The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), in a recent ruling has held in favour of the assessee that, no penalty can be imposed under Minimum Average Tax (MAT) provisions for adjustments in book of profit with regard to disallowance of depreciation.
The appeal was filed by the assessee, Jubilant Infrastructure Ltd. against the penalty order passed by the Commissioner of Income Tax (Appeals) [CIT(A)].
The imposition of penalty of Rs.9,50,000/- under Section 271(1)(c) of the Income Tax Act,1961 with respect to disallowance of depreciation of Rs.28,39,272/- claimed on intangible assets namely, water use rights acquired by the assessee.
A one time payment of Rs.3,58,94,000/- M/s. Gujarat Industries Development Corporation (GIDC) for use of water supply and drainage connection which was capitalized in its fixed assets and the assessee has been claiming depreciation since A.Y.2011-12. No disallowance was carried out in this part.
The Tribunal comprising Anubhav Sharma and Pradip Kumar Kedia found merit in the plea of the assessee for cancellation of penalty on both counts i.e. under normal provision as well as under MAT provision.
It was observed that “In the absence of any malafide as demonstrated on behalf of the assessee, the penalty u/s. 271 (1) (c) are not attracted under the normal provisions. Not only the allowances for depreciation was accepted in the earlier assessment years, such disallowance has not resulted in increase in assessed income due to enhancement of deduction under section 80 IAB” and held in favour of the assessee that, “it is far fetched to impose penalty on such disallowance.”
It was also held that “Similarly adjustment in the book of profit on account on disallowance of depreciation could not culminate in imposition of penalty under the MAT provisions” relying on the judgment rendered in CIT Vs. Nalwa Sons Investments Limited (2010) by the Supreme Court of India, and allowed the appeal of the assessee.
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