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1. In the High Court of Gujarat at Ahmedabad
In Tax Appeal No.121 of 1999
The ITO
Vs.
Gujarat Power Corporation Ltd
Before Mr.Justice A.R.Dave and Mr. Justice M.S.Shah
Manish Bhatt for petitioner and Mr.J.P.Shah for the respondent
Income Tax Assessment year 1991-92 Date : 16-03-2000
This tax appeal has been filed at the instance of the revenue setting out the following question of law :-
“Whether the Appellate Tribunal is right in law and on facts in holding that
the addition of Rs.1,90,299/- being pre operative interest is not permissible
within the provisions of section 143(1)(a) of the Act ? “
FACTS
The assessee had filed a return of income for the assessment year 1991-92 showing ‘Nil’ income as the company has commenced its business during the concerned assessment year. Along with a return, a note was filed to the effect that during the said assessment year, the assessee had received a sum of Rs.5.50 crore from Govt . of Gujarat and from Gujarat Electricity Board as an advance towards share capital and as the said amount was not required by the company immediately, the company had deposited the same with a scheduled bank in short term deposit and company had earned Rs.1,90,299/- by way of interest. The Company had deducted the said amount from the expenditure of Rs.11,26,347/- which was an expenditure pertaining to preoperative project expenditure and it had pleaded that a sum of Rs.1,90,299/- was not income as it would go to reduce cost of project on the basis of judgement delivered in the case of CIT Vs.Nagarjuna Steel Ltd 171 ITR 663. The assessee received a notice under the provisions of Section 143(1)(a) of the Income Tax Act, 1961 that interest of Rs.1,90,299/- should have been treated as income and accordingly additional tax was levied. On appeal, CIT(A) upheld the order of assessing officer. However on Tribunal allowed assessee’s appeal. Being aggrieved by the said order, revenue has approached this court.
Dept contended that in view of law laid down by Hon’ble Supreme court in the case of CIT Vs. Bokaro Steels Ltd 236 ITR 315, the tribunal was in error while permitting the assessee to deduct the amount of interest form the cost of the project.
The company mainly submitted that at the time the company had filed its return, it was not aware of law which was declared by Hon’ble Supreme Court in 236 ITR 315. At the time when return was filed, the view which was expressed by Hon’ble Andhra Pradesh High Court in CIT Vs. Nagarjuna Steels Ltd was very clear to the effect that any income which company receives before it commences its business would not become revenue income and was not taxable. CBDT Circular dated 4.4.89 was also referred prohibiting assessing officers to disallow any claim made on the basis of decision of High court , tribunal or other appellate authority, even though contrary view in the matter has been expressed by another high court or tribunal or any other appellate authority. Another Circular No.689 dated 24-8-94 was also referred which states that the items of disallowance should be such that no two opinions are possible on their inadmissibility. Reliance was also placed on section 119 of the Act and judgments namely MODERN FIBOTEX IND LTD Vs. DCIT & others 212 ITR 496 ratio of which explains the limitation on power U/s 143(1)(a) of the Act. He has similarly relied on 229 ITR 16, 2 ITR 140 and 130 ITR 73.
HELD
The Hon’ble Gujarat High court held that in this appeal no substantial question of law has arisen. The law laid down by the Hon’ble Supreme Court is very clear and it is to the effect that the law which was in force at the time of filing return of income is to be considered for the purpose of initiating proceedings under the provisions of Section 143(1)(a) of the Act. As the return was filed as per the legal position prevailing at the relevant time and as the assessee had revealed the relevant facts by way of a note, the high court was of the view that the order of the tribunal was just and legal.
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2. In the High Court of Gujarat at Ahmedabad
In Income Tax reference No.83 of 1987
The CIT, Gujarat I, Ahmedabad
Vs.
Gujarat State Warehousing Corporation
Before Mr.Justice M.S.Shah and Mr. Justice D.A.Mehta
Manish Bhatt for petitioner and Mr.M.J.Shah for the respondent
Income Tax Assessment years 1973-74 to 1975-76 Date : 17-10-2001
ISSUE
The first question referred at the instance of the revenue is in respect of assessment years 1973-74 to 1975-76. The question is as under :
“ Whether assessee is entitled to interest under section 244(1A) in respect of interest payments under sections 215, 217 and 220(2) of the Income Tax Act, 1961 ?”
The second question referred at the instance of revenue in respect of A.Y. 1977-78 and 1978-79 is as under :
“ whether the assessee is entitled to interest u/s 214 on advance tax payments ?”
