PFIZER PHARMACEUTICALS INDIA PVT.LTD.(FORMERLY KNOWN AS WARNER LAMBERT (I) PVT.LTD.), MUMBAI v. THE DY.C.I.T., RANGE-8(2), MUMBAI

ITA 1111/MUM/2009 | 2003-2004
Pronouncement Date: 15-12-2010 | Result: Allowed

Appeal Details

RSA Number 111119914 RSA 2009
Bench Mumbai
Appeal Number ITA 1111/MUM/2009
Duration Of Justice 1 year(s) 9 month(s) 27 day(s)
Appellant PFIZER PHARMACEUTICALS INDIA PVT.LTD.(FORMERLY KNOWN AS WARNER LAMBERT (I) PVT.LTD.), MUMBAI
Respondent THE DY.C.I.T., RANGE-8(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted G
Tribunal Order Date 15-12-2010
Date Of Final Hearing 06-12-2010
Next Hearing Date 06-12-2010
Assessment Year 2003-2004
Appeal Filed On 18-02-2009
Judgment Text
ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 1 OF 22 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI G BENCH MUMBAI BEFORE SHRI R V EASWAR (PRESIDENT) AND SHRI PRAMOD KUMAR (AM) ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PFIZER PHARMACEUTICALS (INDIA) PRIVATE LIMITED .. APPELLANT [ FORMERLY KNOWN AS WARNER LAMBERT INDIA PVT LTD] 5 PATEL ESTATE OFF S V ROAD JOGESHWARI (WEST) MUMBAI 400 102 PAN : AADCPL 5293L VS. DEPUTY COMMISSIONER OF INCOME TAX RANGE 8(2) MUMBAI 400020 ... RESPONDENT APPEARANCES P J PARDIWALA AND NISHANT THAKKAR FOR THE APPELLANT PAVAN VED FOR THE RESPONDENT O R D E R PER PRAMOD KUMAR: 1. BY WAY OF THIS APPEAL THE ASSESSEE APPELLANT HA S CALLED INTO QUESTION CORRECTNESS OF CIT(A)S ORDER DATED 1 ST DECEMBER 2009 UPHOLDING PENALTY OF RS 10 34 56 092 IMPOSED ON THE ASSESSEE UNDER SE CTION 271(1)(C) OF THE INCOME TAX ACT 1961 FOR THE ASSESSMENT YEAR 20 03-04. 2. GROUNDS OF APPEAL TAKEN BY THE ASSESSEE AS SET OUT IN THE MEMORANDUM OF APPEAL ARE AS FOLLOWS: ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 2 OF 22 1. THE CIT(A) ERRED IN CONFIRMING THE PENALTY LEVIE D BY THE LEARNED DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 8 (2) MUMBAI (DCIT) AMOUNTING TO RS 10 34 56 092 UNDER SECTION 271(1)(C) IN RESPECT OF THE FOLLOWING ITEMS: PARTICULARS AMOUNT (RS) (A) BAD DEBTS WRITTEN OFF 23 45 000 (B) ALLOWANCE OF DEPRECIATION 8 61 26 465 (C) CAPITAL GAINS ON SLUMP SALE OF UNIT 19 32 52 3 83 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE PENAL TY ON THE GROUND THAT YOUR APPELLANT HAD FURNISHED INACCURATE PARTICULARS OF INCOME TO EVADE ITS TAX LIABILITY BY NOT SUBMITT ING INFORMATION BEFORE THE DCIT OR THE CIT(A) WHICH AMOUNTED TO CO NCEALMENT OF INCOME UNDER SECTION 271(1)(C) OF THE ACT. HE FU RTHER ERRED IN HOLDING THAT YOUR APPELLANTS CASE FELL WITHIN THE PURVIEW OF EXPLANATION 1(A) AND 1(B) TO SECTION 271(1)(C) OF T HE ACT. HE ERRED IN NOT CONSIDERING IN THEIR PROPER PERSPECTI VE THE SUBMISSIONS MADE BY YOUR APPELLANT. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS OF APPEAL THE CIT(A) ERRED IN NOT DIRECTING THE DCIT TO DELETE TH E PENALTY ON THE AFORESAID ITEMS IN THE ABSENCE OF ANY FINDINGS FOR CONCEALMENT OR SUPPRESSION OF INCOME IN THESE CASES . 3. AS ALL THESE GROUNDS OF APPEAL PERTAIN TO THE SA ME GRIEVANCE I.E. AGAINST CIT(A)S CONFIRMING PENALTY UNDER SECTION 271(1)(C) AMOUNTING TO RS 10 34 56 092 IT IS NOT REALLY NECESSARY TO SEPARAT ELY ADJUDICATE ON THE ABOVE GROUNDS OF APPEAL. WE WILL TAKE UP ALL THESE GROU NDS OF APPEAL TOGETHER. 4. AS REGARDS THE PENALTY IN RESPECT OF QUANTUM DIS ALLOWANCE OF RS 23 45 000 ON ACCOUNT OF BAD DEBTS IT IS SUFFICIENT TO TAKE NOTE OF THE FACT THAT VIDE ORDER DATED 3 RD DECEMBER 2010 A COORDINATE BENCH HAS ALREADY DEL ETED THE SAID DISALLOWANCE OF BAD DEBTS. ON THIS FACTUAL POSITION AND HAVING REGARD TO THE FACT THAT THE RELATED QUANTUM DISALLOWANCE I TSELF STANDS DELETED THE PENALTY DOES NOT SURVIVE IN RESPECT OF THE DISALLOW ANCE FOR BAD DEBTS. LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT DISPUTE THIS P OSITION AND TO THIS EXTENT FAIRLY CONCEDES THE APPEAL. LET US THEREF ORE PROCEED TO DEAL WITH THE FACTS RELATING TO THE REMAINING PORTION OF THE IMPU GNED PENALTY. ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 3 OF 22 5. THE RELEVANT MATERIAL FACTS WITH REGARD TO THE REMAINING TWO ADJUSTMENTS TO THE INCOME ARE LIKE THIS. ON THE QU ESTION OF ALLOWANCE OF DEPRECIATION AMOUNTING TO RS 8 61 26 465 AND ADDITI ON IN RESPECT OF CAPITAL GAINS ON SLUMP SALE OF UNIT AMOUNTING TO RS 19 32 52 383 ONLY A FEW MATERIAL FACTS NEED TO BE TAKEN NOTE OF. ON 30 TH MARCH 2003 THE ASSESSEE SOLD ONE OF THE UNITS IT OWNED ON A GOING CONCERN BASIS TO CADBURY INDIA LIMITED. WHILE THE ASSESSEE CLAIMED DEPRECATION ONL Y OF RS 2 10 671 THE ASSESSING OFFICER ALLOWED THE DEPRECIATION OF RS 8 61 26 465. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSETS ARE T RANSFERRED ONLY ON 30 TH MARCH 2003 AND SINCE THE ASSESSEE HAS USED THE ASS ETS FOR SUBSTANTIAL PERIOD OF TIME DEPRECIATION FOR MUST BE ALLOWED IN COMPUT ATION OF BUSINESS INCOME. THE STAND OF THE ASSESSING OFFICER WAS THAT IT WAS NOT AT THE OPTION OF THE ASSESSEE TO CLAIM OR NOT TO CLAIM THE DEPRECIATION AND THAT THE ADMISSIBLE DEPRECIATION HAD TO BE ALLOWED TO THE ASSESSEE. HE ALSO OBSERVED THAT THE MAIN REASON FOR NOT CLAIMING DEPRECIATION WAS TO RE DUCE LOSSES FOR THE CURRENT YEAR SO THAT THE WRITTEN DOWN VALUE OF THE ASSETS REMAINED HIGHER IN THE BOOKS OF ACCOUNTS AND THE BENEFIT OF HIGHER SET OFF IS ALLOWED WHEN THE ASSESSEE COMPANY SUBSEQUENTLY MERGED IN PFIZER LIMI TED. IT WAS FURTHER OBSERVED THAT THE ASSESSEE HAD EXCLUDED THE ASSETS OF THE DIVISION TRANSFERRED TO CADBURY INDIA LIMITED BUT SINCE THIS TRANSFER T OOK PLACE ONLY AT THE END OF THE YEAR I.E. ON 30 TH MARCH AND IN VIEW OF THE PROVISIONS OF SECTION 32 INCLUDING EXPLANATION 5 THERETO THE ASSESSEE HAD T O BE ALLOWED DEPRECIATION ON ASSETS USED DURING THE YEAR FOR ITS BUSINESS. IT WAS ALSO NOTED THAT IN TERMS OF THE PROVISIONS OF SECTION 43(6)(C)(I)(C) WHILE COMPUTING WRITTEN DOWN VALUE OF THE BLOCK OF ASSET DEPRECIATION ALLO WABLE ON THE ASSETS SOLD ON SLUMP SALE BASIS WAS TO BE TAKEN INTO ACCOUNT. AS A COROLLARY TO THIS STAND THE ASSESSING OFFICER FURTHER HELD THAT IN COMPUTATION OF PROFIT ON SLUMP SALE OF THE UNIT THE ASSESSEE WAS REQUIRED TO TAKE INTO AC COUNT WRITTEN DOWN VALUE AFTER PROVIDING THE DEPRECIATION ALLOWABLE TO THE A SSESSEE. WHEN ACCORDINGLY THE PROFIT ON SLUMP SALE OF THE UNIT WAS REWORKED O N THAT BASIS AS AGAINST LOSS OF RS 6 53 72 000 COMPUTED BY THE ASSESSEE TH E GAIN WORKED OUT TO RS ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 4 OF 22 12 78 80 383. ON