PR CIT-8 Vs. SAMTEL INDIA LTD

JUDGEMENT

(1.) The following question of law arises in the revenue's appeal, under Section 260A of the Income Tax Act, 1961 (hereafter the "Act"): "Did the Income Tax Appellate Tribunal (ITAT) fall into error in holding that the assessee/respondent was not liable to penalty to the tune of Rs. 1, 02, 53, 238/- under Section 271(l)(c) of the Income Tax Act, 1961 in the circumstances of the case?"

(2.) The relevant facts are that the assessee company was primarily engaged in manufacturing of 'black and white' ("B & W" hereafter) picture tubes for use in televisions. As the market for black and white televisions declined sharply in the year 1995-96 the assessee was forced to shut down the manufacture of B & W picture tubes in financial year 2005-06. During the Financial Year 2007-08, in order to continue in the business, the assessee company decided to set up another project for manufacture of 'metal parts' for which the company purchased some machinery to the tune of Rs. 3.34 crores. The Company was unable to mobilize funds for the machinery and as a result the machinery could not be removed from the port.

(3.) During the year under 2008-09 the financial position of the company worsened further and finally, the assessee company dropped the idea of putting up the new project. Accordingly, the management decided to write off the machinery so purchased after retaining estimated scrap value of the machinery in the books of account. The decision of the management to write off the project was disclosed in the Annual Accounts of the company, and was approved by the assessee's directors and shareholders in the Annual General Meeting (AGM).