Contact us   Feedback   Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2016 (10) TMI 536 - ITAT DELHI

2016 (10) TMI 536 - ITAT DELHI - TMI - Penalty under section 271(1)(c) - Non deduction of tds u/s 195 - Held that:- The explanation furnished by the assessee in support 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r 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 [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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ulars. Thus, in our opinion, in such circumstances no penalty under section 271(1)(c) of the Act is leviable on the issue in dispute. - Revenue appeal dismissed. - ITA No. 2219/Del/2014 - Dated:- 5-10-2016 - SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER Appellant by Sh. F.R. Meena, Sr.DR Respondent by Sh. P.C. Parwal, FCA ORDER Per O. P. Kant, A. M. This appeal by the Revenue is directed against the order dated 15/01/2014 passed by the learned Commissioner of Income-t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

(a)(i) amounting to ₹ 9,14,191/- and LTCG amounting to ₹ 41,62,154/- holding that the assessee has not furnished any inaccurate particulars or has made any deliberate attempt to conceal income. ii. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) erred in deleting the above said penalty ignoring the fact that the quantum addition on disallowance u/s 40(a)(ia) of the Act was confirmed by the first appellate authority and the assessee did not .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ings 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 levi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Appeals), the Revenue is in appeal raising the grounds as reproduced above. The Revenue is in appeal against deletion of penalty only on two issues. The first issue is in respect of penalty under section 271(1)(c) on the addition of ₹ 9,14,191/- under section 40(a)(i) of the Act. The second issue is in respect of penalty under section 271(1)(c) of the Act on the long-term capital gain amounting to ₹ 41,62,154/- which was not contested by the assessee before the appellate authorities. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s. 2.2 While levying the penalty, the Assessing Officer observed as under: 3.1.4 Here it is important to note that it is not a case where claim of deduction was disallowed in a year but was allowable/allowed in subsequent year. Rather, in this case, since no tax was deducted at all at any point of time, even at a later date, this amount was never allowable to the assessee at any point of time even in future. Further, the income of the recipient as received by it/him from the assessee was taxable .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the learned Commissioner of Income-tax (Appeals) as under: The AR of the appellant submitted as under: "Submission:- A.Penalty in respect of disallowance u/s 40(a)(i) of ₹ 8,88,053/- (Rs.4,43,363 + ₹ 4,44,690) 1. The assessee 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 machiner .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 demonstrate that non-resident was conducting any business i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ys, no income has accrued or arisen in India. The AO held that Article 14 only covers independent scientific, literary, artistic, educational and teaching activities. The payment made to Dr. U. Thiele does not fall in the above category. The payment made to him is for rendering technical services which falls in Article 12. Accordingly, he made disallowance u/s 40(a)(i). The Ld. CIT(A) confirmed the disallowance which was upheld by the Hon'ble ITAT vide Para 6.6 of its order bv holding that A .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

