By C. N. Vaze
Shailesh Kamdar
Jagdish T. Punjabi
Bhadresh Doshi
Chartered Accountants
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New Page 2
Part
A: Reported Decisions
48 (2010) 124 ITD 353 (Delhi)
Model Footwear (P.) Ltd. v. ITO
A.Y. 1998-99. Dated : 22-5-2009
S. 271(1)(c) — Deduction u/s.80HHC — Assessee included
miscellaneous income without reducing 90% — Penalty cannot be levied simply
because assessee had not reduced 90% of other incomes.
The assessee claimed deduction u/s.80HHC of Rs. 1,52,63,904.
While doing so, the assessee included interest income, miscellaneous income and
excess provision written back in the profit without reducing 90% thereof. The
AO, by applying the Explanation (baa) to S. 80HHC, excluded 90% of aforesaid
amounts and worked out deduction u/s.80HHC. He also initiated penalty
proceedings u/s.271(1)(c).
The CIT(A) confirmed the above additions. Thereafter, the AO
proceeded with penalty proceedings.
The CIT(A) confirmed that penalty u/s.271(1)(c) is leviable
in the assessee’s case.
Held :
The question of excluding interest income and miscellaneous
income is dependent upon the nature of incomes — whether they are directly
connected to operations of the assessee’s business. Simply because the assessee
had claimed deduction without reducing 90% of aforesaid incomes, it cannot be
said that the assessee has concealed income or has made incorrect claim. The
assessee’s claim was a bona fide one and the assessee has disclosed all material
facts. Hence, no penalty u/s.271(1)(c) is to be levied.
Note : The above issue was the main issue involved in the case.
The other issues being minor issues have not been reported.
