SQL Star International Ltd., Hyderabad v. ACIT, New Delhi

ITA 1018/DEL/2010 | 2001-2002
Pronouncement Date: 29-07-2011 | Result: Allowed

Appeal Details

RSA Number 101820114 RSA 2010
Assessee PAN AAACS0372C
Bench Delhi
Appeal Number ITA 1018/DEL/2010
Duration Of Justice 1 year(s) 4 month(s) 21 day(s)
Appellant SQL Star International Ltd., Hyderabad
Respondent ACIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 29-07-2011
Date Of Final Hearing 21-07-2011
Next Hearing Date 21-07-2011
Assessment Year 2001-2002
Appeal Filed On 09-03-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA HONBLE VICE PRESI DENT & 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 M OHANTY 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 COMMO N. THE GROUND OF APPEAL IN ALL THESE APPEALS ARE IDENTICAL AND RE AD AS UNDER: - ITA NOS. 1016 1017 & 1018/D/2010 2 THE LD. COMMISSIONER OF INCOME TAX ERRED IN CONFIR MING THE ORDER OF THE ASSESSING OFFICER IMPOSING A PENALTY U /S 271(1)(C) WHEN THERE HAS BEEN NO CONCEALMENT OF INC OME OR FURNISHING OF INACCURATE PARTICULARS WHICH IS A SIN E 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 O F 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 FINAN CE 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 PENAL TY LEVIED. 3. THE SHORT ISSUE INVOLVED IN ALL THESE APPEALS IS REGARDING LEVY OF CONCEALMENT PENALTY ON THE DISALLOWANCE OF EXCESS D EPRECIATION CLAIMED BY THE ASSESSEE ON BOOKS PURCHASED BY IT FOR THE US E 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 ORDE R RELATING TO A.Y. 1998-99 FROM WHERE THE ASSESSEE HAS STARTED CLAIMIN G DEPRECIATION ON BOOKS @ 50%. IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR I.E. A.Y. 1997-98 THE ASSESSEE HAD CLAIMED DEPRECIATION ON SU CH BOOKS @ 25%. ITA NOS. 1016 1017 & 1018/D/2010 3 THE BOOKS HAVE NOT BEEN TREATED AS PART OF THE BLOC K 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 TH E STUDENTS IN COMPUTER SOFTWARE. IN SUCH PROCESS THE COMPANY HAD TO PURCH ASE THE BOOKS FOR THE STUDENTS AND FACULTY. THE ASSESSEE HAS CHARGED TRAINING FEE FROM THE STUDENTS WHICH HAS BEEN SHOWN AS REVENUE AND CO ST OF BOOKS HAS BEEN CLAIMED @ 50% DEPRECIATION WHICH WAS TO BE WRI TTEN OFF IN TWO YEARS OF TRAINING DURATION. IT WAS ALSO SUBMITTED THAT IN THE IMMEDIATE PRECEDING YEAR LESS DEPRECIATION WAS CLAIMED FOR TH E 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 LOW ER DEPRECIATION WAS CLAIMED. THE FINANCIAL POSITION OF THE COMPANY HAS IMPROVED CONSIDERABLY IN THE YEAR UNDER CONSIDERATION THERE FORE MANAGEMENT HAS DECIDED TO CLAIM 50% DEPRECIATION DESPITE THE F ACT THAT 100% DEPRECIATION IS ALLOWABLE. THE AO DID NOT ACCEPT S UCH SUBMISSION OF THE ASSESSEE. ACCORDING TO AO ASSESSEE COULD NOT TAKE DIFFERENT STANDS TO SUIT ITS OWN NEEDS AND TO MANIPULATE PROFITS FOR TA XATION OR FOR COMING OUT WITH A PUBLIC ISSUE. IT IS IN THIS MANNER LD. AO H AS DISALLOWED DEPRECIATION AS CLAIMED BY THE ASSESSEE AND HAS ALL OWED 25% DEPRECIATION ON BOOKS. THE STAND OF THE ASSESSEE W AS REJECTED BY THE CIT(A). HOWEVER ASSESSEE DID NOT FILE FURTHER APP EAL 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 OBS ERVING THAT ITAT HAS CONFIRMED THE EXCESS DEPRECIATION CLAIMED ON BO OKS AND SHE ALSO REJECTED THE CONTENTION OF THE ASSESSEE THAT CIT(A) IN THE SUBSEQUENT ORDER HAD CANCELLED PENALTY. SHE OBSERVED THAT ASS ESSEE HAD CLAIMED EXCESS DEPRECIATION ON BOOKS. THEREFORE ASSESSEE IS LIABLE FOR CONCEALMENT PENALTY. THE ASSESSEE IS AGGRIEVED HE NCE IN APPEAL. 