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TMI Blog2004 (6) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... r overhaul of its air-crafts, engines and components etc. She however held that such payments to the residents of UK and USA are not chargeable to tax keeping in view the provisions of the DTAAs with those countries. The Assessee is in the appeal before us for all the three years. The Revenue is in appeal for Financial Years 1998-99 to 1999-2000 only. As the issues are common in all the three years, these appeals are disposed of by a consolidated order. 2. The remaining three appeals are by assessee against sustenance of penalty under section 271C for these three years. We will take first the appeals of the assessee and department in regard to levy of interest under section 201 and 201(1A). 3. The brief facts of the case are that the assessee is a domestic company which had acquired four Boeing Cargo Aircrafts in mid-1997 from a foreign company. The assessee obtained license from the Director General of Civil Aviation (DGCA), the licensing authority, to operate these aircrafts on international routes only. It also engaged crew, technical personnel, engineers and other ground staff and wet-leased the aircrafts to a foreign cargo company. The assessee periodically made payments to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Article 12 of the DTAA read with the Memorandum of Understanding with USA which equally applied to the UK Treaty. Payments made to the residents of USA and UK were held to be 'business profits' and since those companies did not have a PE in India, their income was not chargeable to tax. The Revenue is in appeal against the order of the CIT(A) on this point. 5. Both the assessee and Revenue have raised several grounds of appeal. The learned counsel has filed written submissions on issue-wise. Thereafter the counsel of the assessee argued grounds issue-wise and attention of the Bench was drawn on various documents placed on record. These documents are in shape of copy of agreement; copy of written submissions; details of payments; detail of receipts. Attention of the Bench was drawn on various case laws relied upon by him. The counsel of the assessee has also invited attention of the Bench on issue-wise written submissions placed on record. On the other hand, the learned DR. strongly relied upon the orders of Assessing Officer and the findings of CIT(Appeals) to the extent the order of the Assessing Officer was confirmed. Heavy reliance was placed on the decisions relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... argeable to tax under the provisions of the Act, the assessee has raised three pronged grounds, which are discussed under Issue Nos. 1(a), 1(b) & 1(c). Issue 1(a) "Whether payments made to the foreign companies are for execution of normal maintenance repairs without any involvement of or consultation with the assessee, and therefore these do not tantamount to "fees for managerial, consultancy or technical services" as defined in Explanation 2 to section 9(1)(vii) of the Act?" 7. This issue goes to the root of the controversy. The company operates aircrafts which it had acquired in the middle of 1997 from a foreign company. It had wet-leased these aircrafts to another foreign company. The CIT(A) has held that the major payments were covered by a comprehensive 'Technical Support Services Agreement' as per attachment 'A' of the Contract with Technik. She held that services rendered by Technik were not in the nature of routine repairs as they involved modification of aircraft and its designing for airworthiness etc. which involved knowledge of sophisticated technology and that highly trained engineers were employed by these foreign companies in carrying out the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the aircrafts. Those under the Aircraft Act of India, 1934 read with Aircraft Rules, 1937, the necessary regulatory and enforcement powers have been delegated by the Government to the DGCA, which issues notifications and guidelines etc. from time to time in regard to the maintenance and upkeep of aircraft. Every aircraft operator has to strictly abide by these guidelines. Failure to do so would result in immediate withdrawal of the license and the aircraft would be grounded. It is stated that since the assessee was under obligation to keep the aircrafts in flying condition, it had to maintain them in accordance with the guidelines of DGCA so that it would have a valid airworthiness certificate without which it would not be possible to carry on the business. It is explained that the engineering department of the assessee would constantly track the flying hours of every component. That before the expiry of flying hour, component for overhaul repairs which ordinarily would also involve replacement of parts would be dismantled by the assessee's engineers and flown to Technik workshops in Germany. It is stated that parts were supplied by Technik under separate agreement of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course. 