penalty levied by the AO has been deleted by him. The learned CIT(A) has erred in law and on facts in confirming the levy of a penalty of ` 239,572 in respect of depreciation claimed at 80% on the residual opening written down value of energy saving device.”
Insofar as ground no.1 is concerned, the learned Counsel for the assessee submitted before us that he did not wish to press this ground. Accordingly, ground no.1, is dismissed as “not pressed”.
Ground no.2 relates to levy of penalty under section 271(1)(c) on account of addition made as a result of higher depreciation claimed on the assets of Silvassa unit.
Before us, the learned Counsels appearing for both the parties admitted that the facts and circumstances of the issue arising out of the ground raised in the present appeal are identical to the facts and
28 M/s. Castrol India Limited circumstances relating to the issue arising out of the ground raised by the Revenue in its appeal being ITA no.7033/Mum./2010 for the assessment year 2003–04, wherein vide Paras–9, we have deleted the penalty. Consistent with the view taken therein, we set aside the impugned order passed by the learned Commissioner (Appeals) and allow the ground raised by the assessee.
In the result, assessee’s appeal is partly allowed.
To sum up, assessee’s appeal in ITA no.7033/Mum./2010 for A.Y. 2003–04 is allowed; Department’s appeal in ITA no.7922/Mum./2010 for A.Y. 2003–04 is dismissed; assessee’s appeal in ITA no.2414/ Mum./2014 for A.Y. 2002–03 is allowed and assessee’s appeal in ITA no.5261/Mum./2014 for A.Y. 2004–05 is partly allowed. Order pronounced in the open Court on 27.07.2016
Sd/- Sd/- SAKTIJIT DEY RAMIT KOCHAR ACCOUNTANT MEMBER JUDICIAL MEMBER
MUMBAI, DATED: 27.07.2016
29 M/s. Castrol India Limited Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary
(Dy./Asstt. Registrar) ITAT, Mumbai