Videsh Sanchar Nigam Ltd , Mumbai vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "F" BENCH, MUMBAI BEFORE SHRI A.D. JAIN, JM AND SHRI N.K. BILLAIYA, AM

ी ए.डी. जैन, या यक सद य एवं ी एन. के. बलै या, लेखा सद य । आयकर अपील सं./I.T.A. No. 4221 /Mum/2005 ( नधा रण वष / Assessment Year : 2001-2002

Tata Communications Ltd., बनाम/ Addl. Commissioner of (Formerly Videsh Sanchar Vs. Income Tax - Range Nigam Ltd.), 1(3), Videsh Sanchar Bhavan, Aayakar Bhavan, Mahatma Gandhi Road, 5 t h floor, Fort, Maharshi Karve Road, Mumbai - 400 001. Mumbai - 400 020. थायी ले खा सं . /PAN : Not available (अपीलाथ! /Appellant) .. ("#यथ! / Respondent)

आयकर अपील सं./I.T.A. No. 4219 /Mum/2005 ( नधा रण वष / Assessment Year : 2001-2002

Dy. Commissioner of बनाम/ Videsh Sanchar Nigam Income Tax - Range 1(3), Ltd.), Vs. Room No. 540, Videsh Sanchar Bhavan, Aayakar Bhavan, Mahatma Gandhi Road, 5 t h floor, Fort, Maharshi Karve Road, Mumbai - 400 001. Mumbai - 400 020. थायी ले खा सं . /PAN : Not available (अपीलाथ! /Appellant) .. ("#यथ! / Respondent) 2 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

आयकर अपील सं./I.T.A. No. 1107 /Mum/2008 ( नधा रण वष / Assessment Year : 2001-2002

Tata Communications Ltd., बनाम/ Asst. Commissioner of (Formerly Videsh Sanchar Income Tax - Range Vs. Nigam Ltd.), 1(3), Videsh Sanchar Bhavan, Aayakar Bhavan, Mahatma Gandhi Road, 5 t h floor, Fort, Maharshi Karve Road, Mumbai - 400 001. Mumbai - 400 020. थायी ले खा सं . /PAN : AAACV2808C (अपीलाथ! /Appellant) .. ("#यथ! / Respondent)

आयकर अपील सं./I.T.A. No. 1835 /Mum/2008 ( नधा रण वष / Assessment Year : 2001-2002

Asst. Commissioner of बनाम/ Videsh Sanchar Nigam Income Tax - Range 1(3), Ltd.), Vs. Room No. 540/564, Lokmanya Videsh Aayakar Bhavan, Sanchar Bhavan, 5 t h floor, Kashinath Dhru Marg, Maharshi Karve Road, Opp. Kirti College, Mumbai - 400 020. Prabhadevi, Mumbai - 400 028. थायी ले खा सं . /PAN : AAACV2808C (अपीलाथ! /Appellant) .. ("#यथ! / Respondent)

Assessee by Shri Dinesh Vyas Revenue by : Shri G.M. Doss

ु वाई क' तार)ख / Date of Hearing सन : 01-07-2015 घोषणा क' तार)ख /Date of Pronouncement : 08-07-2015 [ 3 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

आदे श / O R D E R

PER A.D. JAIN, J.M. :

ए.डी. जैन, या यक सद य

These appeals have been filed by assessee and Revenue. ITA No. 4221/Mum/2005, assessee's appeal for A.Y. 2001-02, ITA No. 4219/Mum/2005, Department's appeal for A.Y. 2001-02, ITA No. 1107/Mum/2008, assessee's penalty appeal for A.Y. 2001-02, and ITA No. 1835/Mum/2008, Department's penalty appeal for A.Y. 2001-02.

First, we shall take up assessee's appeal in ITA No. 4221/Mum/2005 for A.Y. 2001-02.

2. As per ground No. 1.1, the ld. CIT(A) has erred in holding that in the computation of its business income, the assessee was not entitled to deduction of Rs. 5.17 crores in respect of loss in the value of shares of ICO Global Holdings Ltd.