13.1 It was contended that the CIT(A) has failed to appreciate that the Art. 2 of the Agreement clearly states that such services would be provided by Technik at the request of the assessee only. It is submitted that the agreement that the responsibility for keeping the aircraft in a state of airworthiness is that of the assessee. Ld. Counsel emphasized before the CIT(A) that these services were not availed of by the assessee and no payment was made on this account. Ld. Counsel took us through the invoices raised by Technik which were filed with the CIT(A) (contained in assessee's Paper Book B), to show that no payment was made for any of those services. It was submitted the modification of an aircraft including development design is an extremely rare event occurring when the manufacturer (Boeing in the present case) finds something seriously wrong with the aircraft of a particular model and issues an international alert. Every licensing authority including DGCA insists that the prescribed modification or alert service is carried out in an authorised workshop. It is stated that no such need for modification or alert service arose during the period that the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. It was explained to the CIT(A) that no hotel bills were paid for by Technik, as it overhauled components only. The components were flown to Technik facilities in Germany with airway bills without any personnel of the assessee accompanying them. However, in so far as payments to ATC, UK are concerned, the CIT(A) has herself finally held that these payments did not constitute 'fees for technical services' as per the provisions of the DTAA with UK. It was further stated that the assessee did not pay any hotel bill for any personnel of Technik as no employee of Technik ever visited India for supervising repairs or any consultancy service to the assessee. 15. It was explained that as per the International Conventions, every component containing rotable parts is allotted a unique identity number and its historical record is maintained in a tag which accompanies the component throughout its life. Such component including engines needs to be overhauled periodically in accordance with Boeing's manual. The assessee sends the components together with tag to the workshop abroad. Technik's workshops in Germany are duly authorised by the manufacturer, namely, the Boe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is otherwise described as carrying on a profession is in contrast to the concept of 'carrying on any work'. Reference was also made to the Supreme Court decision in the case of Hindustan Aeronautics Ltd. v. State of Karnataka [1984] 55 STC 314, wherein the contract for maintenance repairs of aircrafts have been held to be works contract. Reliance was also placed upon the decision of Hon'ble Supreme Court in the case of State of Madras v. Ganon Dunkerley & Co. (Madras) Ltd. [1958] 9 STC 353 and Builders 'Association of India v. Union of India [1989] 73 STC 370 wherein it was held that works contract constitute a class of contracts in which the contractor either himself or through his employee uses certain expertise in performing the work for achieving the task contracted for. That it is in the process of achieving such a task that the contractor utilises his expertise. That when the work is carried out on an inanimate object without any participation or interaction the assessee, the 'human element' is absent. 18. The Ld. Counsel also referred to the decision of the Supreme Court in the case of Birla Cement Works v. CBDT [2001] 248 ITR 216, wherein the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for the contracted consideration, Sochata was obliged to render such services without any request from Sahara. That the payments were admittedly made to Sochata for such services. The Ld. Counsel submitted a chart, comparing the terms of Sochata Sahara Contract vis-a-vis the Technik contract. A copy of this chart was also given to the Ld. DR and he has not disputed the contents. The chart is reproduced below:- Comparative Chart of terms of contract between Sochata France & Sahara Airlines vis-à-vis Lufthansa Technik, Germany & LCI S. No. Sochata-Sahara Contract Art II Technik LCI Contract PB II (1) (2) (3) A. Repairs Engineering coordination overall material co-ordination. Repairs of engines and components. No engineering or material co-ordination B. Provide parts incorporated into equipment in the course of repairs. Provide parts under separate and independent individual contracts of loan/exchange or sale. Material used during the repairs were sold and invoiced accordingly. C. Maintain files on all related engineering specifications, etc. No such requirement. No such facility availed of. No payment was made for any such service. D. Provide warehousing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India. B. (1) New parts, material and supplies at list price plus 10.5% handling charges. For material consumed list price +25%. (2) Used serviceable parts at 8.5% of the list price. New or old parts to be loaned or exchanged or sold under separate contracts for each and every such part on (1) Rental of 5% of Unit Price + 1% of the price per day for first ten days and 1.5% of the listed price per day (pp. 437 and 438 of PB III). (2) In case of sale list price + 75%. (3) Cost