TMI Blog2016 (10) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... ce Petroproducts Private Limited [2010 (3) TMI 80 - SUPREME COURT] has observed that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. The assessee has given an explanation which is found to be bonafide, thus, in our opinion the Explanation -1 to the section 271(1)(c) of the Act is not attracted in the case of the assessee and, therefore, no penalty is leviable. Disallowance of long-term capital gain - Authorized Representative submitted that the long-term capital gain (LTCG) was claimed as exempt by the assessee at the time of filing the return, inasmuch as, the assessee was of bonafide view that STT would be paid in the due course once the BSE would get the issue clarified from the CBDT - Held that:- Since the assessee failed to get the same clarified until the last date of revision of return of income i.e. 31/03/2008, the assessee during the course of assessment proceeding, without any show cause notice issued by the Assessing Officer, offered the long-term capital gain (LTCG) for taxation which was accepted by the Assessing Officer and he adjusted long-term capital loss (LTCL) from the long-term capital gain (LTCG) so offered. This e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case are that in the case of the assessee the assessment under section 143(3) of the Income Tax Act, 1961 (in short the Act ) was passed on 18/09/2009 assessing the total income at ₹ 3,83,03,325/- as against the returned income of ₹ 3,55,15,180/-. The assessing officer also initiated penalty proceedings under section 271(1)(c) of the Act .The additions/disallowances made by the Assessing Officer was confirmed by the learned Commissioner of Income Tax (Appeals) vide his order dated 26/07/2010. The Assessing Officer issued a show cause for levy of penalty on the additions disallowances confirmed by the learned Commissioner of Income Tax (Appeals). The submission made by the assessee that the assessee was not liable for levy of penalty, were not considered by the Assessing Officer and he levied the penalty of ₹ 18,68,590/- under section 271(1)(c) of the Act on 29/03/2012 equivalent to the 100% of the tax sought to be evaded by the assessee. Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax (Appeals), who vide the impugned order dated 15/01/2014 allowed the appeal of the assessee deleting the penalty under section 271(1)(c) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made payment of ₹ 4,43,363/- to M/s. Coperion Werner Pfleiderer in respect of process training conducted by it at the assessee's premises between 07.08.2006 to 11.08.2006. From this non-resident, assessee has purchased plant and machinery from time to time. The machines purchased by the assessee were not working at the optimum level and therefore on complaint by the assessee, the supplier of machine sent its engineer to provide the process training. The assessee has not deducted tax on this payment as according to it, it is a payment of business profit under Article 7 of DTAA with Germany and since the nonresident has no PE in India, no income has accrued or arisen in India. The AO observed that the payment made by the assessee to the nonresident is in respect of fees for technical services under Article 12 of DTAA with Germany and since assessee has not deducted tax at source, the expenditure is disallowed u/s 40(a)(i). The Ld. CIT(A) confirmed the disallowance which was upheld by the Hon'ble ITAT vide Para 5.7 of its order only for the reason that reliance of assessee on Article 7 of Indo-German Treaty is not tenable in as much as assessee has failed to demonstra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere disallowed by the AO while completing the assessment u/s 143(3) of the Act on the ground that assessee failed to deduct TDS. It was observed that the genuineness of the claim of the assessee had not been disputed by the department Therefore, it could not be said that assessee had claimed expenses which were false or not genuine. Assessee had furnished all the relevant facts concerning the claim made by it in the return filed. It was held that the AO had levied penalty in respect of said amount merely because said claim of the assessee was disallowed u/s 40(a)(ia) of the Act as assessee failed to deduct TDS thereon. In the case of CIT vs. Reliance Petro products P. Ltd., 322 ITR 158(SC) it was held that a mere making of the claim which was not sustainable in the law, by itself will not amount to furnishing inaccurate particulars of income. It was held that, in the present case, admittedly, assessee made a claim but the same was rejected and disallowed not for the reason that the claim was not genuine or was fabricated but in view of provisions of law that assessee did not deduct TDS thereon. It was opined that the ratio of judgment in the case of Reliance Petro products Ltd (sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of legal provision and u/s 14A of the Act by attributing expenses to the tax free income claimed by the appellant. . .. The A.O. has in the last page of his order u/s 271(l)(c) levied the penalty on the assessee on the ground that assessee has willfully furnished inaccurate particulars of income. The Ld. Commissioner of Income Tax (Appeals) held that the assessee has furnished all the required details and that hence no penalty can be levied on technical/legal disallowances u/s 14A or u/s 40(a)(ia). We on the facts of this case agree with these findings of the Ld. Commissioner of Income Tax (Appeals). We find no infirmity in the conclusions drawn by the Ld. CIT(A) on this issue. In the result this ground of Revenue is dismissed. 