Income Tax Appellate Tribunal - Mumbai
Speciallity Gragrances (India) P. Ltd ( ... vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "E", MUMBAI.
BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND
SHRI V. DURGA RAO, JUDICIAL MEMBER
ITA No.1687/Mum/2009
(Assessment Year : 2003-04)
M/s. International Flavours & Fragrances Vs. Dy. Commissioner of Income
India Pvt. Ltd. Tax,
(Erstwhile Speciality Frangrances (India) Range 8(3),
Pvt. Ltd., Mumbai.
501-503 Delphi 'C' Wing, Hiranandani
Business Park, Powai, Mumbai-400 076
PAN AAAC14975P
(Appellant) (Respondent)
Appellant By : Shri Dhanesh Bafna & Ms. Shital Bandekar.
Respondent By : Shri D. Songate.
ORDER
This appeal is filed by the assessee against the order of the learned Commissioner of Income Tax (Appeals)-XXIX, Mumbai Dt.5.12.2008.
2. The brief facts of the case are that the assessee-company filed its return of income on 1.12.2003 declaring total loss at `.55,37,680. The assessment was completed under section 143(3) of the Income Tax Act, 1961 (the Act) by the Assessing Officer and total income ;was assessed at ` 6,05,425. The Assessing Officer has made addition on account of income from hiring of assets of ` 4,76,000 and depreciation of ` 10,31,567 and short term capital loss of ` 41,20,749. The assessee carried the matter in appeal before the CIT(A). The CIT(A) has deleted the addition made by the A.O. in respect of hiring of assets of ` 4,76,00. In so far as depreciation is concerned, the ld. CIT(A) has allowed the addition as deleted the addition 2 ITA No.1687/Mum/09 made by the A.O. depreciation on account of furniture and fixtures and confirmed the depreciation on office equipment. On appeal, the Tribunal in ITA No.2379/Mum/07 vide order dt.27.8.2010 allowed the depreciation on office equipment also. The present penalty appeal is u/s. 271(1)(c) only on sustained addition on account of short term capital loss of ` 41,20,749. The facts in brief relating to this issue are that the assessee is a private limited company incorporated for the business of manufacturing of perfumes. The assessee company had hired certain premises to carry on its business of manufacture of fragrances and perfumes for industrial use. The assessee made such investment in the hired premises by way of doing interior and certain structural changes. However, the assessee was never able to commence its business. For sometime it leased out its assets temporarily and ultimately the assessee company got merged with the group concern. The assessee has claimed expenditure incurred on improvement of leased premises as a short term capital loss under section 50(2) of the Income Tax Act, 1961 (the Act). However, the Assessing Officer and CIT(A) had denied the claim of the assessee on the ground that there is no transfer of capital assets and the assessee not received any consideration. It was explained before the Assessing Officer during the course of penalty proceedings that the claim of the assessee is bona fide and all the details in respect of claim was disclosed by him. The assessee neither concealed the income nor filed inaccurate particulars and no penalty can be imposed under section 271(1)(c). However, the Assessing Officer has imposed the penalty on the ground that the onus lies on the assessee to prove genuineness of the claim 3 ITA No.1687/Mum/09 of short term capital loss. The assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) has observed that the assessee knowing very well that the short term capital loss is not allowable and claimed the same and it is amounting to filing of inaccurate particulars and the assessee's claim is not bona fide and confirmed the penalty imposed by the Assessing Officer. On being aggrieved by the order of CIT(A), the assessee carried the matter before the Tribunal.
3. The learned counsel for the assessee has submitted that it is bona fide claim of the assessee and section 271(1)(c) cannot be applicable. He further submitted that in the computation of income filed along with the return of income disclosed all the details in respect of short term capital loss of ` 41,20,749 and also filed Annexure 1 with a note stating that all the details in respect of the claim.
4. On the other hand, the learned Departmental Representative supported the orders of authorities below.
5. We have heard both the sides, perused the records and gone through the orders of authorities below. The assessee company hired premises to carry on its business of manufacturing of fragrances and perfumes for industrial use. On a hire of leasehold premises, the assessee has incurred certain expenditure by way of doing certain structural changes. However, the assessee was not able to commence the business. The leased premises got merged with the group concern. The assessee has claimed expenses incurred for interior and structural changes as a short term capital loss under section 50(2) of the Act. However, the authorities not accepted the claim on 4 ITA No.1687/Mum/09 the ground that there is no transfer of the capital asset and no consideration has been received by the assessee. According to the assessee, he has surrendered the leased premises, he also relinquished the improvements made in the leased premises and therefore it is amounting to transfer and the loss incurred by the assessee is a short term capital loss. The assessee has disclosed all the facts before the Assessing Officer during the assessment proceedings along with the computation and also submitted the note (page No.3 of the paper book) stating that the leasehold improvement has been done by the company and therefore the entire block of leasehold improvement ceased to exist during the year. Accordingly, the block of assets amounting to ` 41,20,749 has been treated as short term capital loss incurred during the year as per the provisions of section 50(2) of the Act. The assessee has disclosed all the facts before the Assessing Officer and according to the Assessing Officer and learned CIT(A), the claim of the assessee is not allowable because there is no transfer of assets. The case of the assessee is that when the assessee has relinquished his rights on leased assets which is according to him amounting to transfer and is eligible for short term capital loss as per section 50(2). After careful consideration of the facts and circumstances of the case, we find that the assessee has disclosed all the details in respect of claim with regard to short term capital loss. According to the assessee, it is a transfer which is allowable under section 50(2) of the Act. Therefore it is a legal claim made by him which is allowable claim according to the assessee and it is also a bona fide claim. It is not the case of revenue that the claim of assessee is bogus and no details 5 ITA No.1687/Mum/09 were filed. In this context, in the case of CIT Vs. Reliance Petroproducts P. Ltd. (322 ITR 158) (SC), it was observed by the Hon'ble Supreme Court that a mere making of the claim which is not sustained in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such claim made in the return cannot amount to furnishing inaccurate particulars. We, therefore, respectfully following the Hon'ble Supreme Court judgement and also taking into consideration of total facts and circumstances of the case, the assessee neither filed inaccurate particulars nor concealed any income. We, therefore, cancel the penalty confirmed by the learned CIT(A) and the ground raised by the assessee is allowed.
In the result the appeal of the assessee is allowed.
Pronounced in the open Court on 10.12.2010.
Sd/- Sd/-
(P.M. JAGTAP) (V. DURGA RAO)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai,
Dt.10-12-2010.
Gpr,
Copies of the order forwarded to :
(1) The Appellant
(2) The Respondent
(3) CIT, Mumbai
(4) CIT(A), Mumbai
(5) DR,
(6) Guard File
By Order
Assistant Registrar
Income Tax Appellate Tribunal
Mumbai Benches
6 ITA No.1687/Mum/09
Date Initials
1. Draft dictated on 6/12/2010
2. Draft placed before author
3. Draft proposed & placed
before second member
4. Draft discussed & approved
by second member
5. Approved draft comes to
Sr.PS/PS
6. Kept for pronouncement on
7. File sent to Bench Clerk
8. Date on which file goes to the
Head Clerk
9. Date of dispatch of order.