2015 (3) TMI 975 - AT - Income Tax

Tribunal Upholds Penalty Deletion & Rules on Taxability Issues

ACIT Noida Versus Technip Italy SPA

ACIT Noida Versus Technip Italy SPA - [2014] 30 ITR (Trib) 494 (ITAT [Del]) Issues Involved:1. Deletion of penalty under section 271(1)(c) of the Income-tax Act.2. Taxability of offshore supply of equipment.3. Taxability of onshore supply and contract receipts.4. Taxability of fees for design and engineering services.5. Taxability of foreign exchange fluctuation gain.6. Assessment of interest income.Issue-wise Detailed Analysis:1. Deletion of Penalty under Section 271(1)(c) of the Income-tax Act:The Revenue challenged the deletion of a penalty amounting to Rs. 73,35,800 by the Commissioner of Income-tax (Appeals). The Tribunal considered the arguments, the material on record, and relevant decisions. The penalty was initially levied for furnishing inaccurate particulars of income. The Tribunal found that the penalty could not be sustained on debatable issues, estimated additions, or when the books were rejected, and the income was assessed at a lower amount than returned. The Tribunal upheld the deletion of the penalty, emphasizing that there was no fraudulent or grossly negligent behavior by the assessee.2. Taxability of Offshore Supply of Equipment:The assessee, Technip, did not offer revenue from offshore supply of equipment to tax in India. The Assessing Officer (AO) considered this revenue taxable and estimated the income at 10% of the receipts. The Tribunal, however, set aside this addition and ultimately deleted it, concluding that the offshore supply was not taxable in India.3. Taxability of Onshore Supply and Contract Receipts:The assessee offered revenue from onshore supply and contract receipts as business income based on audited accounts. The AO taxed this revenue on a gross basis at 20% under section 115A. The Tribunal confirmed this addition. However, the penalty for this addition was deleted by the Tribunal, noting that the income was estimated after rejecting the books of account, and there was no conclusive evidence of inaccurate particulars.4. Taxability of Fees for Design and Engineering Services:The assessee offered this revenue as business income based on audited accounts. The AO added this income separately, considering it taxable under section 115A at 20%. The Tribunal confirmed the addition but deleted the penalty, noting that the issue was debatable, and the assessee had a bona fide belief regarding its taxability. The Tribunal cited several decisions supporting that penalty cannot be levied on debatable issues or where the explanation is bona fide.5. Taxability of Foreign Exchange Fluctuation Gain:The assessee credited this income in its profit and loss account. The AO did not make any specific addition for this income. The Tribunal deleted any penalty related to this income, as the addition itself was not sustained.6. Assessment of Interest Income:The assessee credited this income in its profit and loss account. The AO assessed it as income from other sources. The Tribunal did not specifically address this in the context of penalty, implying no penalty was levied or contested for this item.Conclusion:The Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Act, emphasizing that penalties cannot be imposed on debatable issues, estimated additions, or where the assessee's explanation is bona fide. The appeal by the Revenue was dismissed.