Income Tax Appellate Tribunal - Delhi
Sql Star International Ltd., Hyderabad vs Assessee on 30 November, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'G', NEW DELHI
BEFORE SHRI G.E. VEERABHADRAPPA, HON'BLE VICE PRESIDENT
&
SHRI I.P. BANSAL, JUDICIAL MEMBER
ITA No. 1016/Del/2010
Assessment Year: 1998-99
SQL Star International Ltd., Vs. Addl. CIT,
SQL Star House, Special Range-15,
8-2-293/174/A25, Road No. 14, New Delhi.
Banjara Hills, Hyderabad.
AAACS0372C
(Appellant) (Respondent)
&
ITA Nos. 1017 & 1018/Del/2010
Assessment Years: 2000-01 & 2001-02
SQL Star International Ltd., Vs. ACIT,
SQL Star House, Circle 9(1),
8-2-293/174/A25, Road No. 14, New Delhi.
Banjara Hills, Hyderabad.
AAACS0372C
(Appellant) (Respondent)
Appellant by : None
Respondent by : Smt. Surjani Mohanty, Sr. DR
ORDER
PER I.P. BANSAL, J.M.
All these appeals are filed by the Assessee. They are directed against three separate orders passed by ld. CIT(A) dated 30.11.2009 in respect of assessment years 1998-99, 2000-01 & 2001-02.
2. The issues raised in all these appeals are common. The ground of appeal in all these appeals are identical and read as under: - ITA Nos. 1016, 1017 & 1018/D/2010 2
"The ld. Commissioner of Income Tax erred in confirming the order of the Assessing Officer imposing a penalty u/s 271(1)(c) when there has been no concealment of income or furnishing of inaccurate particulars which is a sine qua non for imposition of penalty.
The ld. Commissioner of Income Tax was wrong in concluding that claim for depreciation at enhanced rates on books when proper disclosure has been made by the assessee in the statement accompanying the Return of Income as well as the Audit Report u/s 44AB of the Income Tax Act.
The ld. Commissioner of Income Tax was wrong in not following the decisions of the jurisdictional High Court relied by the assessee in Commissioner of Income Tax Vs. P.H.I. Seeds India Ltd. [2008] 301 ITR 13 (Delhi) and Commissioner of Income Tax, Delhi Vs. Escorts Finance Ltd. 183 Taxman.
For these reasons and for any other reason that may be adduced at the time of hearing, the Commissioner of Income Tax (Appeals) may be pleased to set aside the penalty levied."
3. The short issue involved in all these appeals is regarding levy of concealment penalty on the disallowance of excess depreciation claimed by the assessee on books purchased by it for the use of its students and faculty against the income arising out of training fee from the students which has been treated as income by the assessee. It will be relevant here to mention the facts stated in assessment order relating to A.Y. 1998-99 from where the assessee has started claiming depreciation on books @ 50%. In the immediate preceding assessment year i.e. A.Y. 1997-98 the assessee had claimed depreciation on such books @ 25%. ITA Nos. 1016, 1017 & 1018/D/2010 3 The books have not been treated as part of the block of fixed assets and books have been separately shown. The assessee was asked by the AO to substantiate its claim of depreciation @ 50% on the books and in response to such query a reply dated 26.3.2001 was filed. It was submitted that assessee is providing training to the students in computer software. In such process the company had to purchase the books for the students and faculty. The assessee has charged training fee from the students which has been shown as revenue and cost of books has been claimed @ 50% depreciation which was to be written off in two years of training duration. It was also submitted that in the immediate preceding year less depreciation was claimed for the reason that there was lack of profit in the hands of the company and company wanted to come with a public issue. In the circumstances, as per decision of management for the purpose of showing a healthy and sound financial position in the balance sheet of the company, a lower depreciation was claimed. The financial position of the company has improved considerably in the year under consideration, therefore, management has decided to claim 50% depreciation despite the fact that 100% depreciation is allowable. The AO did not accept such submission of the assessee. According to AO assessee could not take different stands to suit its own needs and to manipulate profits for taxation or for coming out with a public issue. It is in this manner ld. AO has disallowed depreciation as claimed by the assessee and has allowed 25% depreciation on books. The stand of the assessee was rejected by the CIT(A). However, assessee did not file further appeal and in the ITA Nos. 1016, 1017 & 1018/D/2010 4 circumstances, concealment penalty has been levied by the department in respect of the three years.
