DCIT Vs Federal Brands Ltd. (ITAT Mumbai)
Our indulgence in the present appeal is sought for adjudicating as to whether the penalty of Rs. 11,09,932/- imposed by the Assessing Officer under section 271(1)(c) in respect of excess claim of depreciation by the assessee is sustainable in the eyes of law, or not. We have deliberated on the facts of the case and find substantial force in the contention of the ld. A.R that as the assessee envisaged the likelihood of reimbursement of the subsidy under the TUFS scheme for failure on its part in payment of instalment and interest, therefore, it was for the said reason that the same was reflected as a liability in the balance sheet and not deducted from the capital cost of plant & machinery. We further find that as a similar treatment given by the assessee to the amount of such capital subsidy in the immediately preceding year, viz. A.Y. 2008-09, after thorough scrutiny in the course of the assessment framed under section 143(3) in the said preceding year was accepted by the Assessing Officer, thus, the said fact in itself fortifies the claim of the assessee that it remained under a bonafide belief that no infirmity did emerge from not reducing the capital subsidy from the cost of the fixed assets and reflecting the same in a similar manner as in the preceding year, as a liability in the balance sheet for the year under consideration. We are further persuaded to be in agreement with the claim of the ld. A.R that though during the year under consideration the Assessing Officer discarded the claim of the assessee that the capital subsidy under the TUFS scheme was not to be reflected as a liability in the balance sheet, but rather, was to be reduced from the cost of the fixed assets, however, by not dislodging or rather accepting a similar claim of the assessee while scrutinizing its case for the immediately preceding year, viz. A.Y 2008-09, thus, undoubtedly established that there were two plausible views of the revenue as regards the treatment to be accorded to such capital subsidy sanctioned to the assessee. We are further of the view that as the assessee during the year under consideration had duly disclosed the complete details in respect of the capital subsidy received under the TUFS scheme along with the calculation of the depreciation on the fixed assets, therefore, though the treatment given by the assessee to the capital subsidy received under the TUFS scheme, may not have found favour with the Assessing Officer, therein leading to a consequential reworking of the depreciation on his part, but however, in the backdrop of the fact that a complete disclosure of the facts pertaining to the capital subsidy and computation of the deprecation on the said fixed assets was furnished by the assessee as part of the enclosures forming part of its return of income, therefore, no penalty under Sec. 271(1)(c) for the said reason also was liable to be imposed on it. We find that our aforesaid view stands fortified by the judgment of the Hon’ble Supreme Court in the case of CIT vs. Reliance Petro Products Pvt. Ltd. [322 ITR 158 (SC)], wherein the Hon’ble Apex Court observing that disallowance of a claim by itself would not tantamount to furnishing of inaccurate particulars of income by the assessee, leading to levy of penalty under section 271(1)(c), had held as under:-
“……..as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under Section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under Section 271(1)(c). That is clearly not the intendment of the Legislature.”
We further find that the issue that an excess claim of depreciation by an assessee for bonafide reasons would not justify imposition of penalty under section 271(1)(c) had also been deliberated upon by the Hon’ble High Court of Bombay in the case of CIT vs. Somany Evergreen Knits Ltd. (2013) 352 ITR 592 (Bom.)