The last question referred at the instance of assessee in respect of A.Y. 1977-78 and 1978-79 is as under :
“ whether the assessee is entitled to interest u/s 214/244(1A) on payments of tax U/s 140 A of the Income Tax Act, 1961 ?”
HELD
1. Following the decisions quoted below, the Hon’ble High court held that assessee is entitled to interest u/s 214/244(1A) on payments of tax U/s 140 A of the Income Tax Act, 1961.
CIT Vs. Needle Industries P. Ltd 233 ITR 370 (Mad)
CIT Vs. Sardar Balwant singh Gujarat 86 CTR 64 (MP)
CIT Vs.Ambat Echukutty Menon 173 ITR 581 (Ker)
2. As regards second question, the Hon’ble high court held that in view of the decision of Hon’ble Supreme court in Modi Industries Ltd 216 ITR 759, the assessee entitled to interest u/s 214 on advance tax payments.
3. For the last question, the Hon’ble high court held that the controversy raised herein is concluded in the favour of the assessee by the decision of Apex Court in Modi Industries Ltd Vs CIT as explained by the Punjab & Hariyana High Court in CIT Vs. Hansa Agencies P.Ltd 234 ITR 271 and by Karnataka High Court in CIT Vs.NGEF Ltd 244 ITR 665. Accordingly, the assessee entitled to interest u/s 214/244(1A) on payments of tax U/s 140 A of the Income Tax Act, 1961.
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3. In the High Court of Gujarat at Ahmedabad
In Income Tax Reference No.158 of 1986
Sayaji Iron & Engg Co.
Vs.
Commissioner of Income Tax
Before Mr.Justice A.R.Dave and Mr. Justice D.A.Mehta
Manish J. Shah for petitioner and Mr.Manish R.Bhatt for the respondent
Income Tax Assessment year 1979-80 Date : 25-07-2001
Per : Mr. Justice A.R.Dave
1. At the instance of assessee, the following question has been referred to this court for its opinion by the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’
“ Whether on facts and in the circumstances of the case, the tribunal was right in law in disallowing 1/6th of the total car expenses and depreciation claimed by the assessee because of personal use of the car entrusted to director by him ?”
FACTS
The assessee is Pvt Ltd Co. and owned several vehicles. In the A.Y. 1979-80, the assessee had claimed an expenditure of Rs.96,653/- on vehicles maintained by it. The assessing officer disallowed 1/6th of the expenditure treating the same as personal expenditure of the directors. The ld.CIT(A) dismissed the assessee’s appeal. The tribunal also confirmed the decision of CIT(A). The assessee contended that the assessee had permitted its directors to use the vehicles as part of salary and perquisites. Therefore, it can not be said that directors were using the vehicles for their personal use and, therefore disallowance, of part of expenditure incurred by the company for the maintenance of vehicles was not justified. On the other hand, dept. submitted that directors of the assessee company were using the vehicles for their personal use and therefore view expressed by the tribunal regarding disallowance of 1/6th of expenditure was justified.
HELD
It is not proper on part of assessing officer to make such disallowance. Section 309 r.w.section 198 of the Companies Act lays down the modalities of remuneration to be paid to directors and overall limits of managerial remuneration. Explanation to Section 198 is very important which permits and provides that “remuneration” shall include such type of expenditure even though related to the personal use. Therefore, it is clear that the expenditure incurred by the assessee company would fall within the meaning of ‘remuneration’ as defined in explanation to section 198 of the Companies Act and once the remuneration is fixed as provided in section 309 of the companies Act , it is not possible to state that the assessee company incurred expenditure for the personal use of the directors. i.e. even if there is some personal use by the directors, the same was as per the terms and conditions of service and in so far as the company was concerned it was a business expenditure and not disallowable as such. The limited company is an inanimate person and there can not be anything personal about such an entity. The view of this court also finds support by provisions of Section 40 c and Section 40A(5) of the Act. The High court also observed that the tribunal has no reason to take a different view for this assessment year especially when it is undisputed fact that in the past all such disallowances were deleted by the tribunal and the said decision was not challenged. In the circumstances, the high court held that, the Tribunal was wrong while disallowing 1/6th of the total car expenditure and depreciation claimed by the assessee on account of the personal use of the cars which were used by the directors.