4. Ld. CIT(A) has also confirmed the penalty by observing that ITAT has confirmed the excess depreciation claimed on books and she also rejected the contention of the assessee that CIT(A) in the subsequent order had cancelled penalty. She observed that assessee had claimed excess depreciation on books. Therefore, assessee is liable for concealment penalty. The assessee is aggrieved, hence in appeal.
5. Notice of hearing was sent to assessee. However, none was present on behalf of assessee. As the issue is small, we dispose of these appeals after hearing ld. DR.
6. Ld. DR after narrating the facts relied upon the order passed by AO and CIT(A). She pleaded that assessee has claimed excess depreciation and the claim of the assessee is against the statutory provisions and the claim is patently wrong. Therefore, the assessee is liable for concealment penalty and the orders of CIT(A) in this regard for all the three years should be upheld.
7. We have carefully considered the submission of ld. DR. We have also carefully gone through the assessment order passed for A.Y. 1998- 99, the order for levy of concealment penalty and the order passed by ld. ITA Nos. 1016, 1017 & 1018/D/2010 5 CIT(A). Returned income of the assessee for all the three years is as under: -
S.No. Assessment Year Returned Income Disallowance on a/c of excess depreciation on books
1. 1998-99 48,37,419/- 2,40,737/-
2. 2000-01 1,80,80,910/- 88,200/-
3. 2001-02 1,85,66,460/- 45,470/-
8. It is clear from the facts mentioned in the assessment order for A.Y. 1998-99 that assessee did not treat the books as part of the block of fixed assets and thus, books were shown separately. It has been the contention of the assessee that it is engaged in the activity of providing training to the students in computer software for which it is charging fees from the students. The assessee has to provide books to the students as well as to the faculty. Thus, assessee is engaged in the activity of providing education in which such books were utilized. It is the case of the assessee that the cost of such books is allowable as business expenditure which means that assessee is entitled for 100% depreciation. However, the assessee has claimed depreciation @ 50% by keeping in view that the life of the book will be for two years which is the training duration of the students. The facts relating to the claim made by the assessee is clearly stated in the depreciation chart. Therefore, it cannot be said that assessee had concealed any particulars relating to its income as it was clearly mentioned that against books assessee is claiming 50% depreciation. The amount which has been disallowed is meager amount keeping in view the returned income of the assessee, so, it cannot be said that the assessee had claimed excess ITA Nos. 1016, 1017 & 1018/D/2010 6 depreciation to pay lower tax. It was a view point express by the assessee in the return of income and the business activity of the assessee is that of imparting education for which the books are required as a part of its business activity. A reasonable view can be said to have taken by the assessee to write off the cost of these books into two years which is limited to the training period of the students. The assessee had furnished an explanation which cannot be said to be either false or substantiated. No material has been brought on record by the revenue to show that the explanation given by the assessee was in any manner either false or unsubstantiated. It has also been contention of the assessee that in subsequent years the CIT(A) has cancelled the penalty on similar issue and such contention of the assessee has been rejected by ld. CIT(A) without going into the said contention.
9. In view of above discussion, we are of the opinion that it is not a fit case where levy of penalty can be held to be justified. Therefore, we cancel the penalty for all the three years and allow the appeals filed by the assessee.
10. In the result, all the appeals are allowed.
Order pronounced in the Open Court on 29th July, 2011.
Sd/- Sd/-
(G.E. VEERABHADRAPPA) (I.P. BANSAL)
VICE PRESIDENT JUDICIAL MEMBER
Dated: 29.7.11
*Kavita
ITA Nos. 1016, 1017 & 1018/D/2010 7
Copy forwarded to: -
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT
TRUE COPY
By Order,
DEPUTY REGISTRAR