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2013 (8) TMI 135 - ITAT MUMBAILevy of penalty u/s 271(1)(c) - payment of fee for technical services to non-resident without deduction of TDS thus disallowance u/s 40(a)(i) - technical default of delay in payment - Penalty upheld by CIT(A) - Held that:- The facts as stated by the CIT(A), rather than being adverse to the assessee favour it. This is as it is clear that the assessee was of the clear view that tax was not deductible on the said payment. Accordingly, neither any tax stood deducted, nor paid to the credit of the Central Government. It is only subsequently, on being so pointed out by the tax auditor, that the said default came to light, and the assessee realized his mistake in having not deposited the tax on the impugned sum. The matter stands duly reported by the tax auditor in his report u/s.44AB, and which accompanies and forms part of the assessee's return of income. How could, therefore, it be said that the assessee has not disclosed the correct particulars of its income. Further, following the advice of its tax advisor, tax has also been deposited to the account of the Government on 20.11.2003, prior to the filing of the return for the relevant year on 27.11.2003. No doubt, it does not explain the basis of the claim for the current year; the provision itself providing for the contingency and consequence of delayed payment, deferring the claim to the year of actual payment – the fact remains that the deduction becomes exigible for the subsequent year. The assessee would be entitled to claim the deduction for the immediately succeeding year, and which it has ostensibly not. In terms of the provision itself, therefore, it becomes a case of satisfaction of the principal condition for deduction, i.e., the payment of TDS, though subsequently. It is this that prompted us to state of the provision as having been substantially complied with. It would decidedly be a different matter if the provision made no such exception, as in that case there would be no question of the principal condition of the payment having been met and, thus, of the assessee being substantially compliant. This, therefore, serves as a valid explanation under Explanation (1B) to section 271(1)(c). In favour of assessee.
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