of packing, custom duty, taxes and forwarding to be borne by the customer. Optional Service No Optional service. All support services including training is covered by the consideration under the contract. The entire management of inventories and maintenance to be carried out by Sochata. (1) Airworthiness directive would be carried out on a specific request of the customer (LCI). No such request was ever made. Hence, no such service was performed by Technik and nor any payment therefore made. (cl. 1.2.1 read with 3.1 of Technik contract) (2) Modification status will be advised by the customer (LCI). No suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res would be covered under section 194C or 194J of the Act? Ans: Routine, normal maintenance contracts which include supply of spares will be covered under section 194C. However, where technical services are rendered, the provision of section 194J will apply in regard to tax deduction at source". (Reproduced from pg. 6530 of Chaturvedi & Pithisaria's Income Tax Law, Fifth Edition, and Vol. 4). It was submitted that Technik carried out normal maintenance repairs including supply of spares, and therefore, had Technik been a domestic-company the payments to it would be covered by the provisions of section 194C and not by the provisions of section 194J, which cover fees for technical services as defined in section 9(1)(vii). The Ld. Counsel contends that periodic overhaul repairs of components carried out in accordance with the instructions issued by the DGCA were routine normal repairs as against 'out-of-ordinary' repairs including assignment of technical personnel, which may be required in case of break-down or accident. 21. For the Revenue, the Ld. CIT(DR) strongly relied on the orders of the authorities below. He submits that the decision of Delhi High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees for technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'. The Explanation defines fees for technical services to mean that any payments made to a non-resident for rendering services like 'managerial' 'technical' or 'consultancy' services would be treated as "fees for technical services". The three types of services envisaged above also include the provision of the services of technical or other personnel. 24. It cannot be disputed that the assessee is under legal as well as contractual obligation to keep its aircrafts in airworthy condition. It has therefore two options available for achieving this object:- a. to handover the management of maintenance and upkeep of aircrafts and inventories to a contractor for running a successful programme for keeping them in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ik shall not be held responsible for excess of performance dates and/or non-performance of the agreed work." If unforeseen major defects on airframe, systems, power plants or components have to be rectified, if material ordered from suppliers is temporarily or definitely not supplied, etc..." Article 14 Legal Provisions 14.1 "This Agreement shall be subject to, and construed exclusively in accordance with, the existing laws of the Federal Republic of Germany. The exclusive place of jurisdiction for any legal actions that should arise out of, or in connections with, this Agreement shall be Hamburg/Germany. 14.3 The place of delivery and redelivery shall be the Lufthansa Technik Base performing the work. 14.4 Lufthansa Technik reserves its ownership rights on all components, engine accessories, and spares supplied until full payment of all invoices has been made. 14.5 In case of non-payment by the Customer, both parties agree that Lufthansa Technik has by virtue of its work performed a right of retention as well as a contractual lien of the subject-matter being in custody of Lufthansa Technick. The right of retention and the contractual lien as well as a set-off-right may a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttributable to such services. These services are optional and could be performed on specific request by the assessee. On the facts brought out before us such option was not exercised by the assessee. Ld. DR also could not indicate any clause in the Technik Agreement which would oblige the assessee to pay the fees towards optional services even if such an option is not exercised by the assessee. In the circumstances, we hold that CIT(A) was not correct in making attachments 'A' and 'B' of the Technik Contract as the basis for concluding that the payments were primarily made for rendering of technical services. The only relevant part of the Technik contract which needs consideration is the 'Attachment C which deals with 'Components Overhaul'. 