×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
This appeal by the assessee for the assessment year 2005-06 is directed against the order of learned CIT(A)-IV, New Delhi dated 27th May, 2014.
2. The only ground raised by the assessee is against the levy of penalty of `22,57,083/- under Section 271(1)(c) of the Income-tax Act, 1961.
3. The facts of the case as noted in the penalty order are reproduced below :-
“Amount of revenue expenditure claimed by the assessee being 150% of expenses on R&D 70,38,750
Less : 100% of revenue expenditure allowed 46,92,500
Amount disallowed 23,46,250
Amount of capital expenditure claimed by the assessee being 150% of expenses on the purchase of plant and machinery 3,79,82,700
Less : 40% of depreciation allowable on the purchase of above two machines for Rs.26516377 1,06,06,550
Amount disallowed 2,73,76,249
The ld.CIT(A) vide order dated 09.03/2009 in Appeal No.72/07-08 partially allowed the appeal of the assessee on this issue. The ld.CIT(A) held that the assessee is eligible for deduction under Section 35(1)(iv) rather than under Section 35(2AB). The ld.CIT(A) held that the machines on which the claim of 100% of deduction under Section 35(1) is claimed being used research and development are separate and distinct from the machines which the assessee has used for the purpose of manufacturing process. Therefore, capital expenditure to the extent of Rs.3,41,60,592/- is a allowable deduction as against the depreciation allowed by the AO. However, the claim of weighted deduction of Rs.1,14,66,322/- @ 150% on R & D Equipments amounting to Rs.76,44,215/- is not allowed, thereby Ld.CIT(A) confirmed the addition to the extent of Rs.38,22,107/- (Rs.1,14,66,322/- minus Rs.76,44,215 -). Similarly, the disallowance of weighted deduction on revenue expenditure to the extent of Rs.23,46,050/- (Rs.70,38,750/- minus Rs.46,92,500/-) as made by the AO is also confirmed by the ld.CIT(A).
Thus, it is evident that the assessee has concealed its income as well as furnished inaccurate particulars by claiming weighted deduction under Section 35(2AB) amounting to Rs.61,68,157/- (Rs.38,22,107/-plus Rs.23,46 050/-), which as per law is not allowable to him as the assessee does not satisfied the conditions to be fulfilled under Section 35(2AB).
In view of above, it is clear that the assessee has claimed wrong deduction to the extent of Rs.61,68,157/- thereby concealing of its income as well as furnishing of inaccurate particulars of his income with a view to evade taxes. A penalty of Rs.22,57,083/- is therefore imposed under Section 271(1)(c) of the IT Act as per following calculation :”
4. At the time of hearing before us, it is stated by the learned counsel that the assessee derives income from manufacturing of door trims, roof head liner for automobiles and body parts for scooters etc. That during the year under consideration, the assessee has incurred certain capital as well as revenue expenditure on research and development for developing its products and claimed deduction u/s 35(2AB) which is permissible at the rate of 150% of the actual expenditure incurred. The Assessing Officer treated the expenditure to be genuine but held that it was not incurred for any research purposes and therefore, allowed deduction at the rate of 40% on the purchases of two machineries and allowed 100% of the revenue expenditure. That the learned CIT(A) accepted the assessee’s claim that the entire expenditure was incurred on research and development. However, he held the assessee to be eligible for deduction u/s 35()1)(iv) rather than 35(2AB). Thus, learned CIT(A) allowed the deduction at the rate of 100% as against 150% claimed by the assessee of the total expenditure incurred by the assessee on research and development. It resulted in the addition of `61,68,157/-. That the Assessing Officer treated the same as furnishing of inaccurate particulars of income and levied penalty u/s 271(1)(c) of the Act thereon. He stated that the issue is squarely covered in favour of the assessee by the decision of Hon’ble Apex Court in the case of CIT Vs. Reliance Petroproducts Pvt.Ltd. –  322 ITR 158 (SC) and the following decisions of Hon'ble Jurisdictional High Court :-