3. This issue, it is seen, stands decided against the assessee by the Tribunal in the assessee's own case for A.Y. 2000-01, in ITA No. 4220/Mum/2005, vide order dated 7-3-2014, holding as follows;

"..............In the case in hand the purpose of investment at the most can be said for acquiring or having access to the new advanced technology in the mobile telecommunication system, which could be treated as acquisition of a new and modern profit making apparatus. The loss suffered due to the devaluation of the investment is on capital account. In view of the above discussion, we do not find any error or illegality in the order of ld. CIT(A) qua this issue." (Page 27 of the order)

4. The facts remaining the same, no deviance is required to be made from the aforesaid Tribunal order for A.Y. 2000-01. Therefore, following the order of the co-ordinate Bench, ground No. 1.1 is rejected.

4 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

5. The assessee has raised an alternative ground that the loss on the shares of ICO Global Holding Ltd. is admissible as a capital loss. To this, the ld. D.R. has objected that such alternative ground was never taken up earlier at any stage, and that therefore, it is not permissible to be taken now. It has been requested that, accordingly, this alternative claim be not entertained.

6. In this regard, it is not correct to say that this claim was never made by the assessee earlier. In fact, as pointed out on behalf of the assessee, it was made at the very first instance, i.e., in the return of income, by way of Notes to the Return. Further, it was also made before the A.O. The A.O. dealt with it in the assessment order for A.Y. 2000-01, vide para Nos. 4.5, 4.6 and 4.15 to 4.20, holding the loss to be a capital loss covered under sections 45, 60, 49 of the Act. Further, it was also made before the ld. CIT(A) by way of written submission dtd. 12-11-2003, requesting the ld. CIT(A) to allow the capital loss. This claim has also been considered by the ld. CIT(A), though it was rejected. Therefore, it is not an altogether new claim and it emanates from the orders under appeal. As such, the additional ground of appeal raised in this regard, is admitted.

7. Apropos the merits of this additional ground, the assessee maintained this transaction is covered under the provisions of section 46 of the Act. The ld. CIT(A) has held it to be a case of liquidation, to which, the provisions of section 46(2), pertaining to capital gains on distribution of assets by companies in liquidation, apply. It has been so held in "Vijay Kumar Budhia vs. CIT", 204 ITR 355 (SC).

8. Further, transfer within the meaning of section 2(47) of the Act is an inclusive term, including extinguishment of any right in an asset, as held, inter alia, in "CIT vs. Collis", 248 ITR 323 (SC), "Karthikeya V. Sarabhai vs. CIT", 228 ITR 163 (SC), "Sath Gwaldas Mathuradas Mohata Trust vs. CIT", 165 ITR 620 (Bom)(HC) and "DCIT vs. BPL Sanyo", 312 ITR 63 (Kar)(HC).

5 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

Further, relinquishment is also a transfer u/s 2(47)(1)(i),as is exchanged. The ld. CIT(A) has himself held it to be a case relating to liquidation (page 9, last line of the impugned order). However, the ld. CIT(A) has not considered that the shares of I.C.O. Global Holdings Ltd. were actually transferred. The loss was on investment in the shares. The shares were received from the company/liquidator, as noted by the ld. CIT(A). Therefore, we hold that the loss is a capital loss. Pertinently, the issue raised by the assessee that it was a business loss stands decided against the assessee by the Tribunal on the case for A.Y. 2000-01.

9. As per ground No.2, the ld. CIT(A) erred in denying the claim made u/s 80IA of the Act, in respect of earth station. The A.O. made the disallowance on the basis of a similar disallowance made for A.Y. 1996-97. The ld. CIT(A) confirmed the same.

10. This issue stands consistently decided against the assesee by the Tribunal for the assessment years 1996-97 to 2000-01. Therefore, the facts remaining the same for the year under consideration also, this issue is decided against the assessee.

11. The assessee had also claimed deduction u/s 80IA of the Act in respect of internet. It is seen that for assessment years 1999-2000 and 2000-01, the Tribunal has set aside this issue to the file of ld. CIT(A). Here also, the facts remaining the same, and in keeping in view the said appeal Tribunal order, this issue is remitted to the file of ld. CIT(A), to be decided afresh on affording due opportunity of being heard to the assessee.