THE OTHER HAND STAND OF THE ASSES SEE WAS THAT AFTER THE INTRODUCTION OF BLOCK OF ASSETS CONCEPT W.E.F. 1 ST APRIL 2000 THE WRITTEN DOWN VALUE ON WHICH DEPRECIATION CAN BE CLAIMED HAS TO BE COMPUTED IN TERMS OF THE PROVISIONS OF SECTION 43(6)(C)(I) BY INTER AL IA REDUCING THE NOTIONAL WRITTEN DOWN VALUE IN RESPECT OF ASSETS SOLD DISCA RDED DEMOLISHED OR DESTROYED. IT WAS POINTED OUT THAT SECTION PROVIDE S FOR REDUCTION IN WRITTEN DOWN VALUE BY THE AMOUNT OF DEPRECIATION T HAT WOULD HAVE BEEN ALLOWABLE TO THE ASSESSEE FOR ANY ASSESSMENT YEAR C OMMENCING ON OR AFTER THE 1ST DAY OF APRIL 1988 AS IF THE ASSET WA S THE ONLY ASSET IN THE RELEVANT BLOCK OF ASSETS. IT WAS CONTENDED THAT TH E EXERCISE WAS TO COMPUTE OUT OF THE WDV OF TOTAL ASSTES THE WDV OF ASSETS OF UNIT SOLD IN SLUMP SALE ON A NOTIONAL BASIS RATHER THAN ALLOWI NG THE DEPRECIATION NOT ALLOWED IN EARLIER YEARS. IF LATTER WAS THE COURSE ADOPTED ACCORDING TO THE ASSESSEE THE BENEFIT OF UNABSORBED DEPRECIATIO N WAS TO BE ALLOWED TO BE SET OFF. THE ASSESSEE THUS CHALLENGED THE ACTION OF THE ASSESSING OFFICER BUT OF NO AVAIL. THIS DISPUTE REGARDING DE PRECIATION CLAIM FINALLY TRAVELLED TO A COORDINATE BENCH OF THIS TRIBUNAL A ND VIDE ORDER DATED 3 RD INSTANT THE COORDINATE BENCH CONFIRMED THE STAND O F THE ASSESSING OFFICER. IT WAS HELD BY THE COORDINATE BENCH THAT IN COMPUTATIO N OF THE WRITTEN DOWN VALUE OF THE ASSETS SOLD IN THE SLUMP SALE THE DEP RECIATION AS MAY HAVE BEEN ALLOWABLE HAS TO BE TAKEN INTO ACCOUNT. IT WAS ALS O HELD THAT EVEN THOUGH THE ASSESSEE HAS SOLD THOSE ASSETS IN THE RELEVANT PREV IOUS YEAR ITSELF AS PART OF THE UNIT IN SLUMP SALE DEPRECIATION WAS TO BE ALLO WED FOR THE RELEVANT PREVIOUS YEAR. IN EFFECT THUS THE COORDINATE BENCH UPHELD THE STAND OF THE ASSESSING OFFICER IN HOLDING THAT THE ASSESSEE WAS TO BE GRANTED DEPRECIATION FOR THE ASSETS SOLD DURING THE YEAR AS A PART OF TH E SLUMP SALE OF UNIT AND IN HOLDING THAT WHILE COMPUTING THE WRITTEN DOWN VALUE OF THE ASSETS OF THE UNIT SOLD IN SLUMP SALE ADMISSIBLE DEPRECIATION WHETHE R CLAIMED OR NOT WAS TO BE TAKEN INTO ACCOUNT. THE HIGHER DEPRECIATION THRUST BY THE ASSESSING OFFICER AS ALSO HIGHER LONG TERM CAPITAL GAINS COMPUTED BY THE ASSESSING OFFICER WAS CONFIRMED BY THE COORDINATE BENCH. IN THE MEANTIME THE ASSESSING OFFICER HAS ALSO IMPOSED PENALTY UNDER SECTION 271(1)(C) IN RESPECT OF THE AFORESAID ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 5 OF 22 ADJUSTMENTS IN ADMISSIBLE DEPRECIATION AND IN LONG TERM CAPITAL GAINS ON SALE OF UNIT ON SLUMP SALE BASIS. WHILE DOING SO THE AS SESSING OFFICER HAS ADOPTED THE FOLLOWING LINE OF REASONING: 4.1. IN THE ASSESSMENT ORDER THE AO HAS WORKED OU T THE ELIGIBLE DEPRECIATION AT RS 8 61 26 465/- AGAINST THE CLAIM OF THE ASSESSEE MADE OF RS 2 10 671/- ONLY. DURING THE COURSE OF ASSES SMENT THE A.O HELD THAT THE DEPRECIATION HAS TO BE WORKED OUT ON ALL THE AS SETS WHICH HAD BEEN UTILIZED FOR THE PURPOSE OF ITS BUSINESS DURING THE YEAR ONLY ON ACCOUNT OF ASSETS BEING TRANSFERRED ON 30 TH MARCH 2003 CANNOT QUALIFY THE SAME FOR NOT BEING ELIGIBLE FOR DEPRECIATION. 4.2. IN THE ASSESSMENT ORDER THE AO HAS ALSO STAT ED THAT THE ASESSEE HAD NOT BEEN CLAIMING DEPRECIATION ALLOWABLE AS PE R SEC. 32(1) IN RESPECT OF ITS ASSETS IN EARLIER YEARS PRIOR TO A.Y .2002-03 THOUGH FOR THIS YEAR THE ASSESSEE HAS CLAIMED THE DEPRECIATION AS PER IT ACT AT RS.2 10 671/- WHICH IS DUE TO THE FACT THAT ONE OF THE DIVISIONS HAS BEEN TRANSFERED DURING THE YEAR TO M/S. CADBURV INDIA LT D. IF THE ELIGIBLE DEPRECIATION OF THE EARLIER YEARS ARE CONSIDERED T HEN THE VALUE OF THE OPENING WDV WILL BE ENTIRELY DIFFERENT AND CONSEQU ENTLY THERE IS SUBSTANTIAL CHANGE IN THE EXTENT OF ELIGIBLE DEPREC IATION. ON GIVING OPPORTUNITY TO THE ASSESSCE TO EXPLAIN WHY THE ELIG IBLE DEPRECIATION ALLOWABLE IN THE EARLIER SHOULD NOT BE CONSIDERED THE ASSESSEE COMPANY HAS STATED THAT THE PROVISION OF SECTION 32 BEING B ENEFICIAL PROVISION ALLOWS AN ASSESSEE TO CLAIM DEPRECIATION ON CAPITAL ASSETS USED FOR THE PURPOSE OF ITS BUSINESS. HOWEVER SUCH DEPRECIATIO N CANNOT BE ALLOWED UNTIL A CLAIM IS MADE FOR ALLOWANCE THEREOF AND NE CESSARY PARTICULARS ARE SUBMITTED ALONG WITH THE RETURN OF INCOME AND A LSO PLACED RELIANCE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS M/S. MAHENDRA MILLS 243 ITR 56. HOWEVER THE AO HAS O BSERVED THAT THE AFORESAID DECISION OF SUPREME COURT WOULD NOT BE AP PLICABLE IN THE CASE OF THE ASSESS COMPANY AS SEC .34(1) OF THE INCOME TAX ACT 1961 WAS DELETED W.E.F 1.14.1988 AND FURTHER POINTED NUT THA T THE HONBLE COURT HAS OBSERVED THAT SECTION 32 HAS SINCE BEEN AMENDE D BY THE TAXATION LAWS ACT 1986 W.E.F APRIL 1 1988. AND ACCORDINGLY THE A.O. HAS WORKED OUT THE ELIGIBLE DEPRECIATION AT RS.8 61 26 465/- AND HAS GIVEN THE COMPLETE WORKING OF THE DEPRECIATION ALLOWABLE AS P ER INCOME TAX ACT. 1961 A PER ANNEXURE- A TO THE ASSESSMENT ORDER. 4.3. AGGRIEVED BY THE ORDER OF THE A .0 THE ASSES EE WENT IN APPEAL WHEREIN THE LEARNED CIT (A) HAS HELD THAT THERE IS NO DISPUTE REGARDING THE FACT THAT THE ASSETS OF THE A DIVISION TRANSFE RRED TO CADBURY INDIA LTD. ON 30.3.2003 WERE OWNED AND PUT TO USE BY THE APPE LLANT. FURTHER HE HAS OBSERVED THAT EXPLANATION 5 TO SEC.32(1) PROVID ES AND DECLARES THAT THE PROVISIONS OF THIS SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF THE DEPRECIATIO N IN COMPUTING HIS TOTAL INCOME. THE CIT(A) HAS PLACED RELIANCE ON THE DECISION OF THE ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 6 OF 22 HONBLE HIGH COURT OF DELHI IN THE CASE OF CIT VS. REFRIGERATION AND ALLIED INDUSTRIES LTD. 113 TAXMAN 103 . IN THE CASE OF MITTAL WELDING AND MACHINERY STORES VS. IT 253 FIR 341 THE HONBE HIGH COURT OF PUNJAB AND HARYANA WERE OF THE VIEW THAT HE PROVISION OF S EC.. 32(1) CANNOT BE USED AS A DEVISE TO SAVE TAX WHICH MEAN THAT THE DEPRECIATION BEING A STATUTORY ALLOWANCE CANNOT BE USED AT THE SWEET WIL L OF THE ASSESSEE BY WHENEVER IT IS BENEFICIAL TO IT THE SAME IS CLAIMED AND WHENEVER IT IS NOT THE SAME IS NOT CLAIMED. AND ACCORDINGLY THE CIT(A ) HAS UPHELD THE ACTION OF THE ASSESSING OFFICER. 4.4. ON PROVIDING OPPORTUNITY VIDE LETTER DATED 18 .3.2008 TO SHOW CAUSE AS TO WHY PENALTY SHOULD NOT BE IMPOSED THE ASSESSEE REMAINED SILENT ON THIS ISSUE. 