TaxTMI 
TaxTMI 
2018 (3) TMI 1700
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....irming an order of the AO levying penalty under Section 271 (1)(c) of the Act Rs. 3,65,45,057/- in assessment year 1997-98, Rs. 3,71,56,555/- in assessment year 1998-99, Rs. 8,34,05,256/- in assessment year 1999-2000, Rs. 7,97,24,456/- in assessment year 2000-01, Rs. 3,41,97,448/- in assessment year 2002-03 & Rs. 2,42,42,280/- in assessment year 2003-04. 3. The brief facts of the case are that the assessee is a company incorporated in United Kingdom. The assessee is engaged in India in the business of supplying of Aero-Engines, spare parts and rendering technical services to Indian Customers mainly to M/s Hindustan Aeronautical Limited, Indian Air Force. 4. Rolls Royce India Limited (RRIL), is another company of Rolls Royce group inco....
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....ent (PE) in India which was contrary to the claim of the assessee, and the assessment was completed on 14.3.2005 under Section 148 read with section 143(3) and penalty notice under Section 274 read with section 271 (1)(c) of the Income Tax Act, 1961 was issued. The Assessing Officer invoked Rule 10 of the Income Tax Rules, 1982 and attributed 100 per cent of the profits arising from the sale of goods to Indian customers in India to permanent establishment and completed the assessment at a taxable income of Rs. 22,11,69,973/- in assessment year 1998-99, Rs. 49,64,59,850/- in assessment year 1999-2000, Rs. 47,45,50,337/- in assessment year 2000- 01, Rs. 14,65,60,491/- in assessment year 2002-03 and Rs. 12,36,85,105/- in assessment year 2003-0....
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.... 11. Before us, the AR of the assessee submitted that the Assessing Officer in his order passed has attributed 100 per cent of the profits arising from the sale of goods to customers in India to the permanent establishment and determined the income of the assessee. On appeal, the learned CIT(A) reduced the same to 35 per cent of the profits arising from sale of goods to Indian customers in India. On further appeal, the Tribunal confirmed the order of the learned CIT(A). On further appeal, the Hon'ble Delhi High Court also confirmed the order of the Tribunal that office of Rolls Royce India Limited at New Delhi constituted a permanent establishment that the assessee under Article 5 of the double taxation avoidance agreement between In....
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....of the case are that in the relevant order of assessment passed under Section 147 of the Act, the AO assessed total income of the assessee at Rs. 18,98,44,454/- in assessment year 1997-98, Rs. 22,11,69,973/- in assessment year 1998-99, Rs. 49,64,59,850/- in assessment year 1999-2000, Rs. 47,45,50,337/- in assessment year 2000-01, Rs. 14,65,60,491/- in assessment year 2002-03 and Rs. 12,36,85,105/- in assessment year 2003-04 on the ground that RRIL which was 100 per cent subsidiary of the assessee and through which the assessee sold goods in India and therefore, the said RRIL was PE of the assessee in India and consequently its entire income relatable to those goods sold in India is chargeable to tax in India in the hands of the assessee. ....
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.... Court has admitted the SLP of the assessee vide order dated 2.8.2013 passed in SLP Nos. 1042-1047 / 2012. The quantum appeal is thus now pending before Hon'ble Supreme Court. 18. On the above facts, the argument of the learned Authorized representative of the assessee is that as the above facts shows that the issue is highly debatable and therefore, no penalty under Section 271 (1) (c) is exigible in the instant case. 19. On the other hand, the learned Departmental Representative supported the orders of the lower authorities. 20. We find that it is a established position of law that penalty under Section 271 (1)(c) of the Act cannot be imposed in respect of a debatable issue. This view is supported by the decision of the Hon&#....