12. Ground No. 3 states that the ld. CIT(A) erred in charging interest u/s 234D of the Act. This issue stands decided against the assessee by the Hon'ble jurisdictional High Court in the case of "CIT vs. Indian Oil Corporation Ltd.", 210 Taxmann 466 (Bom.) Therefore, respectfully following 6 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

the decision of the Hon'ble jurisdictional High Court in the case of "Indian Oil Corporation Ltd." (supra), ground No. 3 is rejected.

13. The assessee has made an alternative claim that the computation of interest u/s 234D is incorrect and that interest u/s 244A should be excluded. Reliance in this regard has been placed on the decision of the Mumbai Bench of the ITAT in ITA No. 4962/Mum/2013, for A.Y. 1990-91, dated 22-10-2014, in the case of Tata Communications Ltd., the Mumbai ITAT decision dated 6- 3-2013 in ITA No. 6863/Mum/2011, for A.Y. 1997-98, in the case of M/s Tata Power Company Ltd., and the Mumbai ITAT decision dated 3-7-2013 in ITA No. 3977 & 3978/Mum/2012 for assessment years 2002-03 and 2005- 06, respectively, in the case of Tata Power Company Ltd.

14. In the case of Tata Power Company Ltd. (supra), the A.O. was directed by the ITAT to exclude the interest element of refund earlier granted. In the case of Tata Communications Ltd. (supra), the matter was remitted to the file of A.O. to calculate the interest in keeping with the decision of Tata Power Company Ltd. (supra). The assessee has also contended that interest should be computed for the period beginning on 1-6-2003 and not from the date of granting of the refund, i.e., 31-3-2003. Reliance in this respect has been placed on the decision in the case of "CIT vs. Kerala Chemicals and Proteins Ltd.," rendered by the Hon'ble Kerala High Court on 15-1-2010. Reliance has also been placed on the Hon'ble Punjab & Haryana High Court decision in the case of "CIT vs. Avery Cycle Industries Ltd.", 56 Taxmann.com 459 (Punjab & Haryana).

15. In keeping with the above case laws, the interest u/s 244A needs to be excluded while computing the interest u/s 234B of the Act and this computation needs to be done for the period beginning on 1-6-2003. We order accordingly and remit the issue to the A.O. for the purpose, to be 7 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

decided afresh in accordance with law, keeping in consideration the above decisions.

16. As per ground Nos. 4 & 5, the ld. CIT(A) erred in confirming the reduction in the cost of depreciable fixed asset by Rs. 4.28 crores and in taxing the non-adjustment of cost of fixed asset, the depreciation of Rs. 1.07 crores on the amount of Rs. 4.28 crores. According to the assessee, these adjustments had been carried out in the subsequent year.

17. Here, it is not disputed that the assessee had, in the succeeding year, suo motu made the necessary adjustments and reduction in the cost of depreciable fixed asset. It is only a question of time taken. In fact, there is no revenue loss. Therefore, ground No. 4 & 5 are accepted, directing the A.O. to make necessary verification and grant relief accordingly.

18. Ground No. 6 states that the ld. CIT(A) has erred in partially disallowing certain late remittances of Provident Fund (PF) concerning the contribution by the management towards PF and pension fund. It is not the case of the Department that the payments were made beyond the due date of filing the return of income. Such contributions are covered under the provisions of section 43-B of the Act, as held in the following decisions:-

a) CIT vs. Alom Extrusion Ltd. [2009], 319 ITR 306(SC)

b) CIT vs. Hindustan Organics Chemicals Ltd. (ITA No. 399 of 2012(Bom HC)

c) CIT vs. Ghatge Patil Transports Ltd. (ITA No. 1002 & 1034 of 2012 (Bom HC)

d) Euro Pratik Ispat P. Ltd. vs. ACIT [2013] , 27 ITR (T) 432 (Mum) (Trib.

