TMI Blog2019 (9) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... f Sec.271(1)(c ) of the IT Act. Be that as it may, it is observed that Hon ble High Court for year under consideration admitted substantial questions of law by which addition itself becomes debatable. On perusal of decision relied upon by Ld.AR in case of CIT vs Ankita Electronics Pvt Ltd [ 2015 (3) TMI 1029 - KARNATAKA HIGH COURT] and CIT vs Dr Hirsha N. Biliangady [ 2015 (3) TMI 1146 - KARNATAKA HIGH COURT] additions in respect of which penalty was confirmed has been accepted by Hon ble Karnataka High Court, leading to substantial question of law. Thus when Hon ble High Court admitted substantial question of law on additions, it becomes apparent that issue is certainly debatable. In such circumstances penalty cannot be levied under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance u/s 40(a)(i) of the Act. 3.The Ld.CIT(A) has erred in upholding the levy of penalty stating that: - the disallowance made by the Ld.AO in the assessment order does not involve difference in interpretation of law; -the claim made by the appellant was not based on a bonafide belief; and - there were no two views possible on the claim of the appellant. 4. The Ld.CIT(A) erred in upholding the levy of penalty u/s 271(c ) of the Act by the Ld.AO on the additions made to the total income of the appellant on an ad hoc basis. 5. The Ld.CIT(A) without appreciating the facts of the appellant, erred in concluding that the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt with Ireland PE, whereby assessee was granted marketing and distribution rights of AdWord Program to advertisers in India, and assessee was remunerated on cost plus market basis for distribution services under AdWord Programmes. Ld.AO observed that assessee under agreement acquired marketing and distribution rights over AdWord Programmes for the territory of India from its U.S. AE and that distribution agreement involved three parties being license or the reseller, the distributor and the advertiser. In the instant case AE was the license or, the distributor and reseller was assessee before us and end-users were advertisers. Ld.AO noticed that assessee credited a sum of ₹ 1,115 crore to the account of AE without deduction of TDS an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment receipts received from the advertisers, though as per service agreement assessee rendered certain technical services, that too for AdWord Programs only, for which assessee received certain payments as per terms of agreement with U.S. AE. Revenue was also of the opinion that after sales services and add review was not possible without aid of ITES division and therefore payments made to U.S. AE by assessee were on account of usage of trademark, intellectual property rights, processes, derivative Works etc., and thus nature of payment was royalty. Subsequently, penalty order was passed levying penalty for alleged tax evasion . 4. Aggrieved by penalty order, assessee preferred appeal before Ld.CIT (A) who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler agreement) constituted business income in the hands of GIL and in the absence of any Permanent Establishment of GIL in India, such receipts could not be brought to tax in India and consequently the provisions of Section 195 and 201 of the Act had no application?. 4. Whether the Tribunal completely failed to appreciate that the rights granted under the Distribution Agreement were in the nature of Commercial rights and did not partake he character of/or grant any right to use any intellectual property so as to fall within the ambit of Section 9(1)(vi) of the Act? 5. Whether the Tribunal also erred on facts and in law in concluding that the entire payment made by the Appellant constituted Royalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curate particulars of such income. The penalty could not be imposed under section 271 (1) (c ). Similar is the view taken by Hon ble Karnataka High Court in a subsequent decision in case of CIT vs Dr Hirsha N. Biliangady reported in (2017) 79 Taxmann.com 376. Ld.CIT.DR on contrary placed reliance on orders passed by authorities below. 6. We have perused submissions advanced by both sides in light of records placed before us. It is pertinent to observe that while passing assessment order Ld.AO initiated penalty proceedings without referring to any charge as to for concealment of income or filing of inaccurate particulars of income . Further Ld.AO subsequent to order pas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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