TMI Blog2007 (3) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... , ld. CIT (Appeals) has erred in deleting the penalty levied under section 271C amounting to Rs. 10,60,609 despite the fact that an order under section 201(1)/201(1A) treating the assessee in default for short deduction of Rs. 10,60,609 was sustained by the ld. CIT (Appeals)." 3. The respondent herein is a partnership firm carrying on the business of clearing and forwarding agents (C F agents). It acts as an agent for booking cargo for transportation abroad for various airlines operating in India. The respondent would collect the freight charges from the person, who intends to send goods through a particular airline and pays the same to the airline or the General Sales Agents (GSA) of the airline. It charges commission from the custom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 271C of the Act there was no representation on behalf of the respondent and in the circumstances the Assessing Officer held that the respondent failed to deduct tax at source in terms of sections 194C and 194H of the Act and was, therefore, liable for penalty under section 271C of the Act. The Assessing Officer also held that there was no reasonable cause for the respondent s failure and, therefore, the penalty was to be levied. Against this order of the Assessing Officer, the respondent preferred appeal before the CIT (Appeals). 4. Before the CIT (Appeals) the respondent submitted that its job was basically to transport goods belonging to exporters. Transportation was done by respective airlines and the respondent s job was only t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to deduct tax at source. Even the Cargo Agents Association had got opinion of Tax Solicitors, M/s. Vaish Associates, who had advised them that no TDS is deductible on the transactions of the kind carried out by the respondent. The respondent thus submitted that there was a reasonable cause for not deducting tax at source and, therefore, no penalty should be imposed. The CIT (Appeals) on consideration of the submissions was of the view that there was a reasonable cause for the respondent s failure and no penalty should be imposed. He also noticed that no person in the line of business was deducting tax at source and a mis-conception prevailed in their minds regarding liability to deduct tax at source. Going by the nature of transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the transaction, which we have already explained the Air Cargo Agents Association of India had given a representation dated 19-1-2004 to the Chairman of the Central Board of Direct Taxes explaining the nature of the transaction and praying that the suitable instructions be issued not to insist on deduction of tax at source. Another aspect, which we notice is that many airlines that carry the cargo are non-resident entities. The question whether these entities would be liable to pay tax in India in respect of the profits from operation of aircraft is doubtful. The Double Taxation Avoidance Agreement (DTAA) between India and several other countries provides for taxation only in the contracting State and not in India. 6.1 The plea of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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