At page 433 para 4.

e) Onward Technologies Ltd. vs. Dy. CIT [2013], 26 ITR (T) 734 (Mum)(Trib) at page 742 para 2.

f) Gammon India Ltd. vs. ACIT (ITA No. 20/Mum/2009.

g) CIT vs. Spectrum Consultants [2013], 215 Taxman 597 (Kar.)(HC) h) CIT vs. Aimil Ltd. [2009], 321 ITR 508 (Del)(HC) i) CIT vs. Mark Auto Industries Ltd. [2013], 358 ITR 43 (P&H)(HC) 8 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

j) CIT vs. Kichha Sugar Company Ltd. (2013) 35 taxmann.com 54 (Uttarakhand) k) CIT vs. Nipso Polyfabriks Ltd. (2013), 350 ITR 327 (HP)

19. Accordingly, ground No. 6 is accepted.

20. According to ground No. 7, the ld. CIT(A) erred in disallowing the claim of Rs. 55,64,52,500/- being the amount paid to use the land at Bandra Kurla Complex for 80 years, as a business expenditure. Alternatively says the assessee, the ld. CIT(A) ought to have allowed amortization of the total amount paid over 80 years. According to the assessee's second alternative contention, the depreciation on the amount paid to acquire the right to use the land for 80 years ought to have been allowed. The ld. CIT(A) confirmed the disallowance made, observing, inter alia, that on the expiry of the lease, the assessee had the right to remove and appropriate to itself all buildings, erections and structures and materials from the land and that enduring benefit accrued to the assessee; that the rights were in respect of interest in land and they could not be equated with know-how, patents, copyrights, etc.;

that interest in land was not included in intangible asset and benefit of depreciation could not be given thereon.

21. Here, it is seen that this matter stands decided by the 'G' Bench of the Mumbai Tribunal against the assessee, under similar facts and circumstances, vide order dated 3-7-2013, in the case of "M/s Wadhwa & Associates" for A.Y. 2008-09 in ITA No. 695/Mum/2012, holding as follows:

"page 6A to 7A".

"The entire grievance revolves around the premium paid by the assessee to M/s. MMRDA Ltd. for the leasehold rights acquired by the assessee through the lease deed dt. 22nd November, 2004. It is the say of the Revenue that this lease premium was liable for deduction of tax at source failing which the assessee is to be treated as assessee in default. It is the say of the assessee that such lease premium is in the nature of capital expenditure and therefore there is no question of deduction of tax at source. Further, the said lease premium does not come within the purview of the definition of rent as provided u/s. 194-1 9 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

of the Act. 10. We have carefully perused the lease deed as exhibited from page-1 to 42 of the Paper Book. A careful reading of the said lease deed transpires that the premium is not paid under a lease but is paid as a price for obtaining the lease, hence it precedes the grant of lease. Therefore, by any stretch of imagination, it cannot be equated with the rent which is paid periodically. A perusal of the records further show that the payment to MMRD is also for additional built up are and also for granting free of FSI area, such payment cannot be equated to rent. It is also seen that the MMRD in exercise of power u/s. 43 r.w. Sec. 37(1) of the Maharashtra Town Planning Act 1966, MRTP Act and other powers enabling the same has approved the proposal to modify regulation 4A(ii) and thereby increased the FSI of the entire 'G' Block of BKC. The Development Control Regulations for BKC specify the permissible FSI. Pursuant to such provisions, the assessee became entitled for additional FSI and has further acquired/purchased the additional built up area for construction of additional area on the aforesaid plot. Thus the assessee has made payment to MMRD under Development Control for acquiring leasehold land and additional built up area. The decisions of the Tribunal in the case of M/s. National Stock Exchange (supra) and Mukund Ltd (supra) have been well discussed by the Ld. CIT(A) is his order. The decision of the Hon'ble Jurisdictional High Court in the case of Khimline Pumps Ltd. (supra) squarely and directly apply on the facts of the case wherein the Hon'ble Jurisdictional High Court has held that payment for acquiring leasehold land is a capital expenditure. Considering the entire facts in totality in the light of the judicial decisions vis-à-vis provisions of Sec. 194-1, definition of rent as provided under the said provision, we do not find any reason to tamper or interfere with the findings of the Ld. CIT(A) which we confirm."

The facts remaining the similar, respectfully following "M/s Wadhwa & Associates" (supra), this grievance of the assessee is rejected.

