Bona fide taxability dispute defeats penalty where receipts for seconded employees and IT support services were open to two views.

Penalty under section 270-A of the Income-tax Act was held not leviable where the taxability of receipts for seconded employees and IT support services was debatable and more than one view was possible. The receipts were disputed as either fee for technical services under the Act or fees for included services under the treaty, and prior judicial decisions had supported the assessee's position. On that basis, the assessee's non-taxability claim was treated as a bona fide belief, so the statutory ingredients for penalty were not satisfied.

---

---

Issues: Whether penalty under section 270-A of the Income-tax Act, 1961 could be levied where the underlying taxability dispute on receipts for seconded employees and IT support services was debatable and two views were possible.

Analysis: The dispute concerned whether the receipts were chargeable as fee for technical services under the Act or as fees for included services under the applicable treaty. The relevant controversy had been considered in several judicial decisions, many of which had taken a view favourable to the assessee. In that setting, the assessee's position that the receipts were not taxable was held to be supported by a legitimate bona fide belief. Since the issue was vexed and susceptible to more than one view, the ingredients for penalty were not made out.

Conclusion: Penalty under section 270-A was not leviable and the appeal failed.

---