27. The relevant terms of the contract by way of attachment 'C' of the Technik Agreement are:- Attachment 'C' 1. Scope of services 1.1 Repair, overhaul, modification and test of all components as far as identical with Lufthansa Technik's own components. In cases of differences in the dash-number repair/overhaul items shall only be accepted after Lufthansa Technik's prior telex confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 15 of the judgment observe: "There may be three categories of contracts: (i) The contract may be for work to be done for remuneration and for supply of materials used in the execution of the work for a price; (ii) It may be a contract for work in which the use of the materials is ancillary or incidental to the execution of the work; and (iii) It may be a contract for supply of goods where some work is required to be done as incidental to the sale. The first contract is a composite contract consisting of two contracts one of which is for the sale of goods and the other is for work and labour. The second is clearly a contract for work and labour not involving sale of goods. The third is a contract for sale where the goods are sold as chattels and the work done is merely incidental to the sale." Attachment "C" of the Technik contract is the first type of "work contract" as categorised in the above quoted passage. 29. A Chart was furnished before the CIT (Appeals) and also before us giving the year-wise breakup of the payments made to Technik and others (Page 152 of Paper Book B) under the heads; 'labour', 'material', 'repairs' and 'othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is that of CBDT v. Oberoi Hotels India (P.) Ltd. [1998] 231 ITR 148 (SC) wherein the Supreme Court has held that professional services like recruitment and training of staff, promotion of the business of the Hotel in Nepal, and running and management of the hotel were in the nature of professional services. The Apex Court held that the expression 'technical services' embraces professional services. This decision has no application as no such controversy is involved in the present case. 32. In GVK Industries Ltd. v. CIT [1997] 228 ITR 564 (AP), relied upon by the Assessing Officer, the question before the Andhra Pradesh High Court was whether financial consultancy by way of advice on structuring of an international loan could be said to be technical services. The Hon'ble High Court held that such financial consultancy services were technical service by observing:- "The petitioner-company intended to utilise the expert services of qualified and experienced professionals who could prepare a scheme for raising the required finances and tie up the required loan. Being unable to find such a professional in India, it had to seek the services of a consultant outside Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: "Explanation 2: For the purposes of this clause 'fees for technical services' means any consideration (including any lump sum consideration) for the rendering of any managerial, technical or consultancy services including the provision of services of technical or other personnel but does not include consideration for any construction assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head 'Salaries'. The Tribunal observed:- "It will be clear from this section that any consideration paid to a non-resident for rendering services like managerial services, technical services or consultancy services would be treated as technical fees. The three types of services would also include the provision of services of technical or other personnel. It might be possible to argue that in merely repairing certain machineries for which the warranty period had already expired, there is no consultancy services either the provision of technical or other personnel Normally, managerial or technical consultancy services would be done by a non-resident company by utilizing the services of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 194J reads as under:- "(1) any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any sum by way of- (a) fees for professional services, or (b) fees for technical services Explanation-for the purposes of this section,- (a)............... (b) 'fees for technical services' shall have the same meaning as in Explanation 2 to clause (vii) of sub-section (1) of section 9". The said circular excludes 'routine maintenance repairs' from the scope of section 194J which deals with TDS on 'fees for technical services'. Both section 9(1)(vii) and section 194J rely on the definition given in Explanation 2 to section 9(1)(vii). Therefore, the clarification issued by the Board in the context of section 194J with respect to normal maintenance repairs would be relevant for understanding true import of the said Explanation in the context of section 9(1)(vii)(b) of the Act. 36. We also find no merit in the contention of the Ld. DR that since section 195 deals only with payment to a non-resident, the assessee cannot raise the plea that the income of the non-resident on account of such payments was not charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii). The assessee succeeds on this ground. Issue No. 1(b) "Whether payments for repairs of aircrafts was made for earning income from sources outside India and therefore to be excluded from 'fees for technical services' under section 9(1)(vii)(b) of the Act"? 