TaxTMI 
TaxTMI 
2017 (5) TMI 772
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....ollowing grounds of appeal:- On the facts and circumstances of the case and in law : 1. The Ld.CIT(A) erred in confirming penalty of Rs. 6,41,219/- under section 271C of the Income Tax Act, 1961 for short/non deduction of tax at source that had arisen due to belief of applicability of one provision than the other of the Income Tax Act and debatable nature of issue involved and was not due to any contumacious conduct or for want of bonafides on the part of the appellant and therefore the appellant could not have been faulted for failure to deduct tax at source without a reasonable cause. It is prayed that in the light of the facts of the case of the appellant, attendant circumstances and judicial precedents the penalty confirmed by the Learned CIT(A) be deleted." 4. Briefly, in the facts of the case, the assessee was a subsidiary company of Volkswagen AG, Germany. It was engaged in the manufacturing of passenger vehicles of Skoda and Volkswagen brand. The assessee had a manufacturing unit at Chakan wherein passenger vehicles were manufactured. Survey under section133A of the I.T. Act was conducted on the premises of the assessee on 09-11-2011 for verification of compliance ....
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....ad of 194J of the Act was not accepted to be the bonafide belief for applying different provisions of the I.T. Act. The CIT(A) accepted the next plea of the assessee that in respect of hotel and service of apartment expenses, it was not for hiring of room but contract for rate and hence the Assessing Officer was directed to modify the amount of penalty excluding non deduction of tax in respect of hotel/service apartment expenses amounting to Rs. 2,40,600/-. The next plea of the assessee in respect of other defaults was that it had reasonable cause against the said default and its plea under section 273B of the Act for failure to deduct the tax or failure to comply the provisions of the TDS by the Chartered Accountant was also not accepted by the CIT(A). 8. The assessee is in appeal against upholding of the penalty levied under section 271C of the Act. 9. After taking us through the facts of the case, the Ld. AR for the assessee pointed out that the entire tax due on account of deduction of TDS alongwith interest was paid by the assessee in respect of Assessment Years 2008-09 to 2009-10. The Ld. AR for the assessee pointed out that the default in deduction of tax at source was....
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....re was no failure to deduct tax at source and in any case there was "reasonable cause" and hence no penalty to be levied. The Ld. AR for the assessee thereafter pointed out that in respect of certain amounts TDS was paid in the succeeding year and hence no penalty is to be levied in the year under consideration on such amounts. He further placed reliance on the ratio laid down by the Hon'ble Supreme Court in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 25 taxmann.com 400. 12. The Ld. DR for the revenue pointed out that the assessee on realizing the default had paid the entire tax alongwith interest as assessee was satisfied that it had committed default. In such a case where there is default of payment of tax deductible at source, the assessee was liable to levy of penalty under section 271C of the Act. 13. We have heard the rival contentions and perused the record. The assessee is in appeal against the orders of the authorities below in levying penalty under section 271C of the Act. Under the provisions of section 271C of the Act it is provided that where any person fails to deduct the whole or any part of the tax as required under the provisions of Chapter XVIIB, or pa....
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....respect which reads as under: Sr. No. Particulars FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 Total 1 acility outside India or services rendered outside India 4,79,874 5,25,028 1,01,175 - 11,06,077 2 Reimbursement of expenses or service tax element 751 2,85,522 77,261 - 3,63,534 3 Section 194C/194J debate 1,58,716 6,52,402 31,777 546 8,43,441 4 TDS not applicable 283 9,905 - 34,690 44,878 5 Short deduction/oversight 1,594 17,951 180 25,041 44,766 6 TDS in succeeding year - 52,865 - 17,522 70,387 Total 6,41,218 15,43,673 2,10,393 77,799 24,73,083 15. The issue which arise for adjudication is in respect of the above said defaults where the assessee can avail the benefit of the provisions of section 273B of the Act establishing its case of reasonable cause for non deduction of tax at source in order to escape the rigours of section 271C of the Act. 16. The Hon'ble Supreme Court in Price Waterhouse Coopers Ltd. (Supra) while deciding the issue of levy of penalty under ....
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....ved belief of applicability of one provision of law and it could not be said that the assessee had failed to comply with the provisions of section 194C and/or 194J without reasonable cause. 19. Now coming to the various defaults of non deduction of tax at source/short deduction of tax at source which have been attributed to the assessee, the first allegation against the assessee is for not deducting the tax at source against payments made to its German company for accessing standard data server facility located outside India. The plea of the assessee is that such services which did not involve any human intervention for transmitting the data through such data lines did not involve technical services and there was no liability to deduct tax at source under section194J of the Act. The second aspect which has been raised in this regard is that the off-shore services were rendered outside India and since it did not satisfy the twin conditions laid down in section 9(1)(vii) applicable to the Financial Year 2007-08, there was no merit in holding the assessee to be in default. 20. The issue of applicability of section 194J of the Act, vis-à-vis similar payments of data line c....
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.... the I.T. Act for deducting the tax at source under section194C of the Act as against the applicable provisions of section 194I and 194J of the Act. The Hon'ble High Court held that there was a bonafide belief on the basis of the advice of the Chartered Accountant due to which the said tax was deducted under section194C of the Act. The explanation of the assessee was accepted that it had reasonable cause for non deduction of tax under the requisite provisions and the penalty levied under section 271C of the Act was deleted. 26. Following the same ratio laid down by the Hon'ble Delhi High Court, we hold that in case of payments on which the assessee had deducted the tax at source under section194C of the Act and merely because the debate was whether the provisions of section 194J are attracted or not and even if the stand of the Assessing Officer was such, does not make the assessee exigible to levy of penalty under section 271C of the Act and hence the same is deleted. 27. The next set of deduction which is claimed to be amounts on which TDS was not applicable and short deduction/oversight in deduction of tax at source. The total amount of payments on which tax in default is ....