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ‘A’
(Before S/Shri T.N.Chopra and S.K.Yadav)
ITA No. 3793/Ahd/1996
A.Y. 1994-95
M/s. Kirti Builders, Ahmedabad (Appellant)
Vs
The DCIT, Range 4 ,
Ahmedabad (Respondent)
Appellant By : Shri S.N.Divetiya
Respondent by : Shri Shri Jaspal Singh
O R D E R
PER SHRI T.N.CHOPRA , A.M.
FACTS
This appeal filed by the assessee is directed against the order dated 9-5-1996 passed by CIT(A) whereby penalty amounting to Rs.1,51,01,700/- levied U/s 272A(2)(g) of the Income Tax Act, 1961 for A.Y.1994-95 has been confirmed. Assessee firm derives income from contract business. Since the TDS certificates in Form No.16A were issued late by the assessee to recipients, the A.O. issued show cause notice U/s 272A(2)(g) on 1.2.95. The assessee submitted that it was under genuine and bonafide belief that certificates in form no.16A had to be issued before filing of annual return in as much as the details of such certificates have to be incorporated in the annual return. Due to paucity of administrative staff and partners being not well versed in taxation matters, the certificates to sub contractors could not be issued in time. The assessee further stated that it had to issue as many as 157 certificates in prescribed form no. 16A in respect of TDS made u/s 194C and all the details concerning 897 payments in all had to be compiled and incorporated in certificates. The cumulative result of all these factors have contributed delay in issue of certificates. Bonafide of the assessee are evident from the fact that TDS had been deducted well in time and deposited in the govt treasury and certificates have been issued to payees so as to enable them to claim credit in their income tax return. The A.O. rejected contentions of the assessee and levied penalty of Rs.1,57,07,100/- U/s 272A(2)(g). On appeal, CIT(A) upheld the penalty. The appellant strongly argued that bonafides of the assessee are proved. The tax had been deducted and paid to the govt treasury well in time. There has been no complaint from the contractors regarding delay in issue of certificates. The amount of TDS aggregates to Rs.2,20,456 whereas penalty levied for mere technical default is Rs.1,51,07,100 U/s 272A(2)(g). It was strongly urged that onus under the provisions of Section 273B and reasonable cause for delay in issue of certificates has been proved. Reliance was placed upon the decision of Gujarat High court in the case of CIT Vs.Harsidh Construction P.Ltd 244 ITR 417 wherein such penalty has been cancelled. Relying on decision of Supreme Court in the case of Motilal Padampat Sugar Mills Co. Ltd Vs. State of UP 118 ITR 326, the appellant argued that there is no presumption that everybody knows the law. Looking to the complexity of the ever changing provisions concerning the scheme of tax deduction, as contained in the I.T. Act, it was argued that it could not be said that every citizen particularly the one who is not well versed with the tax matters would be able to understand intricacies of such provisions. On these grounds, it was contended that impugned penalty sustained by ld. CIT(A) deserves to be cancelled.
HELD
Hon’ble tribunal was of the opinion that the facts and circumstances of the case do not warrant imposition of impugned penalty u/s 272A(2)(g). The assessee has discharged the onus which lay upon him in terms of section 273 B in as much as reasonable cause for delay has been proved. The authority competent will be justified in refusing to impose penalty when there is technical or venial breach of provisions. This view is fully supported by the decision of the Apex court in the case of Hindustan Steels Ltd Vs State of Orissa 83 ITR 26. We would further rely on the decision of CIT Vs. Harsidh Construction P.Ltd 244 ITR 417 wherein similar facts and circumstances the High court upheld the cancellation of penalty by the Tribunal on the ground that failure to forward the certificate of tax deduction was a bonafide mistake and no loss of revenue. On the aforesaid reasoning, the impugned penalty was cancelled.
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IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH SMC RAJKOT
(Before Shri Pradeep Parikh, Accountant Member )
ITA No. 27/RJT /2000
A.Y. 1995-96
M/s. Lajvin Enterprises, Jamnagar (Appellant)
vs
The JCIT, Jamnagar
Range (Respondent)
Appellant By : Shri Prashant Maharshi
Respondent by : Shri Andrew Dutt
O R D E R
The assessee has preferred this appeal before us against the order of the ld.CIT(A) dated 2.11.99 for A.Y. 1995-96. The only issue involved in appeal relates to penalty of Rs.75,178/- under section 271 C of the Income Tax Act, 1961 (the Act) .
FACTS :
During the financial year 1994-95, the assessee made the following payments.
