Income Tax Appellate Tribunal - Chennai
Sundaram Non-Conventional Energy ... vs Department Of Income Tax on 5 January, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI GEORGE MATHAN, JUDICIAL MEMBER
I.T.A. Nos. 1706 & 1707/Mds/2011
(Assessment Years : 2003-04 & 2004-05)
The Assistant Commissioner M/s Sundaram Non-
of Income Tax, Conventional Energy Systems
Company Circle VI(4), v. Ltd.,
Chennai - 600 034. 98A, Dr. Radhakrishnan Salai,
Mylapore, Chennai - 600 004
(Appellant) PAN : AABCS5036L
(Respondent)
Appellant by : Shri K.E.B. Rangarajan,
Junior Standing Counsel
Respondent by : Shri R. Vijayaraghavan, Advocate
Date of Hearing : 05.01.2012
Date of Pronouncement : 05.01.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
These are appeals filed by the Revenue for assessment years 2003-04 and 2004-05, against orders dated 4.8.2011 of Commissioner of Income Tax (Appeals)-VI, Chennai, deleting penalty 2 I.T.A. Nos. 1706 & 1707/Mds/11 levied under Section 271(1)(c) of Income-tax Act, 1961 (in short "the Act").
2. Facts for both years lie in the same compass. Assessee had taken windmills on lease from its associated companies engaged in manufacturing. The companies from which assessee had leased the windmills had acquired the windmills and leased it out to the assessee. As per the assessee, it was the first user of the windmills and though it was holding the windmills under a lease, it was eligible for claim of deduction under Section 80-IA of the Act with regard to the profits earned on supply of electricity generated by such windmills. Assessee had claimed deduction under Section 80-IA of the Act for both the years. Similar claims were there from assessment year 1994-95 onwards. Assessing Officer was of the opinion that lease of the windmills by the assessee from its associated companies was in effect a transfer of such windmills to the assessee by virtue of Section 53A of Transfer of Property Act. Further, according to A.O., the lessors of the windmills had made first use of windmills by virtue of the transaction of leasing of such windmills to the assessee. Assessee's contention that lease did not 3 I.T.A. Nos. 1706 & 1707/Mds/11 result in a transfer and windmills were first put to use by the assessee as lessee and therefore, eligible for claim of deduction under Section 80-IA, did not find acceptance with the Assessing Officer. As already mentioned, similar claims were there for earlier years and reassessments were also done for assessment years 1997-98 to 2002-03 withdrawing the deduction given under Section 80-IA of the Act.
3. Assessee moved in appeal against orders of Assessing Officer and ld. CIT(Appeals) in quantum proceedings held assessee to be eligible for claim under Section 80-IA of the Act with respect to electricity generated and supplied to its associated companies. However, Revenue moved in further appeal before this Tribunal and this Tribunal vide its order dated 11th February, 2009, for assessment year 2004-05 set aside the order of ld. CIT(Appeals) and reinstated the order of A.O. denying the claim of deduction under Section 80-IA of the Act. The A.O. thereafter issued notice to the assessee to show cause why penalty should not be levied under Section 271(1)(c) of the Act. In response to such notice, it was submitted by the assessee that there was no concealment nor furnishing of any inaccurate or 4 I.T.A. Nos. 1706 & 1707/Mds/11 false particulars. As per the assessee, the claim for deduction under Section 80-IA of the Act was supported by Tax Audit Report in Form 3CD and audit report in Form 10CCB as prescribed under Section 80-IA of the Act. Assessee pointed out that ld. CIT(Appeals) in quantum proceedings accepted the case of the assessee that it was eligible for deduction under Section 80-IA of the Act in respect of its income from generation and distribution of electricity. Assessee also pointed out that it had disclosed full and proper particulars with regard to its claim and it was not a fictitious claim. However, the A.O. was not appreciative of this argument. According to him, the constituent companies of the assessee had installed windmills for their own captive consumption of power for mutual benefits, the lease rentals were very low and plant and machinery leased to the assessee were already used. Just because form No.10CCB was filed, the claim could not be accepted. Learned A.O. noted that the Tribunal had reversed the finding of ld. CIT(Appeals) in quantum assessment resulting in denial of such deduction under Section 80-IA of the Act and therefore, it became mandatory to initiate penalty proceedings. Finally, he came to a conclusion that assessee was unable to 5 I.T.A. Nos. 1706 & 1707/Mds/11 establish its bonafide with regard to the claim and levied penalty for both the years at the minimum level prescribed under the Act.
