Metro Tyres Limited Wins ITAT Case: Penalty Order Quashed
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) recently ruled in favor of Metro Tyres Limited in an important case concerning the claim of depreciation on non-competing fees. The bench, comprising of Yogesh Kumar U.S. (Judicial Member) and Pradip Kumar Kedia (Accountant Member), made the significant decision to delete the penalty imposed subsequent to the addition of Rs. 21,89,970, which was made on account of disallowance of depreciation on non-compete fees.
The matter arose when the assessment order was passed against the assessee, involving disallowance of depreciation claimed on non-compete fee of Rs. 21,89,970, along with a disallowance under section 14A of Rs. 7,37,674.
Upon further appeals, the Commissioner of Income Tax (Appeals) [CIT(A)] partially ruled in favor of the assessee, deleting the disallowance made under section 14A of the Income Tax Act but sustaining the disallowance of Rs. 21,89,970 claimed as depreciation on non-compete fee. Subsequently, penalty proceedings were initiated against the assessee, resulting in the imposition of a penalty, against which the assessee appealed to the CIT (A) but did not find success.
The assessee argued that no penalty should be levied in this situation, emphasizing that depreciation on non-compete fees is a debatable issue, and therefore, no penalty under Section 271(1)(c) can be justified. The department, however, stood by the orders of the lower authorities and sought dismissal of the appeal.
In a pivotal turn of events, the tribunal allowed the appeal, asserting that the provisions of Section 271(1)(c) are not applicable in this case and subsequently quashing the penalty order passed by the Assessing Officer for the Assessment Year 2014-15.
The represented parties in this case were Salil Kapoor as the Counsel for Appellant and Anshul as the Counsel for Respondent.
The case, officially titled “Metro Tyres Limited Versus ACIT,” was filed under Case No. I.T.A. No. 1873/DEL/2020 (A.Y 2014-15).
For further details and to read the full order, refer to the official document