Landmark – Chennai ITAT ruling in GEM Granties on CONCEALMENT PENALTY: AFTER CONSIDERING DHARMENDERA TEXTILES (SC) HELD PENALTY IS NOT AUTOMATIC AND CANNOT BE EQUATED WITH TAX
In aforesaid ruling, Chennai ITAT after making reference to Larger Bench SC ruling in Dharmendra Textiles 306 ITR 277, has interalia held that "..We note that even though the Supreme Court held that penalty provision is civil liability and willful concealment is not an essential ingredient for attracting this liability, but still the penalty provision requires a strict construction and onus to prove there was concealment of income with a view ot avoid tax, is on the department. We are also of the view that penalty is not automatic and department has to establish fool proof case for attracting penalty. Merely because the addition is confirmed does not ipso facto attract the penalty provision. In the penalty proceeding, the whole matter has to be seen in a different perspective…."
Further reference in this connection may be made to Mumbai ITAT ruling in Armour Chemicals 27 SOT 552, wherein also after considering SC larger bench ruling in Dharmenrdra Textiles it is held by ITAT that "It is trite law that the assessment proceeding and the penalty proceedings are distinct and separate proceedings. Therefore, the findings recorded in the assessment proceedings cannot be conclusive, in the penalty proceedings, though the same may not be irrelevant"
Bombay High Court in Deepak Fertilizers ITA 95/2009 : Held on basis of its earlier decision in Mahindra case 261 ITR 501 that forfeited debenture money is capital receipt : Revenue Appeal contending same is chargeable under section 41(1) on basis of SC in TVS case: dismissed
Bombay High Court in Jahangir Gulabbhai in ITA 1405/2008 : Held sundry client deposits lying with assessee and not claimed by depositors cannot be assessed to tax u/s 41(1) till the same are written off.
Chennai ITAT in Real Image Tech Pvt Limited 120 TTJ PART VII Page 983/ 14 DTR 138: NON COMPETE FEES HELD TO BE INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION
Commercial right comes into existence whenever the assessee makes payment for non compete fees and after obtaining non compete right, the assessee can develop and rub his business without bothering about the competition and therefore non compete right is intangible asset eligible for depreciation. Further reference in this connection may be made to Del ITAT ruling in Climate Systems 27 SOT 218. However, adverse views can be found in Chennai ITAT ruling in A.B.Mauria India ITA 1293/Mds/2006 & Malladi Drugs ITA 2/Mds/2005.
Pune ITAT in S.Balan 15 DTR 60/ 308 ITR 151 : INTEREST IN AMOUNT BORROWED FOR SHARE INVESTMENT : HELD PART OF COST OF ACQUISITION AND NO DISALLOWANCE UNDER SECTION 14A
Interest on funds borrowed for acquisition of shares is to be taken into account towards the cost of acquisition for the purpose of computation of capital gains as prescribed under section 48(ii); capital gains on sale of shares being part of the total income of the assessee and not an exempt income, section 14A has no application.
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