4.5 FROM THE FINDINGS OF THE AO GIVEN IN THE ASSESS MENT ORDER AND ALSO THE DECISION OF THE CIT (A) IT IS CLEAR THAT THE ASSESSEE COMPANY DOES NOT WANT TO CLAIM DEPRECIATION IN ORDER TO REDUCE I TS LOSSES FOR THE CURRENT YEAR SO THAT THE WDV OF THE ASSETS REMAIN HIGHER IN THE BOOKS OF ACCOUNT AND GET THE BENEFIT OF HIGHER SET OFF WHEN SUBSEQUENTLY THIS COMPANY MERGED WITH THE COMPANY M/S. PFIZER LIMIT ED WHICH IS A PROFIT MAKING CONCERN. FOR WORKING OUT THE ELIGIBL E DEPRECIATION ALLOWABLE AS PER INCOME TAX ACT 196I THE AO HAS P ROVIDED AN OPPORTUNITY TO THE ASSESSEE TO EXPLAIN AS TO SINCE THE ASSETS HAD PRACTICALLY BEEN UTILIZED FOR THE ENTIRE FINANCIAL YEAR AND WHY THE DEPRECIATION SHOULD NOT BE ALLOWED AND HAS CATEGOR ICALLY ASKED AS TO WHY IT SHOULD NOT BE CONSIDERED THAT SUCH NON-CLAIM WAS ONLY TO INCREASE THE NET WORTH OF THE UNIT TRANSFERRED AND THEREBY D ECREASING THE CAPITAL GAIN LIABILITY. HOWEVER THE ASSESSEE COMPANY HA N OT FURNISHED ANY EXPLANATION EITHER IN THE COURSE OF ASSESSMENT PR OCEEDING OR IN THE APPELLATE PROCEEDINGS. EVEN NOW THE ASSESSEE COMPA NY HAS CHOSEN TO BE SILENT. 4.6 THUS IT IS CLEAR THAT THE ASSESSEE COMPANY WH ICH WAS ON THE PROCESS OF MERGER WITH M/S. PFIZER LIMITED A PROFI T MAKING COMPANY WITH A DELIBERATE INTENTION DID NOT CLAIM DEPRECIA TION SO AS TO KEEP THE WDV OF THE ASSETS AT HIGHER SIDE IN THE IN THE BOO KS TO GET THE BENEFIT OF HIGHER SET OFF ON MERGER WITH PFIZER LTD. THE ASSE SSEE COMPANY HAS NOT EVEN FURNISHED THE SUPPORTING EVIDENCES IN RESPECT OF PURCHASE OF CERTAIN ASSETS AND EXCLUDED THE SAME WHILE CALCULAT ING THE ELIGIBLE DEPRECIATION FOR THE A.Y.2002-03 AS WELL AS FOR TH E YEAR UNDER CONSIDERATION. FURTHER THE ASSESSEE COMPANY HAS EX CLUDED THE ASSETS OF THE DIVISION TRANSFERRED TO M/S. CADBURY INDIA LTD . BEFORE COMPUTING THE ELIGIBLE DEPRECIATION FOR THE YEAR WHICH WERE TRAN SFERRED AT THE FAG END OF THE YEAR I.E.30.3.2003. THUS THE ASSESSEE COMP ANY HAS FURNISHED INACCURATE PARTICULARS WITH INTENT TO GET THE BENE FIT OF HIGHER SET OFF IN FUTURE ON MERGER WITH M/S. PFIZER LIMITED. ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 7 OF 22 4.7. IN VIEW OF THE ABOVE PROVISIONS OF SECTION 27 1(1)(C) OF THE INCOME TAX ACT 1961 ARE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE COMPANY AND ACCORDINGLY THE PENALTY IS BEING IMPOSED HERE IN UNDER ON THE AMOUNT OF TAX SOUGHT TO BE EVADED ON THE DIFFERENCE OF DEPRECIATION ALLOWABLE AND CLAIMED BY THE ASSESSEE COMPANY I.E. TAX LIABILITY ON RS 8 59 15 794/- (RS 8 61 26 465 RS 2 10 671/-) 5. LTCG ON ACCOUNT OF SLUMP SALE OF DIVISION: 5.1 DURING THE YEAR THE ASSESSEE COMPANY HAS TRANS FERRED ITS UNIT TO M/S. CADBURY INDIA LTD BY WAY OF SLUMP SALE VIDE AGREEMENT DATED 30.3.2003 FOR A TOTAL CONSIDERATION OF `.32.71 CR ORES AND HAS SHOWN LONG TERM CAPITAL LOSS AT `.6 53 72 000/- ON ACCOUNT OF THE SAME. THE CALCULATION OF LTCG AS PER ASSESSEE IS AS UNDER: LONG TERM CAPITAL LOSS NET SALE CONSIDERATION 327072000 INVENTORIES 29475000 LOANS AND ADVANCES 12317000 CURRENT LIABILITIES (21446000) FIXED ASSETS 372098000 392444000 (65372000) 5.2. THE ASSESSEE COMPANY HAS TAKEN THE VALUE OF F IXED ASSETS AT RS 37.21 CRORES. SINCE THE ASSESEE COMPANY HAS NOT BEE N CLAIMING DEPRECIATION AS PER SEC. 32 OF THE INCOME TAX ACT 1961 THE AO HAD REWORKED THE SAME AT RS.8.61 CRORES AND FURTHER ON ACCOUNT OF TREATING THE ADVERTISEMENT EXPENSES AND SALE PROMOTION EXPEN SES OVER THE YEAR AS CAPITA EXPENDITURE AND AFTER ALLOWING ELIGIBLE DEPRECIATION THEREON THE AO WORKED OUT THE WDV OF FIXED ASSETS AT RS 36. 77 CRORES AS AGAINST THE ASSESSEES CLAIM AT `.40.38 CRORES. SINCE THE ENTIRE BLOCK OF BUILDING FURNITURE AND FIXTURES PLANT AND MACHINERY AND COM PUTER AND MOTOR VEHICLES HAVE BEEN TRANSFERRED TO M/S. CADBURY INDI A PURSUANT TO SLUMP SALE THE AO AFTER TAKING INTO CONSIDERATION THE DE PRECIATION ALLOWABLE TILL THE DATE OF TRANSFER HAS WORKED OUT THE VALUE OF ASSET AT RS 17 88 45 617/- AS AGAINST THE ASSESSEES CLAIM AT R S 37 20 98 133/- AND WORKED OUT THE LONG TERM CAPITAL GAIN AS UNDER: LONG TERM CAPITAL LOSS NET SALE CONSIDERATION 327072000 INVENTORIES 29475000 LOANS AND ADVANCES 12317000 CURRENT LIABILITIES (21446000) FIXED ASSETS 178845617 199191617 1278803383 5.3. AGGRIEVED BY THE ACTION OF THE AO THE ASSESS EE WENT ON APPEAL BEFORE THE CIT (A). WHILE DECIDING THE APPEAL OF T HE ASSESSCE. THE LEARNED CLT(A) HAS DISMISSED THE PLEA OF THE ASSESSEEIN VIE W OF THE FACT THAT THE ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 8 OF 22 ACTION OF THE AO IN ALLOWING DEPRECATION ON THE AS SETS OWNED AND USED BY THE APPELLANT TILL 30.3.2003 HAS BEEN UPHELD B Y HIM AND THIS ISSUE BEING CONSEQUENTIAL TO THE SAME HE HAS OBSERVED THA T IT NEEDS NO ADJUDICATION. 5.4. ON ASKING TO SHOW CAUSE AS TO WHY PENALTY SHO ULD NOT BE IMPOSED VIDE LETTER DATED 18.3.2008 THE ASSESSEE REMAINED SILENT ON THIS ISSUE ALSO. 5.5 THUS IT IS CLEAR FROM THE ABOVE THAT THE ASSE SSEE COMPANY NOT CONSIDERED CLAIM OF DEPRECIATION SO AS TO KEEP THE VALUE OF THE ASSETS AT HIGHER SIDE AND HAS WORKED THE PROFIT ON THE SLUMP SALE AS CAPITAL LOSS INSTEAD OF ARRIVING AT CAPITAL GAIN AS DONE BY THE AO. THUS THE ASSESSEE COMPANY HAS NOT ONLY FURNISHED INACCURATE PARTICULA RS OF INCOME BUT HAS ALSO TRIED TO CONCEAL THE INCOME TO THE EXTENT OF R S 12 78 80 383/-. IN VIEW OF THE ABOVE THE PROVISIONS OF SECTION 271(1) (C) OF THE INCOME TAX ACT 1961 ARE CLEARLY APPLICABLE IN THE CASE OF THE ASSESSEE COMPANY AND ACCORDINGLY THE PENALTY IS BEING IMPOSED HEREIN UN DER ON THE AMOUNT OF TAX SOUGHT TO BE EVADED ON THE DIFFERENCE OF LONG T ERM CAPITAL GAIN WORKED OUT BY THE AO AND LONG TERM CAPITAL LOSS SH OWN BY THE ASSESSEE COMPANY I.E. TAX LIABILITY ON RS 19 32 52 383/- [ RS 12 78 80 383 RS 6 53 72 000]. 6. AGGRIEVED ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. THE CIT(A) DISMISSED THE GRIEV ANCE OF THE ASSESSEE AND OBSERVED AS FOLLOWS: 2.15 SECONDLY THE AO HAS HELD THAT THE APPELLANT C OMPANY HAS NOT CLAIMED DEPRECIATION DELIBERATELY TO AVOID TAX. THE AO HAS HELD THAT THE ASSESSEE COMPANY DOES NOT WANT TO CLAIM DEPRECIATIO N IN ORDER TO REDUCE ITS LOSSES FOR THE CURRENT YEAR SO THAT THE WDV OF THE ASSETS REMAIN HIGHER IN THE BOOKS OF ACCOUNTS AND GET THE BENEFIT OF HIGHER SET OFF AND SUBSEQUENTLY THIS COMPANY MERGED WITH THE COMPANY M /S. PFIZER LTD WHICH IS A PROFIT MAKING CONCERN. A SHOW CAUSE WAS ALSO ISSUED BY THE AO TO FURNISH EXPLANATION IN THIS REGARD BUT THE APPEL LANT COMPANY HAS NOT FURNISHED ANY SUBMISSION BEFORE THE AO IN THE ASSES SMENT PROCEEDINGS BEFORE CIT(A) IN THE APPELLATE PROCEEDINGS AND EVEN BEFORE THE AO DURING THE PENALTY PROCEEDINGS. THUS IT IS A CASE OF NON- SUBMISSION OF INFORMATION WHICH IS COVERED UNDER THE EXPLANATION 1(A) & 1(B) TO SECTION 271(1)(C) WHICH IS EXPLAINED AS SUPRA. REGA RDING THE ALLOWABILITY OF DEPRECIATION U/S.32 OF THE IT ACT THE CASE OF T HE APPELLANT IS COVERED UNDER THE EXPLANATION 5 TO SECTION 32 OF THE IT. AC T WHICH READS AS UNDER: FOR THE REMOVAL OF DOUBTS II IS HEREBY DECLARED THAT THE PROVISIONS OF THIS SUB-SECTION SHALL APPLY WHETHER OR NOT THE ASSESSEE HAS CLAIMED THE DEDUCTION IN RESPECT OF DEPRECIATION IN COMPUTING HIS TOTAL INCOME. 