38. The assessee's contention is that payments made to the non-residents is for earning income from sources outside India and these are therefore to be excluded from 'fees for technical services'. Section 9(1)(vii)(b) of the Act reads as under: "A person who is a resident, except where the fees are payable in respect of services utilised in a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India" To fall within the ambit of the exclusionary provision of section 9(1)(vii)(b), the following conditions are required to be fulfilled:- (a) the assessee is resident of India, (b) income is earned from a source outside India, and (c) there exists a direct nexus between the payment (expenditure) and earning of the income. All the three conditions should be cumulatively satisfied for exempting "fees for technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranteed block hours. The assessee is not free to lease the cargo space to a third party without prior permission of the LCAG. 40. In support of the contention that the income was earned from sources outside India, a certificate dated 22nd December, 2000 from Lovelock & Lewes, Chartered Accountants, was filed with the CIT(A) which reads as under:- To whomsoever it may concern We have verified from books and records maintained by that M/s. Lufthansa Cargo India Limited having Registered Office at Radisson Hotel, Commercial Plaza Wing B New Delhi-37 and certify that, the Company had a Capacity Purchase Agreement for wet-lease of the aircrafts with only foreign companies for the Financial Years 1997-98, 1998-99 and 1999-2000 for their international air cargo operations. One of the major customer to whom aircrafts were given on wet lease was Lufthansa Cargo AG of Germany. Annexure 'A' of the certificate gives the year-wise breakup of the lease rentals as under: Details of Traffic Revenue from wet-lease of aircrafts by Lufthansa Cargo India Private Ltd. F.Y 1997-98 F.Y. 1998-99 F.Y. 1999-2000 Traffic Revenue from wet lease of aircraft's received from &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10.6 of the LCAG contract relating to 'Governing Law' clearly states that the law governing the contract would be German Law. In this connection, reliance was placed on a decision of Supreme Court in the case of Dhanrajmal Gobindram v. Shamji Kalidas & Co. [1961] (3) SCR 1020, wherein it has been held:- "Whether the proper law is the lex loci contract us or lex loci solution is is a matter of presumption; but there are accepted rules for determining which of them is applicable. Where the parties have expressed themselves, the intention so expressed overrides any presumption." Reliance was also placed on the decision of the Supreme Court in the case of Kunwar Trivikram Narain Singh v. State of Uttar Pradesh [1965] 57 ITR 29, wherein it was held that in certain circumstances the contract itself can be the 'source of income'. Thus, if the wet-leasing contract were to be considered as the source from which income is earned, the said source is outside India as the contract has been made outside India. However, if the activity of wet-leasing were to be considered as the 'source', the same also took place outside India. Hence the situs of the source of the recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me is not the uplinking or downlinking of the signals but of the actual viewership." It is clarified that the above-quoted observations were made in the context of a non-resident earning income from a source within India, under section 9(1)(vi)(c), but the principle stated therein is equally applicable to a resident under section 9(1)(vii)(b) of the Act in determining whether income was earned from a source outside India. Lastly, it is submitted that it is indisputable that payments to the non-resident have been made for overhaul repairs for earning income from the activity of wet-leasing. There is therefore a direct nexus between the payments and the earning of income from sources outside India. 45. For the Revenue, Ld. DR stated that it could not be said that the entire income was earned from sources outside India. He drew our attention to the relevant paras in the orders of the Assessing Officer and CIT(A), wherein it was found that the entire income of the assessee could not be said to have been earned from sources outside India. He strongly relied upon the findings in the orders of the authorities below. 46. We have carefully considered the rival submissions. It would be ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rules of the International Chamber of Commerce, Paris. The arbitration, if so required, shall be held in the English language. The place of arbitration shall be Geneva, Switzerland or any place mutually agreed upon between the Parties. Capacities and Flight Schedules Annex No. 2 1. Capacities to be made available by LCI Should LCAG anticipate that the capacity provided by LCI under the Agreement cannot be utilised by LCAG in its entirety in any calendar month, LCAG shall give promptly written notice of such determination to LCI. In the instance such notice is given more than 60 days before the date of the flight concerned, LCI will use its utmost efforts to re-market the capacities and flights not to be utilised by LCAG. Should LCI be able to sell any such capacities on its own behalf, LCAG shall be entitled to a refund as set forth in Annex 3 of the Agreement, but only within the minimum block Hours guaranteed to LCAG to LCI under this Agreement. Charges and Payments Annex No. 3 As set forth in Article 3.2 of the agreement the following terms and conditions apply for the calculation and payments of any charges by the LCIL for the Capacity provided under this agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. 