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2022 (7) TMI 675 - AT - Income TaxPenalty u/s 271(1)(c) - Software Maintenance service charges treated as Royalty in the draft order - HELD THAT:- Access is automatically obtained to the underlined technology of the Facility when it is used. But, strictly speaking, the user of an equipment implies its use simpliciter de hors access to its underlined technology facilitating the operation. As section 9(1) of the Act is a deeming provision and it unequivocally provides, inter alia, for treating consideration for the use of equipment as royalty, we cannot countenance the contention of the ld. AR for reading the words 'use of equipment’ as equivalent of `getting access to the underlined technology’. In our view, the proposition suggesting to read the mandate of copyright royalty cases in the context of industrial royalty cases is grossly misconceived. That appears precisely to be the reason for the assessee appreciating the correct position as per law and thus accepting the assessment order and not challenging the taxability of the amount as royalty in quantum proceedings. The mere fact that an assessee has not challenged the addition does not per se lead to imposition or confirmation of penalty u/s.271(1)(c) of the Act thereon. The relevant facts and circumstances of the case need to be viewed independently for the purpose of penalty, which is distinct proceeding. Amongst others, it is a well settled proposition that penalty cannot be imposed on a debatable issue. If a favourable view initially canvassed by the assessee is judicially substantiated, it cannot lead to imposition of penalty simply because there exists a contrary view which the assessee has finally chosen by not filing an appeal. Reverting to the prevailing factual panorama, we find that as against the unfavorable view of the Pune Tribunal in the cases there is another decision in Ovid Technologies Inc. [2022 (3) TMI 1019 - ITAT DELHI] holding that consideration received for granting license to access online database does not fall within the definition of Royalty. In view of the prevalence of divergent views on the point, we hold that the penalty is not sustainable. The conclusion drawn in the impugned order is, ergo, accorded imprimatur on this legal score. Appeal of assessee allowed.
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