2.16 MOREOVER THE LD. CIT(A) HAS RELIED ON THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. REFRIGERATI ON AND ALLIED INDUSTRIES ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 9 OF 22 LIT 115 TAXMAN 103(DELHI) AND IN THE CASE OF MITTAL WELDING AND MACHINERY STORES VS. CIT 253 ITR 341 (P&H) WHERE I T WAS HELD THAT THE PROVISIONS OF SECTION 32(1) CANNOT BE USED AS A DEV ICE TO SAVE TAX WHICH MEANS THAT THE DEPRECIATION BEING A STATUTORY ALLOW ANCE CANNOT BE USED AT THE SWEET WILL OF THE ASSESSEE BY WHENEVER IT IS BENEFICIAL TO IT THE SAME IS CLAIMED AND NEVER IT IS NOT THE SAME IS NO T CLAIMED. THE EXPLANATION(5) TO SECTION 32 A JUDICIAL DECISIONS E STABLISHES THAT IT IS NOT THE SWEET WILL OF THE ASSESSEE TO CLAIM OR NOT TO C LAIM DEPRECIATION TO AVOID TAX. KEEPING IN VIEW THE FACTS AND CIRCUMSTAN CES THE AO HAS RIGHTLY ALLOWED DEPRECIATION AS PER THESE PROVISION S OF THE I.T.ACT. THE HONBLE ALLAHAHAD ITAT B BENCH IN THE CASE OF ITO VS GEEP INDUSTRIAL SYNDICATE LTD. 23 ITR 448 HELD THAT THE ASSESSEE W AS LIABLE TO IMPOSITION OF PENALTY U/S.271(L)(C) ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION. THE FACTS OF THE CASE THAT THE APPELLANT HAS NOT SUBMIT TED ANY INFORMATION BEFORE THE AO OR THE CIT(A) OR EVEN DURING THE PENA LTY PROCEEDINGS IS COVERED UNDER EXPLANATION 1(A) & 1(B) TO SECTION 27 1(1)(C) AND THE WRONG CLAIM OF DEPRECIATION IS COVERED BY THE DECIS ION OF THE ALLAHABAD ITAT. THUS THE TOTALITY OF FACTS PROVES THAT THE A PPELLANT HAS FINISHED INACCURATE PARTICULARS WHICH TANTAMOUNT TO CONCEALM ENT BY NOT SUBMITTING INFORMATION CALLED FOR BEFORE THE AO AND THE CIT(A) BY CLAIMING WRONG DEPRECIATION. 2.17 THIRDLY THE AO HAS STATED THAT THE ASSESSEE COMPANY HAS TRANSFERRED ITS UNIT TO M/S CADBURY INDIA LTD BY W AY OF SLUMP SALE ON A TOTAL CONSIDERATION OF RS.32.71 CRORES AND SHOWN A LONG TERM CAPITAL LOSS AT RS.6 53 72 000/-. IN THE PENALTY ORDER TH E AO HAS RECOMPUTED THIS LOSS AND DISCUSSED THE ISSUE AT GREAT LENGTH. IN THE ASSESSMENT ORDER THE AO HAS RECOMPUTED THIS CAPITAL LOSS ON THE BASI S OF DEPRECIATION ALLOWED AS STATED ABOVE. THE LD. CIT(A) HAS CONFIRM ED THE ADDITION MADE BY THE AO BEING CONSEQUENTIAL TO DEPRECIATION ISSUE ALREADY CONFIRMED. KEEPING ALL THE FACTS AND CIRCUMSTANCES THE AO HAS LEVIED PENALTY ON THE AMOUNT OF TAX SOUGHT TO BE EVADED ON THE DIFFERENCE OF LONG TERM CAPITAL GAIN WORKED OUT BY THE AO AND THE LONG TERM CAPITAL LOSS SHOWN BY THE ASSESSEE. RELIANCE IS ALSO PLACED ON THE DECISION OF HONBLE ITAT CHENNAI SPECIAL BENCH IN THE EASE OF SOUTHERN TRAVELS VS. ACIT 103 LTD 198 (CHENNAI SPECIAL BENCH) WHERE IT IS HELD THAT BROUG HT FORWARD DEPRECIATION LOSS OF EARLIER YEARS CANNOT BE SET OF F AGAINST CAPITAL GAINS OF CURRENT YEAR IN VIEW OF PROVISIONS OF SECTION 32 (2((III). SINCE THIS ISSUE IS CONSEQUENTIAL TO THE DEPRECIATION ALLOWED BY THE AO IN THE SECOND GROUND THEREFORE KEEPING IN VIEW ALL THESE FACTS AND CIRCUMSTANCES ON FACTS THE CASE OF THE APPELLANT IS COVERED UNDER T HE EXPLANATION 1(A) & 1(B) TO SECTION 27 1(1 )(C) BECAUSE THE APPELLANT H AS NOT SUBMITTED ANY INFORMATION CALLED FOR BY THE AO DURING THE ASSESSM ENT PROCEEDINGS BEFORE THE CIT(A) DURING THE APPELLATE PROCEEDINGS AND EVEN RE THE AO DURINGING THE PENALTY PROCEEDINGS BY SHOWING ITS I NABILITY TO PRODUCE THE REQUIRED INFORMATION. THEREFORE THE JUDICIAL D ECISIONS RELIED UPON BY THE APPELLANT COMPANY WILL NOT HELP AS THE FACTS OF THE CASE ARE DISTINGUISHABLE BECAUSE NO INFORMATION HAS BEEN FIL ED BEFORE THE AO OR CIT (A). MOREOVER THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF UNION OF INDIA VS. DHARMENDRA TEXTILES PROCESSORS 1 74 TAXMAN 571 IT IS HELD THAT PENALTY UJS.271(L)(C) IS A CIVIL OFFENCE THEREFORE MENSREA AND MALAFIDE INTENTION IS NOT TO BE PROVED BY THE DEPAR TMENT. ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 10 OF 22 7. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE US. 8. LEARNED COUNSEL BEGINS BY HIGHLIGHTING THE SCHEME OF DEPRECIATION AFTER INTRODUCTION OF THE CONCEPT OF BLOCK OF ASSET S. HE TAKES US THROUGH SECTION 43(6)(C) AND POINTS OUT THAT IN COMPUTATION OF WRITTEN DOWN VALUE IN RESPECT OF A BLOCK OF ASSETS THE ASSESSEE HAS TO T AKE THE OPENING WRITTEN DOWN VALUE OF ALL THE ASSETS FALLING IN THAT BLOCK OF AS SETS INCREASE THE SAME BY ACTUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK ACQUIRED DURING THE YEAR AND REDUCE THE SAME BY MONIES PAYABLE IN RESPECT O F ANY ASSETS AND THE SCRAP VALUE IF ANY FALLING WITHIN THAT BLOCK WHI CH IS SOLD DISCARDED DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR SUBJECT OF COURSE TO THE RIDER THAT SUCH REDUCTION IS RESTRICTED TO THE WRITTEN DOWN VALUE SO INCREASED. IN RESPECT OF THE ASSETS SOLD ON SLUMP S ALE AS AN INTEGRAL PART OF THE ABOVE EXERCISE UNDER SECTION 43(6)(C) THE ACTU AL COST OF THE ASSET FALLING WITHIN THE BLOCK PERIOD IS TO BE REDUCED BY (A) THE AMOUNT OF DEPRECIATION ACTUALLY ALLOWED TO HIM IN RESPECT OF ANY PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR COMMENCING BEFORE THE 1ST DA Y OF APRIL 1988 (B) THE AMOUNT OF DEPRECIATION THAT WOULD HAVE BEEN ALLOWAB LE TO THE ASSESSEE FOR ANY ASSESSMENT YEAR COMMENCING ON OR AFTER THE 1ST DAY OF APRIL 1988 AS IF THE ASSET WAS THE ONLY ASSET IN THE RELEVANT BLOCK OF ASSETS. HAVING SET OUT THE SCHEME OF SECTION 43(6)(C) LEARNED COUNSEL CONTEND S THAT IN THE BLOCK OF ASSETS SCHEME IT IS NOT PERMISSIBLE FOR THE ASSESS EE TO COMPUTE DEPRECIATION ON WRITTEN DOWN VALUE WITHOUT MAKING ADJUSTMENTS IN WRITTEN DOWN VALUE IN RESPECT OF ASSETS SOLD DISCARDED DEMOLISHED OR DE STROYED DURING THE YEAR. IT IS POINTED OUT UNDER THE SCHEME OF THE ACT DEPRECI ATION IS TO BE ALLOWED ON THE WRITTEN DOWN VALUE AND THAT THE WRITTEN DOWN V ALUE AS EVIDENT FROM A PLAIN READING OF SECTION 43(6)(C) HAS TO NECESSARI LY TAKE INTO ACCOUNT THE ASSETS FALLING