2017 (8) TMI 233

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....arties in view of the orders of the authorities below, material available on record and the decisions relied upon. 3. Being a tax resident of the UK, the assessee opted to be taxed in India under the provisions of India-UK Double Taxation Avoidance Agreement for the previous year relevant to the assessment year under consideration. As per the assessee under the provisions of the Tax Treaty, income derived by him from supply of network equipment (hardware and software) to Indian customers qualified as "business profits" and, therefore, not liable to taxation in India under the provisions of article 7(1) of the Tax Treaty in the absence of a "permanent establishment" (PE) of the assessee in India. Accordingly, the assessee did not offer the ....

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....earned Commissioner of Income-tax (Appeals) has deleted the penalty, which has been questioned by the Revenue authorities before us. 4. In support of the ground, the learned senior Departmental representative, Shri Rajesh Kumar has placed reliance on the penalty order with this submission that the assessee tried to evade payment of tax by not filing its return of income. It had filed its return of income only in compliance with the notices issued under section 142(1) of the Act. The Assessing Officer was thus justified in initiating and imposing the penalty as the assessee has furnished inaccurate particulars of its income by claiming that income derived by it from supply of network equipment to Indian customers qualifies as "business prof....

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....ee establishes that the explanation furnished was bona fide and all the facts relating to the same and material to the computation of its total income has been disclosed by it, in our view, Explanation 1B to section 271(1)(c) of the Act will not be applicable. In the present case before us the explanation of the assessee was that being a tax resident of UK it had opted to be taxed in India under the provisions of the India-UK Double Taxation Avoidance Agreement (Tax Treaty) for the previous year relevant to the assessment year under consideration. It was explained that under the provisions of the Tax Treaty, income derived by it from supply of network equipment to Indian customers qualify as "business profits" and, therefore, not liable to ....