48. In this view of the matter, we are satisfied that the assessee's immediate source of income is from the activity of wet-leasing of aircrafts under contracts made outside India to non-resident parties. A miniscule fraction of the lease rental (0.2%) has been earned from an Indian party. But, this cannot detract from the fact that virtually entire income has been earned from non-residents through the activity of wet-leasing of the aircrafts carried on outside India. 49. The assessee's activity of wet-leasing of aircrafts is a distinct activity which constitutes a source from which income has been earned. Revenue is not correct in identifying this leasing activity with the transportation activity of the lessee, LCAG, Germany. The following observations of the Supreme Court in the case of Gosalia Shipping (P.) Ltd. are apposite:- "If any guidance is to be sought from the terms of the agreement between the parties, the conclusion seems inescapable that the amount which the timecharters were required to pay to the owners of the ship was not payable on account of the carriage of goods but was payable on account of the use and hire of the ship. Indeed, the other term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fees for technical services if such services are utilised in a business or profession carried on by the assessee outside India. It is submitted that the assessee's business of leasing of aircrafts along with crew is carried on outside India. All the aircrafts were acquired by the assessee outside India-three under hire-purchase agreement and one under dry-lease agreement-from a foreign company for which payments were made in foreign exchange. The leasing revenues were earned outside India from non-resident lessees. The Ld. Counsel referred to the Annual Accounts of the assessee for the three financial years (Paper Book-1) to show that leasing revenues were earned in foreign exchange from foreign airline companies. He also submitted a chart indicating transactions in foreign exchange for each of the three financial years as obtaining from the Annual Accounts of the assessee. As per this chart the leasing revenues earned in foreign exchange were 100%, 99.79% and 99.86% for the Financial years 1997-98, 1998-99 and 1999-2000, respectively. This chart also gives the figures of direct operational expenses in foreign exchange on actual payment basis as culled out from the Annual Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined the legal position in following words:- 'In the case of a composite business, i.e., in the case of a person who is carrying on a number of businesses, it is always difficult to decide as to the place of the accrual of profits and their apportionment inter se. For instance, where a person carries on manufacture, sale, export and import, it is not possible to say that the place where the profits accrue to him is the place of sale. The profits received relate firstly to his business as a manufacturer, secondly to his trading operations, and thirdly to his business of import and export. Profit or loss has to be apportioned between these business in a business like manner and according to well established principles of accountancy in such eases it will be doing no violence to the meaning of the words "accrue" or "arise" if the profits attributable to the manufacturing business are said to arise or accrue at the place where the manufacture is being done and the profits which arise by reason of the sale are said to arise at the place where the sales are made and the profits in respect of the import and export business are said to arise at the place where the business is conduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d article 13.4(c) of the UK treaty, respectively. The Ld. DR relies on the order of the Assessing Officer; whereas, according to the Ld. Counsel for the assessee, the issue is squarely covered in the assessee's favour by the decision of the ITAT, Mumbai Bench 'C, in the case of Raymond Ltd. v. Dy. CIT [2003] 86 ITD 791. We however do not propose to go into this controversy in view of our decision that the impugned payments to non-residents for repairs of components are not chargeable to tax under the Act, and therefore the assessee was not liable to deduct tax under section 195 of the Act. In this view of the matter, the Revenue's appeals fail. 58. We now take the appeals filed by assessee relating to penalty under section 271C for assessment years 1997-98, 1998-99 and 1999-2000. 58.1 We have already allowed the appeals of the assessee on quantum, i.e., against orders under section 201/201(1A). Therefore, these appeals have to be allowed because the basis on which the penalties under section 271C were imposed have already quashed. Therefore, these appeals of assessee in regard to penalty levied and confirmed under section 271C are hereby allowed by deleting the penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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