INTO THAT BLOCK OF ASSETS ACQUIRED DURING THE YEAR AS ALSO THE ASSETS FALLING IN THAT BLOCK OF ASSETS SOLD OR OT HERWISE ALIENATED DURING THE YEAR. LEARNED COUNSEL FAIRLY ADMITS THAT THE COORD INATE BENCH VIDE ORDER DATED 3 RD INSTANT HAS DECIDED THE ISSUE AGAINST THE ASSESSE E INASMUCH AS IT IS ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 11 OF 22 HELD BY THE COORDINATE BENCH THAT DEPRECIATION ON T HE ASSETS SOLD IN SLUMP SALE IS ALSO TO BE GRANTED TO THE ASSESSEE BUT HE SUBMITS THAT THE SAID DECISION OF THE COORDINATE BENCH IS CONTRARY TO THE PLAIN AN D UNAMBIGUOUS WORDS OF SECTION 43(6). HE SUBMITS THAT A CLAIM OF DEPRECIAT ION MADE ON THE BASIS OF THE CLEAR AND UNAMBIGUOUS PROVISIONS OF THE STATUTE CANNOT BE SAID TO BE AN ERRONEOUS CLAIM AT ALL. IN ANY EVENT LEARNED COUNS EL CONTENDS THIS CLAIM WAS MADE IN A TRANSPARENT MANNER SETTING OUT ALL THE N ECESSARY DETAILS IN THE INCOME TAX RETURN ITSELF AND ALSO HAVING MADE A DIS CLOSURE THAT DEPRECIATION IS NOT BEING CLAIMED IN RESPECT OF THE ASSETS OF TH E UNIT SOLD BY THE ASSESSEE. LEARNED COUNSEL TAKES US THROUGH THE ANNEXURE 3.1 T O THE TAX AUDIT REPORT WHICH IS FILED ALONGWITH THE INCOME TAX RETURN TO SHOW THAT ALL THE NECESSARY FACTS HAVE BEEN DULY DISCLOSED TO THE ASSESSING OFF ICER AND THAT NOTHING HAS BEEN CONCEALED. IT IS SUBMITTED THAT WHETHER THE AS SESSING OFFICER ACCEPTS THE CLAIM OF THE ASSESSEE OR NOT A MERE REJECTION OF LEGAL CLAIM CANNOT BE VISITED WITH PENAL CONSEQUENCES UNDER SECTION 271(1)(C) OF THE ACT. LEARNED COUNSEL THEN ALSO SUBMITS THAT SO FAR AS THE QUESTI ON OF HIGHER DEPRECIATION BEING GRANTED TO THE ASSESSEE IS CONCE RNED THERE CANNOT BE BY ANY STRETCH OF LOGIC ANY QUESTION OF CONCEALMEN T OF INCOME. IT IS ONLY ELEMENTARY THAT A HIGHER DEPRECIATION BEING GRANTED TO THE ASSESSEE RESULTS IN A LOWER TAXABLE INCOME AND THEREFORE SUCH A HIGHER DEPRECIATION BEING HELD TO BE ADMISSIBLE CANNOT BE VISITED WITH PENALTY UNDER SECTION 271(1)(C). LEARNED COUNSEL FURTHER SUBMITS THAT IN COMPUTATION OF WRITTEN DOWN VALUE UNDER SECTION 4 3(6) IT IS NOT OPEN TO THE ASSESSING OFFICER TO TAKE INTO ACCOUNT THE DEPRECIA TION WHICH WOULD HAVE BEEN ALLOWABLE TO THE ASSESSEE BUT FOR THE CLAIM MA DE BY THE ASSESSEE. IT IS SUBMITTED THAT WE CANNOT READ A PART OF THE SUB SEC TION AND IGNORE THE OTHER PART. ACCORDING TO THE LEARNED COUNSEL THE EMPHASI S OF THIS SCHEME OF SECTION 43(6) IS ON WORKING OUT THE DEPRECIATION ON STANDALONE BASIS IN RESPECT OF THE ASSETS SOLD ON SLUMP SALE BASIS AN D WHAT IS CONTEMPLATED BY THE WORD DEPRECIATION THAT WOULD HAVE BEEN ALLOWAB LE TO THE ASSESSEE IS THE DEPRECIATION ALLOWABLE TO THE ASSESSEE AS IF T HE ASSET WAS THE ONLY ASSET IN THE RELEVANT BLOCK OF ASSETS. IT DOES NOT ACC ORDING TO THE LEARNED COUNSEL ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 12 OF 22 MEAN THE DEPRECIATION WHICH WAS LEGALLY PERMISSIBLE TO THE ASSESSEE BUT NOT CLAIMED BY THE ASSESSEE. LEARNED COUNSEL FURTHER SU BMITS THAT IT IS NOT A CASE IN WHICH ANY DEDUCTION UNDER CHAPTER VI A IS CLAIME D AND THEREFORE HONBLE BOMBAY HIGH COURTS JUDGMENT IN THE CASE OF PLASTIB LENDS INDIA LTD VS. ADDITIONAL COMMISSIONER OF INCOME TAX (318 ITR 352) HOLDING THAT DEPRECIATION BEING GRANTED IS MANDATORY CANNOT APP LY TO THE FACTS OF THIS CASE. IT IS FURTHER SUBMITTED THAT WHETHER DEPRECIA TION IS MANDATORY OR NOT HAS BEEN AN ISSUE ON WHICH THERE WAS A CLEAVAGE OF VIEW S OF THE DIVISION BENCHES OF THIS TRIBUNAL AND IT WAS FOR THIS REASO N THAT A SPECIAL BENCH HAD TO BE CONSTITUTED BY IN THE CASE OF VAHID PAPER CO NVERTORS VS ITO ( 98 ITD SB 165). THE SIMPLE FACT OF CONSTITUTION OF SPECIA L BENCH SHOWS THAT THE VIEW TAKEN BY THE ASSESSEE WAS NOT AN UNREASONABLE EVEN IF UNACCEPTABLE LEGAL CLAIM MADE BY THE ASSESSEE. A REFERENCE IS T HEN MADE TO THE TRIBUNAL DECISION IN THE CASE OF MAERSK INDIA PVT LTD VS DC IT ( ITA NO. 1883/MUM/06; ORDER DATED 3 RD JULY 2008) IN SUPPORT OF THE PROPOSITION THAT WHEN SPECIAL BENCH IS CONSTITUTED ON A LEGAL ISSUE JUST BECAUSE LEGAL CLAIM IN REJECTED BY THE REVENUE AUTHORITIES THE ASSESSE E CANNOT BE IMPOSED PENALTY IN RESPECT OF SUCH A REJECTION OF LEGAL CLAIM. IT I S ALSO POINTED OUT THAT AS NOTED BY THE HONBLE BOMBAY HIGH COURT IN PLASTIBLE NDS CASE (SUPRA) THERE WAS ALSO CLEAVAGE OF JUDICIAL OPINION ON THE ISSUE AS TO WHETHER DEPRECIATION IS TO BE THRUST ON THE ASSESSEE WHEN ASSESSEE IS CL AIMING DEDUCTION UNDER CHAPTER VI A IN HONBLE HIGH COURT AS WELL AND IT WAS FOR THIS REASON THAT THE MATTER WAS REFERRED TO THE FULL BENCH OF HONBL E BOMBAY HIGH COURT. IN THE PRESENT CASE LEARNED COUNSEL POINTS OUT NO DE DUCTION IS CLAIMED UNDER CHAPTER VI A AND THEREFORE FACTS OF THE CASE ARE MUCH STRONGER THAN THE CASES IN WHICH EVEN DIVISION BENCHES OF HONBLE BOM BAY HIGH COURT HAVE HELD THAT DEPRECIATION CANNOT BE THRUST ON THE ASSE SSEE. IT IS CONTENDED THAT IN SUCH A SITUATION THE ASSESSEE CANNOT BE IMPOSED PENALTY FOR NOT CLAIMING DEPRECIATION WHICH HAS BEEN FOUND TO BE ADMISSIBLE TO THE ASSESSEE. LEARNED COUNSEL FURTHER SUBMITS THAT NOT CHARGING DEPRECIAT ION WOULD NOT HAVE ANYWAY MADE ANY DIFFERENCE TO THE TAX POSITION OF T HE ASSESSEE BUT FOR THE DECISION OF SPECIAL BENCH IN THE CASE OF DCIT VS TI MES GUARANTEE LIMITED ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 13 OF 22 (131 TTJ 257) WHICH IS RENDERED ONLY ON 30 TH JUNE 2010 I.E. MUCH AFTER EVEN THE ASSESSMENT WAS FINALIZED. IT IS SUBMITTED THAT UNTIL THIS SPECIAL BENCH DECISION WAS DELIVERED THE LEGAL POSITION WAS THAT CAPITAL GAINS COULD HAVE BEEN SET OFF AGAINST UNABSORBED DEPRECIATION AND T HEREFORE NOT CLAIMING THE DEPRECIATION WOULD HAVE BEEN TAX NEUTRAL. IN VIEW O F THE LEGAL POSITION AS IT PREVAILED AT THE RELEVANT POINT OF TIME I.E. WHEN RELATED INCOME TAX RETURNS WERE FILED THE ASSESSEE WOULD NOT HAVE DERIVED ANY TAX ADVANTAGE FROM NOT CLAIMING THE DEPRECIATION. THE ASSESSEE CANNOT THUS BE HELD TO HAVE ACTED MALAFIDE IN NOT CLAIMING THE DEPRECIATION AND THIS DECISIO N OF THE ASSESSEE COULD NOT HAVE BEEN INFLUENCED BY TAX CONSIDERATION S. THE CIT(A) IS THUS NOT JUSTIFIED IN HOLDING THAT NOT CLAIMING THE DEPRECIA TION WAS WITH A VIEW TO REDUCE TAX LIABILITY. IN ANY EVENT ACCORDING TO TH E LEARNED COUNSEL IT IS ONLY A LEGAL CLAIM WHICH HAS NOT BEEN APPROVED. LEARNED COUNSEL ALSO POINTS OUT THAT WHILE PENALTY HAS BEEN LEVIED FOR FURNISHING O F INACCURATE PARTICULARS THERE IS NOT EVEN A WHISPER ABOUT AS TO WHICH PARTI CULARS HAVE BEEN