1. Transport charges Rs.5,753
2. Lighterage charges Rs.58,595
3. Labour contracts Rs.10,830
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Rs.75,178
It was found that assessee has not made any deduction of tax U/s 194C of the Act from the above payments and penalty proceedings U/s 271C were initiated. All the submissions of the assessee were rejected by AO. The learned assessing officer placed reliance on circular no 93 dated 26-9-92. For transportation charges, he relied on supreme court decision in the case of Hindustan Aeronautics Ltd Vs. State of Karnataka (55 STL 314). Though, subsequently, assessee did make payment on being pointed out about the default , AO levied penalty for non compliance of section 194 C. The CIT(A) confirmed the penalty relying on the decision of Supreme Court in the case of Associated Cement Companies Ltd in 201 ITR 435. The appellant argued that Circular no.681 on the basis of which penalty was levied was struck down by the Gujarat High Court. Attention was also drawn to the dictionary meaning of the word “Lighter” and “lighterage” which in substance meant transportation only, albeit by sea route. Moreover Circular no 86 and 93 on which reliance was placed also stood withdrawn by circular 681 dated 8-3-94 and in the present case since accounting year ended on 31.3.95, assessee had reasonable belief that it was not liable to deduct tax. The fact that assessee subsequently paid the tax on spot verification was disregarded by AO and penalty was levied. Reliance was placed on the decision of the Supreme Court in Birla Cement Works 248 ITR 216.
HELD :
Hon’ble supreme court decision in the case of Birla cement works is quite relevant and applicable to the facts of the case. It has been held that there are no compelling reasons to hold that explanation III inserted in section 194 C wef 1-7-95 is clarificatory or retrospective in operation. And hence, section 194 C before insertion of Explanation III is not applicable to transport contracts. The period involved in the present case is from 1-4-94 to 31-3-95. Therefore Section 194 C can not be made applicable to transport charges as per the decision of Supreme court. Lighterage charges also stand on the same footing as transportation charges and therefore section 194C can not be made applicable to lighterage charges as well. What remains is payment of labour charges aggregating to Rs.10,830/- paid to 14 parties. The payments, being less than Rs.20,000/- can not attract Section 194 C. Thus under any circumstances, there is no violation in respect of entire amount of Rs.75,178/- and hence penalty is wrongly levied and therefore cancelled.
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IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH ‘C’
(Before S/Shri B.M.Kothari and T.K.Sharma)
ITA No. 1842/A/1994
A.Y. 1985-86
M/s. Liberty Footwear, Baroda (Appellant)
Vs.
The ACIT, Cir 1(1) ,Baroda (Respondent)
Appellant By : Shri J.P.Shah
Respondent by : Shri Yogendra Dube
O R D E R
PER SHRI T.K.SHARMA, J.M.
This appeal by the assessee is directed against the order of CIT(A) dtd 24.2.94 upholding levy of penalty of Rs.1,20,000/- U/s 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1985-86.
FACTS
Assessee’s argument was that since it was previously assessed to tax and has not filed return of income and therefore penalty U/s 271(1)© is not leviable. He also contended that Explanation 5 to section 271(1)© is not applicable since it was inserted w.e.f.1-10-1984 whereas in the case of the assessee search was conducted on 3.3.84. He further contended that none of the authorities below invoked either explanation 3 or explanation 5 of the act and on this ground alone, penalty deserves to be cancelled. The counsel of the assessee also concluded that in this case the A.O. levied the penalty merely on ground of failure to file return of income which do not tantamount to concealment of particulars of income. Therefore, the ld. CIT(A) is clearly erred in upholding the impugned penalty levied U/s 271(1)(c). Dept mainly argued that as the assessee has not furnished return of income U/s 139(1) as also return in response to notice U/s 148, the A.O. is fully justified in levying impugned penalty of Rs.1,20,000/- U/s 271(1)(c).
HELD :
The Hon’ble tribunal agreed with the view of the assessee that explanation 3 is not applicable as assessee was previously assessed to tax under I.T.Act. Explanation 5 is not applicable because same was inserted after date of search. The only default is that assessee has not furnished any return of income and therefore the case of the assessee falls within clause (a) and not within clause (c). Non filing of return of income is not tantamount to concealment of particulars of income. Reliance can be placed on Madras high Court decision in the case of S.Santosh Nadas Vs. 1st addl. ITO reported in 46 ITR 411. In view of the foregoing reasons, tribunal was of the opinion that the A.O.erred in levying impugned penalty of Rs.1,20,000/- U/s 271(1)(c)
and accordingly cancelled the same.
May 2002
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