4. In its appeals before ld. CIT(Appeals), argument of the assessee was that the claim was bonafide and just because the claim was found by the Assessing Officer not sustainable, assessee could not be considered to have concealed any income or furnished any inaccurate particulars. As per the assessee, it had given all particulars in its returns of income and the claim was genuine. The claim was to be disallowed only for a reason that leasing of the windmills from the lessee companies was itself considered to be first use of windmills, whereas, in fact, the windmills were first used by the assessee as lessee and electricity generated was supplied to sister concerns. Assessee also argued that there was no transfer of property coming within the ambit of Section 53A of Transfer of Property Act by the lease. Ld. CIT(Appeals) was appreciative of these contentions. According to him, decision of Hon'ble Apex Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd. (322 ITR 158) and that of Delhi High Court in the case of CIT v. Nath Brothers (288 6 I.T.A. Nos. 1706 & 1707/Mds/11 ITR 670) went in favour of assessee. He, therefore, deleted the levy of penalty for both the years.
5. Now before us, learned D.R. submitted that assessee had made a false claim and was trying to justify such claim stating that the claim was legal. According to learned D.R., assessee was well aware that it was not eligible for claim since the machinery was put to use earlier. According to learned D.R., ld. CIT(Appeals) had erred in deleting the penalty when the claim itself was illegal.
6. Per contra, learned A.R. supported the orders of ld. CIT(Appeals) and submitted that originally though it was denied deduction under Section 80-IA of the Act on electricity generated and distributed, ld. CIT(Appeals) had allowed the appeals of the assessee and directed the A.O. to allow such claim. Learned A.R. conceded that the order of ld. CIT(Appeals) was reversed by the Tribunal holding that the assessee was not eligible for deduction under Section 80-IA of the Act in respect of the electricity generated and distributed. But this by itself would establish that the claim was considered by different authorities and different views were taken on 7 I.T.A. Nos. 1706 & 1707/Mds/11 this issue. Therefore, this claim was not a malafide one and it was genuine. Learned A.R. also pointed out that assessee had moved in appeal before Hon'ble jurisdictional High Court against the decision of Tribunal and Hon'ble jurisdictional High Court had admitted such appeals in TCA 358 and 359 of 2009. Reliance was again placed on the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd. (supra).
7. Facts stated above would lead to automatic resolution of the dispute, in our view. Assessee had made claim under Section 80-IA of the Act on electricity generated and distributed. But, the Assessing Officer denied it. The reasons given by the Assessing Officer were that the windmills were taken not on lease but on transfer and there was earlier use of such windmills. However, these reasonings were not found acceptable by the ld. CIT(Appeals). No doubt, the Tribunal had reversed the order of ld. CIT(Appeals) and reinstated the orders of A.O. in quantum assessments. Appeals against such orders of the Tribunal have been admitted by the Hon'ble High Court. This by itself, in our opinion, shows that the claim of the assessee was bonafide. The claim was supported by Form No. 10CCB. Assessee had not 8 I.T.A. Nos. 1706 & 1707/Mds/11 concealed any particulars in its returns. The lease was not doubted but the lease itself was considered to be a transfer. The lease transaction by itself was also considered to be a first use of the machinery. All these are debatable issues without doubt. In such circumstances, to say that the claim itself was malafide will be far fetched. Admission of the appeals of assessee by Hon'ble jurisdictional High Court by itself show that there was substance in the claim of the assessee. A look at the decision of Hon'ble Apex Court in the case of Reliance Petroproducts Pvt. Ltd. (supra) would clearly show that when an appeal was admitted by an High Court, bonafide nature of the explanation given by the assessee stood proved. If there can be two opinions about the claim of the assessee, the explanation offered by the assessee cannot be regarded as fictitious one. Just because a claim for deduction was not palatable to the authorities, we cannot say that the claim itself was not supported or without substance. We are of the opinion that ld. CIT(Appeals) was justified in deleting the penalty for both the years under such circumstances. Interference is not called for. 9 I.T.A. Nos. 1706 & 1707/Mds/11
8. In the result, appeals filed by the Revenue for both the years stand dismissed.
Order pronounced in the open court after conclusion of hearing on 5th January, 2012.
sd/- sd/-
(George Mathan) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 5th January, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-VI, Chennai
(4) CIT-III, Chennai
(5) D.R.
(6) Guard file