INACCURATELY FURNISHED AND ALL THE DISCUSSIONS ARE ONLY ABOUT THE REASONS FOR WHICH THIS LEGAL CLAIM IS NOT ACCEPTABLE. HOWEVER AS THE LAW IS WELL SETTLED BY HONBLE SUPREME COURT IN THE CASE OF CIT VS. REL IANCE PETROPRODUCTS LTD (322 ITR 158) MERELY BECAUSE THE ASSESSEE HAS MAD E A LEGAL CLAIM EVEN IF INADMISSIBLE THE ASSESSEE CANNOT BE IMPOSED PENALT Y UNDER SECTION 271(1)(C) OF THE ACT. IT IS THUS SUBMITTED THAT IT WAS NOT A FIT CASE FOR IMPOSITION OF PENALTY INASMUCH AS A REASONABLE LEGAL CLAIM HAS BE EN MADE BONAFIDE BY THE ASSESSEE AND IRRESPECTIVE OF WHETHER OR NOT SUCH A CLAIM HAS BEEN ACCEPTED BY THE ASSESSING OFFICER OR EVEN BY THE TRIBUNAL P ENALTY CANNOT BE IMPOSED UNDER SECTION 271(1)(C). ON THE STRENGTH OF ALL T HESE SUBMISSIONS LEARNED COUNSEL CONTENDS THAT THE FACTS AND CIRCUMSTANCES D ID NOT WARRANT IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT AND URGES US TO DELETE THE SAME. LEARNED DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND MAINLY RELIES UPON THE ORDERS OF THE AUTHORITIES BELOW. HE SUBMIT S THAT ONCE HONBLE BOMBAY HIGH COURT HAS HELD IN THE CASE OF PLASTIBL ENDS (SUPRA) THAT DEPRECIATION CLAIM IS NOT AT THE OPTION OF THE ASSE SSEE IT IS NO LONGER PERMISSIBLE FOR THE ASSESSEE NOT TO CLAIM THE DEPRE CIATION. HE SUBMITS THAT ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 14 OF 22 DEPRECIATION HAS NOT BEEN CLAIMED WITH AN ULTERIOR MOTIVE AND WITH A VIEW TO AVOID ASSESSEES LEGITIMATE TAX LIABILITY. IT IS A LSO POINTED OUT THAT THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RE LIANCE PETROPRODUCTS (SUPRA) DEALT WITH A BONAFIDE CLAIM MADE BY THE ASSESSEE WHICH WAS NOT ACCEPTED BY THE ASSESSING OFFICER BUT BONAFIDES OF THE CLAIM WERE NOT DOUBTED EITHER. AS AGAINST THE SAID SITUATION ACCO RDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE WE ARE NOW DEALING WIT H A SITUATION IN WHICH THE ACTION OF THE ASSESSEE IN NOT CLAIMING DEPRECI ATION HAS BEEN MALAFIDE AND WITH A MOTIVE TO AVOID TAX LIABILITY. IT IS POI NTED OUT THAT AS ASSESSEE WAS CONTEMPLATING MERGER WITH PFIZER LIMITED THE ASSES SEE WANTED TO SHOW A HIGHER BOOK VALUE OF THE ASSETS. AS REGARDS ASSESSE ES RELIANCE ON TRIBUNAL DECISION IN THE CASE OF MAERSK INDIA PVT LTD (SUPRA) LEARNED DEPARTMENTAL REPRESENTATIVE FINDS IT WHOLLY MISPLACED BECAUSE TH E ASSESSEE HAS RELIED UPON OBITER DICTA MADE BY THE BENCH IN THE SAID ORDER. I T IS ALSO CONTENDED THAT CONCEALMENT OF INCOME AND FURNISHING OF INACCURATE PARTICULARS ARE GENERALLY INTERMINGLED AND MUST BE SEEN IN CONJUNCTION WITH AND TAKING COLOUR FROM EACH OTHER. THEREFORE AS LONG AS THERE IS SUPPRESS ION OR CONCEALMENT OF INCOME IT IS DE FACTO THE SAME AS FURNISHING OF INACCURATE PARTICULARS. BEYOND THESE SUBMISSIONS LEARNED DEPARTMENTAL REPR ESENTATIVE DID NOT MAKE ANY OTHER SPECIFIC SUBMISSIONS BUT STRONGLY RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. IN HIS BRIEF REJOINDER LEARNED COUNSEL FOR THE ASSESSEE REITERATED THAT THE PENALTY HAS BEEN IMPOSED FOR FU RNISHING INACCURATE PARTICULARS BUT NO SPECIFIC INACCURACY OF PARTICULA RS HAVE BEEN POINTED OUT AND THAT THE CIT(A) IS FACTUALLY INCORRECT IN REFER RING TO MERGER WITH PFIZER INASMUCH AS THERE IS ONLY A CHANGE OF NAME OF THE C OMPANY AND THAT THERE HAS BEEN NO MERGER AT ALL. IT IS ALSO POINTED OUT THAT SLUMP SALE OF UNIT IS TO A THIRD PARTY AND THUS HIGHER WRITTEN DOWN VALUE OF T HE ASSET DOES NOT AFFECT THE DEPRECIATION IN SUBSEQUENT YEARS. AS REGARDS PENALT Y ON CAPITAL GAINS ISSUE IS ALSO POINTED OUT THAT WHILE DEPRECIATION IS BEING T HRUST IN THE EARLIER YEARS THE PENALTY HAS BEEN IMPOSED IN THE CURRENT YEAR AN D THAT NOTHING IS DONE IN THE PRESENT YEAR SO AS TO INVITE PENALTY PROCEEDING S. AS REGARDS DEPRECIATION ISSUE IT IS ONCE AGAIN POINTED OUT THAT THERE HAS BEEN A REDUCTION IN THE ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 15 OF 22 INCOME RATHER THAN ENHANCEMENT OF INCOME AS A RESU LT OF ALLEGED LAPSE OF THE ASSESSE AND AS SUCH THERE IS NO QUESTION OF PENAL TY BEING IMPOSED IN RESPECT OF THE SAME. WE ARE THUS ONCE AGAIN URGED TO DELETE THE IMPUGNED PENALTY. 9. WE FIND THAT A PLAIN READING OF SECTION 271(1)(C ) MAKES IT CLEAR THAT SO FAR AS THE SCHEME OF PENALTY FOR CONCEALMENT OF INCOME IS CONCERNED IT IS SINE QUA NON FOR IMPOSITION OF PENALTY THAT DURING THAT THE ASS ESSING OFFICER SHOULD BE SATISFIED THAT THE ASSESSEE HAS (I) CONCEALED HIS INCOME OR (II) FURNISHED INACCURATE PARTICULARS OF INCOME. IN THE CASE BEFORE US THE CASE OF THE ASSESSING OFFICER IS THAT THE ASSES SEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME INASMUCH AS THE CL AIM MADE BY THE ASSESSEE IS CONTRARY TO APPLICABLE LEGAL POSITION. HONBLE SUPREME COURT HAS IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) OBSERVED THAT FURNISHING OF INACCURATE PARTICULARS MUST MEAN TH E DETAILS SUPPLIED IN THE RETURN WHICH ARE NOT ACCURATE NOT EXACT OR CO RRECT NOT ACCORDING TO TRUTH OR ERRONEOUS . THEIR LORDSHIPS NOTED THAT I N THIS CASE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE I N ITS RETURN WERE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE AND SUCH NO T BEING THE CASE THERE WOULD BE NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1)( C ) OF THE ACT. IT WAS THEN NOTED BY THEIR LORDSHIPS THAT A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LAW BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INC OME OF THE ASSESSEE AND THAT SUCH CLAIM MADE IN THE RETURN CANNOT AMOU NT TO THE INACCURATE PARTICULARS. THE STAND OF THE ASSESSING OFFICER W HICH HAS BEEN APPROVED BY THE CIT(A) IS THUS CLEARLY UNSUSTAINABLE IN LAW AND CONTRARY TO THE LAW LAID DOWN BY HONBLE SUPREME COURT. WE HAVE NOTED THAT SO FAR AS THE DEPRECIATION ISSUE IS CONCERNED THE MAIN PLEA OF T HE ASSESSEE IS THAT FOR THE PURPOSE OF COMPUTING DEPRECIATION ON BLOCK OF ASSETS IT IS NECESSARY TO FIRST MAKE ADJUSTMENTS AS CONTEMPLATED UNDER SEC TION 43(6) AND THUS REDUCE THE WRITTEN DOWN VALUE OF THE ASSETS SOLD ON SLUMP SALE BASIS AND IT IS ONLY ON THE WRITTEN DOWN VALUE SO COMPUTED THAT DEPRECIATION CAN BE ALLOWED UNDER SECTION 32. VIEWED IN THIS PERSPECTI VE THE WRITTEN DOWN ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 16 OF 22 VALUE OF THE ASSETS IN RESPECT OF THE UNIT SOLD ON SLUMP SALE BASIS IS TO BE REDUCED FIRST FROM THE AGGREGATE OF (A) OPENING BAL ANCE OF THAT BLOCK OF ASSETS AND (B) THE ASSETS ACQUIRED DURING THE YEAR FALLING IN THAT BLOCK OF ASSETS AND IT IS ONLY THE NET