5. NOTICE OF HEARING WAS SENT TO ASSESSEE. HOWEVER NONE WAS PRESENT ON BEHALF OF ASSESSEE. AS THE ISSUE IS SMA LL 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 CLAIM ED EXCESS DEPRECIATION AND THE CLAIM OF THE ASSESSEE IS AGAIN ST THE STATUTORY PROVISIONS AND THE CLAIM IS PATENTLY WRONG. THEREF ORE THE ASSESSEE IS LIABLE FOR CONCEALMENT PENALTY AND THE ORDERS OF CI T(A) IN THIS REGARD FOR ALL THE THREE YEARS SHOULD BE UPHELD. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSION OF L D. DR. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER PA SSED FOR A.Y. 1998- 99 THE ORDER FOR LEVY OF CONCEALMENT PENALTY AND T HE ORDER PASSED BY LD. ITA NOS. 1016 1017 & 1018/D/2010 5 CIT(A). RETURNED INCOME OF THE ASSESSEE FOR ALL TH E 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 ASSE SSMENT 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 TH E ACTIVITY OF PROVIDING TRAINING TO THE STUDENTS IN COMPUTER SOFTWARE FOR W HICH IT IS CHARGING FEES FROM THE STUDENTS. THE ASSESSEE HAS TO PROVIDE BOO KS TO THE STUDENTS AS WELL AS TO THE FACULTY. THUS ASSESSEE IS ENGAG ED IN THE ACTIVITY OF PROVIDING EDUCATION IN WHICH SUCH BOOKS WERE UTILIZ ED. IT IS THE CASE OF THE ASSESSEE THAT THE COST OF SUCH BOOKS IS ALLOWAB LE AS BUSINESS EXPENDITURE WHICH MEANS THAT ASSESSEE IS ENTITLED F OR 100% DEPRECIATION. HOWEVER THE ASSESSEE HAS CLAIMED DE PRECIATION @ 50% BY KEEPING IN VIEW THAT THE LIFE OF THE BOOK WILL B E FOR TWO YEARS WHICH IS THE TRAINING DURATION OF THE STUDENTS. THE FACTS R ELATING TO THE CLAIM MADE BY THE ASSESSEE IS CLEARLY STATED IN THE DEPRE CIATION CHART. THEREFORE IT CANNOT BE SAID THAT ASSESSEE HAD CONC EALED 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 RET URNED INCOME OF THE ASSESSEE SO IT CANNOT BE SAID THAT THE ASSESSEE H AD 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 A CTIVITY OF THE ASSESSEE IS THAT OF IMPARTING EDUCATION FOR WHICH T HE BOOKS ARE REQUIRED AS A PART OF ITS BUSINESS ACTIVITY. A REASONABLE V IEW CAN BE SAID TO HAVE TAKEN BY THE ASSESSEE TO WRITE OFF THE COST OF THES E BOOKS INTO TWO YEARS WHICH IS LIMITED TO THE TRAINING PERIOD OF THE STUD ENTS. THE ASSESSEE HAD FURNISHED AN EXPLANATION WHICH CANNOT BE SAID TO BE EITHER FALSE OR SUBSTANTIATED. NO MATERIAL HAS BEEN BROUGHT ON REC ORD 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 CA NCELLED THE PENALTY ON SIMILAR ISSUE AND SUCH CONTENTION OF THE ASSESSE E HAS BEEN REJECTED BY LD. CIT(A) WITHOUT GOING INTO THE SAID CONTENTIO N. 9. IN VIEW OF ABOVE DISCUSSION WE ARE OF THE OPINI ON THAT IT IS NOT A FIT CASE WHERE LEVY OF PENALTY CAN BE HELD TO BE JUSTIF IED. THEREFORE WE CANCEL THE PENALTY FOR ALL THE THREE YEARS AND ALLO W THE APPEALS FILED BY THE ASSESSEE. 10. IN THE RESULT ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH 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