22. The first alternative claim of amortization in this regard has also been decided against the assessee in "CIT vs. Khimline Pumps Ltd." 258 ITR 459 (Bom), by the Hon'ble jurisdictional High Court, holding such expenditure to the capital in nature. Accordingly, this alternative claim is also rejected.

23. The assessee has further raised a second alternative claim, i.e., of depreciation in this regard. Since the nature of the expense has already been held to be capital, as above, the A.O. is directed to allow the depreciation thereon in accordance with law.

10 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

24. The issue of allowability of repairs and maintenance expenses (prior deductions being expenses pertaining to the year under consideration), amounting to Rs. 3,41,222/- as raised on the additional ground stands decided in favour of the assessee by the Tribunal in its case for assessment years 1997-98, 1999-2000 and 2000-01. The facts remaining the same, the issue of allowability of repairs and maintenance expenses, i.e., prior period expenses being expenses pertaining to the year under consideration, is decided in favour of the assessee.

25. Apropos, the issue of prior period expenses paid during the year under consideration, the Tribunal has allowed relief to the assessee vide its order of A.Y. 2000-01 (supra), therefore, this ground is infructuous.

26. The assessee has also claimed write-back of repairs and maintenance expenses disallowed in A.Y. 1999-2000, since the expenses related to prior period. These expenses are of Rs. 49,99,521/- for A.Y. 2000-01. Under similar circumstances, the A.O. should verify whether this write-back of repair and maintenance expenses was also subjected to tax for A.Y. 1999-2000, being disallowed in the assessment order and to take steps to avoid double taxation of the same amount as per the Tribunal order for A.Y. 2000-01, for the year under consideration also, we remit the matter to the file of the A.O. for making a similar verification and to allow relief accordingly.

ITA 4219/Mum/2005 for A.Y. 2001-02 (Revenue's appeal)

27. The first ground in this appeal by the Department fir A.Y. 2001-02 is that the ld. CIT(A) erred in directing the A.O. to allow depreciation of Rs. 21,02,61,421/- on undersea Flag Cable System.

11 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

28. This issue has been decided in favour of the assessee by the Tribunal for assessment years 1997-98 to 2000-01. In accordance with thereof, ground No. 1 is rejected.

29. As per ground No. 2, the ld. CIT(A) erred in directing the A.O. to restrict the disallowance u/s 36(1)(va) and section 43B of the Act to the contribution credited in the funds after the grace period, specified in the relevant statutes.

30. This ground is a counter ground to ground No. 6 taken by the assessee its appeal and our observation therein in deciding that ground are squarely applicable here also. In accordance with thereof, this ground is rejected.

31. For the above discussion, the assessee's appeal in ITA No. 4221/Mum/2005 for A.Y. 2001-02 is partly allowed and Department's appeal in ITA No. 4219/Mum/2005 for A.Y. 2001-02 is dismissed.

ITA No. 1107/Mum/2008 for A.Y. 2001-02 (Assessee's appeal) 32. This is assessee's appeal for A.Y. 2001-02 against confirmation of levy of penalty u/s 271()(c) of the I.T. Act.

33. The penalty was levied on the disallowance of claim of business loss on account of ICO Global Holdings Ltd. The ld. CIT(A) confirmed the penalty. A similar penalty for A.Y. 2000-01 stands deleted by the Tribunal holding as follows:-

"18.1 We first take up ground no. 2 regarding levy of penalty of disallowance of claim of business loss on account of devaluation of the value of investment in ICO Global. We have heard the Ld. Senior Counsel as well as Ld. DR and carefully perused the relevant material on record. Though, the disallowance of claim being business loss has been confirmed by us, however, we find that the issue involves in the claim of business loss is a highly debatable one, and there is nothing on record to indicate that this claim of the assessee is absolutely illegal, bogus or false. The assessee has supported its claim with the decision of Hon'ble Supreme Court in the case of Patnaik Co. Ltd.(supra), therefore, we are of the view that the claim of the assessee though not allowable as per the 12 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

provisions of Income Tax Act, however the same cannot be termed as bogus or inherently incorrect claim leading to the conclusion that the assessee has furnished inaccurate particulars of income or concealed the particulars of income. Disallowance of a claim which is not found bogus or inherently incorrect or patently untenable would not ifso facto lead to the conclusion that the assessee has furnished inaccurate particulars of income or concealed particulars of income attracting levy of penalty U/s 271 (1)(C). The assessee has disclosed all the relevant facts and details in respect of the claim during the assessment proceedings and the claim has been specifically explained through the notes of the return of income. Therefore, we find that the penalty on the disallowance of claim of business loss on account of written down value of shares of ICO Global in the facts and circumstances of the case does not warrant levy of penalty. Accordingly, we delete the penalty on this account."