AMOUNT WHICH CONSTI TUTES WRITTEN DOWN VALUE THAT DEPRECIATION IS TO BE COMPUTED. EVEN A S WE ARE ALIVE TO THE FACT THAT THIS INTERPRETATION CANVASSED BY THE ASSESSEE HAS BEEN REJECTED BY A COORDINATE BENCH WE ARE ALSO OF THE CONSIDERED VIE W THAT THIS INTERPRETATION CANNOT BE SAID TO BE TOTALLY DEVOID OF ANY REASONABLE BASIS. AS A COORDINATE BENCH HAS DEALT WITH THE SAME ON ME RITS AND EVENTUALLY REJECTED THE SAME WE DONOT WANT TO CONDUCT AN EXER CISE WHICH IS PARALLEL TO OR CONTRARY TO THE EXERCISE CONDUCTED BY THE S AID COORDINATE BENCH BUT WE MAY ADD THAT WHETHER THE LEGAL INTERPRETATIO N ADOPTED BY THE ASSESSEE MAY OR MAY NOT FINALLY BE ACCEPTED BY THE APPELLATE AUTHORITIES BUT THEN MERELY BECAUSE THE INTERPRETATION CANVASSE D BY THE ASSESSEE IS REJECTED IT CANNOT BE INFERRED THAT THE CLAIM MADE BY THE ASSESSEE IS NOT BONAFIDE AND IS LIABILE TO BE VISITED WITH PENAL CONSEQUENC ES SET OUT IN SECTION 271(1)(C) OF THE ACT. WE HAVE ALSO NOTED TH AT THE CLAIM HAS BEEN MADE IN A TRANSPARENT MANNER WITHOUT CONCEALING ANY MATERIAL FACTS AND BY GIVING ALL THE NECESSARY DISCLOSURES AND DETAILS IN THE DOCUMENTS ACCOMPANYING THE INCOME TAX RETURN. IT IS NOT EVEN THE ASSESSING OFFICERS CASE THAT ANY MATERIAL FACTS HAVE BEEN WITHHELD OR CONCEALED BY THE ASSESSEE. ON THESE FACTS REJECTION OF ASSESSEES C LAIM CAN NOT BE VISITED BY PENALTY UNDER SECTION 271(1)(C) AND THAT TOO FOR AS ASSESSING OFFICER PUTS IN FURNISHING OF INACCURATE PARTICULARS. AS H AS BEEN HELD BY HONBLE SURPEME COURT IN THE CASE OF RELIANCE PETROPRODUCTS (SUPRA) A MERE MAKING OF THE CLAIM WHICH IS NOT SUSTAINABLE IN LA W BY ITSELF WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. THAT PRECISELY IS THE CASE BEFORE US. SIMILARLY AS FAR PENALTY IN RESPECT OF VARIATION OF CAPITAL GAINS IS CONCERN ED THE ASSESSEE HAS MADE A CLAIM IN A TRANSPARENT MANNER AND IT IS PURE LY A LEGAL CLAIM. WHETHER THE CLAIM OF DEPRECIATION IS AT THE OPTION OF THE ASSESSEE OR IS MANDATORY IN COMPUTATION OF BUSINESS INCOME HAS BE EN A SUBJECT MATTER ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 17 OF 22 OF DIFFERENT VERDICTS BY THE JUDICIAL BODIES. THERE HAVE BEEN DIFFERENT OPINIONS ON THIS ISSUE THOUGH IN THE CONTEXT OF CL AIM OF DEDUCTION UNDER CHAPTER VI A NOT ONLY IN THIS TRIBUNAL LEADING TO FORMATION OF A SPECIAL BENCH OF THIS TRIBUNAL BUT ALSO IN HONBLE HIGH CO URT LEADING TO CONSTITUTION OF A FULL BENCH TO RESOLVE THE CONTRO VERSY. IN THESE CIRCUMSTANCES THE ASSESSEE CANNOT BE FAULTED FOR H AVING ADOPTED THE VIEW THAT THE CLAIM OF DEPRECIATION WAS INDEED OPTI ONAL PARTICULARLY WHEN THE ASSESSEE WAS NOT CLAIMING ANY DEDUCTION UN DER CHAPTER VI A. WE ARE NOT REALLY INCLINED TO GO INTO THIS ISSUE ON MERITS AS THE SCOPE OF PRESENT APPEAL IS CONFINED TO PENALTY MATTER BUT S UFFICE TO SAY THAT STAND OF THE ASSESSEE TO THE EFFECT THAT DEPRECIATION IS OPTIONAL AND CANNOT BE THRUST ON THE UNWILLING ASSESSEE CANNOT BE SAID TO BE FURNISHING OF INACCURATE PARTICULARS BY ANY STANDARD. IT IS PURE LY A LEGAL CLAIM AND MERELY BECAUSE A LEGAL CLAIM IS FOUND TO BE INADMIS SIBLE IT CANNOT BE INFERRED THAT THERE IS ANY FURNISHING OF INACCURATE PARTICULARS. WE HAVE ALSO NOTED THAT UNTIL THE TIME SPECIAL BENCH DECISION WAS DELIVERED IN THE CASE OF DCIT VS TIMES GUARANTEE LIMITED (SUPRA) I.E. ON 30 TH JUNE 2010 AND MUCH AFTER EVEN THE ASSESSMENT WAS FINALIZED A VIEW WAS INDEED POSSIBLE THAT NOT CHARGING DEPRECIATION WOULD NOT H AVE ANYWAY MADE ANY DIFFERENCE TO THE TAX POSITION OF THE ASSESSEE BECA USE POSITION WAS THAT CAPITAL GAINS COULD HAVE BEEN SET OFF AGAINST UNABS ORBED DEPRECIATION AND THEREFORE NOT CLAIMING THE DEPRECIATION WOULD HAVE BEEN TAX NEUTRAL. IT IS THEREFORE INCORRECT TO TAKE A STAND AS HAS BEEN TA KEN BY THE ASSESSING OFFICER AND THE CIT(A) THAT NOT CHARGING THE DEPRECIATION ON ASSETS WAS MALAFIDE AND INFLUENCED SOLELY BY ULTERIOR MOTIVES TO AVOID LEGI TIMATE TAX LIABILITY. THERE IS THUS NO BASIS FOR CIT(A)S HOLDING THAT IT WAS A CASE OF FURNISHING OF INACCURATE PARTICULARS AND MALAFIDE ACTION ON THE PART OF THE ASSESSEE. NO DOUBT NOT ONLY THAT THE PENALTY PROVISIONS COVER TH E SITUATIONS IN WHICH THE ASSESSEE HAS CONCEALED INCOME OR FURNISHED THE INAC CURATE PARTICULARS IN CERTAIN SITUATION EVEN WITHOUT THERE BEING ANYTHIN G TO INDICATE SO STATUTORY DEEMING FICTION FOR INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. IN ADDITION TO NORMAL CONNOTATIONS OF CONCEALMENT THUS ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 18 OF 22 A DEEMING FICTION IS ALSO IMPLICIT IN THE SCHEME OF PENALTY PROVISIONS. THIS DEEMING FICTION BY WAY OF EXPLANATION 1 TO SECTION 271(1)(C) ENVISAGES TWO SITUATIONS (A) FIRST WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT THE ASSESSEE FAILS TO OFFERS AN EXPLANATION OR THE EXPLANATION O FFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR THE C IT(A); AND (B) SECOND WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPU TATION OF TOTAL INCOME UNDER THE PROVISIONS OF THIS ACT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS TO PROVE THAT S UCH EXPLANATION IS BONAFIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS R ELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTAL INCOM E. IN THE FIRST SITUATION THE DEEMING FICTION IS TRIGGERED BY THE INACTION OF THE ASSESSEE BY HIS NOT GIVING THE EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE AS SESSING OFFICER OR THE CIT(A) BY GIVING CATEGORICAL FINDING TO THE EFFECT THAT THE EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION THE DEEMING FICTION IS TRIGGERED BY THE FAILURE OF THE ASSESSEE LEADING TO SATISFACTION OF CONDITIONS LAID DOWN IN CLAUSE B OF EXPLANATION 1 TO SECTION 2 71(1)(C) NAMELY THAT THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE AN EXPLANA TION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND I N ADDITION TO THIS THE ASSESSEE IS ALSO NOT ABLE TO PROVE THAT SUCH EXPLA NATION WAS GIVEN BONAFIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. WHEN THIS DEEMING FICTION COMES INTO PLAY THE RELATED ADDITION OR D ISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSES OF SECTION 271(1)(C) IS DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED BUT THAT THE LEVY OF PENALTY H INGES ON ASSESSEES SUBSTANTIATING THE EXPLANATION PROVING THAT IT IS BONAFIDES AND THAT ALL THE MATERIAL FACTS ARE DISCLOSED. VIEWED IN THIS PERSP ECTIVE ALSO HOWEVER WE FIND THAT THE ASSESSING OFFICER DOES NOT HAVE A LEG