CIT Vs Nirma Limited (Gujarat High Court)
Summary: The Gujarat High Court dismissed Revenue’s Tax Appeal Nos. 2089 of 2009 and 169 of 2010, answering both substantial questions of law in favour of Nirma Limited and against the Revenue. The appeals concerned deletion of penalties imposed under Section 271(1)(c) of the Income-tax Act, 1961.
Tax Appeal No. 2089 of 2009 related to AY 2000-01, while connected Tax Appeal No. 169 of 2010 related to AY 1998-99. The substantial question in the first appeal concerned deletion of penalty stated in the question as Rs.33,66,07,201, while the second concerned penalty of Rs.9.25 crores.
For AY 2000-01, Nirma Limited had originally returned income of Rs.4,28,09,945. Assessment under Section 143(3) was completed on 31.03.2003 at Rs.157.65.29.680 and, following the CIT(A)’s order dated 29.11.2004, total income was redetermined at Rs.157,04,10,400. The principal additions included Rs.92,62,52,470 relating to interest on SPNs (Secured Premium Notes), pre-operative expenses resulting in a net disallowance of Rs.62,15,39,797, and excess depreciation of Rs.27,77,824.
The Assessing Officer initiated penalty proceedings under Section 271(1)(c) and imposed penalty of Rs.59,69,70,000. The CIT(A) deleted penalty concerning the two other principal additions because the Tribunal had restored those issues to the Assessing Officer for re-adjudication, while observing that penalty could be considered later if additions were ultimately sustained. However, the CIT(A) upheld penalty concerning the Rs.92.62 crore SPN-interest disallowance and reduced the overall penalty to Rs.35,66,07,201.
