Relief to Airport Authority of India: ITAT deletes Penalty imposed by Income Tax Department [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench has recently granted a major relief to the Airports Authority of India where the Tribunal upheld an order of the Commissioner of Income Tax (Appeals) deleting the penalty imposed on the assessee in connection with a deduction claim

Earlier, penalty proceedings have been initiated by the income tax department for furnishing of inaccurate particulars of income to the tune of Rs.4,86,99,262/- while claiming Research & Development (R&D) expenditure. The Assessing Officer (AO) was of the view that the said expenditure shall be treated as capital in nature and therefore, disallowed the same.

The assessee contended that none of the inaccurate particulars have been furnished while claiming deduction of Rs.4,86,99,262/- on account of R&D expenses.

The Tribunal bench comprising Judicial Member Mr. Kuldip Singhand Accountant Member Mr.O P Kantobserved that undisputedly, the assessee is a public sector undertaking and maintaining 125 airports comprising 68 operational airports, 25 civil enclaves i.e. Civil Air Terminals at Defense controlled airports and 31 non-services at all civil airports in the country.

“It is also not in dispute that the assessee has claimed to have incurred expenditure of Rs.5.41 crores as expenses on R&D. It is also not in dispute that assessee has set up R&D centre at Hyderabad during the year under assessment. AO treated the payment made for R&D expenditure as part of setting up the said R&D centre at Hyderabad. It is also not in dispute that the AO treated all the expenditure claimed by the assessee to be capital in nature by allowing an amount of Rs.54,11,029/- i.e. 10% as depreciation and made addition of the remaining amount of Rs.4,86,99,262/-.”

Upholding the order quashing penalty on the assessee, the Tribunal added that “when the notice issued by the AO is bad in law being vague and ambiguous having not specified under which limb of section 271(1)(c) of the Act the same has been issued, the penalty proceedings initiated u/s 271(1)(c) are not sustainable.”

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