ALLY SUSTAINABLE CASE. WE HAVE NOTED THE ASSESSEE HAS A REASONABLE EXPLANATION FOR HAVIN G MADE THIS CLAIM IN THE INCOME TAX RETURN AND ALL THE NECESSA RY DETAILS ARE FILED BY THE ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 19 OF 22 ASSESSEE AND THE CLAIM IS MADE IN A FAIR AND TRANSP ARENT MANNER. THE CLAIM MADE BY THE ASSESSEE MAY NOT HAVE BEEN APPROVED IN QUANTUM ASSESSMENT PROCEEDINGS BUT AS WE HAVE NOTED EARLIER IT IS A REASONABLE CLAIM WHICH WAS NOT CLEARLY CONTRARY TO THE LEGAL PROVISIONS AN D SETTLED LAW AT LEAST AT THE POINT OF TIME WHEN THE CLAIM WAS MADE BY THE AS SESSEE. THE DEPRECIATION BEING GRANTED ON THE WRITTEN DOWN VALU E AFTER REDUCING THE VALUE OF W.D.V. OF ASSETS SOLD ON LUMP SUM BASIS D OES NOT CONSTITUTE A WHOLLY IMPOSSIBLE VIEW OR CLEARLY ILLEGAL STAND. AS FOR D EPRECIATION BEING THRUST ON THE ASSESSEE THOUGH THERE IS ONE HONBLE JURISDIC TIONAL HIGH COURT DECISION IN FAVOUR OF THE ASSESSING OFFICER IT IS A VIEW TA KEN BY THE HONBLE HIGH COURT ON 16 TH OCTOBER 2009 I.E. MUCH AFTER THE RELATED INCOME TA X RETURNS WERE FILED AND THAT TOO IN THE CONTEXT IN WHICH AS SESSEE HAD CLAIMED DEDUCTION UNDER CHAPTER VI A. BROADLY THE STAND O F THE ASSESSING OFFICER WHICH HAS NOW BEEN APPROVED BY A COORDINATE BENCH O F THIS TRIBUNAL IS THAT IN COMPUTATION OF WRITTEN DOWN VALUE UNDER SECTION 43(6)(C)(I)(C) WHICH IS TAKEN INTO ACCOUNT FOR COMPUTING CAPITAL GAIN ON S LUMP SALE IS DEPRECIATION THAT WOULD HAVE BEEN ALLOWABLE TO THE ASSESSEE FOR ANY ASSESSMENT YEAR COMMENCING ON OR AFTER 1 ST APRIL 1998 ( I.E. WHEN THE CONCEPT OF BLOCK OF ASSETS WAS INTRODUCED IN THE ACT) AS IF THE ASSET WAS THE ONLY ASSET IN THE RELEVANT BLOCK OF ASSETS. IT IS THUS CONTENDED THAT THE ADMISSIBLE DEPRECIATION WHETHER CLAIMED OR NOT IS TO BE TAKEN INTO ACCOUNT FOR COMPUTATION OF THIS WRITTEN DOWN VALUE. THIS PR OVISION HAS BEEN ON THE OTHER HAND CONSTRUED BY THE ASSESSEE TO MEAN THAT NOTIONAL WRITTEN DOWN VALUE IS TO BE COMPUTED WITH RESPECT OF EACH OF THE ASSET INCLUDED IN THE ASSETS SOLD ON SLUMP SALE BASIS AND THAT THE REFER ENCE TO DEPRECIATION THAT WOULD HAVE BEEN ALLOWABLE TO THE ASSESSEE IS TO B E READ IN CONJUNCTION WITH THE EXPRESSION AS IF THE ASSET WAS THE ONLY ASSET IN THE RELEVANT BLOCK OF ASSETS WHICH WOULD IMPLY THAT DEPRECIATION IS TO BE ALLOCATED TO EACH OF THE ASSET ON THAT BASIS; IT REFERS TO ALLOCATION OF DEP RECIATION RATHER THAN DEPRECIATION BEING THRUST ON THE ASSESSEE WHETHER C LAIMED OR NOT. ANY OTHER VIEW ACCORDING TO THE ASSESSEE WOULD LEAD TO THE ABSURDITY INASMUCH AS THE ASSESSEE WILL NOT BE ENTITLED TO CARRY FORWARD OF U NABSORBED DEPRECIATION ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 20 OF 22 THRUST ON THE ASSESSEE AND YET THE WRITTEN DOWN VAL UE FOR THE PURPOSE OF COMPUTING CAPITAL GAINS WILL STAND REDUCED BY THAT NOTIONAL AMOUNT. THIS VIEW HAS BEEN REJECTED BY THE COORDINATE BENCH AND WE ARE BOUND BY THE CONCLUSIONS SO ARRIVED AT BY THE COORDINATE BENCH BUT IN OUR HUMBLE UNDERSTANDING THIS IS NOT AN INTERPRETATION OF THE PROVISION WHICH CAN BE SAID TO BE WHOLLY DEVOID OF ANY BASIS OR RATIONALE. MERELY BECAUSE A LEGAL INTERPRETATION IS REJECTED AS HAS BEEN DONE IN THI S CASE IT CANNOT BE INFERRED THAT THERE IS NO REASONABLE EXPLANATION FO R HAVING RESORTED TO THAT INTERPRETATION AND AS LONG AS THERE IS A REASONABL E EXPLANATION FOR MAKING A CLAIM OR RESORTING TO AN INTERPRETATION PENALTY U NDER SECTION 271(1)(C) CANNOT BE IMPOSED. IN ANY EVENT IT IS IMPORTANT TO BEAR IN MIND THE FACT THAT NOT CLAIMING THE DEPRECIATION IS AN ACTION OF THE A SSESSING OFFICER IN PRECEDING PREVIOUS YEARS AND NOT THE YEAR THAT WE A RE DEALING WITH AND IN RESPECT OF WHICH PENALTY IS IMPOSED. CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS IF AT ALL IT CAN BE SAID TO BE CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS TOOK PLACE IN THE PREVIOUS YEARS OTHER THAN THE PREVIOUS YEAR RELATING TO THE ASSESSMENT Y EAR BEFORE US AND THEREFORE THE ASSESSEE CANNOT BE IMPOSED PENALTY U NDER SECTION 271(1) (C). IT IS NOT A CASE THAT THE ASSESSEE HAS MADE A CLAIM WHICH IS CLEARLY INADMISSIBLE A CLAIM OR CLEARLY CONTRARY TO THE PRE VAILING LEGAL POSITION. WE HAVE ALSO NOTED THAT THE CONDUCT OF THE ASSESSEE CA NNOT BE SAID TO BE LACKING BONAFIDES IN ANY MANNER AND THAT THE ASSESSEE HAD ALSO MADE THE CLAIM IN A FAIR AND TRANSPARENT MANNER WITHOUT WITHHOLDING AN Y MATERIAL INFORMATION . THE LEGAL POSITION IS RELEVANT FOR THE PURPOSE OF D ECIDING THE MATTER ON MERITS BUT WHEN WE ARE EXAMINING THE CONDUCT OF TH E ASSESSEE VIS--VIS EXPLANATION OF THE ASSESSEE FOR MAKING THE CLAIM W E CANNOT REJECT THE ASSESSEES EXPLANATION ON THE GROUND THAT THE LEGA L POSITION AS UNDERSTOOD BY THE ASSESSEE TURNED OUT TO BE UNACCEPTABLE ON M ERITS. AS AT THIS STAGE OF ADJUDICATING CORRECTNESS OF PENALTY IMPOSED WHAT I S TO BE EXAMINED IS CONDUCT OF THE ASSESSEE IN MAKING THE CLAIM AND NO T CORRECTNESS OF THE LEGAL POSITION IN DECIDING THE CLAIM ON MERITS. WE ARE SATISFIED THAT THE EXPLANATION OF THE ASSESSEE FOR HAVING MADE THE CLA IM IS REASONABLE AND ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 21 OF 22 WORTH BEING ACCEPTED. IN OUR CONSIDERED VIEW THERE FORE IT WAS NOT EVEN A FIT CASE IN WHICH PENALTY UNDER SECTION 271(1)(C) C OULD HAVE BEEN IMPOSED FOR FURNISHING OF INACCURATE PARTICULARS OR ON ACCO UNT OF INFERENCE BEING DRAWN TO THAT EFFECT UNDER EXPLANATION TO SECTION 2 71(1)(C). 10. IN VIEW OF THE ABOVE DISCUSSIONS AS ALSO BEAR ING IN MIND ENTIRETY OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT TH E CIT(A) INDEED ERRED IN UPHOLDING THE IMPUGNED PENALTY OF RS 10 34 56 092 I MPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT AND TH E FACTS AND CIRCUMSTANCES OF THIS CASE DID NOT REALLY WARRANT O R JUSTIFY THE IMPOSITION OF THIS PENALTY. WE THEREFORE DIRECT THE ASSESSIN G OFFICER TO DELETE THE IMPUGNED PENALTY. THE ASSESSEE GETS THE RELIEF ACCO RDINGLY. 11. IN THE RESULT THE APPEAL IS ALLOWED. PRONOUNC ED IN THE OPEN COURT TODAY ON 15 TH DAY OF DECEMBER 2010. SD/- SD/- (R V EASWAR) (PRAMOD KUM AR) PRESIDENT ACCOUNTANT MEMBER MUMBAI; 15 TH DAY OF DECEMBER 2010 . COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. CIT VIII MUMBAI 4. COMMISSIONER (APPEALS) -VIII MUMBAI 5. DEPARTMENTAL REPRESENTATIVE G BENCH MUMBAI 6. GUARD FILE TRUE COPY BY ORDER ETC. ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES MUMBAI ITA NO: 1111/MUM/09 ASSESSMENT YEAR: 2003-04 PAGE 22 OF 22