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2016 (8) TMI 822 - GUJARAT HIGH COURT

2016 (8) TMI 822 - GUJARAT HIGH COURT - TMI - Penalty levied u/s.271C - non deduction of tds - Held that:- The assessee could not be faulted if it thought that its own determination of what would be the income of the Canadian and UK Companies were not conclusive of its liability to deduct tax from the provisions. Such belief appears to have been held by the assessee bona fidely. The bona fide belief is fortified when the assessee deducted and paid tax in October 2005 when it received invoices an .....

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x Court in the case of CIT v. Eli Lilly and Co. (India) P. Ltd., [2009 (3) TMI 33 - SUPREME COURT ]. In that case, it has been held that liability to pay penalty u/s.271C can be fastened only on the person who does not have good and sufficient reason for not deducting tax at source and the burden, of course, will be on that person to prove such good and sufficient reason. - Decided in favour of the assessee - TAX APPEAL NO. 1952 of 2009 - Dated:- 4-8-2016 - MR. KS JHAVERI AND MR. G.R.UDHWANI, JJ .....

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reversing the order passed by CIT(A) and thereby deleting the penalty levied u/s.271C of the Act amounting to ₹ 97,59,312/? 2. The assessee herein is a 100% subsidiary company of a German company, which, in turn, is a 100% subsidiary of a Canadian company. The assessee was in receipt of certain services from the Canadian company since 01.04.2003. The assessee had made a provision in the books of accounts in respect of service charge to the tune of ₹ 5,68,80,548/in favour of the Canad .....

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as on 31.03.2005 was levied u/s.271C of the Act. Thereafter, the ACIT (TDS), Baroda passed order u/s.201(1) on 28.02.2006 and order u/s.201(1A) of the Act on 02.03.2006. The penalty order u/s.271C of the Act was passed on 31.03.2006 amounting to ₹ 1,09,30,427/for failure to deduct tax u/s.195 of the Act. 3. Against the said order, the assessee filed three different appeals before the CIT(A). However, except reducing the penalty to ₹ 97,59,312/, the other two appeals were dismissed. A .....

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ed only if no reasonable cause is shown by the assessee for its failure to deduct tax. Of course, the burden of proving such reasonable cause is on the assessee. The assessee s case is that it was under a bona fide belief that the amounts credited to the provisions did not represent income accrued to the Nonresident Company and therefore, it did not deduct tax. It had voluntarily paid TDS in October 2005, much before the Department could take any proceedings, when the invoices were raised agains .....

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