4. The only reason given by the AO for levy of penalty is that no tax was deducted at all at any point of time, even at a later date and thus no tax could be realized from the recipient being a foreign national thus causing loss to the revenue. This cannot be a reason for levy of penalty as once the tax along with interest is recovered from the assessee by raising demand by disallowing the expenditure, no loss is caused to the revenue. Guja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r made a payment of ₹ 4,44,690/- to Dr. U. K. Thele. This was for scientific services. The AO however held that the payment was for technical services and subject to TDS and therefore disallowed the amount u/s 40(a)(i). The Ld. CIT(A) and Hon'ble ITAT up held the addition. The Hon'ble ITAT observed that the payment to Dr. U. Thele was for rendering technical services not falling under Article 14 of the DTAA. 5.15. I shall now discuss whether penalty will be imposable on these amounts. All the particulars had been furnished by the appellant. All facts relating to the computation of his total income had been disclosed by him. The explanation give by the appellant appears to be bonafide. 5.16. As per the views of the AO, the Ld. CIT(A) and the Hon'ble ITAT the appellant was in default for not deducting TDS. However, there is no concealment of income or furnishing of inaccurate particulars of income. The explanation given by the appellant stating that no inaccurate particulars were filed has merit. The explanation of the appellant is bonafide. 5.17. To conclude it was seen that in respect of all the issues, all particulars had been furnished by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of its claim of non-deduction of tax at source, though, has not been found correct, however, same was not malafide. According to the assessee, the payment of ₹ 4,43,363/- paid to an entity M/s. Coperion Werner Pfleiderer was covered under Article-7 of the DTAA with Germany whereas the Tribunal has held that the Article-7 was not applicable in the case of the assessee. Similarly, in respect of payment of ₹ 4,44,690/- to Dr. UK Thiele, the assessee claimed that the payment was towards independent scientific activity which fall under Article 14 of DTAA with Germany, whereas the Tribunal held that the assessee failed to demonstrate that the services rendered by Dr UK Thiele are independent scientific services. The Assessing Officer has nowhere stated that the assessee has furnished false and fabricated bills or claimed expenditure which was not related to the business of the assessee. The Hon ble Supreme Court in the case of CIT Vs. Reliance Petroproducts Private Limited has observed that making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. The assessee has given an explanation which is found to be bonafide, thus, in our opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Jurisdictional High Court, we hereby direct the Assessing Officer to delete the penalty on this amount. Thus, this ground is allowed and the appeal of the assessee for AY 2006-07 is allowed. 2.8 Thus respectfully following the above decision no penalty is leviable in the case for disallowances towards non-deduction of tax at source. 3. Third disallowance of ₹ 26,138/- under section 40(a)(i) has already been deleted by the Tribunal and, therefore, no penalty was leviable corresponding to the disallowance of ₹ 26,138/-. In view of above discussion, we find that order of the learned Commissioner of Income-tax (Appeals) on the issue in dispute is well reasoned and no interference is required on our part and accordingly we uphold the same. The grounds of the Revenue on the issue are dismissed. 4. The second issue contested before us is in respect of penalty levied under section 271(1)(c) of the Act in respect of disallowance of long-term capital gain of ₹ 41,62,154/-. The facts in respect of the issue in dispute are that in the return of income the assessee shown long-term capital gain (LTCG) on sale of shares of M/s. Mayuka Investment Ltd. and claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the long-term capital gain (LTCG) was claimed as exempt by the assessee at the time of filing the return, inasmuch as, the assessee was of bonafide view that STT would be paid in the due course once the BSE would get the issue clarified from the CBDT. The correspondence of the BSE in this respect was also filed before the Assessing Officer. However, since the assessee failed to get the same clarified until the last date of revision of return of income i.e. 31/03/2008, the assessee during the course of assessment proceeding, without any show cause notice issued by the Assessing Officer, offered the long-term capital gain (LTCG) for taxation which was accepted by the Assessing Officer and he adjusted long-term capital loss (LTCL) from the long-term capital gain (LTCG) so offered. This explanation offered by the assessee has not been found false by the Assessing Officer. Further, the assessee substantiated the explanation with necessary evidence and explanation filed is bonafide and all the facts relating to the explanation and material to the computation of income on the issue have been disclosed by the assessee. In view of these facts, the Explanation-1 to the section ..... X X X X Extracts X X X X X X X X Extracts X X X X
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