- (1.) We heard learned Counsel for the Appellant.
(2.) The appeal is founded on two questions, which according to the Revenue involves substantial points of law. These questions, as suggested by the Revenue are:- "(i) Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in law in deleting the penalty of Rs.6,66,66,190/- ignoring the assessee's unsubstantiated claim of deduction under Section 80-IB from the DEPB benefits since the said benefit were lawfully not a part of the net profit of the eligible industrial undertaking for the purpose of the said section. (ii) Whether on the facts and in the circumstances of the case the Tribunal was justified in law in allowing the carry forward of unabsorbed depreciation of Rs.3,27,26,923/- when there was no such unabsorbed depreciation determined nor allowed to be carried forward in the assessment of the immediately preceding year i.e. assessment year 2007-08."
(3.) On both these counts the Commissioner of Income Tax (Appeals) and the Tribunal have decided in favour of the Assessee. On the first question, the Tribunal has held:- "(8). We have given a very careful consideration to the rival submissions. As far as imposition of penalty on the claim of the Assessee that export incentives were received on export of ferro alloys manufacture in dwarika unit and therefore such incentive should also be considered as profit derived from the business of manufacture of ferro alloys and deduction u/s 80IB of the Act should be allowed, we find that the issue was debatable when the Assessee filed its return of income for the AY 2008-09 i.e., on 30.9.2008. The decision of the Hon'ble Supreme Court in the case of Liberty India Vs. CIT, 2009 183 Taxman 349 (SC) rendered in the year 2009 ultimately settled the issue as to whether deduction u/s.80-IB of the Act can be on export incentives or not. The Hon'ble Supreme Court held that export incentives cannot be considered as profits derived from the business of manufacture and it was traceable only to the scheme of incentive under which the Assessee received export incentive. Prior to this decision, there were conflicting decisions of various High Courts and ITAT. Therefore the claim made by the Assessee cannot be held to be an act of concealment of income or furnishing of inaccurate particulars of income. the Hon'ble Delhi High Court in the case of CIT Vs. Harshvardhan Chemicals & Minerals, 2003 259 ITR 212 (Del) held that where an arguable, controversial or debate deduction is claimed, the claim cannot be said to be false, otherwise it would become impossible for any assessee to raise any claim or deduction which might be debatable. In view of the aforesaid legal position, we are of the view that the CIT(A) was fully justified in cancelling the order of the AO in imposing penalty on the disallowance of deduction u/s.80-IB of the Act on export incentives. 9.As far as claim of the Assessee for deduction u/s.80-IB of the Act on the interest of Rs.73,76,953/- on FDs is concerned, it is no doubt true that the Hon'ble Supreme Court in the case of Pandian Chemiclas 262 ITR 278 took the view in the context of Sec.80HH of the Act that interest earned on the deposit made with the Electricity Board for the supply of electricity to the appellant's industrial undertaking cannot be treated as income derived from the industrial undertaking within the meaning of s.80HH. This decision of the Hon'ble Supreme Court was rendered on 24.4.2003 and the assessee filed its return of income on 30.9.2008. Hence it is clear in the present case on interest issue on fixed deposits, the decision of the Hon'ble Supreme Court mentioned laid down the law that was already available at the time of filing return of income by the assessee. The claim of the assessee established on this issue was patently wrong and penalty imposed thereon was rightly levied. The Cross-Objection, according to us, is liable to be dismissed. Respectfully following the principle laid down by the Hon'ble Supreme Court in the case of Pandian Chemicals , we therefore hold that imposition of penalty on the disallowance of deduction u/s.80-IB of the Act on interest on fixed deposit is sustained. We therefore dismiss the Cross Objection of the assessee in this regard.";