Txa/53/2010 Of The Commissioner Of Income Tax v. Zuari Maroc Phosphates Private Limited

IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 53 OF 2010 The Commissioner of Income Tax,Aayakar Bhavan,Patto Plaza,Panaji, Goa.…...AppellantsV e r s u sZuari Maroc Phosphates Private Limited,Zuarinagar, Goa.…...RespondentMs. Asha Dessai, Advocate for the Appellant.Coram :-A. S. OKAF. M. REIS, JJ.thDate : 28 July, 2010.ORAL ORDER (Per A. S. Oka, J.) Heard the learned Counsel appearing for the Appellant. 2.This is an Appeal under Section 260-A of the Income Tax Act, 1961. The Appeal arises out of penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961. 3.On 28[th] October, 2004, the Respondent-Assessee filed return of income declaring loss of Rs.14,70,90,290/-. The assessment was made by Order dated 25[th] November, 2005, by fixing the total taxable income of Rs.4,68,26,023/-. Disallowance was made on account of management service fees of Rs.18,08,35,360/-. Notice was issued under Section 271(1)(c) of the said Act to the Respondent-Assessee on account of furnishing inaccurate particulars in the return of income. After adjudication, a penalty was imposed by the Assessing Officer by holding that there is an evasion of income tax to the extent of Rs.19,16,50,016/-. This amount is comprised of the managerial service fees of Rs.18,08,35,360/- and interest income of Rs.1,08,14,656/-. 4.An Appeal was preferred by the Respondent-Assessee against the said Order. The Appeal was partly allowed and penalty imposed was maintained in respect of management services fees and in respect of additional amount of Rs.1,08,14,656/- on account of short of interest, the penalty was deleted. 5.There were two Appeals preferred against the said Order, one was by the Respondent-Assessee and the other was by the Appellant. By the impugned Order, the Appeal preferred by the Respondent-Assessee was allowed. By passing an Order of remand, the Appeal preferred by the Appellant was allowed for statistical purpose. 6.The Appellate Tribunal referred to the observations made by the Assessment Officer in his earlier Assessment Order that the Assessee may claim the expenditure of management service fees in the year in which the corresponding income is received. The submission of the Respondent-Assessee was that it was beneficial for the Respondent-Assessee to claim the expenditure on account of managerial fees in the year in which the corresponding income was expected to be received than to get deduction for the same in the year under consideration. It was held by the Tribunal that by accepting the observations made by the Assessing Officer, the claim of expenditure on account of managerial fees was made by the Assessee in the year in which interest income was received. The Tribunal held that the claim of the Assessee for deduction of managerial fees was a bonafide claim made by it in the year under consideration. In view of the Order of the Assessment Officer, it was held that the claim made by the Assessee was on some legitimate basis. Therefore, the Tribunal observed that this was not a fit case to impose penalty under Section 271(1)(c) in respect of the addition made on account of disallowance of the said claim on account of managerial fees. Therefore, while allowing the Appeal preferred by the Assessee, penalty was set aside. 7.The Appeal preferred by the Appellant was for challenging the Order setting aside the penalty in respect of addition of Rs.1,08,14,656/- passed by CIT(A). As there was a remand as in respect of the said addition in quantum proceedings, to that extent, by the impugned Order, the Tribunal passed an Order of remand in penalty proceedings. This part of the Order of remand cannot be faulted with as it protects the Appellant. 7.The Appeal preferred by the Appellant was for challenging the Order setting aside the penalty in respect of addition of Rs.1,08,14,656/- passed by CIT(A). As there was a remand as in respect of the said addition in quantum proceedings, to that extent, by the impugned Order, the Tribunal passed an Order of remand in penalty proceedings. This part of the Order of remand cannot be faulted with as it protects the Appellant. 8.In the present case, the finding of fact recorded by the Appellate Tribunal is that there was a legitimate basis for the claim made by the Assessee for deduction of account of managerial fees. As pointed out earlier, in the Assessment Order passed in the earlier year, what was observed by the Assessment Officer was that the Assessee may claim of expenditure in the year which corresponding income was received. Accordingly, claim for deduction on account of managerial fees was made in the year in which income was received. The finding of fact recorded by the Tribunal that the claim of deduction of managerial fees was a bonafide claim, is supported by material on record. In view of the said finding of fact, no substantial question of law arises and, therefore, the Appeal is liable to be dismissed. 9.We, however, make it clear that we have made no adjudication as regards subject matter of the Order of remand by the Tribunal. Subject to what is stated above, the Appeal is dismissed. A. S. OKA, J. arp/* F. M. REIS, J.