34. For parity of facts for the year under consideration also, the levy of penalty on this count is deleted.

35. Penalty was also levied on disallowance of deduction u/s 80IA of the Act on income from earth station undertaking. This penalty amounting to Rs. 75.56 crores, The ld. CIT(A) confirmed the same. Here also for A.Y. 2000-01, the Tribunal has deleted the penalty holding as follows:-

"18.2 Ground no. 3 is regarding levy of penalty on disallowance of deduction u/s 80IA. We have heard Ld. Senior Counsel as well as Ld. DR and considered the relevant material on record. Since the issue of deduction u/s 80IA on the internet income has been decided in favour of the assessee and the claim of deduction u/s 80IA has been allowed in the quantum appeal. Therefore, the penalty to the extent of disallowance of deduction u/s 80IA on internet income is not sustainable and accordingly deleted. As regards the penalty against the disallowance of deduction u/s 80IA on earthstation it is to be noted that the question of law involved in the claim of the assessee is a highly complexed and debatable one as it was finally decided by a larger bench of this Tribunal. Since the issue was referred to the larger bench (SB) of this Tribunal for adjudication which itself manifests that there was possibility of more than one view on this issue. Accordingly, the disallowance of claim which involves a highly debatable issue and based on the difference of opinion would not amount to furnishing incorrect particulars of income or concealment of particulars of income on the part of the assessee. Hence levy of penalty on such a debatable legal issue is not warranted and accordingly deleted."

36. On similar reasoning as that given by the Tribunal for A.Y. 2000-01, this penalty is also deleted.

13 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

ITA 1835/Mum/2008 for A.Y. 2001-02 (Revenue's appeal)

37. This is Department's appeal against the action of ld. CIT(A) in deleting the penalty levied u/s 271(1)(c) of the Act.

38. As per ground No. 1, the ld. CIT(A) erred in directing the A.O. to delete the penalty levied for wrong full claim u/s 80IA of the Act. Here, for A.Y. 2000-01, the Tribunal decided the matter in favour of the assessee, holding as follows:-

"19.1 We have heard the Ld. DR as well as Ld. Senior Counsel and considered the relevant material on record. The AO levied the penalty inter alia against the disallowance of higher depreciation on Gateway Digital Switches(GDS). We have set aside the issue of higher depreciation on GDS to the record of CIT(A) and, therefore, the penalty on this account does not survive. Even otherwise this issue of higher depreciation on GDS is a debtatable issue as the question involves whether GDS is part of the computer for the purpose for depreciation u/s 32 of the Income Tax Act. The assessee has claimed higher depreciation in view of the Information Technology Act, and supported its claim by the various decisions of this Tribunal, wherein the switches and routers are held to be the part of the computer for the purpose of depreciation U/s 32 of the Act. Even otherwise there is no dispute about the asset in question and the higher rate of depreciation is only a question of interpretation of definition of the computer. Therefore, when the assessee has disclosed and explained all the relevant facts and details relevant to the claim of higher depreciation on GDS, then we do not find that merely claiming a higher depreciation which is otherwise supported by the various decisions would lead to the conclusion that the assessee has furnished inaccurate particulars or concealed particulars of income. In view of our finding in the quantum appeal on this issue, we are of the considered opinion, that disallowance of higher depreciation on GDS switches does not warrant levy of penalty u/s 271(1)(C). Accordingly, in the facts and circumstances of the case, we do not find any error or illegality in the order of CIT(A) in deleting the penalty on this account and hence we dismiss the appeal of the revenue."

