Delhi High Court
Cit vs Sarla Fabrics Pvt. Ltd. on 20 July, 2012
Author: S.Ravindra Bhat
$~7
* IN THE HIGH COURT OF DELHI AT NEW DELHI
DECIDED ON: 20.07.2012
+ ITA 788/2011
CIT ..... Appellant
Through: Mr. Deepak Chopra, Sr. Standing
Counsel with Mr. Harpreet Singh Ajmani,
Advocate.
versus
SARLA FABRICS PVT LTD ..... Respondent
Through: Mr. M.P. Rustogi with
Mr. Deepak Malik and Mr. K.N. Ahuja,
Advocates.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
MR. JUSTICE S.RAVINDRA BHAT (OPEN COURT)
%
1. The Revenue claims to be aggrieved by the order of the ITAT in
ITA No.3735/DEL/2010 dated 22.10.2010.
2. The facts in this case are not in dispute. The assessment in the
case was completed on 23.12.2005 when a loss of Rs.2,30,53,433/-
was claimed. The assessee had claimed deduction under Section
80HHC to the extent of Rs.1,32,88,262/-. This amount was disallowed
ITA-788/2011 Page 1
and the assessee lost its case on merit before the CIT (A) as well as
Tribunal. In this backdrop, the Revenue initiated proceedings under
Section 271 (1) (c) contending that penalty was justifiably leviable.
The CIT (A) allowed the assessee's appeal against the order of AO.
The Revenue's appeal was rejected by the impugned order where it
was held that: -
"The discussions in the impugned order show that the
assessee maintained separate books of accounts for
different units and, therefore, the claim in respect of
deduction u/s 80HHC is allowable, without offsetting the
loss from other unit. The CIT (Appeals) while dealing
with the quantum addition, as well as the ITAT denied the
claim of the assessee. When it came to the imposition of
penalty, it was contended by the assessee that all
particulars of the income have been disclosed and,
therefore, there was bonafide claim of deduction u/s
80HHC. There were several orders of the Tribunal
which were in favour of the assessee to claim the
deduction. It was further claimed that it has raised a
legal claim. If it is ultimately found to be legally
unacceptable, it does not mean that the assessee has
concealed the particulars of its income. Reliance was
placed on the decision of the Supreme Court in the case
of CIT VS. Reliance Petro products Pvt. Ltd.322 ITR 158
and also the decision of Dilip N. Shroff vs. Joint CIT 291
ITR 519. The Commissioner, based on the principle laid
down by the aforesaid cases of the Apex Court, has
deleted the penalty.
3. We have carefully considered the submissions of the learned
counsel for the Revenue. Recently in the context of another kind of
disallowance i.e. under Section 269SS of the Income Tax Act, this
Court was of the view that where there is a difference of opinion either
ITA-788/2011 Page 2
between the different Benches of the Tribunal or the High Courts,
which is finally settled by the pending judgment of the Supreme Court
and all the necessary facts have been disclosed by the assessee in its
return, proceedings under Section-271D would not be warranted.
This was so held in Commissioner of Income Tax, Delhi-IV v. I.P.
India (P.) Ltd. [2012] 204 TAXMAN 368 in the following terms: -
"8. On a careful consideration of the matter, we find that the
AO has relied on the judgment of the Jharkhand High Court
(supra) and referred the issue of levying penalty to the
Additional CIT. He did not examine whether the share
application monies can be treated as "loan" or "deposit"
within the meaning of Section 269SS. The Additional CIT has
merely endorsed the view of the AO in passing the penalty
order. The CIT(A) has found as a fact that the shares were
subsequently allotted to the applicant companies as shown by
the form filed before the Registrar of Companies. Neither the
AO nor the Additional CIT has taken the trouble to examine this
aspect while imposing the penalty. They have merely relied on
the judgment of the Jharkhand High Court (supra). The reliance
on this judgment appears to us to be misplaced. In Baidya Nath
Plastic Industries (P) Ltd. and Ors vs K.L. Anand (1998) 230
ITR 522, a learned Single Judge of this court pointed out that
the distinction between a loan and a deposit is that in the case
of the former it is ordinarily the duty of the debtor to seek out
the creditor and to repay the money according to the agreement
while in the case of a deposit it is generally the duty of the
depositor to go to the banker or to the depositee, as the case
may be, and make a demand for it. This judgment was
approvingly cited by a Division Bench of this court in Director
of Income Tax (Exemption) vs ACME Educational Society
(2010) 326 ITR 146 (Del). In this decision, it was held that a
loan grants temporary use of money, or temporary
accommodation, and that the essence of a deposit is that there
must be a liability to return it to the party by whom or on whose
behalf it has been made, on fulfillment of certain conditions. If
ITA-788/2011 Page 3
these tests are applied to the facts of the case before us, it may
be seen that the receipt of share application monies from the
three private limited companies for allotment of shares in the
assessee-company cannot be treated as receipt of loan or
deposit. In any case, the Tribunal has rightly noticed the
cleavage of judicial opinion on the point and held that in that
situation there was reasonable cause u/S.273B, applying the
judgment of the Supreme Court in Vegetable Products (supra)."
4. In the present case too as noticed by the Tribunal all the
foundational facts which ultimately led to the disallowance were
revealed by the assessee in the return. Furthermore, interpretation
which ultimately prevailed was pronounced upon by the Supreme
Court in the decision reported as IPCA Laboratories v. DCIT, 266 ITR
521. Previous to that various Benches of the Tribunal had interpreted
the provision in favour of the assessee even though two High Courts
i.e. Bombay and Madras High Court took contrary positions.
5. Having regard to these facts, this Court is of the opinion that the
decision of the Tribunal impugned in this case does not suffer from
any legal infirmity. No question of law is made out. The Appeal is
accordingly dismissed.
S. RAVINDRA BHAT, J
R.V.EASWAR, J
JULY 20, 2012
/vks/
ITA-788/2011 Page 4
