INCOME TAX ACT, 1961

Section 271(1)(c)

Penalty under section 271(1)(c) - Additions on account of deduction under section 80IB(7) and netting off of interest and disallowance of expenses of Jaipur Project - Imposition of -

Assessee-company was engaged in business of running and operating hotels and resort and claimed deduction under section 80IB (7) which was 50% of the total business income from running of hotels and resort. AO noted that assessee had claimed deductions on Interest income (FDR interest) and rent which were not related to business. He had also made further addition on account of disallowance of expenses of Jaipur project and disallowance on account of netting of interest income. Accordingly, levied penalty under section 271(1)(c). Held: It was seen that assessee's claim was that interest income on short term surplus funds which was kept for running hotel business, rent receipt etc. had direct nexus with hotel business and these were income derived from hotel business. Similarly, expenses related to Jaipur project were also claimed on the ground that it was not a separate business but a part of assessee's own business. Simply because disallowances have been made without any adverse material on record but on some legal interpretation, then no penalty could be levied in view of the decision of Apex Court in the case of Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC) : 2010 TaxPub(DT) 1683 (SC), therefore penalty was liable to be deleted.

REFERRED :

FAVOUR : In assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 271(1)(c)

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