39. Finding no difference in the facts for the year under consideration, following the Tribunal order for A.Y. 2000-01, ground No. 1 raised by the Department is rejected.

40. Penalty was also levied for wrong full claim of depreciation on GDS The equipment. The ld. CIT(A) deleted the penalty. The Tribunal, for A.Y. 2000-01 14 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

has again decided the matter in favour of the assessee. Respectfully following that order, ground No. 2 is rejected.

41. Penalty was also levied for wrong full claim of advance rent as revenue expenditure. The ld. CIT(A) deleted the penalty.

42. Here, it is seen that the ld. CIT(A) observed that the issue of expense being revenue or capital was a debatable issue. It was found that no inaccurate particulars have been furnished by the assessee. The conduct of the assessee was found to be bona fide. The Department has not been able to refute these findings of the ld. CIT(A). Further, as discussed, while dealing with the issue on merit in the quantum appeal, the assessee was found to have made due disclosure in this regard in the notes forming part of computation of income, where the said disclosure has been made, no penalty has been held to be liable, as per, inter alia, the following decision;

a. CIT vs. Reliance Petroproducts (P) Ltd. (322 ITR 158(SC) b. CIT vs. Nalin P. Shah (HUF (Bom HC) (40 taxmann.com 86) c. Metal Rolling Works Ltd. vs. CIT (339 ITR 373) (Bom) d. Narang International Hotels (P) Ltd. vs. DCIT (137 ITD 53) (Mum) (TM) e. Kanbay Software India (P) Ltd. vs. DCIT (31 SOT 153) (Pune ITAT)

43. The A.O. also levied penalty for wrong full claim of depreciation on Interconnect System - TAS. The ld. CIT(A) deleted the penalty, holding that whereas the assessee had projected the features of the asset to claim it to be computer, this claim was disbelieved by the A.O., without supplying any reasoning. The ld. CIT(A) also held the controversy to be equitable with that of GDS (Ground No. 2 of this appeal pertains to levy of penalty for wrong full claim of depreciation on GDS equipment). Here, the claim was never shown to be malafide. The A.O. did not elaborate any reasons by recording the finding in the assessment order as to why the assessee was being disbelieved. The claim invited a difference of opinion. All this did not attract levy of 15 ITA 4221/M/05, ITA 4219/M/05, ITA 1107/M/08 & 1835/M/08

concealment of penalty and the ld. CIT(A) has correctly deleted the same. Therefore, ground No. is also rejected.

44. For the above discussion, the assessee's appeal in ITA No. 1107/Mum/2008 for A.Y. 2001-02 is allowed, whereas, the Department's appeal in ITA No. 1835/Mum/2008 is dismissed.

45. In the result, ITA 4221/Mum/2005, i.e., the assesasee's appeal in the quantum proceeding for A.Y. 2001-02 is partly allowed, ITA No. 4219/Mum/2005 being department's appeal in the quantum proceeding for A.Y. 2001-02 is dismissed, ITA No. 1107/Mum/2008 being the assesee's penalty appeal for A.Y. 2001-02 is allowed and ITA No. 1835/Mum/2008 being Department's appeal is dismissed.

Order pronounced in the open court on 8th July, 2015.

आदे श क' घोषणा खल ु े यायालय म0 1दनांकः 08-07-2015 को क' गई ।

Sd/- sd/- (N.K. BILLAIYA) (A.D. JAIN) लेखा सद य ACCOUNTANT MEMBER या यक सद य/JUDICIAL MEMBER मंब ु ई Mumbai; 1दनांक Dated 08-07-2015 [ व. न.स./ R.K., Sr. PS

आदे श क" # त%ल&प अ'े&षत/Copy of the Order forwarded to :

1. अपीलाथ! / The Appellant

2. "#यथ! / The Respondent.

3. आयकर आय?

ु त(अपील) / The CIT(A)- Concerned,, Mumbai

4. आयकर आयु?त / CIT- Concerned, Mumbai

5. Bवभागीय " त नDध, आयकर अपील)य अDधकरण, मंब ु ई / DR, ITAT, Mumbai F Bench

6. गाडF फाईल / Guard file.

ु ार/ BY ORDER, आदे शानस

स#याBपत " त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai