TMI Blog2023 (5) TMI 1219X X X X Extracts X X X X X X X X Extracts X X X X ..... fore not exigible. CIT(A) has rightly deleted the penalty. Accordingly, we reject the appeals of the Revenue. - Shri G.S. Pannu, Hon ble President And Ms. Astha Chandra, Judicial Member For the Assessee : Shri Rishabh Melhotra, AR For the Department : Shri Sanjay Kumar, Sr. DR ORDER PER ASTHA CHANDRA, JM The two appeals filed by the Revenue are directed against two separate orders both dated 30.09.2019 of the Ld. Commissioner of Income Tax (Appeals) - 42, New Delhi ( CIT(A) ) whereby he deleted the penalty of Rs. 1,97,31,721/- and Rs. 4,95,98,366/- imposed under section 271(1)(c) of the Income Tax Act, 1961 (the Act ) for Assessment Years ( AYs ) 2013-14 and 2014-15 respectively. Since the common issue is involved, both the appeals are being disposed of by this common order. 2. The Revenue has raised the following common ground of appeal:- 1. Whether on the facts and in the circumstances of the case and in the law, the Ld. CIT(A) has erred in holding that the issue of royalty income in the hands of entity providing service in registration of domain name is still not settled even though the Supreme Court in the case of Satyam Infoway Ltd. Vs. Sifynet Solutions Pvt. Ltd. have held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14 and Rs. 43,77,61,396/- in AY 2014-15 was in the nature of royalty. The Tribunal held that rendering of services for domain registration amounts to rendering of services in connection with the use of an intangible property which is similar to trade mark. Therefore, the charges received by the assessee for services rendered in respect of domain name are royalty within the meaning of clause (vi) r.w. clause (iii) of Explanation 2 to section 9(1) of the Act. 3.2 Consequent to the above, the Ld. AO issued show cause notices to the assessee under section 274 r.w.s 271(1)(c) of the Act asking it to explain as to why penalty should not be levied. In response thereto, the assessee filed written submissions stating that the assessee is in appeal before the Hon ble High Court against the order of the Tribunal and therefore the penalty proceedings should be kept in abeyance. The submissions of the assessee were not acceptable to the Ld. AO who proceeded to levy penalty of Rs. 1,97,31,721/- for AY 2013-14 and penalty of Rs. 4,95,98,366/-for AY 2014- 15 under section 271(1)(c) of the Act. 4. Dissatisfied, the assessee carried the matter before the Ld. CIT(A). The Ld. CIT(A) recorded the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 9(1)(vi) of the Income Tax Act, 1961? 5.5 Meanwhile the AO initiated penalty under section 271(1)(c) of the act for concealment of income and furnishing of inaccurate particulars of income. The AO issued show cause notice as to why the penalty may not be imposed in this case? The AO did not accept the contention of the assessee and imposed penalty under section 271(1)(c) of the act for concealment of income and furnishing of inaccurate particulars of income. 5.6 The appellant pointed out that while taking the positions in the return of income regarding non changeability of tax on receipts and while furnishing response to the queries raised by the Ld. AO, the appellant company neither concealed any particulars of income nor furnished any inaccurate particulars of income. Further, the appellant argued that during the course of assessment proceedings, complete details of the same were furnished by the appellant company. The AO while concluding the assessment held based on the information supplied by the assessee that the receipts are in the nature of Royalty. 5.7 As regards the taxation of services, the appellant explained that the services provided by the Appellant are similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant submitted that the AO held domain name registration services as 'royalty1 under section 9(1)(vi) of the Act by invoking clause (iva) of Explanation 2 to section 9(1)(vi) of the Act and held income from domain name registration services as payment for the use industrial, commercial or scientific equipment and hence taxable as royalty. As against this, Hon'ble ITAT invoked clause (vi) read with clause (iii) of Explanation 2 to section 9(1)(vi) of the Act to hold that domain name registration services is in the nature of rendition of services in connection with the use of an intangible property which is similar to trademark and hence taxable as royalty. As regards reliance of the AO on the decision of Apex Court in the case of Satyam Infoway Ltd., Delhi High Court in the case of Tata Sons Limited and Bombay High Court in the case of Rediff Communications Ltd, the appellant highlighted that in fact, the said decisions have examined the issue of whether the domain names can be considered as intellectual properties such as trade mark under the Trade Marks Act, 1999. The appellant averred that the aforesaid decisions were not on the issue of taxability of domain name regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that Hon'ble APEX court has held domain name as trade mark. However, the issue of royalty income in the hands of entity providing service in registration of domain name is still not settled. Accordingly, Hon'ble Delhi High Court has admitted the substantial question of law in this case. 5.15 It is now settled that act of mere making of the claim by itself will not amount to furnishing inaccurate particulars regarding the income of the appellant. This position has been upheld by Hon ble Supreme Court in the case of Reliance Petro products wherein it is held as under: Therefore, it is obvious that it must be shown that the conditions under section 271(1) (c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the appellant can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the appellant Such claim made in the return cannot amount to the inaccurate parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot automatic consequence when an addition is made by disallowance of expenses and by not accepting the explanation given by the assessee. Merely making a claim which is held as not sustainable under law should not lead to penalization. When the assessee had furnished full details in the Return itself and the claim is debatable, reasonably plausible or may well have been accepted. Penalty u/s 271(1)(c) of the Act was not justified. 5.18 Keeping in view the above discussion, in my considered view, the appellant's explanation in the matter is held to be bonafide and acceptable. Accordingly the order of penalty is cancelled. 5. Aggrieved, the Revenue is in appeal before the Tribunal. 6. Before us, the Ld. AR reiterated the submissions made before the Ld. CIT(A) and pleaded that the penalty should not be levied as the issue in relation to which the impugned penalty has been sought to be levied by the Ld. AO is a debatable issue and the Hon ble Delhi High Court has admitted the assessee s appeal on the issue and has framed the following question of law vide its order dated 25.02.2019 in ITA 891/2018, a copy of which was placed on record:- Whether, in the facts of the case and in law, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and held as under:- Both the CIT(A) as well as the ITAT have set aside the penalty imposed by the Assessing Officer under Section 271(1)(c) of the Income Tax Act, 1961 on the ground that the issue of deduction under Section 14A of the Act was a debatable issue. We may also note that against the quantum assessment where under deduction under Section 14A of the Act was prescribed to the assessee, the assessee has preferred an appeal in this Court under Section 260A of the Act which has also been admitted and substantial question of law framed. This itself shows that the issue is debatable. For these reasons, we are of the opinion that no question of law arises in the present case. 11. In Yugal Kishore Jajoo (supra) the Indore Bench of the Tribunal while taking cognizance of the above decision of the Hon ble Delhi High Court and also relying on the decision of the Hon ble Supreme Court in the case of Santosh Hosiery, Civil Appeal No. 1117 of 2001 dated 03.02.2001 held as under:- 9. Furthermore, Hon'ble Delhi High Court in the case of CIT vs. Liquid Investment Limited, I.T.A.No. 240/2009 vide its order dated 5.10.2010 has clearly held that where High Court accepted substantial ques ..... X X X X Extracts X X X X X X X X Extracts X X X X
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