2023 (12) TMI 1044 - HC - Income Tax

Tax Tribunal Rejects Penalty Appeal; Domain Registration Income Not 'Royalty' Under Tax Law for 2013-14 & 2014-15.

The Tribunal dismissed the appeal concerning the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961, for AY 2013-14 and AY 2014-15. The ... Penalty u/s 271(1)(c) - undisclosed royalty receipts - assessee earned revenues from two streams i.e. web hosting and domain registration charges and offered revenue from web hosting services to tax in the return filed for the relevant AYs. However, the assessee did not offer to tax its income from domain registration services for the reason that it was under a bonafide belief that this income is not chargeable to tax under the provisions of the Act. HELD THAT:- Tribunal was of the view that the issue involved in the appeal was debatable. As would be evident, in this behalf, the Tribunal had also taken recourse to the fact that the quantum appeal was pending in this court. Concededly, the quantum appeals were filed by the respondent/assessee with this court for the AY in issue, i.e., AY 2013-14 and other AYs as well. The other AYs qua which the appeals were filed, as noticed above, were AY 2014-15 and AY 2015-16. Insofar as these appeals were concerned, the question of law, as framed, was answered in favour of the respondent/assessee and against the appellant/revenue, although, as noticed above, the respondent/assessee had preferred appeals before this court. The question of law which was framed and answered by this court in [2023 (12) TMI 718 - DELHI HIGH COURT] decided issue in favour of assessee. Thus the penalty imposed in the instant appeal cannot be sustained. Issues involved: The appeal concerns Assessment Year (AY) 2013-14. The Tribunal was called upon to adjudicate the legal tenability of two separate orders dated 30.09.2019 passed by the Commissioner of Income Tax (Appeals) [CIT(A)] concerning penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 for AY 2013-14 and AY 2014-15. Details of the Judgment: The Tribunal observed that the issue involved in the appeal was debatable and the position in law was not settled. The Tribunal considered the fact that the quantum appeal was pending in the court. The respondent/assessee had filed quantum appeals for AY 2013-14, AY 2014-15, and AY 2015-16. The question of law framed and answered by the court in those appeals was whether the income received for providing domain name registration services amounted to 'royalty' under Section 9(1)(vi) of the Income Tax Act, 1961. The court answered in favor of the respondent/assessee in those appeals. Given that the respondent/assessee succeeded in the quantum appeals, the penalty imposed in the instant appeal could not be sustained. Therefore, the impugned order required no interference, and the appeal was closed. The application for condonation of delay was rendered inefficacious and closed. Parties were instructed to act based on the digitally signed copy of the order.