TaxTMI 
TaxTMI 
2016 (1) TMI 680
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....eferring any appeal against the order of AO u/s 195. 2. On facts and the circumstances of the case and in law whether the Ld. CIT(A) erred in holding that provisions of Sec. 271C would not be applicable in the absence of any desire on the part of appellant to make payments without TDS and whether such observation can be considered 'reasonable cause' u/s 273B. 3.On the facts and the circumstances of the case and in law whether the Ld. CIT(A)'s finding in para 31 of his order that Ld. AR relied on CA certificate and made payment without TDS under bonafide belief is sufficient to arrive at 'reasonable cause' as envisaged u/s 273B. 4. The Appellant prays that the order of the Id. CIT(A) on the above ground(s) be set aside and that of the Assessing Officer restored. 5. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 2. During the course of hearing Shri Paras Savla & Shri Harsh Kapadia Authorised Representatives (Ld Counsel) on behalf of the assessee and Shri Amerender Reddy Departmental Representative (Ld DR) on behalf of the Revenue, argued the case. 3. All the grounds address the common issue....
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.... engineering services and these services do not qualify as FTS within Article 12(4)(c) of India- Singapore Treaty. (iii) Payments to Insight Technology Solution Pte. Ltd. and Q.A. Software and Software One Pte. Limited are for purchase of shrink wrapped software and hence, it is not liable for taxation in India. 3.4. It was further submitted by the assessee during the penalty proceedings that in all these cases TDS was not deducted in view of the certificate issued by the CA, in this regard, at the time of making remittances and therefore, penalty should not have been levied for not deducting the TDS, on the basis of CA's certificate. The assessee relied upon the various judgments in its support to demonstrate that issues involved were decided in favour of the assessee or these were at least debatable, and in any case there was reasonable cause for not deducting TDS, and therefore, this case was not liable for levy of penalty u/s 271C. 3.5. But the JDIT did not agree with the submissions of the assessee and he levied the penalty u/s 271C for an aggregate amount of Rs. 11,55,280/-. 3.6. Being aggrieved, the assessee filed an appeal before the Ld. CIT(A) and there also detaile....
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....le, b) The assessee had bonafide belief while making payment without deducting TDS, more so by relying upon CA's certificate c) In any case the assessee had a reasonable cause and this case is covered by section 273B. He has relied upon various judgments to show that the issue involved is debatable. 3.9. We have gone through the orders of the lower authorities, submissions made, material placed before us for our consideration and judgments relied upon by both the sides. The solitary issue, which we have been called upon to decide, is that whether in the given facts of the case whether penalty levied u/s 271C by the AO for the alleged failure of the assessee in deduction of tax at source on five foreign remittances, has been rightly deleted by Ld. CIT(A). In this regard, before discussing the facts of this case, it is noted by us that penalty u/s 271C can be levied subject to section 273B. It provides that no penalty shall be imposed on the person or the assessee as a case may be for any failure rendered to in the said provisions if he proves that there was 'reasonable cause' for the said failure. Therefore, if assessee is able to make out that there was a 'reasonable cause' fo....
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..... We further noted from the perusal of various judgments that what would constitute 'reasonable cause' cannot be laid down with precision and that the question as to whether there was a reasonable cause or not for the assessee not to deduct tax at source at all or under some particular provisions than prescribed is a question of fact which is required to be ascertained in the facts and circumstances of each case. 3.12. In the aforesaid position of law we have analysed facts of this case, as brought before us. It is noted that as per the AO the assessee was liable to deduct tax at source on the five remittances particulars of which have been narrated in this order above. For analyzing the obligation of the assessee under the law to deduct TDS on these payments, we can put these payments into two categories i.e. 1) payments made for Engineering and Draughting services (i.e. design and drafting services) and 2) payments made for purchase of shrink wrapped software (i.e. a standard computer software). 3.13. As far as first category of payment is concerned, these were made to two parties namely AEC Technology Ltd., UK and Lye Singapore Pte. Ltd., Singapore. The assessee has submitted ....
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....he technology contained therein. 3.16. It is further noted by us that the undisputed fact is that there was a CA's certificate, and relying upon the same only the assessee took a view that it was not liable to deduct tax at source on the payments made to these two parties. 3.17. Similarly, with regard to payments made to remaining three parties for purchase of shrink wrapped software (i.e. standard computer software), the TDS was not deducted by the assessee for the reason that the impugned payments were for a copyrighted article, i.e. they were 'goods' and, therefore, such payments were not nature of royalties as per the income tax act as well as respective DTAA's. Rather these were to be treated as sale of goods and were treated taxable as business profits. 3.18. It is noted that there is huge controversy on this issue, and therefore, assessee placed reliance on the judgments which were in its favour including the judgment of Hon'ble Supreme court in the case of Tata consultancy services 271 ITR 401. It is noted by us that various High Courts and benches of the tribunal have taken contradictory stands on this issue. The assessee has furnished list of various cases 'for' and 'a....