vities and therefore no income has accrued to the nonresident so as to call for withholding tax u/s 195. It is not the case of any of the authorities that the explanation of the assessee is false or malafide. It is a case of difference in the interpretation as to whether the payment is of business profit/independent scientific activities or fees for technical services. The Hon'ble ITAT has upheld the disallowance only for the reason that assessee has failed to demonstrate the applicability o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ineness 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e case of Reliance Petro products Ltd (supra) squarely applied to the facts of the present case and, therefore, levy of penalty was not justified. It was also observed that similar issue had also been considered in the case of ACIT vs. Mazda Ltd (2012) 33 CCH 047 (Ahd.) (Trib.), wherein, levy of penalty u/s 271(l)(c) of the Act was cancelled which was levied on account of disallowance of claim for deduction of royalty and technical know-how as per section 40(a)(ia) of the Act., as the assessee f .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al facts and the audit report in the statutory form along with its return & also filed an explanation which could not be said to be not bona fide, it cannot not be said to be guilty of concealment of income or furnishing of inaccurate particular thereof, merely because certain expenses have been disallowed u/s 40(a)(ia). Further, it is a case of honest difference of opinion between the assessee and the revenue regarding the disallowance made & applicability of provisions of section 40(a) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssessment proceedings as asked for by the A.O. In fact it is on the basis of the details filed by the appellant that the A.O. worked out the disallowable amounts both u/s 40(a)(ia) and 14A of the Act. The expenses claimed by the appellant were genuine expenses incurred for business purposes and there are no contrary observations by the Assessing Officer. The disallowance made by the A.O. u/s 40(a)(ia) of the Act was on account of legal provision and u/s 14A of the Act by attributing expenses to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ied. In view of above, penalty levied u/s 271(l)(c) on the above disallowance be deleted. B. Penalty in respect of disallowance of depreciation of ₹ 26.138/- u/s 40(a)(i) The assessee made payment of ₹ 1,74,254/- to M/s. Henchel Industrietichik for supervision and erection of machine which has been capitalized. It claimed depreciation of ₹ 26,138/- on the same being 15% of ₹ 1,74,254/-. The AO observed that as tax has not been deducted at source on the said payment, the c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be deleted. 2.4 After considering the submission of the assessee, learned Commissioner of Income-tax (Appeals) deleted the penalty levied on the issue in dispute with following findings: 5.11. The fourth issue on which penalty has been imposed by the AO is on the issue of non deduction of tax u/s 40(a)(i) on an amount of ₹ 8,88,053/-. In appeal, the addition has been confirmed by the Ld. CIT(A) and the Hon'ble ITAT. 5.12. The appellant had made payments of ₹ 4,43,363/- to an ent .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X 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 amoun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ulars 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 appellant. The AO also has not stated that particulars furnished were not correct or inaccurate. 5.18. The bonafides of the appellant can be seen from the fact that details of all the expenditure which was claimed were furnished. The AO has nowhere stated that the appellant had furnished false or fabricated bills or h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was not due to fraud or neglect, he shall be not deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof and consequently be liable to the penalty provided by that section. In view of the above, the onus is on the appellant to prove that there was no fraud or neglect in filing correct income, which the appellant has proved. 2.5 Before us, learned Senior Department Representative relied on the order of the Assessing Officer and prayed that the order of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ion 40(a)(i) of the Act. The learned Authorized Representative also relied on the decision of the Tribunal in ITA No. 2572 to 2574/Ahd/2011 in the case of Sh. Vishal Neeraj Aggarwal versus DCIT, Baroda. 2.7 We have heard the rival submissions and perused material on record. From the submission of the assessee before the lower authorities, we find that the assessee has filed all the particulars in respect of the expenses incurred, which has been held to be disallowable under section 40(a)(i) of t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

o 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 i .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

on of the Hon ble Gujarat High Court in the case of CIT-IV Vs. LG Chaudhary reported in (2013) 33 taxmann.com 156 (Guj) held that disallowance under section 40(a)(ia) of the Act was due to non-payment of TDS, which was at the most technical default, and hence no penalty was leviable. The relevant finding of the Tribunal is as under: 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement relie .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

which was also deposited late and on such disallowance as has been confirmed by both CIT (Appeals) and ITAT and therefore, the imposition of penalty by Assessing Officer was just and proper. Per contra, learned senior counsel submitted that none of the elements of Section 271(1 )(c) get attracted in case of the respondent assessee. On due consideration of the submissions of both sides and on examining the orders of all the authorities, we find no reason to interfere in this appeal in as much as .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

law and the same requires no interference and is consequently to be dismissed. 13. Therefore, respectfully following the judgment of Hon 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

espect 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 the same as exempt under section 10(38) of the Act. Before the Assessing Officer, the assessee explained that at the time of filing of return, the assessee was expecting that .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

1)(c) of Act. The learned Commissioner of Income-tax (Appeals) held that no inaccurate particulars of income has been filed by the assessee and there is no concealment made by the assessee and hence no penalty under section 271(1)(c) of the Act was attracted in the case of the assessee. The relevant finding of the learned Commissioner of Income-tax(Appeals) on the issue in dispute is reproduced as under: 5.9 In respect of adjustment of capital gain made by the AO it is seen that the appellant ha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

y bonafide. In my view penalty u/s 271(1)(c) would not be attracted on this issue. 4.1 Before us, the learned Sr. Departmental Representative relied on the finding of the Assessing Officer and submitted that the assessee has filed inaccurate particulars of income and hence the penalty was leviable in the case of the assessee. 4.2 On the other hand, learned Authorized Representative of the assessee relied on the findings of the learned Commissioner of Income Tax (Appeals). 4.3 We have heard the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version